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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2013
OR
o 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 001-33982
LIBERTY INTERACTIVE CORPORATION
(Exact name of Registrant as specified in its charter)
State of Delaware
(State or other jurisdiction of
incorporation or organization)
84-1288730
(I.R.S. Employer
Identification No.)
 
 
12300 Liberty Boulevard
Englewood, Colorado
(Address of principal executive offices)
80112
(Zip Code)
Registrant's telephone number, including area code: (720) 875-5300
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 x   No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x    No o
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o
(do not check if
smaller reporting company)
Smaller reporting company o
Indicate by check mark whether the Registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes o    No x
The number of outstanding shares of Liberty Interactive Corporation's common stock as of October 31, 2013 was:
 
Series A
 
Series B
Liberty Interactive common stock
479,504,070

 
28,891,103

Liberty Ventures common stock
35,351,097

 
1,442,689


 




LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(unaudited)
 
September 30,
2013
 
December 31,
2012
 
amounts in millions
Assets
 
 
 
Current assets:
 
 
 
    Cash and cash equivalents
$
981

 
2,660

Trade and other receivables, net of allowance for doubtful accounts of $82 million and $79 million
954

 
1,201

Inventory, net
1,328

 
1,106

Short term marketable securities (note 5)
552

 
186

Other current assets
152

 
105

        Total current assets
3,967

 
5,258

Investments in available-for-sale securities and other cost investments (note 6)
1,343

 
1,819

Investments in affiliates, accounted for using the equity method (note 7)
1,225

 
851

Property and equipment, at cost
2,201

 
2,170

Accumulated depreciation
(995
)
 
(935
)
 
1,206

 
1,235

Intangible assets not subject to amortization (note 8):
 
 
 
    Goodwill
9,553

 
9,556

    Trademarks
4,350

 
4,324

 
13,903

 
13,880

Intangible assets subject to amortization, net (note 8)
2,624

 
3,117

Other assets, at cost, net of accumulated amortization
102

 
95

    Total assets
$
24,370

 
26,255

 
(continued)
 

See accompanying notes to condensed consolidated financial statements.
I- 1


LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Continued)
(unaudited)
 
September 30,
2013
 
December 31, 2012
 
amounts in millions,
 
except share amounts
Liabilities and Equity
 
 
 
Current liabilities:
 
 
 
    Accounts payable
$
682

 
719

    Accrued liabilities
794

 
918

    Current portion of debt (note 9)
1,366

 
1,638

    Deferred income tax liabilities
942

 
912

    Other current liabilities
210

 
302

        Total current liabilities
3,994

 
4,489

Long-term debt, including $2,236 million and $2,930 million measured at fair value (note 9)
5,668

 
6,246

Deferred income tax liabilities
2,894

 
3,209

Other liabilities
255

 
260

    Total liabilities
12,811

 
14,204

Equity
 

 
 

Stockholders' equity (note 10):
 

 
 

    Preferred stock, $.01 par value. Authorized 50,000,000 shares; no shares issued
—

 
—

Series A Liberty Interactive common stock, $.01 par value. Authorized 4,000,000,000 shares; issued and outstanding 483,312,332 shares at September 30, 2013 and 516,009,627 shares at December 31, 2012
5

 
5

Series B Liberty Interactive common stock, $.01 par value. Authorized 150,000,000 shares; issued and outstanding 28,893,353 shares at September 30, 2013 and 28,942,403 shares at December 31, 2012
—

 
—

Series A Liberty Ventures common stock, $.01 par value. Authorized 200,000,000 shares; issued and outstanding 35,351,042 shares at September 30, 2013 and 35,355,434 shares at December 31, 2012
—

 
—

Series B Liberty Ventures common stock, $.01 par value. Authorized 7,500,000 shares; issued and outstanding 1,442,689 shares at September 30, 2013 and 1,446,916 shares at December 31, 2012
—

 
—

    Additional paid-in capital
1,478

 
2,225

    Accumulated other comprehensive earnings (loss), net of taxes
126

 
148

    Retained earnings
5,444

 
5,184

        Total stockholders' equity
7,053

 
7,562

Noncontrolling interests in equity of subsidiaries
4,506

 
4,489

    Total equity
11,559

 
12,051

Commitments and contingencies (note 11)


 


    Total liabilities and equity
$
24,370

 
26,255





See accompanying notes to condensed consolidated financial statements.
I- 2



LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements Of Operations
(unaudited)

 
Three months ended
September 30,
 
Nine months ended
September 30,
 
2013
 
2012
 
2013
 
2012
 
amounts in millions
Revenue:
 
 
 
 
 
 
 
Net retail sales
$
2,245

 
2,196

 
7,079

 
6,875

Other revenue
255

 
—

 
732

 
—

Total revenue
2,500

 
2,196

 
7,811

 
6,875

Operating costs and expenses:
 
 
 
 
 
 
 
Cost of sales (exclusive of depreciation shown separately below)
1,437

 
1,407

 
4,511

 
4,361

Operating, including stock-based compensation (note 3)
246

 
201

 
733

 
608

Selling, general and administrative, including stock-based compensation (note 3)
358

 
213

 
1,086

 
693

Impairment of intangible assets
19

 
39

 
19

 
39

Depreciation and amortization
235

 
147

 
702

 
437

 
2,295

 
2,007

 
7,051

 
6,138

Operating income
205

 
189

 
760

 
737

Other income (expense):
 
 
 
 
 
 
 
    Interest expense
(87
)
 
(111
)
 
(288
)
 
(324
)
    Share of earnings (losses) of affiliates, net (note 7)
29

 
43

 
25

 
89

Realized and unrealized gains (losses) on financial instruments, net (note 5)
15

 
(160
)
 
(49
)
 
(338
)
Gains (losses) on transactions, net
—

 
—

 
(2
)
 
288

Other, net
3

 
(2
)
 
(50
)
 
31

 
(40
)
 
(230
)
 
(364
)
 
(254
)
Earnings (loss) before income taxes
165

 
(41
)
 
396

 
483

    Income tax (expense) benefit
(34
)
 
15

 
(62
)
 
(155
)
Net earnings (loss)
131

 
(26
)
 
334

 
328

    Less net earnings (loss) attributable to the noncontrolling interests
18

 
15

 
74

 
44

Net earnings (loss) attributable to Liberty Interactive Corporation shareholders
$
113

 
(41
)
 
260

 
284

Net earnings (loss) attributable to Liberty Interactive Corporation shareholders:
 
 
 
 
 
 
 
    Liberty Interactive Corporation common stock
NA

 
(31
)
 
NA

 
294

    Liberty Interactive common stock
$
77

 
38

 
281

 
38

    Liberty Ventures common stock
36

 
(48
)
 
(21
)
 
(48
)
 
$
113

 
(41
)
 
260

 
284

 
 
 
 
 
 
 
 
 
(Continued)
 

See accompanying notes to condensed consolidated financial statements.
I- 3



LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements Of Operations (Continued)
(unaudited)
 
 
 
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
2013
 
2012
 
2013
 
2012
 
amounts in millions,
except per share amounts
Basic net earnings (losses) attributable to Liberty Interactive Corporation shareholders per common share (note 4):
 
 
 
 
 
 
 
Series A and Series B Liberty Interactive Corporation common stock
NA

 
(0.06
)
 
NA

 
0.53

Series A and Series B Liberty Interactive common stock
$
0.15

 
0.07

 
0.54

 
0.07

Series A and Series B Liberty Ventures common stock
$
1.00

 
(1.66
)
 
(0.58
)
 
(1.66
)
Diluted net earnings (losses) attributable to Liberty Interactive Corporation shareholders per common share (note 4):
 
 
 
 
 
 
 
Series A and Series B Liberty Interactive Corporation common stock
NA

 
(0.06
)
 
NA

 
0.52

Series A and Series B Liberty Interactive common stock
$
0.15

 
0.07

 
0.53

 
0.07

Series A and Series B Liberty Ventures common stock
$
0.97

 
(1.60
)
 
(0.57
)
 
(1.60
)


See accompanying notes to condensed consolidated financial statements.
I- 4



LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements Of Comprehensive Earnings (Loss)
(unaudited)
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
2013
 
2012
 
2013
 
2012
 
amounts in millions
Net earnings (loss)
$
131

 
(26
)
 
334

 
328

Other comprehensive earnings (loss), net of taxes:
 
 
 
 
 
 
 
    Foreign currency translation adjustments
74

 
35

 
(39
)
 
