a n n u a l
r e p o r t
2014
Contents
Letter to Shareholders
Stock Performance
Investment Summary
Financial Information
Corporate Data
1
5
8
F-1
Inside Back Cover
Certain statements in this Annual Report 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; future investment opportunities; the performance of our current investments; revenue growth at QVC, Inc.; the
recoverability of our goodwill and other long-lived assets; our projected sources and uses of cash; and the anticipated impact of certain contingent liabilities related to legal and tax
proceedings and other matters arising in the ordinary course of business. In particular, statements in our “Letter to Shareholders” and under “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and “Quantitative and Qualitative Disclosures About Market Risk” contain forward-looking statements. 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;
• increased digital TV penetration and the impact on channel positioning of our programs;
• the levels of online traffic to our businesses’ websites and our ability to convert visitors into consumers 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;
• the launch of QVC France and the expected expenditures in connection therewith;
• 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;
• domestic and international economic and business conditions and industry trends;
• consumer spending levels, including the availability and amount of individual consumer debt;
• changes in distribution and viewing of television programming, including the expanded deployment of personal video recorders,
video on demand and IP television and their impact on home shopping programming;
• rapid technological changes;
• the regulatory and competitive environment of the industries in which we operate;
• failure to protect the security of personal information about our customers, subjecting us to potentially costly government enforcement
actions or private litigation and reputational damage;
• threatened terrorist attacks, political unrest in international markets and ongoing military action around the world; and
• fluctuations in foreign currency exchange rates.
These forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Annual 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. When considering such forward-looking statements, you should keep in mind any risk factors identified and other
cautionary statements contained in this Annual Report. Such risk factors and statements describe circumstances which could cause actual results to differ materially from those contained
in any forward-looking statement.
This Annual Report includes information concerning public companies in which we have non-controlling interests that file reports and other information with the SEC in accordance
with the Securities Exchange Act of 1934, as amended. Information contained in this Annual Report concerning those companies has been derived from the reports and other information
filed by them with the SEC. If you would like further information about these companies, the reports and other information they file with the SEC can be accessed on the Internet website
maintained by the SEC at www.sec.gov. Those reports and other information are not incorporated by reference in this Annual Report.
Annual Report 2014 Letter to Shareholders
Dear Fellow Shareholders,
We often start by writing “it’s been a busy year” and this one would be no exception. If you held both of the
Liberty Interactive tracking stocks a year ago, some of your shares have a new ticker (LINTA => QVCA), you
received a distribution of shares of Liberty Ventures Group and you hold shares of a whole new publicly
traded company – Liberty TripAdvisor Holdings. These activities were consistent with our strategy – create
long-term shareholder value tax efficiently – and, we believe, successful.
In August 2014, Liberty Ventures Group spun-off Liberty TripAdvisor, which holds our former stakes in
TripAdvisor and BuySeasons. We created Liberty TripAdvisor to tax efficiently highlight the value of our
TripAdvisor investment and provide investor choice, while retaining control and setting up an efficient structure.
Liberty TripAdvisor raised a $400 million margin loan, with $350 million of this being distributed to Liberty
Ventures Group, which will be used for repurchases of our shares within twelve months of the spin-off.
Following the Liberty TripAdvisor spin-off, we re-evaluated our structure and best opportunities for investment,
which subsequently led to the reattribution announced on October 4th. In this reattribution, the digital
commerce companies and $1 billion of cash were reattributed from Liberty Interactive Group to Liberty
Ventures Group with Liberty Interactive Group shareholders receiving a tax-free dividend of Liberty Ventures
Group shares. In connection with the reattribution we began referring to Liberty Interactive Group as QVC
Group, and the tickers were changed to QVCA and QVCB. Our rationale for the reattribution was:
• Create a pure-play equity focused on multi-channel commerce, the QVC Group;
• Achieve our target leverage at QVC;
• Place capital where it had the most opportunities for investment; and
• Receive value for the digital commerce companies by aligning them with a more
growth-oriented investor base.
Although the initial reaction of some was hesitant, we are happy to say that as of April 6th both QVCA and LVNTA
now trade above their respective pre-reattribution levels. In that time, QVCA (inclusive of the LVNTA dividend
received) has appreciated approximately 25%, while LVNTA is up approximately 16% over the same period.
