Quarterly report pursuant to Section 13 or 15(d)

Investments In Affiliates Accounted For Using The Equity Method

v2.4.0.6
Investments In Affiliates Accounted For Using The Equity Method
6 Months Ended
Jun. 30, 2012
Investments In Affiliates Accounted For Using The Equity Method  
Investments In Affiliates Accounted For Using The Equity Method
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 and percentage ownership of the more significant investments in affiliates at June 30, 2012 and the carrying amount at December 31, 2011:

 
June 30, 2012
 
December 31, 2011
 
Percentage
ownership
 
Market
value (level 1)
 
Carrying
amount
 
Carrying
amount
 
 
 
dollars in millions
Expedia, Inc. (a)
26
%
 
$
1,664

 
$
643

 
621

TripAdvisor, Inc. (b)
18
%
 
1,169

 
189

 
184

HSN, Inc.
34
%
 
808

 
233

 
217

Other
various

 
N/A

 
148

 
113

 
 

 
 

 
$
1,213

 
1,135

(a)
Liberty entered into a forward sales contract on 12 million shares of Expedia common stock in March 2012 at a per share forward price of $34.316. The forward contract may be settled, in October 2012, in stock or cash, at the election of Liberty. Liberty delivered 12 million shares of Expedia as collateral under the forward contract. The carrying value of the shares, held as collateral by the counterparty, was $223 million and the fair value was $577 million as of June 30, 2012.
(b)
In May 2012, Liberty sold approximately 8.5 million shares of TripAdvisor, Inc. for cash proceeds of $338 million. The sale resulted in a $288 million gain recorded in gain (losses) on dispositions, net in the statement of operations.
The following table presents Liberty's share of earnings (losses) of affiliates:
 
Three months ended
June 30,
 
Six months ended
June 30,
 
2012
 
2011
 
2012
 
2011
 
amounts in millions
Expedia (1)
$
26

 
35

 
24

 
48

TripAdvisor, Inc. (1)
12

 

 
23

 

HSN, Inc.
9

 
7

 
24

 
20

Other
(12
)
 
(5
)
 
(25
)
 
(11
)
 
$
35

 
37

 
46

 
57

(1)
During the fourth quarter of 2011 Expedia, Inc. completed the pro-rata split-off of TripAdvisor, Inc. ("TripAdvisor"), its wholly owned subsidiary. As of the TripAdvisor split-off date, the Company had a 26% economic ownership interest in each of Expedia, Inc. and TripAdvisor and, through ownership of class B common stock with 10 votes per share, had an approximate 58% voting interest in each respective company. Through a stockholders agreement, Liberty has given Barry Diller, Chairman and Senior Executive Officer of both companies, the right to vote all of the common stock owned by Liberty. Through a governance agreement, Liberty has the right to nominate up to 20% of the board members for each entity and currently two members on each company's 10 member board were nominated by Liberty. Because of Liberty's board representation, it was determined that the Company has significant influence over each respective company and the Company continues to apply the equity method of accounting to its interests in TripAdvisor. As discussed above, in May 2012 Liberty sold shares of TripAdvisor which decreased Liberty's ownership percentage below 20%. As Liberty's board representation on the TripAdvisor board continues to be 20%, subsequent to the sale of securities discussed above, it was determined that significant influence still exists and the application of the equity method of accounting is appropriate.
Expedia
Summarized unaudited financial information for Expedia is as follows:
Expedia Consolidated Balance Sheets
 
June 30,
2012
 
December 31, 2011
 
amounts in millions
Current assets
$
3,087

 
2,274

Property and equipment, net
377

 
320

Goodwill
3,001

 
2,877

Intangible assets
836

 
744

Other assets
204

 
290

Total assets
$
7,505

 
6,505

Current liabilities
$
3,450

 
2,553

Deferred income taxes
337

 
280

Long-term debt
1,249

 
1,249

Other liabilities
127

 
118

Noncontrolling interest
107

 
105

Equity
2,235

 
2,200

Total liabilities and equity
$
7,505

 
6,505



Expedia Consolidated Statements of Operations
 
Three months ended
June 30,
 
Six months ended
June 30,
 
2012
 
2011
 
2012
 
2011
 
amounts in millions
Revenue
$
1,040

 
913

 
1,856

 
$
1,641

Cost of revenue
(230
)
 
(195
)
 
(430
)
 
(371
)
Gross profit
810

 
718

 
1,426

 
1,270

Selling, general and administrative expenses
(644
)
 
(566
)
 
(1,208
)
 
(1,075
)
Amortization
(9
)
 
(6
)
 
(12
)
 
(12
)
Restructuring charges and other
(3
)
 
(2
)
 
(3
)
 
(4
)
Operating income (loss)
154

 
144

 
203

 
179

Interest expense
(22
)
 
(22
)
 
(43
)
 
(45
)
Other income (expense), net
3

 
(1
)
 
2

 
(4
)
Income tax (expense) benefit
(29
)
 
(33
)
 
(34
)
 
(36
)
Income (loss) from continuing operations
106

 
88

 
128

 
94

Earnings (loss) from discontinued operations

 
53

 
(24
)
 
99

Net earnings (loss)
106

 
141

 
104

 
193

Less net earnings (loss) attributable to noncontrolling interests
(1
)
 
(1
)
 
(2
)
 
(1
)
Net earnings (loss) attributable to Expedia, Inc. shareholders
$
105

 
140

 
102

 
$
192