(1
)
    Unrealized holding gains (losses) arising during the period
1

 
—

 
—

 
—

 Share of other comprehensive earnings (losses) of equity affiliates
—

 
1

 
—

 
—

        Other comprehensive earnings (loss)
75

 
36

 
(39
)
 
(1
)
Comprehensive earnings (loss)
206

 
10

 
295

 
327

Less comprehensive earnings (loss) attributable to the noncontrolling interests
22

 
18

 
57

 
41

Comprehensive earnings (loss) attributable to Liberty Interactive Corporation shareholders
$
184

 
(8
)
 
238

 
286

Comprehensive earnings (loss) attributable to Liberty Interactive Corporation shareholders:
 
 
 
 
 
 
 
Liberty Interactive Corporation common stock
NA

 
(17
)
 
NA

 
277

Liberty Interactive common stock
$
145

 
57

 
256

 
57

Liberty Ventures common stock
39

 
(48
)
 
(18
)
 
(48
)
 
$
184

 
(8
)
 
238

 
286


See accompanying notes to condensed consolidated financial statements.
I- 5



LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements Of Cash Flows
(unaudited)
 
Nine months ended
September 30,
 
2013
 
2012
 
amounts in millions
Cash flows from operating activities:
 
 
 
    Net earnings (loss)
$
334

 
328

    Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
        Depreciation and amortization
702

 
437

        Stock-based compensation
124

 
53

        Cash payments for stock-based compensation
(8
)
 
(9
)
        Share of (earnings) losses of affiliates, net
(25
)
 
(89
)
        Cash receipts from returns on equity investments
25

 
21

        Realized and unrealized (gains) losses on financial instruments, net
49

 
338

        (Gains) losses on transactions, net
2

 
(288
)
        Impairment of intangible assets
19

 
39

        Deferred income tax expense (benefit)
(271
)
 
(34
)
        Other, net
72

 
(22
)
        Changes in operating assets and liabilities
 
 
 
            Current and other assets
15

 
162

            Payables and other liabilities
(287
)
 
8

                Net cash provided (used) by operating activities
751

 
944

Cash flows from investing activities:
 
 
 
Cash proceeds from dispositions of investments
1,136

 
348

    Investments in and loans to cost and equity investees
(371
)
 
(192
)
    Capital expended for property and equipment
(217
)
 
(237
)
Purchases of short term and other marketable securities
(1,388
)
 
—

    Sales of short term and other marketable securities
725

 
46

    Other investing activities, net
(53
)
 
(40
)
        Net cash provided (used) by investing activities
(168
)
 
(75
)
Cash flows from financing activities:
 
 
 
    Borrowings of debt
3,718

 
2,043

    Repayments of debt
(5,052
)
 
(1,238
)
Shares repurchased by subsidiary
(142
)
 
—

Shares issued by subsidiary
24

 
—

    Repurchases of Liberty Interactive common stock
(750
)
 
(690
)
    Other financing activities, net
(39
)
 
(30
)
        Net cash provided (used) by financing activities
(2,241
)
 
85

Effect of foreign currency exchange rates on cash
(21
)
 
(8
)
            Net increase (decrease) in cash and cash equivalents
(1,679
)
 
946

            Cash and cash equivalents at beginning of period
2,660

 
847

            Cash and cash equivalents at end of period
$
981

 
1,793



See accompanying notes to condensed consolidated financial statements.
I- 6



LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement Of Equity
(unaudited)
Nine months ended September 30, 2013
 
Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liberty
Interactive
 
Liberty
Ventures
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated other comprehensive earnings
 
 
 
Noncontrolling interest in equity of subsidiaries
 
 
 
Preferred Stock
 
Series A
 
Series B
 
Series A
 
Series B
 
Additional paid-in capital
 
 
Retained Earnings
 
 
Total equity
 
amounts in millions
Balance at January 1, 2013
$
—

 
5

 
—

 
—

 
—

 
2,225

 
148

 
5,184

 
4,489

 
12,051

    Net earnings (loss)
—

 
—

 
—

 
—

 
—

 
—

 
—

 
260

 
74

 
334

    Other comprehensive earnings (loss)
—

 
—

 
—

 
—

 
—

 
—

 
(22
)
 
—

 
(17
)
 
(39
)
    Stock-based compensation
—

 
—

 
—

 
—

 
—

 
68

 
—

 
—

 
35

 
103

Issuance of common stock upon exercise of stock options
—

 
—

 
—

 
—

 
—

 
3

 
—

 
—

 
—

 
3

Series A Liberty Interactive stock repurchases
—

 
—

 
—

 
—

 
—

 
(750
)
 
—

 
—

 
—

 
(750
)
Shares repurchased by subsidiary
—

 
—

 
—

 
—

 
—

 
(61
)
 
—

 
—

 
(81
)
 
(142
)
Shares issued by subsidiary
—

 
—

 
—

 
—

 
—

 
(7
)
 
—

 
—

 
31

 
24

    Distribution to noncontrolling interest
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(25
)
 
(25
)
Balance at September 30, 2013
$
—

 
5

 
—

 
—

 
—

 
1,478

 
126

 
5,444

 
4,506

 
11,559


See accompanying notes to condensed consolidated financial statements.
I- 7



LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
(1)
Basis of Presentation
The accompanying condensed consolidated financial statements include the accounts of Liberty Interactive Corporation and its controlled subsidiaries (collectively, "Liberty" or the "Company" unless the context otherwise requires). All significant intercompany accounts and transactions have been eliminated in consolidation.
Liberty, through its ownership of interests in subsidiaries and other companies, is primarily engaged in the video and on-line commerce industries in North America, Europe and Asia.
The accompanying (a) condensed consolidated balance sheet as of December 31, 2012, 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. Certain amounts included in the accompanying financial statements for 2012 have been reclassified and adjusted to conform to the 2013 financial statement presentation. During the current period, due to the increased level of activity, we changed the presentation of Net sales (purchases) of short term investments and other marketable securities to present gross amounts in the consolidated statement of cash flows, in order to conform to GAAP requirements. 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 thereto contained in Liberty's Annual Report on Form 10-K for the year ended December 31, 2012.
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. Liberty considers (i) fair value measurement, (ii) accounting for income taxes, (iii) assessments of other-than-temporary declines in fair value of its investments and (iv) estimates of retail-related adjustments and allowances to be its most significant estimates.
Liberty holds investments that are accounted for using the equity method. Liberty does not control the decision making process or business management practices of these affiliates. Accordingly, Liberty relies on management of these affiliates to provide it with accurate financial information prepared in accordance with GAAP that Liberty uses in the application of the equity method. In addition, Liberty relies on audit reports that are provided by the affiliates' independent auditors on the financial statements of such affiliates. The Company is not aware, however, of any errors in or possible misstatements of the financial information provided by its equity affiliates that would have a material effect on Liberty's condensed consolidated financial statements.
In September 2011, Liberty completed the split-off (the “Split-Off”) of its former wholly-owned subsidiary (then named Liberty Media Corporation), which at the time of the Split-Off held all of the businesses, assets and liabilities attributed to Liberty's then Capital and Starz tracking stock groups. In January 2013, this entity (now named Starz) spun-off (the “Spin-Off”) its former wholly-owned subsidiary, Liberty Media Corporation ("LMC"). Following the Split-Off and Spin-Off, Liberty, LMC and Starz each operate as separate publicly traded companies, none of which has any stock ownership, beneficial or otherwise, in the other.

In connection with the Split-Off, Liberty entered a Reorganization Agreement, a Services Agreement, a Facilities Sharing Agreement and a Tax Sharing Agreement with the split-off entity (now known as Starz). All of these agreements, with the exception of the Tax Sharing Agreement, were assigned by Starz to LMC in connection with the Spin-Off. The Reorganization Agreement provides for, among other things, provisions governing the relationship between Liberty


I- 8


LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)


and LMC following the Split-Off, including certain cross-indemnities. Pursuant to the Services Agreement, LMC provides Liberty with certain general and administrative services including legal, tax, accounting, treasury and investor relations support. Liberty reimburses LMC for direct, out-of-pocket expenses incurred by LMC in providing these services and for Liberty's allocable portion of costs associated with any shared services or personnel based on an estimated percentage of time spent providing services to Liberty. Under the Facilities Sharing Agreement, LMC shares office space and related amenities at its corporate headquarters with Liberty. Under these various agreements, approximately $4 million and $12 million of allocated expenses were reimbursable by Liberty to LMC for the three and nine months ended September 30, 2013, respectively, and approximately $4 million and $9 million for the three and nine months ended September 30, 2012, respectively. The Tax Sharing Agreement provides for the allocation and indemnification of tax liabilities and benefits between Liberty and Starz and other agreements related to tax matters. With respect to the Split-Off, the IRS has examined the transaction, and during 2012, the IRS and Liberty Interactive entered into a Closing Agreement which provides that the Split-Off qualified for tax-free treatment to Liberty and Starz.   In April 2013, the IRS completed its review of the Spin-Off and notified the parties that it agreed with the nontaxable characterization of the transaction.