Some also ask us “why maintain the tracking stock structure?” and our answer is simple: because it works. It
allows us to maintain the benefits of a “conglomerate” with a tax-efficient and reduced cost structure, and
provides the ability to reattribute assets and liabilities between businesses to better address opportunities if
needed, while also providing investor choice. We still believe trackers are poised for an increase in popularity.
1
Annual Report 2014 QVC group
It was an exciting year for QVC with continued progress in delivering a compelling shopping experience
based on its four pillars of discovery, storytelling, social engagement and outstanding service. Mike George
and his team continue to excel. QVC’s investment in eCommerce enhancements is paying off and enabled
the company to generate $3.5 billion in eCommerce revenues and $1.7 billion in mobile orders, once again
making it one of the world’s largest and most profitable eCommerce and mobile retailers. QVC entered
2015 with its largest ever customer count.
US results were outstanding across the board. QVC Plus, our second channel in the US, now reaches 54
million homes, and we are using it more for original and counter programming. In February 2015, QVC
introduced a new shipping and handling policy. We recognize that customers are increasingly sensitive to
shipping and handling rates and given our momentum from 2014, we felt it was the right time to adjust
our rates with a large majority of items now shipping for either $3 or $5. There are some gives and takes in
the policy, and we expect it will be largely neutral to revenue growth with the net adjusted OIBDA margin
impact to be in the range of a decrease of 20-30 basis points.
Turning to our international markets, the trends from 2013 largely continued in 2014, with strength in the
UK, China and Italy and lingering challenges in Japan and Germany. In 2015, we are cautiously optimistic
that Japan will not face the same major macroeconomic headwinds from 2014. Germany has worked
through many of its vendor transitions and the team is invigorated by its new CEO. We were thrilled for
QVC Italy to achieve OIBDA positive results in the fourth quarter of 2014, and we look forward to the launch
of QVC France this summer. Taking lessons learned from Italy, the capital and operational expense outlay
in France will be lower, and it will be our first true multi-channel launch. Exchange rate movements are
expected to be a challenge in 2015, but they are mainly translational with little impact to our margins.
We often point analysts and investors to the strength of QVC Group’s financial results, but due to the tracking
stock structure and the quirks of purchase accounting, comparisons on an earnings per share basis can be
a bit obfuscated. As such, we recently introduced a new metric: adjusted net income.* We hope this will
make it easier to compare and highlight QVC’s financial and operational dominance.
Our other large holding at the QVC Group is HSN. We were very pleased with their one-time dividend,
and announced additional share repurchase program and accompanying leverage increase in 2015. The
company has performed well, and we believe it will continue to excel, with the added benefit of a more
efficient balance sheet.
*Defined as attributed net income with add-backs for (i) non-cash, non-tax deductible purchase accounting amortization, net of book deferred tax benefit
and (ii) the net income/loss from the digital commerce companies through the date of the reattribution.
2
Liberty Interactive Corporation In 2014, we returned $3.26 billion in value to QVC Group shareholders through the reattribution and share
repurchases, and ended the year near our target leverage ratio of 2.5x. Going forward we expect the main
use of capital at QVC Group to be share repurchases that will more closely track free cash flow generation.
Additionally, we will continue to refine the cost of capital and maturity profile of QVC, taking advantage of
attractive capital markets.
Liberty VentureS group
We were pleased to end the year with almost $2.8 billion of cash at Liberty Ventures Group. We have publicly
stated we would love to find a big transformational investment. Having more cash not only increases the
universe of potential deals, but also differentiates us by our ability to write a big check. Our track record as
long-term equity partners should increase our appeal. Additionally, we don’t shy away from complicated
situations; complexity plays to our strengths. We expect to be patient, rational allocators of capital and
welcome your thoughts on potential investments.
Activity with our digital commerce companies was high over the past year. Provide Commerce was acquired by
FTD, and we are now the happy owners of 35% of FTD. We felt the floral and gifting market would benefit from
consolidation, and the combination of FTD and ProFlowers would be very complementary. CommerceHub,
our only B-to-B business, purchased Mercent, expanding its product portfolio. Given the attractiveness of
this space and the high margin profile, we hope to complete additional, well-priced, synergistic acquisitions.
Backcountry.com and Bodybuilding.com both grew nicely with expanding margins and continue to be leaders
in their respective fields. Over time, we will evaluate how to best drive value for our shareholders with
these businesses.
