Liberty Media Corporation (“Liberty”) (Nasdaq: LCAPA, LCAPB,
LINTA, LINTB, LSTZA, LSTZB) today reported first quarter results
for Liberty Capital group, Liberty Interactive group and Liberty
Starz group. Highlights include(1):
- Received favorable ruling from Delaware
Court of Chancery on proposed split-off of Liberty Capital and
Liberty Starz
- Proxy statement declared effective and
set shareholder vote for May 23rd
- Grew consolidated QVC revenue by 4%
with particular strength in Germany and the UK
- Adjusted OIBDA(2) decreased less than
1%, but excluding the effects of the new agreement with GE Money
Bank and Italy launch, adjusted OIBDA grew 4%
- Operating income decreased 3%
- Set a premiere viewership record for
STARZ original series Camelot
- Increased STARZ and ENCORE
subscriptions by 10% and 6%, respectively
- Value of Liberty’s stake in SiriusXM
increased to $5.5 billion as of May 5, 2011
- Repurchased $31 million of Liberty
Capital stock, from February 1st through April 29th, 2011
“We are pleased with QVC’s results, particularly in light of the
challenging economic environment for consumers and the tragedies in
Japan,” stated Greg Maffei, Liberty President and CEO. “At Starz,
we posted strong financial results with robust subscriber growth
and continue to execute on our original content strategy with solid
viewership for both Spartacus: Gods of the Arena and Camelot. We
were extremely gratified to receive a favorable ruling from the
Court regarding our split-off of Liberty Capital and Liberty Starz
and plan to have our shareholder vote on May 23rd. Pending a final,
non-appealable ruling from the Court, we expect to complete the
split-off this summer.”
LIBERTY INTERACTIVE GROUP – Liberty Interactive group’s
revenue increased 7% to $2.2 billion and adjusted OIBDA decreased
1% to $378 million, while operating income decreased 2% to $213
million. The decrease in adjusted OIBDA and operating income was
primarily due to the impact of the earthquake and related disasters
in Japan on QVC’s business during the quarter, QVC’s new agreement
with GE Money Bank and the launch of QVC Italy.
QVC
QVC’s consolidated revenue increased 4% in the first quarter to
$1.8 billion and adjusted OIBDA decreased less than 1% to $363
million.
“QVC drove solid revenue growth of 4% against a challenging
prior year comparison,” stated Mike George, QVC President and CEO.
“While our consolidated adjusted OIBDA declined slightly from the
prior year, this was driven by three extraordinary events: our
Italy start-up, the change in our QCard program with GE Money Bank
and the impact of the tragedies in Japan. In the US, our 3% revenue
growth in the first quarter contributed to a 14% two year growth
rate, placing us among the faster growing large retailers in the
US. Exceptional revenue growth from new customers and eCommerce,
inclusive of mobile, in the US, Germany and the UK, are the leading
factors in this quarter’s performance. We are committed to creating
highly immersive shopping experiences with differentiated products,
engaging personalities, high levels of community involvement and
simultaneous engagement over multiple platforms - an experience
that cannot be replicated by either store based or internet
retailers. A perfect example of this was March’s Red Carpet event
celebrating the Oscars®, where we engaged our customer over
multiple platforms through the creation of behind the scenes video
blogs, contests on Facebook and QVC.com and live streaming
tweets.”
QVC’s US revenue increased 3% in the first quarter to $1.2
billion and adjusted OIBDA was relatively flat. Sales of
electronics, beauty and accessories increased while jewelry sales
declined. The average selling price for the first quarter increased
7% from $51.16 to $54.83 while total units sold decreased 3% to 24
million. Returns as a percent of gross product revenue decreased
from 18.6% to 18.2% for the quarter. QVC.com sales as a percentage
of US sales grew from 32% in the first quarter of 2010 to 36% in
the first quarter of 2011. Overall, US adjusted OIBDA was
negatively impacted by $10 million for the quarter due to the
change in terms of our arrangement with GE Money Bank for our QCard
that was effective in August 2010 as previously disclosed.