On December 11, 2012, we acquired approximately 4.8 million additional shares of common stock of TripAdvisor, Inc. ("TripAdvisor") (an additional 4% equity ownership interest), for $300 million, along with the right to control the vote of the shares of TripAdvisor's common stock and class B common stock we own. Following the transaction, we own approximately 22% of the equity and 57% of the total votes of all classes of TripAdvisor common stock. As this transaction resulted in Liberty gaining control of TripAdvisor, we applied the applicable purchase accounting guidance. The fair value of our ownership interest previously held and the fair value of the noncontrolling interest (Level 1) was determined based on the trading price of TripAdvisor common shares on the last trading day prior to our transaction. Additionally, the noncontrolling interest includes the fair value of TripAdvisor's fully vested options (Level 2) outstanding at the date of acquisition. Following the transaction date, TripAdvisor is a consolidated subsidiary with a 78% noncontrolling interest accounted for in equity and the condensed consolidated statements of operations. Other than a $30 million re-classification from the "Intangibles subject to amortization" line item to the "Trademarks" line item, there have been no significant changes to our purchase price allocation since December 31, 2012.

Liberty announced that its board has authorized management to pursue a plan to recapitalize (the "Recapitalization") its Liberty Interactive Group tracking stock into two new tracking stocks, one (currently the Liberty Interactive common stock) to be renamed the QVC Group common stock and the other to be designated as the Liberty Digital Commerce common stock. In the Recapitalization, record holders of Series A and Series B Liberty Interactive common stock would receive 1 share of the corresponding series of Liberty Digital Commerce common stock for each 10 shares of the renamed QVC Group common stock held by them as of the effective date. Liberty intends to attribute to the Liberty Digital Commerce Group its operating subsidiaries Provide Commerce, Inc., Backcountry.com, Inc., Bodybuilding.com, LLC, CommerceHub, Right Start and Evite along with cash and certain liabilities. The QVC Group, which is currently known as the Liberty Interactive Group, would have attributed to it Liberty's subsidiary QVC, Inc. and an approximate 38% interest in HSN, Inc. ("HSNi"), along with cash and certain liabilities.
    
Additionally, Liberty announced that its board has also authorized management to pursue a plan to spin-off to holders of its Liberty Ventures Group tracking stock shares of a newly formed company (the “Trip spin-off”) to be called Liberty TripAdvisor Holdings ("Trip Holdings"). Trip Holdings would be comprised of, among other things, Liberty's 22% economic and 57% voting interest in TripAdvisor, as well as Liberty's BuySeasons business, which is currently a part of Liberty's subsidiary Celebrate Interactive, LLC ("Celebrate Interactive"). BuySeasons would be reattributed from the Liberty Interactive Group to the Liberty Ventures Group prior to the Trip spin-off (or, if following the Recapitalization, from the new Liberty Digital Commerce Group to the Liberty Ventures Group) and cash equal to the fair market value of BuySeasons would be reattributed from the Liberty Ventures Group to the Liberty Interactive Group. The Evite business, also currently a part of Celebrate Interactive, would remain at Liberty attributed to the Liberty Interactive Group (or, assuming the completion of the Recapitalization, the new Liberty Digital Commerce


I- 9


LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)


Group). In the Trip spin-off, record holders of Series A and Series B Liberty Ventures common stock would receive 1 share of the corresponding series of Trip Holdings common stock for each share of the Liberty Ventures common stock held by them as of a to-be-determined record date.
    
The Recapitalization and the Trip spin-off will be subject to various conditions. The Recapitalization is subject to the requisite approval of the holders of Liberty Interactive common stock and Liberty Ventures common stock at a stockholders' meeting and the receipt of the opinion of tax counsel. The Trip spin-off is intended to be tax-free to stockholders of Liberty and its completion is conditioned upon the receipt of an IRS private letter ruling and an opinion of tax counsel. Subject to the satisfaction of these conditions and final board consideration and approval, the Recapitalization and Trip spin-off are expected to occur in the first half of 2014. However, neither the Recapitalization nor the Trip spin-off is conditioned on the other, and no assurance can be given as to which transaction will occur first, if at all.


(2)   Tracking Stocks

On August 9, 2012, Liberty completed the approved recapitalization (the "2012 recapitalization") of its common stock through the creation of the Liberty Interactive common stock and Liberty Ventures common stock as tracking stocks. In the 2012 recapitalization, each holder of Liberty Interactive Corporation common stock remained a holder of the same amount and series of Liberty Interactive common stock and received 0.05 of a share of the corresponding series of Liberty Ventures common stock, by means of a dividend, with cash issued in lieu of fractional shares of Liberty Ventures common stock.
A 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 has two tracking stocks—Liberty Interactive common stock and Liberty Ventures common stock, which are intended to track and reflect the economic performance of the Interactive Group and Ventures Group, respectively. While the Interactive Group and the Ventures Group have separate collections of businesses, assets and liabilities attributed to them, no group is a separate legal entity and therefore cannot own assets, issue securities or enter into legally binding agreements. Holders of tracking stocks have no direct claim to the group's stock or assets and are not represented by separate boards of directors. Instead, holders of tracking stock are stockholders of the parent corporation, with a single board of directors and subject to all of the risks and liabilities of the parent corporation.
The term "Ventures Group" does not represent a separate legal entity, rather it represents those businesses, assets and liabilities that have been attributed to that group. The Ventures Group is primarily comprised of TripAdvisor, a consolidated subsidiary, and interests in Expedia, Inc., Interval Leisure Group, Inc., Tree.com, Inc., investments in Time Warner Inc. and Time Warner Cable Inc., as well as cash in the amount of approximately $526 million (at September 30, 2013). The Ventures Group also has attributed to it certain liabilities related to our corporate indebtedness (see note 9) and certain deferred tax liabilities. The Ventures Group is primarily focused on the maximization of the value of these investments and investing in new business opportunities.
The term "Interactive Group" does not represent a separate legal entity, rather it represents those businesses, assets and liabilities that have been attributed to that group. The Interactive Group is primarily focused on video and e-commerce operating businesses and has attributed to it the remainder of Liberty's businesses and assets, including operating subsidiaries QVC, Inc. ("QVC"), Provide Commerce, Inc., Backcountry.com, Inc., Bodybuilding.com, LLC, Celebrate Interactive Holdings, LLC and CommerceHub as well as interests in HSN, Inc., and cash of approximately $455 million (at September 30, 2013), which includes subsidiary cash. The Interactive Group has attributed to it liabilities that reside with QVC and the other entities listed as well certain liabilities related to our corporate indebtedness (see note 9) and certain deferred tax liabilities.


I- 10


LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)


See Exhibit 99.1 to this Quarterly Report on Form 10-Q for unaudited attributed financial information for Liberty's tracking stock groups.
(3) Stock-Based Compensation
The Company has granted to certain of its directors, employees and employees of its subsidiaries stock appreciation rights ("SARs"), restricted stock grants and options to purchase shares of Liberty common stock (collectively, "Awards"). The Company measures the cost of employee services received in exchange for an equity classified Award (such as stock options and restricted stock grants) based on the grant-date fair value 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 (such as stock appreciation rights that will be settled in cash) based on the current fair value of the Award, and remeasures the fair value of the Award at each reporting date.
Included in the accompanying condensed consolidated statements of operations are the following amounts of stock-based compensation, a portion of which relates to TripAdvisor as discussed below:
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
2013
 
2012
 
2013
 
2012
 
(amounts in millions)
Operating expense
$
7

 
—

 
20

—

—

Selling, general and administrative expense
31

 
18

 
104

 
53

 
$
38

 
18

 
124

 
53

During the nine months ended September 30, 2013, Liberty granted, primarily to QVC employees, 4.2 million options to purchase shares of Series A Liberty Interactive common stock. Such options had a weighted average grant-date fair value of $8.16 per share and vest semi-annually over the 4 year vesting period.
The Company has calculated the grant-date fair value for all of its equity classified Awards and any subsequent remeasurement of its liability classified Awards using the Black-Scholes Model. The Company 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 Liberty's stock and the implied volatility of publicly traded Liberty options. The Company uses a zero dividend rate and the risk-free rate for Treasury Bonds with a term similar to that of the subject options.