The other large asset at Liberty Ventures Group is our stake in Expedia which is valued at around $2 billion.
We continue to assess the various options regarding this investment. Thus far, our patience has paid off,
as Expedia has proven to be an attractive investment.
3
Annual Report 2014 Looking AheAd
We are excited for the year ahead. QVC Group is a focused pure-play in the multi-channel retail space which
we think will help it get the attention it well deserves from the financial community. We expect the prevalent and
growing trend of video consumption on any device to drive growth in existing and new markets. At Liberty
Ventures the potential for activity is high and could be spread across our operating assets, our investments,
and of course, looking for that high-return investment for our cash.
The Board of Directors is also pleased to report that Liberty has extended Greg’s employment contract to
serve as CEO for five more years. Greg and his team have successfully overseen the evolution and growth
of the Liberty family of companies and increased shareholder value. We look forward to a continuation of
this success for years to come.
We look forward to seeing many of you at this year’s annual investor meeting, which will take place on
November 12th at the TimesCenter at 242 West 41st Street in New York City.
We appreciate your ongoing support.
Very truly yours,
Gregory B. Maffei
President and Chief Executive Officer
April 2015
John C. Malone
Chairman of the Board
4
Liberty Interactive Corporation Stock performance
The following graph compares the percentage change in the cumulative total shareholder return on the Series A
and Series B Liberty Interactive common stock (now referred to as the Series A and Series B QVC Group common
stock) from May 10, 2006 through December 31, 2014, to the percentage change in the cumulative total return on
the S&P 500 Index and the S&P Retail Index. The Series A and Series B QVC Group stock performance includes (i) the
performance of the pro rata portion of the shares of the Liberty Ventures Group, which began trading on August 10,
2012, (ii) the impact of the Liberty Ventures Group rights offering, (iii) the spin-off of Liberty TripAdvisor Holdings,
Inc., which began trading on August 27, 2014 and (iv) the distribution of Series A and Series B Liberty Ventures
shares to QVC Group shareholders as part of the reattribution transaction (ex-dividend date of October 15, 2014).
QVC Group Common Stock vs. S&P 500 and Retail Indices
5/10/06 to 12/31/14
$250
$200
$150
$100
$50
$0
M ay-06
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Series A QVC Group
Series B QVC Group
S&P 500 Index
S&P Retail Index
5/10/06 12/31/06 12/31/07 12/31/08 12/31/09 12/31/10 12/31/11 12/31/12 12/31/13 12/31/14
Series A QVC Group
$100.00
$110.90
$98.10
$16.04
$55.73
$81.08
$83.37
$121.30
$189.76
$219.97
Series B QVC Group
$100.00
$111.76
$97.34
$15.29
$54.94
$79.54
$83.12
$119.86
$188.66
$220.08
S&P 500 Index
$100.00
$107.22
$111.00
$68.28
$84.30
$95.07
$95.07
$107.81
$139.73
$155.64
S&P Retail Index
$100.00
$110.34
$81.15
$50.41
$75.82
$91.78
$88.40
$92.60
$110.50
$132.65
Note: Trading data for all Series B shares is limited as they are thinly traded.
5
Annual Report 2014
The following graph compares the percentage change in the cumulative total shareholder return on the
Series A and Series B Liberty Ventures common stock from August 10, 2012 through December 31, 2014, to
the percentage change in the cumulative total return on the S&P 500 Index and the S&P 500 Information
Technology Index. Liberty Ventures Group performance includes the spin-off of Liberty TripAdvisor Holdings,
Inc., which began trading on August 27, 2014.
Liberty Ventures Common Stock vs. S&P 500
and Information Technology Indices
8/10/12 to 12/31/14
$400
$350
$300
$250
$200
$150
$100
$50
$0
Aug-12
Oct-12
Dec-12
Feb-13
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
Series A Liberty Ventures
Series B Liberty Ventures
S&P 500 Index
S&P 500 Information
Technology Index
Series A Liberty Ventures
Series B Liberty Ventures
S&P 500 Index
S&P 500 Information Technology Index
8/10/12
$100.00
$100.00
$100.00
$100.00
12/31/12
12/31/13
12/31/14
$150.58
$144.12
$101.45
$96.24
$272.42
$256.43
$131.47
$121.49
$287.20
$272.15
$146.45
$143.58
Note: LVNTA began trading on 8/10/12, LVNTB first priced on 8/15/12. Liberty TripAdvisor Series A and B shares began
trading “regular way” on 8/28/14. Trading data for all Series B shares is limited as they are thinly traded.