Excluding the negative impact of this arrangement, US adjusted
OIBDA increased 3% for the first quarter. The US adjusted OIBDA
margin decreased 77 basis points to 21.8% for the quarter primarily
due to the previously disclosed change in our QCard arrangement and
a decrease in initial margins due to growth in electronics.
On March 11, 2011 there was a significant earthquake and related
disasters in Japan. As a result, QVC Japan experienced an
interruption of its business and was off-air for 12 days. The
distribution center suffered moderate damage. QVC maintains
insurance coverage for property damage and certain business
interruption circumstances, subject to approximately a $12 million
deductible. QVC has not yet determined the complete financial
impact of the property damage, the impact to its future operations
or the value, if any, of a related insurance claim. Due to the
nature of the events that caused QVC Japan to suspend their
operations for a time in March, we estimate that approximately $24
million in revenue was lost based on prior year revenue during the
same period. Since QVC Japan has resumed its broadcast, sales have
been running approximately 10% below prior year sales, due to the
disruption in the country. We cannot determine at this time when
QVC Japan will return to sales levels we were experiencing before
the earthquake and related disasters in Japan. Additionally,
management enacted a temporary employee pay policy to continue to
pay employees during the off-air period, effectively causing QVC
Japan’s variable labor costs to be fixed for a period of time.
These events described above negatively impacted QVC Japan’s and
QVC’s consolidated adjusted OIBDA margin.
Despite this event, QVC’s international revenue increased 7% in
the first quarter to $643 million including the impact of
unfavorable exchange rates in Germany and Italy and favorable
exchange rates in the UK and Japan. International adjusted OIBDA
decreased 2% to $103 million for the quarter. Included in QVC’s
international first quarter results is $10 million of adjusted
OIBDA loss compared to $4 million in the prior year, related to QVC
Italy operations that launched as planned in October 2010.
Excluding the effects of Italy, international adjusted OIBDA would
have increased 4% for the quarter. International adjusted OIBDA
margins decreased 145 basis points for the quarter due primarily to
the negative impact of QVC Italy’s early stage operations and the
temporary suspension of QVC Japan operations. Excluding Italy,
international adjusted OIBDA margin would have decreased 45 basis
points.
QVC UK’s revenue grew 5% in local currency due primarily to the
increased sales of electronics. QVC UK’s average selling price in
local currency increased 3% and units sold increased 4% for the
quarter. QVC UK’s adjusted OIBDA increased 11% in local currency
for the quarter with the adjusted OIBDA margin increasing 26 basis
points due primarily to lower obsolescence expense and freight
savings.
QVC Germany’s revenue grew 13% in local currency for the quarter
through increased sales in apparel, health and fitness and
accessories. QVC Germany’s average selling price in local currency
increased 3% for the quarter with units sold increasing 13%. QVC
Germany’s adjusted OIBDA increased 18% in local currency and the
adjusted OIBDA margin increased 78 basis points for the quarter due
primarily to lower inventory obsolescence expense.
QVC Japan’s revenue and adjusted OIBDA decreased 9% and 19%,
respectively, in local currency for the quarter due to the
suspension of operations related to the earthquake and related
disasters. In addition, the results were impacted by QVC’s decision
to pay all employees during the off-air period and the negative
leverage impact of QVC’s fixed fee broadcasting distribution
arrangements. QVC Japan also contributed close to $2 million to
local charitable restoration efforts.
QVC Italy continues to ramp up its operations with its sales
coming primarily from the beauty and home product categories. QVC
Italy’s revenue for the quarter was $4 million with an adjusted
OIBDA loss of $10 million as mentioned above.
QVC’s outstanding bank and bond debt was $2.8 billion at March
31, 2011.
eCommerce Businesses
In the aggregate, the eCommerce businesses increased revenue 21%
to $324 million for the quarter as each company reported an
increase in revenue for the three-month period. Adjusted OIBDA
increased 61% to $29 million for the quarter and operating income
increased 100% to $8 million. The three months ended March 31, 2010
included the results of a start-up that was deconsolidated in the
third quarter of 2010. Excluding the results of the start-up for
the three months ended March 31, 2010, adjusted OIBDA increased
32%, and operating income was flat due to the revenue increase and
leveraging of fixed costs.