I- 11


LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)


Liberty—Outstanding Awards
The following tables present the number and weighted average exercise price ("WAEP") of the Awards to purchase Liberty Interactive and Liberty Ventures common stock granted to certain officers, employees and directors of the Company.
 
Liberty Interactive
 
Series A (000's)
 
WAEP
 
Series B (000's)
 
WAEP
Outstanding at January 1, 2013
33,839

 
$
16.92

 
432

 
$
17.92

Granted
4,188

 
$
21.08

 
—

 
$
—

Exercised
(3,836
)
 
$
12.84

 
—

 
$
—

Forfeited/Cancelled
(544
)
 
$
15.00

 
—

 
$
—

Outstanding at September 30, 2013
33,647

 
$
17.93

 
432

 
$
17.92

Exercisable at September 30, 2013
14,055

 
$
16.17

 
432

 
$
17.92


 
Liberty Ventures
 
Series A (000's)
 
WAEP
 
Series B (000's)
 
WAEP
Outstanding at January 1, 2013
1,155

 
$
56.26

 
22

 
$
46.69

Granted
—

 
$
—

 
—

 
$
—

Exercised
(98
)
 
$
48.81

 
—

 
$
—

Forfeited/Cancelled
(1
)
 
$
43.48

 
—

 
$
—

Outstanding at September 30, 2013
1,056

 
$
56.96

 
22

 
$
46.69

Exercisable at September 30, 2013
444

 
$
54.82

 
22

 
$
46.69

The following table provides additional information about outstanding Awards to purchase Liberty Interactive and Liberty Ventures common stock at September 30, 2013.
 
No. of
outstanding
Awards (000's)
 
WAEP of
outstanding
Awards
 
Weighted
average
remaining
life
 
Aggregate
intrinsic
value
(000's)
 
No. of
exercisable
Awards
(000's)
 
WAEP of
exercisable
Awards
 
Weighted
average
remaining
life
 
Aggregate
intrinsic
value
(000's)
Series A Liberty Interactive
33,647

 
$
17.93

 
5.1 years
 
$
186,764

 
14,055

 
$
16.17

 
4.1 years
 
$
102,874

Series B Liberty Interactive
432

 
$
17.92

 
1.7 years
 
$
2,523

 
432

 
$
17.92

 
1.7 years
 
$
2,523

Series A Liberty Ventures
1,056

 
$
56.96

 
5.0 years
 
$
32,988

 
444

 
$
54.82

 
4.2 years
 
$
14,835

Series B Liberty Ventures
22

 
$
46.69

 
1.7 years
 
$
931

 
22

 
$
46.69

 
1.7 years
 
$
931

As of September 30, 2013, the total unrecognized compensation cost related to unvested Liberty outstanding equity Awards was approximately $125 million, including compensation associated with the option exchange that occured in December 2012. Such amount will be recognized in the Company's consolidated statements of operations over a weighted average period of approximately 2.3 years.


I- 12


LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)


TripAdvisor - Stock-based Compensation
During the nine months ended September 30, 2013, TripAdvisor issued 2.8 million of primarily service based stock options under their 2011 Incentive Plan with a weighted average estimated grant-date fair value per option of $28.11. As of September 30, 2013, TripAdvisor has 9.7 million options outstanding of which 3.5 million are exercisable. TripAdvisor stock-based compensation for the three and nine months ended September 30, 2013 was approximately $14 million and $44 million, respectively. As of September 30, 2013, the total unrecognized compensation cost related to unvested TripAdvisor stock options was approximately $112 million and will be recognized over a weighted average period of approximately 3.5 years.
Additionally, during the nine months ended September 30, 2013, TripAdvisor granted 1.1 million service based RSUs under their 2011 Incentive Plan for which the fair value was measured based on the quoted price of TripAdvisor common stock at the date of grant. As of September 30, 2013, the total unrecognized compensation cost related to 1.1 million unvested TripAdvisor RSUs was approximately $39 million and will be recognized over a weighted average period of approximately 3.3 years.
Other
Certain of the Company's other subsidiaries have stock based compensation plans under which employees and non-employees are granted options or similar stock based awards. Awards made under these plans vest and become exercisable over various terms. The awards and compensation recorded, if any, under these plans is not significant to Liberty.
(4)
Earnings (Loss) Per Common Share
Basic earnings (loss) per common share ("EPS") is computed by dividing net earnings (loss) by the weighted average number of common shares outstanding 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.
Series A and Series B Liberty Interactive Corporation Common Stock
The basic and diluted EPS calculation for Liberty Interactive Corporation prior to the recapitalization is based on the following number of weighted average shares outstanding. Excluded from diluted EPS, for the three and nine months ended September 30, 2012, prior to the 2012 recapitalization, are 7 million potential common shares because their inclusion would be antidilutive. As discussed in more detail in note 2, Liberty Interactive Corporation common stock was recapitalized through the creation of the Liberty Interactive common stock and Liberty Ventures common stock as tracking stocks during the third quarter of 2012. Therefore, there is no Liberty Interactive Corporation common stock outstanding at September 30, 2013.
 
Liberty Interactive Corporation Common Stock
 
July 1, 2012 through August 9, 2012
 
January 1, 2012 through August 9, 2012
 
number of shares in millions
Basic EPS
542

 
559

  Potentially dilutive shares
10

 
9

Diluted EPS
552

 
568



I- 13


LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)


Series A and Series B Liberty Interactive Common Stock
Liberty completed a recapitalization on August 9, 2012, whereby each holder of then-existing Liberty Interactive Corporation common stock became a holder of the same number of shares of Liberty Interactive common stock. Excluded from diluted EPS, for the three and nine months ended September 30, 2013, are less than a million potential common shares because their inclusion would be antidilutive.
 
Liberty Interactive Common Stock
 
Three months ended
September 30, 2013
 
Nine months ended
September 30, 2013
 
August 9, 2012 through September 30, 2012
 
number of shares in millions
Basic EPS
513

 
524

 
542

  Potentially dilutive shares
10

 
8

 
10

Diluted EPS
523

 
532

 
552

Series A and Series B Liberty Ventures Common Stock
Liberty completed a recapitalization on August 9, 2012, whereby each holder of then-existing Liberty Interactive Corporation common stock received 0.05 of a share of the corresponding series of Liberty Ventures common stock, by means of a dividend, with cash paid in lieu of fractional shares of Liberty Ventures common stock. Excluded from diluted EPS, for the three and nine months ended September 30, 2013, are less than a million potential common shares because their inclusion would be antidilutive.
 
Liberty Ventures Common Stock
 
Three months ended
September 30, 2013
 
Nine months ended
September 30, 2013
 
August 9, 2012 through September 30, 2012
 
number of shares in millions
Basic EPS
36

 
36

 
29
  Potentially dilutive shares
1

 
1

 
1
Diluted EPS
37

 
37

 
30
(5) 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.








I- 14


LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)


The Company's assets and liabilities measured at fair value are as follows:
 
 
 
Fair Value Measurements at September 30, 2013
Description
Total
 
Quoted prices
in active markets
for identical assets
(Level 1)
 
Significant other
observable
inputs
(Level 2)
 
Significant
unobservable
inputs
(Level 3)
 
 
 
amounts in millions
Cash equivalents
$
600

 
600

 
—

 
—

Short term marketable securities
$
552

 
—

 
552

 
—

Available-for-sale securities
$
1,339

 
899

 
440

 
—

Debt
$
2,236

 
—

 
2,236

 
—

The majority of the Company's Level 2 financial assets and liabilities are debt instruments with quoted market prices that are not considered to be traded on "active markets," as defined in GAAP.
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
September 30,
 
Nine months ended
September 30,
 
2013
 
2012
 
2013
 
2012
 
amounts in millions
Fair Value Option Securities
$
31

 
237

 
367

 
418

Exchangeable senior debentures
(15
)
 
(293
)
 
(431
)
 
(510
)
Other derivatives (a)
(1
)
 
(104
)
 
15

 
(246
)
 
$
15

 
(160
)
 
(49
)
 
(338
)

