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
9 Months Ended
Sep. 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 September 30, 2012 and the carrying amount at December 31, 2011:

 
September 30, 2012
 
December 31, 2011
 
Percentage
ownership
 
Market
value (level 1)
 
Carrying
amount
 
Carrying
amount
 
 
 
dollars in millions
Interactive Group
 
 
 
 
 
 
 
    HSN, Inc.
36
%
 
$
982

 
$
241

 
217

    Other
various

 
N/A

 
64

 
13

        Total Interactive Group
 
 
 
 
305

 
230

Ventures Group
 
 
 
 
 
 
 
    Expedia, Inc. (a)
26
%
 
2,002

 
681

 
621

    TripAdvisor, Inc. (b)
18
%
 
861

 
199

 
184

    Other
various

 
N/A

 
124

 
100

        Total Ventures Group
 
 
 
 
1,004

 
905

Consolidated Liberty
 

 
 

 
$
1,309

 
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 was settled in October 2012 for total cash proceeds of $412 million and the 12 million shares of Expedia common stock, held as collateral, were released to the counterparty. During the nine months ended September 30, 2012 the Company has recognized losses of $282 million on the forward contract in the realized and unrealized gains (losses) on financial instruments, net line item in the statement of operations. The carrying value of the shares, held as collateral by the counterparty, was $236 million and the fair value was $694 million as of September 30, 2012. At the time the forward contract is settled, in the fourth quarter of 2012, the difference between the fair value of the Expedia shares and the carrying value of the shares will be recognized in the gain (loss) on dispositions, net line item in the statement of operations.
(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, based on the average cost, 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,
 
2012
 
2011
 
2012
 
2011
 
amounts in millions
Interactive Group
 
 
 
 
 
 
 
    HSN, Inc.
$
10

 
10

 
34

 
30

    Other
(4
)
 
(4
)
 
(8
)
 
(12
)
        Total Interactive Group
6

 
6

 
26

 
18

Ventures Group
 
 
 
 
 
 
 
    Expedia, Inc. (1)
41

 
56

 
65

 
104

    TripAdvisor, Inc. (1)
10

 

 
33

 

    Other
(14
)
 

 
(35
)
 
(3
)
        Total Ventures Group
37

 
56

 
63

 
101

Consolidated Liberty
$
43

 
62

 
89

 
119

(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
 
September 30,
2012
 
December 31, 2011
 
amounts in millions
Current assets
$
3,091

 
2,274

Property and equipment, net
393

 
320

Goodwill
3,007

 
2,877

Intangible assets
828

 
744

Other assets
189

 
290

Total assets
$
7,508

 
6,505

Current liabilities
$
3,299

 
2,553

Deferred income taxes
353

 
280

Long-term debt
1,249

 
1,249

Other liabilities
135

 
118

Noncontrolling interest
107

 
105

Equity
2,365

 
2,200

Total liabilities and equity
$
7,508

 
6,505


Expedia Consolidated Statements of Operations
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
2012
 
2011
 
2012
 
2011
 
amounts in millions
Revenue
$
1,199

 
1,021

 
3,055

 
$
2,662

Cost of revenue
(243
)
 
(207
)
 
(673
)
 
(578
)
Gross profit
956

 
814

 
2,382

 
2,084

Selling, general and administrative expenses
(717
)
 
(585
)
 
(1,925
)
 
(1,660
)
Amortization
(10
)
 
(5
)
 
(22
)
 
(17
)
Restructuring charges and other
(2
)
 
(15
)
 
(5
)
 
(19
)
Operating income (loss)
227

 
209

 
430

 
388

Interest expense
(22
)
 
(23
)
 
(65
)
 
(68
)
Other income (expense), net
(2
)
 
17

 

 
13

Income tax (expense) benefit
(36
)
 
(31
)
 
(70
)
 
(67
)
Income (loss) from continuing operations
167

 
172

 
295

 
266

Earnings (loss) from discontinued operations
2

 
39

 
(22
)
 
138

Net earnings (loss)
169

 
211

 
273

 
404

Less net earnings (loss) attributable to noncontrolling interests
2

 
(1
)
 

 
(2
)
Net earnings (loss) attributable to Expedia, Inc. shareholders
$
171

 
210

 
273

 
$
402