Share Repurchases
There were no repurchases of Liberty Interactive stock from
February 1, 2011 through April 29, 2011. Liberty has approximately
$740 million remaining under its Liberty Interactive stock
repurchase authorization.
The businesses and assets attributed to Liberty Interactive
group are engaged in, or are ownership interests in companies that
are engaged in, video and on-line commerce, and currently include
Liberty’s subsidiaries QVC, Provide Commerce, Backcountry.com,
Bodybuilding.com, Celebrate Interactive, CommerceHub, and The Right
Start, and its interests in, HSN, Tree.com, Interval Leisure Group,
Expedia and Lockerz. Liberty has identified wholly-owned QVC as the
principal operating segment of the Liberty Interactive group.
LIBERTY STARZ GROUP – Results for Liberty Starz group
primarily represent results of Starz, LLC. The following discussion
regarding the results of Starz, LLC include the legacy Starz
Entertainment and the legacy Starz Media businesses for the three
months ended March 31, 2011. The historical results for Starz for
the three months ended March 31, 2010 only include the historical
results for the legacy Starz Entertainment business, as the change
in attribution of Starz Media from Liberty Capital to Liberty Starz
became effective as of September 30, 2010.
Starz, LLC’s revenue increased 28% to $391 million for the first
quarter, an increase of $86 million. The additional revenue from
the legacy Starz Media businesses contributed approximately $65
million of such increase. The remaining increase in the period can
be attributed to the legacy Starz Entertainment business as a
result of a $4 million increase due to higher effective rates for
the channels and $6 million due to growth in the average number of
subscriptions. Additionally, there was approximately $11 million in
additional ancillary revenue related to television rights and home
video for STARZ original content. Revenue associated with the
legacy Starz Media businesses was significantly less than the
corresponding prior year period primarily due to the wide release
of two theatrical films in the first quarter of 2010 and no
theatrical releases in the current period along with the release on
home video of three significant theatrical films in the prior year
as compared to only one in the current period.
Starz, LLC’s adjusted OIBDA increased 24% to $131 million, a $25
million increase and operating income increased 25% to $124
million. Approximately $15 million of the adjusted OIBDA increase
was contributed by the legacy Starz Media businesses. As discussed
above, the reduced theatrical and home video releases resulted in
lower revenue which was more than offset by no current period
spending on marketing, advertising, production and acquisition
costs associated with the theatrical exhibition of such
productions. STARZ’ subscription units increased 10% and ENCORE
subscriptions increased 6% compared to the first quarter of
2010.
“The first quarter marked another period of solid results and
new highs in subscriptions to the STARZ and ENCORE flagship
channels,” said Chris Albrecht, Starz, LLC, President and CEO.
“Performance of our current original dramatic series, Camelot, has
surpassed expectations and continued our momentum with successful
original programming. The legacy Starz Media businesses had
positive results in the first quarter, with Anchor Bay benefitting
from improved operational performance. Anchor Bay is positioned for
the future to benefit from a home video distribution pipeline that
now includes content from The Weinstein Company, Starz Originals,
and such titles as The Walking Dead, which we are distributing for
AMC.”
Share Repurchases
There were no repurchases of Liberty Starz stock from February
1, 2011 through April 29, 2011. Liberty has approximately $447
million remaining under its Liberty Starz stock repurchase
authorization.
The businesses and assets attributed to Liberty Starz group are
primarily engaged in the production and distribution of video
programming and related businesses.
LIBERTY CAPITAL GROUP – Liberty Capital group’s revenue
increased to $581 million while adjusted OIBDA and operating income
increased to $358 million and $343 million, respectively, for the
first quarter. The increase in revenue is primarily due to the
impact of a one-time recognition of previously deferred revenue and
cost at TruePosition, partially offset by the change in attribution
of Starz Media from Liberty Capital to Liberty Starz which was
effective September 30, 2010. The increase in adjusted OIBDA is
primarily due to the one-time recognition of previously deferred
revenue and cost at TruePosition.