(a)
In the first quarter of 2012, we entered into a forward contract to sell 12 million Expedia, Inc. shares at approximately $34 per share. The derivative contract was in a liability position in the prior year as the stock price of Expedia, Inc. shares had increased since the inception of the derivative contract and resulted in a recognition of unrealized losses on the contract in the prior year. The contract was settled during the fourth quarter of 2012.
(6) Investments in Available-for-Sale Securities and Other Cost Investments
All marketable equity and debt securities held by the Company are classified as available-for-sale ("AFS") and are carried at fair value based on quoted market prices. GAAP permits entities to choose to measure many financial instruments, such as AFS securities, and certain other items at fair value and to recognize the changes in fair value of such instruments in the entity's statement of operations (the "fair value option"). In prior years, Liberty entered into economic hedges for certain of its non-strategic AFS securities (although such instruments were not accounted for as fair value hedges by the Company). Changes in the fair value of these economic hedges were reflected in Liberty's statements of operations as unrealized gains (losses). In order to better match the changes in fair value of the subject AFS securities and the changes in fair value of the corresponding economic hedges in the Company's financial statements, Liberty elected the fair value option for those of its AFS securities which it considered to be non-strategic ("Fair Value Option Securities"). Accordingly, changes in the fair value of Fair Value Option Securities, as determined


I- 15


LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)


by quoted market prices, are reported in realized and unrealized gains (losses) on financial instruments in the accompanying condensed consolidated statements of operations.
Investments in AFS securities, the majority of which are considered Fair Value Option Securities, and other cost investments are summarized as follows:
 
September 30,
2013
 
December 31, 2012
 
amounts in millions
Interactive Group
 
 
 
    Other cost investments
$
4

 
4

        Total attributed Interactive Group
4

 
4

Ventures Group
 
 
 
    Time Warner Inc. (1)
289

 
1,042

    Time Warner Cable Inc.
610

 
531

    AOL Inc. (1)
—

 
59

    TripAdvisor AFS securities
164

 
99

    Other AFS investments
276

 
84

     Total attributed Ventures Group
1,339

 
1,815

Consolidated Liberty
$
1,343

 
1,819


(1) Liberty sold 17.4 million shares of Time Warner Inc. and 2.0 million shares of AOL Inc. for proceeds of $1,099 million during the three months ended June 30, 2013 in connection with the redemption of the 3.125% Exchangeable Senior Debentures, as discussed in note 9.
(7)
Investments in Affiliates Accounted for Using the Equity Method
Liberty has various investments accounted for using the equity method. The following table includes Liberty's carrying amount, fair value, and percentage ownership of the more significant investments in affiliates at September 30, 2013 and the carrying amount at December 31, 2012:
 
September 30, 2013
 
December 31, 2012
 
Percentage
ownership
 
Fair value (Level 1)
 
Carrying
amount
 
Carrying
amount
 
 
 
dollars in millions
Interactive Group
 
 
 
 
 
 
 
    HSN, Inc.
38
%
 
$
1,073

 
$
283

 
242

    Other
various

 
NA

 
52

 
62

        Total Interactive Group
 
 
 
 
335

 
304

Ventures Group
 
 
 
 
 
 
 
    Expedia, Inc. (1)
17
%
 
1,196

 
465

 
431

    Other (2)
various

 
NA

 
425

 
116

        Total Ventures Group
 
 
 
 
890

 
547

Consolidated Liberty
 

 
 

 
$
1,225

 
851

(1)
Liberty's 22% owned consolidated subsidiary TripAdvisor, Inc. earned revenue of approximately $56 million and $171 million for the three and nine months ended September 30, 2013,


I- 16


LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)


respectively, and $57 million and $164 million for the three and nine months ended September 30, 2012, respectively, from Expedia, Inc. (TripAdvisor's former parent).
(2)
Liberty invested $300 million in a solar energy plant on September 30, 2013. Liberty expects to receive a portion of the initial investment back within a year as the entity expects to receive grant proceeds and other favorable tax attributes once the solar plant is operational. Similar to some of Liberty's other alternative energy investments, the Company expects to record the Company's share of losses of the solar plant initially but expects to record the impacts of favorable tax attributes (primarily accelerated depreciation) as a current tax benefit with an offsetting deferred tax expense in the tax expense (benefit) line item in the Statement of Operations.
The following table presents Liberty's share of earnings (losses) of affiliates:
 
Three months ended September 30,
 
Nine months ended September 30,
 
2013
 
2012
 
2013
 
2012
 
amounts in millions
Interactive Group
 
 
 
 
 
 
 
    HSN, Inc.
$
15

 
10

 
46

 
34

    Other
(2
)
 
(4
)
 
(13
)
 
(8
)
        Total Interactive Group
13

 
6

 
33

 
26

Ventures Group
 
 
 
 
 
 
 
    Expedia, Inc.
27

 
41

 
17

 
65

    TripAdvisor, Inc. (1)
NA

 
10

 
NA

 
33

    Other
(11
)
 
(14
)
 
(25
)
 
(35
)
        Total Ventures Group
16

 
37

 
(8
)
 
63

Consolidated Liberty
$
29

 
43

 
25

 
89

(1)
On December 11, 2012, we acquired approximately 4.8 million additional shares of common stock of TripAdvisor (an additional 4% equity ownership interest), for $300 million, and obtained voting control of TripAdvisor. Following the date of this transaction, TripAdvisor is accounted for as a consolidated subsidiary. See note 1 for additional details of this transaction.
(8) Intangible Assets
Goodwill
Changes in the carrying amount of goodwill are as follows:
 
QVC
 
E-commerce
 
TripAdvisor
 
Total
 
amounts in millions
Balance at January 1, 2013
$
5,349

 
558

 
3,649

 
9,556

Foreign currency translation adjustments
(29
)
 
—

 
—

 
(29
)
Acquisitions (1)
—

 
(10
)
 
36

 
26

Balance at September 30, 2013
$
5,320

 
548

 
3,685

 
9,553

(1)
The $36 million increase to TripAdvisor goodwill during the period is primarily attributable to certain acquisitions made by TripAdvisor during the nine months ended September 30, 2013 and to a lesser extent


I- 17


LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)


certain purchase price allocation adjustments recorded in connection with our acquisition of a controlling interest in TripAdvisor during December 2012.
Intangible Assets Subject to Amortization
Amortization expense for intangible assets with finite useful lives was $201 million and $589 million for the three and nine months ended September 30, 2013, respectively, and $114 million and $331 million for the three and nine months ended September 30, 2012, respectively. Based on its amortizable intangible assets as of September 30, 2013, Liberty expects that amortization expense will be as follows for the next five years (amounts in millions):
Remainder of 2013
$
207

2014
$
738

2015
$
637

2016
$
520

2017
$
366



I- 18


LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)


(9) Long-Term Debt
Debt is summarized as follows:
 
 
Outstanding principal at September 30, 2013
 
Carrying value
 
 
September 30, 2013
 
December 31, 2012
 
 
amounts in millions
Interactive Group
 
 
 
 
 
 
5.7% Senior Notes due May 2013
$
—

 
—

 
240

 
8.5% Senior Debentures due 2029
287

 
285

 
285

 
8.25% Senior Debentures due 2030
505

 
501

 
501

 
1% Exchangeable Senior Debentures due 2043
400

 
413

 
—

 
QVC 7.125% Senior Secured Notes due 2017
—

 
—

 
500

 
QVC 7.5% Senior Secured Notes due 2019
769

 
760

 
988

 
QVC 7.375% Senior Secured Notes due 2020
500

 
500

 
500

 
QVC 5.125% Senior Secured Notes due 2022
500

 
500

 
500

 
QVC 4.375% Senior Secured Notes due 2023
750

 
750

 
—

 
QVC 5.95% Senior Secured Notes due 2043
300

 
300

 
—

 
QVC Bank Credit Facilities
673

 
673

 
903

 
Other subsidiary debt
153

 
153

 
125

     Total Interactive Group
4,837

 
4,835

 
4,542

Ventures Group
 
 
 
 
 
 
3.125% Exchangeable Senior Debentures due 2023
—

 
—

 
1,639

 
4% Exchangeable Senior Debentures due 2029
439

 
277

 
311

 
3.75% Exchangeable Senior Debentures due 2030
439

 
276

 
297

 
3.5% Exchangeable Senior Debentures due 2031
363

 
308

 
292

 
3.25% Exchangeable Senior Debentures due 2031
—

 
—

 
391

 
0.75% Exchangeable Senior Debentures due 2043
850

 
962

 
—

 
TripAdvisor Debt Facilities
376

 
376

 
412

     Total Ventures Group debt
2,467

 
2,199

 
3,342

 
 