Share Repurchases
From February 1, 2011 through April 29, 2011, Liberty
repurchased approximately 430,000 shares of Series A Liberty
Capital common stock at an average cost per share of $72.34 for
total cash consideration of $31.1 million. Since the
reclassification of Liberty Capital on March 4, 2008 through April
29, 2011, Liberty has repurchased 50.9 million shares at an average
cost per share of $25.35 for total cash consideration of $1.3
billion. These repurchases represent 39.4% of the shares
outstanding. Liberty had approximately $310.6 million remaining
under its Liberty Capital stock repurchase authorization on April
29, 2011.
The businesses and assets attributed to Liberty Capital group
are all of Liberty’s businesses and assets other than those
attributed to the Liberty Interactive group and Liberty Starz group
and include its subsidiaries Starz Media (through September 30,
2010), TruePosition, Atlanta National League Baseball Club (the
owner of the Atlanta Braves), its interests in SiriusXM, and
minority interests in Live Nation, Time Warner, and Viacom.
FOOTNOTES
1) Liberty’s President and CEO, Gregory B. Maffei,
will discuss these highlights and other matters in Liberty’s
earnings conference call which will begin at 11:00 a.m. (ET) on May
6, 2011. 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.
NOTES
Liberty Media Corporation operates and owns interests in a broad
range of video and on-line commerce, media, communications and
entertainment businesses. Those interests are currently attributed
to three tracking stock groups: Liberty Interactive group, Liberty
Starz group and Liberty Capital group.
Unless otherwise noted, the foregoing discussion compares
financial information for the three months ended March 31, 2011 to
the same period in 2010.
On September 16, 2010, Liberty Media’s board of directors
approved a change in attribution of Liberty Media’s interest in
Starz Media from its Capital group to its Starz group, effective
September 30, 2010. The historical results for the three months
ended March 31, 2010, June 30, 2010, and September 30, 2010 only
include the historical results for the legacy Starz Entertainment
business operations, as the change in attribution of Starz Media
from Liberty Capital to Liberty Starz became effective as of
September 30, 2010. Results for the three months ended December 31,
2010 and March 31, 2011 include the legacy Starz Entertainment and
the legacy Starz Media businesses.
On February 9, 2011, Liberty Media's Board of Directors approved
the change in attribution of (i) approximately $1.138 billion
principal amount of Liberty Media LLC's 3.125% Exchangeable Senior
Debentures due 2023 (the "TWX Exchangeable Notes"), (ii) 21,785,130
shares of Time Warner Inc. common stock, 5,468,254 shares of Time
Warner Cable Inc. common stock and 1,980,425 shares of AOL, Inc.
common stock, which collectively represent the basket of securities
into which the TWX Exchangeable Notes are exchangeable and (iii)
$263.8 million in cash from the Capital Group to the Interactive
Group, effective February 9, 2011 (the "TWX Reattribution"). The
TWX Reattribution had no effect on the assets and liabilities
attributed to the Starz Group, nor did it effect any change to the
obligor of the TWX Exchangeable Notes, which remains Liberty Media
LLC.
The following financial information is intended to supplement
Liberty’s consolidated statements of operations to be included in
its Form 10-Q.
Fair Value of Public Holdings and
Derivatives
(amounts in millions and include the value
of derivatives)
December 31,2010
March 31,2011
Expedia(1) 1,737
1,569 HSN(1) 568 593 Interval Leisure Group and Tree.com(1)
294 288 Non Strategic Public Holdings(2) -- 1,207
Total
Attributed Liberty Interactive Group 2,599 3,657
SIRIUS XM debt and equity(3) 4,650 4,661 Live Nation debt
and equity 389 362 Non-strategic public holdings(4) 2,482 1,336
Total Attributed Liberty Capital Group
7,521 6,359 (1)
Represents fair value of Liberty’s investments. In
accordance with GAAP, Liberty accounts for these investments using
the equity method of accounting and includes these investments in
its consolidated balance sheet at their historical carrying values.
(2) Represents Liberty’s non-strategic public holdings which are
accounted for at fair value including any associated equity
derivatives on such investments. Non-strategic public holdings
increased at Liberty Interactive group as a result of the TWX
Reattribution. (3) Represents the fair value of Liberty’s various
debt and equity investments in SIRIUS XM. The fair value of
Liberty’s convertible preferred stock is calculated on an
as-if-converted basis into common stock. In accordance with GAAP,
Liberty accounts for the convertible preferred stock using the
equity method of accounting and includes this in its consolidated
balance sheet at historical carrying value. (4) Represents
Liberty’s non-strategic public holdings which are accounted for at
fair value including any associated equity derivatives on such
investments. Also includes the liability associated with borrowed
shares which totaled $1,219 million and $1,125 million on December
31, 2010 and March 31, 2011, respectively. Non-strategic public
holdings decreased at Liberty Capital group as a result of the TWX
Reattribution.
Cash and Debt
The following presentation is provided to separately identify
cash and liquid investments and debt information.
(amounts in millions)
December 31,2010
March 31,2011
Cash and Liquid Investments Attributable to: Liberty
Interactive group(1) 1,089 1,350 Liberty Starz group(2) (3) 1,120
1,290 Liberty Capital group(4) (5) 1,546 1,319
Total Liberty Consolidated Cash and Liquid Investments
3,755 3,959 Less:
Short-term marketable securities – Liberty Interactive group -- 111
Short-term marketable securities – Liberty Starz group 175 149
Long-term marketable securities – Liberty Starz group 67 97
Short-term marketable securities – Liberty Capital group 334
165
Total Liberty Consolidated Cash (GAAP)
3,179 3,437 Debt: Senior
notes and debentures(6) 1,115 1,115 Senior exchangeable
debentures(7) 1,960 3,096 QVC senior notes(6) 2,000 2,000 QVC bank
credit facility 785 781 Other 79 53
Total
Attributed Liberty Interactive Group Debt 5,939
7,045 Unamortized discount (22 ) (22 ) Fair market value
adjustment (737 ) (404 )
Total Attributed Liberty Interactive
Group Debt (GAAP) 5,180 6,619
Other 105 81
Total Attributed Liberty Starz
Group Debt (GAAP) 105 81
Senior exchangeable debentures(7) 1,138 -- Bank investment facility
750 750
Total Attributed Liberty Capital Group
Debt 1,888 750 Fair market value adjustment 145
--
Total Attributed Liberty Capital Group Debt
(GAAP) 2,033 750
Total Consolidated Liberty Debt (GAAP) 7,318
7,450 (1) Includes $111 million of
short-term marketable securities with an original maturity greater
than 90 days as of March 31, 2011. (2) Includes $175 million and
$149 million of short-term marketable securities with an original
maturity greater than 90 days as of December 31, 2010 and March 31,
2011, respectively. (3) Includes $67 million and $97 million of
marketable securities with an original maturity greater than one
year as of December 31, 2010 and March 31, 2011, respectively,
which is reflected in investments in available-for-sale securities
in Liberty’s condensed consolidated balance sheet. (4) Includes
$334 million and $165 million of short-term marketable securities
with an original maturity greater than 90 days as of December 31,
2010 and March 31, 2011, respectively. (5) Excludes $503 million
and $590 million of restricted cash on December 31, 2010 and March
31, 2011, respectively, associated with the bank investment
facility which is reflected in other long-term assets in Liberty’s
December 31, 2010 consolidated balance sheet and in current
restricted cash at March 31, 2011, respectively. (6) Face amount of
Senior Notes and Debentures with no reduction for the unamortized
discount or fair market value adjustment. (7) Face amount of Senior
Exchangeable Debentures with no reduction for the fair market value
adjustment.