 
 
 
 
 
Total consolidated Liberty debt
$
7,304

 
7,034

 
7,884

 
Less current classification
 

 
(1,366
)
 
(1,638
)
 
Total long-term debt
 
 
$
5,668

 
6,246

QVC Bank Credit Facilities
On March 1, 2013, QVC entered into an amended and restated syndicated senior secured credit agreement which served to refinance QVC's existing bank credit facility (the “Amended and Restated Credit Agreement”). The Amended and Restated Credit Agreement is a multi-currency facility providing for a $2 billion revolving credit facility, with a $250 million sub-limit for standby letters of credit and $1 billion of uncommitted incremental revolving loan commitments or incremental term loans. The loans are scheduled to mature on March 1, 2018. The covenants contained in the Amended and Restated Credit Agreement are substantially similar to those contained in QVC's previously existing bank credit facility. Borrowings under the Amended and Restated Credit Agreement bear interest at either the alternate


I- 19


LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)


base rate or LIBOR (based on an interest period selected by QVC of one week, one month, two months, three months or six months, or to the extent available from all lenders, nine months or twelve months) at QVC's election in each case plus a margin. Borrowings that are alternate base rate loans will bear interest at a per annum rate equal to the base rate plus a margin that varies between 0.25% and 1.00% depending on QVC's ratio of consolidated total debt to consolidated Adjusted OIBDA (the “consolidated leverage ratio”). Borrowings that are LIBOR loans will bear interest at a per annum rate equal to the applicable LIBOR plus a margin that varies between 1.25% and 2.00% depending on QVC's consolidated leverage ratio. Each loan may be prepaid at any time and from time to time without penalty other than customary breakage costs. Any amounts prepaid on the revolving facility may be reborrowed. The Amended and Restated Credit Agreement is secured by the stock of QVC. Availability under the QVC Amended and Restated Credit Agreement at September 30, 2013 was $1,327 million. QVC was in compliance with all debt covenants related to the Amended and Restated Credit Agreement at September 30, 2013.
QVC Senior Secured Notes
On March 4, 2013, QVC announced the commencement of cash tender offers (the “Offers”) for any and all of its outstanding $500 million in aggregate principal amount of 7.125% senior secured notes due 2017 (the “7.125% Senior Notes”) and up to $250 million in aggregate principal amount of its 7.5% senior secured notes due 2019 (the “7.5% Senior Notes”). The Offer for the 7.125% Senior Notes expired on March 15, 2013, and the Offer for the 7.5% Senior Notes expired on April 1, 2013. Approximately $124 million of the 7.125% Senior Notes were tendered pursuant to the Offers, whereby holders of the 7.125% Senior Notes received consideration of $1,039.40 for each $1,000 principal amount of tendered 7.125% Senior Notes purchased pursuant to the Offers. QVC called the remaining $376 million principal of its 7.125% Senior Notes at $1,035.63 for each $1,000 principal amount of 7.125% Senior Notes on April 17, 2013. Approximately $231 million of the 7.5% Senior Notes were tendered pursuant to the Offers. The total consideration for the 7.5% Senior Notes was $1,120 for each $1,000 principal amount of tendered 7.5% Senior Notes.
On March 18, 2013, QVC completed the offering of $750 million principal amount of new 4.375% senior secured notes due 2023 and $300 million principal amount of new 5.95% senior secured notes due 2043 (collectively, the “Notes”). The Notes are secured by a first-priority lien on QVC's capital stock, pari passu with the Amended and Restated Credit Agreement and QVC's existing notes. The net proceeds from the offering of the Notes were used to fund the Offers, repay outstanding amounts on QVC's existing bank credit facility and, via dividend from QVC, retire Liberty's 5.7% Senior Notes due May 2013, and for general corporate purposes.
As a result of these refinancing transactions, QVC recorded extinguishment losses of $57 million for the nine months ended September 30, 2013, which is recorded in other, net in the Company's statements of operations.
QVC was in compliance with all of its debt covenants related to its outstanding senior notes at September 30, 2013.
QVC Interest Rate Swap Arrangements
In March 2013, QVC's notional interest rate swaps of $3.1 billion expired. These swap arrangements did not qualify as cash flow hedges under GAAP. Accordingly, changes in the fair value of the swaps were reflected in realized and unrealized gains or losses on financial instruments in the accompanying condensed consolidated statements of operations.
Interactive Exchangeable Senior Debentures
On September 9, 2013, Liberty LLC, a wholly owned subsidiary of Liberty, issued $400 million aggregate original principal amount of the 1% Exchangeable Senior Debentures due 2043 (the "HSNi Exchangeables"). The HSNi Exchangeables mature on September 30, 2043 and interest on the HSNi Exchangeables accrues at an annual rate of 1% of the original principal amount of $1,000 per debenture, payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing December 31, 2013. Each $1,000 original principal amount


I- 20


LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)


of HSNi Exchangeables is initially exchangeable for 13.4580 shares of common stock of HSNi (the "HSNi Reference Shares").
Each of the HSNi Exchangeables is exchangeable at the option of the holder after the calendar quarter ending March 31, 2014, upon achieving certain trading prices of the underlying HSNi Reference Shares. Upon exchange, holders of HSNi Exchangeables will be entitled to receive the HSNi Reference Shares attributable to such HSNi Exchangeables or, at the election of Liberty LLC, cash or a combination of HSNi Reference Shares and cash having a value equal to such HSNi Reference Shares. For purposes of the HSNi Exchangeables, Liberty LLC is treated as an affiliate of HSNi under the Securities Act. Therefore, for as long as Liberty LLC is treated as an affiliate of HSNi for purposes of the HSNi Exchangeables, any reference shares consisting of HSNi common stock (or common stock of any other reference company of which Liberty LLC is treated as an affiliate for purposes of the HSNi Exchangeables) delivered by Liberty LLC upon exchange or purchase of a HSNi Exchangeables will be "restricted securities" under the Securities Act and subject to restrictions on transfer. Liberty LLC may deliver HSNi Reference Shares upon exchange or purchase of the HSNi Exchangeables only if (1) permitted under certain contractual arrangements between the Company and HSNi and (2) such Reference Shares would be freely transferable by the holders of the HSNi Reference Shares (other than by affiliates of HSNi) under the Securities Act, or if not freely transferable, there is at that time an effective registration statement under a registration rights agreement that Liberty LLC has with HSNi (or such other Reference Company) pursuant to which the recipients of such HSNi Reference Shares may sell those shares in a registered transaction under the Securities Act.
Liberty LLC will make an additional distribution on the HSNi Exchangeables if HSNi makes a distribution of cash (an “Excess Regular Cash Dividend”) in excess of the regular quarterly cash dividend of $0.18, currently paid by the HSNi, securities (other than publicly traded common equity securities) or other property with respect to the HSNi Reference Shares. The principal amount of the HSNi Exchangeables will not be reduced by any amount we pay that corresponds to any Excess Regular Cash Dividends on the HSNi Reference Shares.
On October 5, 2016, Liberty LLC may, at its option, redeem the HSNi Exchangeables, in whole or in part, in each case at a redemption price, in cash, equal to the adjusted principal amount of the HSNi Exchangeables plus accrued and unpaid interest to the date of redemption plus any final period distribution. Additionally, as of such date, holders may tender HSNi Exchangeables for purchase by Liberty LLC, at a purchase price equal to the adjusted principal amount plus accrued and unpaid interest to the purchase date plus any final period distribution. Liberty LLC may pay the purchase price, at its election, in cash or through delivery of HSNi Reference Shares (subject to the restrictions discussed previously ) having a value equal to the purchase price or a combination of HSNi Reference Shares and cash. If Liberty LLC makes a partial redemption, HSNi Exchangeables in an aggregate original principal amount of at least $100 million must remain outstanding.
Due to the restrictions on the delivery of HSNi shares and exchangeability of the debentures at the option of the holder beyond March 31, 2014, Liberty has classified the HSNi Exchangeables as a current liability in the Balance Sheet. Liberty has elected to account for the HSNi Exchangeables using the fair value option. Accordingly, changes in the fair value of this instrument are recognized as unrealized gains (losses) in the statements of operations.
Ventures Exchangeable Senior Debentures
During the nine months ended September 30, 2013, Liberty retired all outstanding 3.25% Exchangeable Senior Debentures due 2031. Liberty paid approximately $414 million to retire the outstanding principal balance.     
On April 9, 2013, Liberty's wholly owned subsidiary, Liberty Interactive LLC, called for the redemption of all the outstanding 3.125% Exchangeable Senior Debentures due 2023 ("3.125% Exchangeable Senior Debentures") on May 9, 2013 (the "redemption date"). In accordance with the redemption provisions of the 3.125% Exchangeable Senior Debentures and the related indenture, the 3.125% Exchangeable Senior Debentures were redeemed at a redemption price of approximately $1,667 for each $1,000 principal amount outstanding, which was equal to the sum of (i) the adjusted principal amount of such debenture in effect on the redemption date, (ii) any accrued and unpaid interest on such debenture to the redemption date and (iii) subject to certain conditions, any final period distribution on such