Total attributed Liberty Interactive group cash increased $261
million, primarily due to cash flow from operations at QVC and the
$264 million received from the Liberty Capital group in connection
with the TWX Reattribution. These cash inflows were partially
offset by capital expenditures, subsidiary debt payments and
intergroup tax payments. Total attributed Interactive group debt
increased by $1,138 million as a result of the TWX Reattribution.
This increase was partially offset by other subsidiary debt
repayments.
Total attributed Liberty Starz group cash increased $171
million, primarily as a result of cash flow from operations at
Starz LLC and intergroup tax receipts. Total attributed Starz group
debt decreased $24 million as a result of payments.
Total attributed Liberty Capital group cash decreased $227
million, primarily due to the TWX Reattribution and $80 million of
LCAPA stock repurchases. These cash outflows were partially offset
by returns on debt investments related to Liberty Capital’s bank
investment facility. Total attributed Capital group debt decreased
$1,138 million as a result of the TWX Reattribution.
Important Notice: Liberty Media Corporation (Nasdaq:
LCAPA, LCAPB, LINTA, LINTB, LSTZA, LSTZB,) President and CEO,
Gregory B. Maffei will discuss Liberty’s earnings release in a
conference call which will begin at 11:00 a.m. (ET) on May 6, 2011.
The call can be accessed by dialing (888) 293-6979 or (719)
325-2234 at least 10 minutes prior to the start time. Replays of
the conference call can be accessed until 8:00 p.m. (ET) May 13,
2011, by dialing (888) 203-1112 or (719) 457-0820 plus the pass
code 6157921#. The call will also be broadcast live across the
Internet and archived on our website. To access the webcast go to
http://www.libertymedia.com/events. Links to this press release
will also be available on the Liberty Media website.
This press release includes certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995, including statements about business strategies, market
potential, future financial prospects, international expansion, new
service and product launches, the impact of the Japanese tragedies,
the proposed split-off of our Liberty Capital and Liberty Starz
tracking stock groups 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, the ability of QVC Japan to restore to
pre-disaster sales levels, continued access to capital on terms
acceptable to Liberty Media, changes in law and government
regulations that may impact the derivative instruments that hedge
certain of our financial risks and the satisfaction of the
conditions to the proposed split-off. These forward looking
statements speak only as of the date of this press release, and
Liberty Media 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 Media’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 Media,
including the most recent Form 10-Q and Form 10-K, for additional
information about Liberty Media and about the risks and
uncertainties related to Liberty Media’s business which may affect
the statements made in this press release.
Additional Information
Nothing in this press release shall constitute a solicitation to
buy or an offer to sell shares of the split-off entity or any of
Liberty's tracking stocks. The offer and sale of shares in the
proposed split-off will only be made pursuant to Liberty Splitco,
Inc.'s effective registration statement. Liberty stockholders and
other investors are urged to read the effective registration
statement on file with the SEC, including Liberty's proxy
statement/prospectus contained therein, because they contain
important information about the split-off. Copies of these SEC
filings are available free of charge at the SEC’s website
(http://www.sec.gov). Copies of the filings together with the
materials incorporated by reference therein are also available,
without charge, by directing a request to Liberty Media
Corporation, 12300 Liberty Boulevard, Englewood, Colorado 80112,
Attention: Investor Relations, Telephone: (720) 875-5408.
Participants in a Solicitation
The directors and executive officers of Liberty and other
persons may be deemed to be participants in the solicitation of
proxies in respect of proposals to approve the split-off.
Information regarding the directors and executive officers of each
of Liberty and the split-off entity and other participants in the
proxy solicitation and a description of their respective direct and
indirect interests, by security holdings or otherwise, are
available in the definitive proxy materials on file with the
SEC.
SUPPLEMENTAL INFORMATION
As a supplement to Liberty’s consolidated statements of
operations, to be included in its Form 10-Q, the following is a
presentation of quarterly financial information and operating
metrics on a stand-alone basis for the two largest privately held
businesses (QVC and Starz, LLC) owned by Liberty at March 31,
2011.
Results for the Liberty Starz group include the legacy Starz
Entertainment and the legacy Starz Media businesses for the three
months ended December 31, 2010 and March 31, 2011. The historical
results for the three months ended March 31, 2010, June 30, 2010,
and September 30, 2010 only include the results for the legacy
Starz Entertainment business operations, as the change in
attribution of Starz Media from Liberty Capital to Liberty Starz
became effective as of September 30, 2010
Please see below for the definition of adjusted OIBDA and a
discussion of why management believes the presentation of adjusted
OIBDA provides useful information for investors. Schedule 2 to this
press release provides a reconciliation of adjusted OIBDA for each
identified entity to that entity’s operating income for the same
period, as determined under GAAP.
QUARTERLY SUMMARY
(amounts in millions) 1Q10
2Q10 3Q10 4Q10
1Q11
Liberty Interactive Group
QVC Revenue – US 1,156 1,193 1,167 1,719 1,192 Revenue –
International 601 565 604 802 643
Revenue – Total 1,757 1,758 1,771 2,521
1,835 Adjusted OIBDA – US 261 303 261 364 260
Adjusted OIBDA – International 105 100 108 169
103 Adjusted OIBDA – Total 366 403 369
533 363 Operating income – US 161 201 159 261
159 Operating income – International 71 69 76
132 66 Operating income – Total 232 270
235 393 225 Gross margin – US 35.6 % 37.3 %
35.9 % 33.1 % 35.1 % Gross margin – International 36.6 % 36.9 %
37.4 % 37.7 % 36.9 %
Liberty Starz Group Starz
LLC(1) Revenue 305 308 316 400 391 Adjusted OIBDA 106
107 92 110 131 Operating income 99 102 87 70 124 Subscription units
– Starz 17.1 17.3 17.4 18.2 18.8 Subscription units – Encore 31.1
31.9 32.0 32.8 33.1 (1)
Includes the legacy Starz Entertainment and the legacy Starz
Media businesses for the three months ended December 31, 2010 and
March 31, 2011 and only legacy Starz Entertainment results for the
three months ended March 31, 2010, June 30, 2010, and September 30,
2010 as the change in attribution of Starz Media from Liberty
Capital to Liberty Starz became effective as of September 30, 2010.
NON-GAAP FINANCIAL MEASURES
This press release includes a presentation of adjusted OIBDA,
which is a non-GAAP financial measure, for each of Liberty’s
tracking stock groups and each of QVC (and certain of its
subsidiaries), the eCommerce businesses, and Starz, LLC, together
with a reconciliation to that group’s or entity’s operating income,
as determined under GAAP. Liberty defines adjusted OIBDA as revenue
less cost of sales, operating expenses, and selling, general and
administrative expenses (excluding stock and other equity-based
compensation) and excludes from that definition depreciation and
amortization, restructuring and impairment charges and gains on
legal settlements 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 defines adjusted OIBDA margin as adjusted OIBDA divided by
revenue.
Liberty believes adjusted OIBDA is an important indicator of the
operational strength and performance of its businesses, including
each business’ ability to service debt and fund capital
expenditures. In addition, this measure allows management to view
operating results and perform analytical comparisons and
benchmarking between businesses and identify strategies to improve
performance. Because adjusted OIBDA is used as a measure of
operating performance, Liberty 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's management
considers in assessing the results of operations and performance of
its assets. Please see the attached schedules for applicable
reconciliations.
SCHEDULE 1
The following table provides a reconciliation of adjusted OIBDA
for each of Liberty Interactive group, Liberty Starz group, and
Liberty Capital group to that group’s operating income calculated
in accordance with GAAP for the three months ended March 31, 2010,
June 30, 2010, September 30, 2010, December 31, 2010, and March 31,
2011, respectively.