I- 21


LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)


debenture. Interest on the debentures ceased accruing on and after the redemption date. Liberty had the option to satisfy the value of the exchange in cash, Time Warner Inc., Time Warner Cable Inc. and AOL, Inc. common stock, or a combination thereof. All of the outstanding 3.125% Exchangeable Senior Debentures were redeemed prior to June 30, 2013, using cash provided by the Debentures (defined below) and cash provided by the sale of shares of Time Warner Inc. and AOL, Inc. common stock.
Also on April 9, 2013, Liberty Interactive LLC, a wholly owned subsidiary Liberty, completed the offer and sale of $850 million aggregate original principal amount of Liberty Interactive LLC's 0.75% Exchangeable Senior Debentures due 2043 (the “Debentures”) in a private placement transaction. The Debentures mature on March 30, 2043. Interest on the Debentures will accrue from April 9, 2013 at an annual rate of 0.75% of the original principal amount of $1,000 per Debenture, payable quarterly in arrears on March 30, June 30, September 30 and December 30 of each year, commencing June 30, 2013. Each $1,000 original principal amount of Debentures is initially exchangeable for a basket of 6.3040 shares of common stock of Time Warner Cable Inc. and 5.1635 shares of common stock of Time Warner Inc., which may change over time to include other publicly traded common equity securities that may be distributed on or in respect of those shares of Time Warner Cable Inc. and Time Warner Inc. (or into which any of those securities may be converted or exchanged). This basket of shares for which each Debenture in the original principal amount of $1,000 may be exchanged is referred to as the Reference Shares attributable to such Debenture, and to each issuer of Reference Shares as a Reference Company. Each Debenture is exchangeable at the option of the holder at any time, upon which they will be entitled to receive the Reference Shares attributable to such Debenture or, at the election of Liberty Interactive LLC, cash or a combination of Reference Shares and cash having a value equal to such Reference Shares. Upon exchange, holders will not be entitled to any cash payment representing accrued interest or outstanding additional distributions. Liberty has elected to account for this instrument using the fair value option. Accordingly, changes in the fair value of this instrument are recognized as unrealized gains (losses) in the statements of operations.
Other Subsidiary Debt
Other subsidiary debt at September 30, 2013 is comprised of capitalized satellite transponder lease obligations and bank debt of certain subsidiaries.
Fair Value of Debt
Liberty estimates the fair value of its debt based on the quoted market prices for the same or similar issues or on the current rate offered to Liberty for debt of the same remaining maturities (Level 2). The fair value of Liberty's publicly traded debt securities that are not reported at fair value in the accompanying condensed consolidated balance sheet at September 30, 2013 are as follows (amounts in millions):
Senior debentures
$
837

QVC senior secured notes
$
2,828

Due to the variable rate nature, Liberty believes that the carrying amount of its other debt, not discussed above, approximated fair value at September 30, 2013.


I- 22


LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)



(10) Stockholders' Equity
As of September 30, 2013, Liberty reserved for issuance upon exercise of outstanding stock options approximately 33.6 million shares of Series A Liberty Interactive common stock, 432,000 shares of Series B Liberty Interactive common stock, 1.1 million shares of Series A Liberty Ventures common stock and 22,000 shares of Series B Liberty Ventures common stock.
In addition to the Series A and Series B Liberty Interactive and Liberty Ventures common stock there are 4 billion shares of Series C Liberty Interactive and 200 million shares of Series C Liberty Ventures common stock authorized for issuance. As of September 30, 2013, no shares of any Series C Liberty Interactive and Liberty Ventures common stock were issued or outstanding.
(11) Commitments and Contingencies
Litigation
Liberty has contingent liabilities related to legal and tax proceedings and other matters arising in the ordinary course of business. Although it is reasonably possible Liberty may incur losses upon conclusion of such matters, an estimate of any loss or range of loss cannot be made. In the opinion of management, it is expected that amounts, if any, which may be required to satisfy such contingencies will not be material in relation to the accompanying condensed consolidated financial statements.
(12) Information About Liberty's Operating Segments
Liberty, through its ownership interests in subsidiaries and other companies, is primarily engaged in the video and on-line commerce industries. Liberty identifies its reportable segments as (A) those consolidated subsidiaries that represent 10% or more of its consolidated annual revenue, annual Adjusted OIBDA or total assets and (B) those equity method affiliates whose share of earnings represent 10% or more of Liberty's annual pre-tax earnings. The segment presentation for prior periods has been conformed to the current period segment presentation.
Liberty evaluates performance and makes decisions about allocating resources to its operating segments based on financial measures such as revenue, Adjusted OIBDA, gross margin, average sales price per unit, number of units shipped and revenue or sales per customer equivalent. In addition, Liberty reviews nonfinancial measures such as unique website visitors, conversion rates and active customers, as appropriate.
Liberty defines Adjusted OIBDA as revenue less cost of sales, operating expenses, and selling, general and administrative expenses excluding all stock-based compensation. Liberty believes this measure is an important indicator of the operational strength and performance of its businesses, including each business's 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. This measure of performance excludes depreciation and amortization, stock-based compensation and restructuring and impairment charges that are included in the measurement of operating income pursuant to GAAP. Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP. Liberty generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current prices.


I- 23


LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)


For the nine months ended September 30, 2013, Liberty has identified the following consolidated subsidiaries as its reportable segments:
•
QVC - consolidated subsidiary that 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.
•
TripAdvisor, Inc. - a consolidated subsidiary that is an online travel research company that empowers users to plan and maximize their travel experience.
Additionally, for presentation purposes, Liberty is providing financial information of the E-commerce businesses on an aggregated basis. The consolidated E-commerce businesses do not contribute significantly to the overall operations of Liberty on an individual basis; however, Liberty believes that on an aggregated basis they provide relevant information for users of these financial statements. While these businesses may not meet the aggregation criteria under relevant accounting literature Liberty believes the information is relevant and helpful for a more complete understanding of the consolidated results.
•
E-commerce - the aggregation of certain consolidated subsidiaries that market and sell a wide variety of consumer products via the Internet. Categories of consumer products include perishable and personal gift offerings (Provide Commerce, Inc.), active lifestyle gear and clothing (Backcountry.com, Inc.), fitness and health goods (Bodybuilding.com, LLC), celebration offerings from invitations to costumes (Celebrate Interactive Holdings LLC) and a drop-ship solutions company (CommerceHub).
Liberty's operating segments are strategic business units that offer different products and services. They are managed separately because each segment requires different technologies, distribution channels and marketing strategies. The accounting policies of the segments that are also consolidated subsidiaries are the same as those described in the Company's summary of significant accounting policies in the Annual Report on Form 10-K for the year ended December 31, 2012.
Performance Measures
 
Nine months ended September 30,
 
2013
 
2012
 
Revenue
 
Adjusted
OIBDA
 
Revenue
 
Adjusted
OIBDA
 
amounts in millions
Interactive Group
 
 
 
 
 
 
 
QVC
$
5,882

 
1,246

 
5,824

 
1,225

E-commerce
1,197

 
60

 
1,051

 
61

Corporate and other
—

 
(18
)
 
—

 
(16
)
Total Interactive Group
7,079

 
1,288

 
6,875

 
1,270

Ventures Group
 
 
 
 
 
 
 
TripAdvisor, Inc.
732

 
326

 
—

 
—

Corporate and other
—

 
(9
)
 
—

 
(4
)
Total Ventures Group
732

 
317

 
—

 
(4
)
Consolidated Liberty
$
7,811

 
1,605

 
6,875

 
1,266




I- 24


LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)


 
Three months ended September 30,
 
2013
 
2012
 
Revenue
 
Adjusted
OIBDA
 
Revenue
 
Adjusted
OIBDA
 
amounts in millions
Interactive Group
 
 
 
 
 
 
 
QVC
$
1,947

 
408

 
1,918

 
397

E-commerce
298

 
(5
)
 
278

 
4

Corporate and other
—

 
(7
)
 
—

 
(5
)
Total Interactive Group
2,245

 
396

 
2,196

 
396

Ventures Group
 
 
 
 
 
 
 
TripAdvisor, Inc.
255

 
104

 
—

 
—

Corporate and other
—

 
(3
)
 
—

 
(3
)
Total Ventures Group
255

 
101

 
—

 
(3
)
Consolidated Liberty
$
2,500

 
497

 
2,196

 
393


Other Information
 
September 30, 2013
 
Total
assets
 
Investments
in
affiliates
 
Capital
expenditures
 
amounts in millions
Interactive Group
 
 
 
 
 
QVC
$
12,811

 
52

 
122

E-commerce
1,229

 
—

 
56

Corporate and other
444

 
283

 
—

Total Interactive Group
14,484

 
335

 
178

Ventures Group
 
 
 
 
 
TripAdvisor
7,325

 
—

 
39

Corporate and other
2,716

 
890

 
—

Total Ventures Group
10,041

 
890

 
39

Inter-group eliminations
(155
)
 
—

 
—

Consolidated Liberty
$
24,370

 
1,225

 
217



I- 25


LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)


The following table provides a reconciliation of segment Adjusted OIBDA to earnings (loss) from continuing operations before income taxes:
 
Three months ended
September 30, 2013
 
Nine months ended
September 30,
 
2013
 
2012
 
2013
 
2012
 
amounts in millions
Consolidated segment Adjusted OIBDA
$
497

 
393

 
1,605

 
1,266

  Stock-based compensation
(38
)
 
(18
)
 
(124
)
 
(53
)
Impairment of intangible assets
(19
)
 
(39
)
 
(19
)
 
(39
)
  Depreciation and amortization
(235
)
 
(147
)
 
(702
)
 
(437
)
  Interest expense
(87
)
 
(111
)
 
(288
)
 
(324
)
  Share of earnings (loss) of affiliates, net
29

 
43

 
25

 
89

  Realized and unrealized gains (losses) on financial instruments, net
15

 
(160
)
 
(49
)
 
(338
)
  Gains (losses) on dispositions, net
—

 
—

 
(2
)
 
288

  Other, net
3

 
(2
)
 
(50
)
 
31

Earnings (loss) before income taxes
$
165

 
(41
)
 
396

 
483



I- 26


Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
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; the proposed creation of the QVC Group and Liberty Digital Commerce Group tracking stocks; the proposed spin-off of our interest in TripAdvisor, Inc.; revenue growth at QVC, Inc. ("QVC"); 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;
•
the levels of online traffic to our businesses' websites and our ability to convert visitors into customers or contributors;
•
uncertainties inherent in the development and integration of new business lines and business strategies;
•
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 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, distributors, suppliers and vendors;
•
general economic and business conditions and industry trends;
•
consumer spending levels, including the availability and amount of individual consumer debt;
•
advertising spending levels;
•
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 programs;
•
increased digital TV penetration and the impact on channel positioning of our networks;
•
rapid technological changes;
•
if we fail to protect the security of personal information about our customers we could be subject to costly government enforcement actions or private litigation and our reputation could suffer;
•
the regulatory and competitive environment of the industries in which we 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.


I- 27


For additional risk factors, please see Part I, Item 1 of the Annual Report on Form 10-K for the year ended December 31, 2012. 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, 2012.
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"). 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. We also own a controlling interest in TripAdvisor, Inc. ("TripAdvisor"), a separate reportable segment, which is an online travel company that empowers users to plan and maximize their travel experience by aggregating reviews and opinions of members about destinations, accommodations, restaurants and activities throughout the world. 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. ("Backcountry"), Bodybuilding.com, LLC ("Bodybuilding"), Celebrate Interactive Holdings, LLC ("Celebrate"), Provide Commerce, Inc. ("Provide") and CommerceHub. 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, décor, 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. CommerceHub operates a drop-ship solution which allows different software systems from both sides of the transaction to more easily access the data necessary to fulfill orders.
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. and Time Warner Cable Inc., which are accounted for at their respective fair market values and are included in "Corporate and Other."
On August 9, 2012, Liberty completed the approved recapitalization of its common stock through the creation of the Liberty Interactive common stock and Liberty Ventures common stock as tracking stocks. In the recapitalization, each holder of Liberty Interactive Corporation common stock remained a holder of the same amount and series of Liberty Interactive common stock and received 0.05 of a share of the corresponding series of Liberty Ventures common stock, by means of a dividend, with cash issued in lieu of fractional shares of Liberty Ventures common stock.
The term "Ventures Group" does not represent a separate legal entity, rather it represents those businesses, assets and liabilities that have been attributed to that group. The Ventures Group is comprised primarily of our consolidated subsidiary TripAdvisor and interests in Expedia, Inc., Interval Leisure Group, Inc., Tree.com, Inc., investments in Time Warner Inc. and Time Warner Cable Inc., as well as cash in the amount of approximately $526 million (at September 30, 2013). The Ventures Group also has attributed to it certain liabilities related to our corporate level indebtedness (see note 9 in the accompanying financial statements) and certain deferred tax liabilities. The Ventures Group is primarily focused on the maximization of the value of these investments and investing in new business opportunities.
The term "Interactive Group" does not represent a separate legal entity, rather it represents those businesses, assets and liabilities that have been attributed to that group. The Interactive Group is primarily focused on our video and e-commerce operating businesses and has attributed to it the remainder of our businesses and assets, including our operating subsidiaries QVC, Provide, Backcountry, Bodybuilding, Celebrate and CommerceHub as well as our interest in HSN, Inc. and cash of approximately $455 million (at September 30, 2013), including subsidiary cash. The Interactive Group has attributed to it liabilities that reside with QVC and the other entities listed as well certain liabilities related


I- 28


to our corporate level indebtedness (see note 9 in the accompanying financial statements) and certain deferred tax liabilities.
Results of Operations—Consolidated
General.    We provide in the tables below information regarding our Consolidated Operating Results and Other Income and Expense, as well as information regarding the contribution to those items from our reportable segments and our E-commerce businesses. The "corporate and other" category consists of those assets or businesses which we do not disclose separately. For a more detailed discussion and analysis of the financial results of the principal reporting segments, see "Results of Operations—Businesses" below.
Operating Results
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
2013
 
2012
 
2013
 
2012
 
amounts in millions
Revenue
 
 
 
 
 
 
 
Interactive Group
 
 
 
 
 
 
 
QVC
$
1,947

 
1,918

 
5,882

 
5,824

E-commerce
298

 
278

 
1,197

 
1,051

Total Interactive Group
2,245

 
2,196

 
7,079

 
6,875

Ventures Group
 
 
 
 
 
 
 
TripAdvisor
255

 
—

 
732

 
—

Corporate and other
—

 
—

 
—

 
—

Total Ventures Group
255

 
—

 
732

 
—

Consolidated Liberty
$
2,500

 
2,196

 
7,811

 
6,875

 
 
 
 
 
 
 
 
Adjusted OIBDA
 
 
 
 
 
 
 
Interactive Group
 
 
 
 
 
 
 
QVC
$
408

 
397

 
1,246

 
1,225

E-commerce
(5
)
 
4

 
60

 
61

Corporate and other
(7
)
 
(5
)
 
(18
)
 
(16
)
Total Interactive Group
396

 
396

 
1,288

 
1,270

Ventures Group
 
 
 
 
 
 
 
TripAdvisor
104

 
—

 
326

 
—

Corporate and other
(3
)
 
(3
)
 
(9
)
 
(4
)
Total Ventures Group
101

 
(3
)
 
317

 
(4
)
Consolidated Liberty
$
497

 
393

 
1,605

 
1,266

 
 
 
 
 
 
 
 
Operating Income (Loss)
 
 
 
 
 
 
 
Interactive Group
 
 
 
 
 
 
 
QVC
$
259

 
260

 
804

 
819

E-commerce
(46
)
 
(56
)
 
(29
)
 
(42
)
Corporate and other
(14
)
 
(11
)
 
(48
)
 
(35
)
Total Interactive Group
199

 
193

 
727

 
742

Ventures Group
 
 
 
 
 
 
 
TripAdvisor
11

 
—

 
48

 
—

Corporate and other
(5
)
 
(4
)
 
(15
)
 
(5
)
Total Ventures Group
6

 
(4
)
 
33

 
(5
)
Consolidated Liberty
$
205

 
189