QUARTERLY SUMMARY
(amounts in millions) 1Q10
2Q10 3Q10 4Q10
1Q11
Liberty Interactive Group Adjusted
OIBDA 381 428 373 564 378 Depreciation and amortization (141 ) (139
) (141 ) (150 ) (149 ) Stock compensation expense (22 ) (15 ) (12 )
(18 ) (16 )
Operating Income 218 274
220 396 213
Liberty Starz Group Adjusted OIBDA 103 103 89 106 126
Depreciation and amortization (5 ) (4 ) (7 ) (2 ) (5 ) Stock
compensation expense (6 ) (3 ) (5 ) (38 ) (5 ) Impairment of
long-lived assets -- -- -- (4 ) --
Operating Income 92 96 77
62 116 Liberty Capital
Group Adjusted OIBDA (43 ) (59 ) 25
-- 358 Depreciation
and amortization (16 ) (21 ) (20 ) (15 ) (16 ) Stock compensation
expense (11 ) (3 ) (8 ) (9 ) (6 ) Gain on legal settlement --
-- -- 48 7
Operating Income
(Loss) (70 ) (83 ) (3
) 24 343
The following table provides a reconciliation of adjusted OIBDA
to earnings from continuing operations before income taxes for the
quarters ended March 31, 2010 and 2011, respectively.
(amounts in millions) 2010
2011 Liberty Interactive group $ 381 $ 378
Liberty Starz group 103 126 Liberty Capital group (43 )
358
Consolidated Adjusted OIBDA $
441 $ 862 Consolidated
segment adjusted OIBDA $ 441 $ 862 Stock-based compensation (39 )
(27 ) Depreciation and amortization (162 ) (170 ) Legal settlement
-- 7 Interest expense (170 ) (117 ) Share of earnings of
affiliates, net 9 15 Realized and unrealized gains on financial
instruments, net 167 43 Gains (losses) on dispositions, net 363 (2
) Other, net (2 ) 43
Earnings from
Continuing Operations Before Income Taxes $ 607
$ 654
SCHEDULE 2
The following table provides a reconciliation of adjusted OIBDA
for QVC (and certain of its subsidiaries), the eCommerce businesses
and Starz, LLC to that entity or group’s operating income (loss)
calculated in accordance with GAAP for the three months ended March
31, 2010, June 30, 2010, September, 30, 2010, December 31, 2010 and
March 31, 2011, respectively.
QUARTERLY SUMMARY
(amounts in millions) 1Q10
2Q10 3Q10 4Q10
1Q11
Liberty
Interactive Group
QVC QVC US adjusted OIBDA 261 303 261
364 260 QVC UK adjusted OIBDA 19 22 25 43 21 QVC
Germany adjusted OIBDA 42 30 38 71 49 QVC Japan adjusted OIBDA 48
53 54 69 43 QVC Italy adjusted OIBDA (4 ) (5 ) (9 ) (14 ) (10 ) QVC
International adjusted OIBDA 105 100 108 169
103 Total QVC adjusted OIBDA 366 403 369 533
363 Depreciation and amortization (129 ) (129 ) (129 ) (136 ) (134
) Stock compensation expense (5 ) (4 ) (5 ) (4 ) (4 )
Operating
Income 232 270 235
393 225 eCommerce
Businesses Adjusted OIBDA 18 28 10 47 29 Depreciation and
amortization (10 ) (11 ) (12 ) (15 ) (16 ) Stock compensation
expense (4 ) (9 ) 2 (4 ) (5 )
Operating Income
4 8 -- 28
8 Liberty Starz Group
Starz, LLC(1) Adjusted OIBDA 106 107 92 110 131
Depreciation and amortization (4 ) (4 ) (3 ) (5 ) (5 ) Stock
compensation expense (3 ) (1 ) (2 ) (35 ) (2 )
Operating
Income 99 102 87
70 124 (1) Includes the
legacy Starz Entertainment and the legacy Starz Media businesses
for the three months ended December 31, 2010 and March 31, 2011 and
only legacy Starz Entertainment results for the three months ended
March 31, 2010, June 30, 2010, and September 30, 2010 as the change
in attribution of Starz Media from Liberty Capital to Liberty Starz
became effective as of September 30, 2010.
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