6
Liberty Interactive Corporation
The following graph compares the percentage change in the cumulative total shareholder return on
Series A and Series B Liberty Interactive common stock (now referred to as the Series A and Series B
QVC Group common stock) from August 10, 2012 (the day following the creation of the Liberty Ventures
tracking stock) through December 31, 2014, to the percentage change in the cumulative total return on
the S&P 500 Index and the S&P Retail Index. QVC Group performance includes the distribution of Series A
and Series B Liberty Ventures shares to QVC Group shareholders as part of the reattribution transaction
(ex-dividend date of October 15, 2014).
QVC Group Common Stock vs. S&P 500 and Retail Indices
8/10/12 to 12/31/14
$250
$200
$150
$100
$50
$0
Aug-12
Oct-12
Dec-12
Feb-13
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
Series A QVC Group
Series B QVC Group
S&P 500 Index
S&P Retail Index
Series A QVC Group
Series B QVC Group
S&P 500 Index
S&P Retail Index
8/10/12
$100.00
$100.00
$100.00
$100.00
12/31/12
12/31/13
12/31/14
$112.33
$113.04
$101.45
$91.43
$167.52
$170.38
$131.47
$109.10
$198.53
$203.19
$146.45
$130.97
Note: Trading data for all Series B shares is limited as they are thinly traded.
7
Annual Report 2014
investment Summary | Based on publicly available information as of March 31, 2015
libertyinteractive.com/asset-list.aspx
Liberty Interactive Corporation operates and owns interests in a broad range of digital commerce businesses.
Those interests are currently attributed to two tracking stock groups: the Liberty Interactive Group (which,
following the October 2014 reattribution, we refer to as QVC Group) and Liberty Ventures Group.
The following tables set forth some of Liberty Interactive Corporation’s major assets that are held directly and
indirectly through partnerships, joint ventures, common stock investments and instruments convertible into
common stock. Ownership percentages in the tables are approximate and, where applicable, assume conversion
to common stock by Liberty Interactive Corporation and, to the extent known by Liberty Interactive Corporation,
other holders. In some cases, Liberty Interactive Corporation’s interest may be subject to buy/sell procedures,
repurchase rights or dilution.
ENTITY
DESCRIPTION OF OPERATING BUSINESS
OWNERSHIP
QVC group
HSN, Inc.
(NASDAQ: HSNI)
QVC, Inc.
A retailer and interactive lifestyle network offering
an assortment of products through television home
shopping programming on HSN television network
and HSN.com.
One of the world’s leading video and digital commerce
retailers, offering a curated collection of brands to
millions of customers around the globe each day
through broadcast, Internet, and mobile sales outlets.
38%
100%
8
Liberty Interactive Corporation
investment Summary | Based on publicly available information as of March 31, 2015
ENTITY
DESCRIPTION OF OPERATING BUSINESS
OWNERSHIP
Liberty VentureS group
Backcountry.com, Inc.
Bodybuilding.com, LLC
eCommerce business that sells performance gear for
motorsports, bicycling and backcountry adventures,
including backpacking, climbing, skiing, snowboarding,
trail running and adventure travel.
eCommerce business that sells supplements, clothing,
tanning supplies, accessories and other bodybuilding
products. Also hosts an online site BodySpace, where
visitors can network and exchange information.
Commerce Technologies, Inc.
(CommerceHub)
Leading provider of integration and fulfillment solutions
for multi-channel eCommerce merchants.
Evite, Inc.
Expedia, Inc.
(NASDAQ: EXPE)
Leading online invitation and social event planning
service on the web.
Empowers business and leisure travelers with the tools
and information needed to research, plan, book and
experience travel. It also provides wholesale travel to
offline retail travel agents. Expedia’s main companies
include: Expedia.com, Hotels.com, Hotwire.com and
Classic Vacations.
FTD Companies, Inc.
(NASDAQ: FTD)
A premier floral and gifting company with a presence in
the United States, Canada, the United Kingdom and the
Republic of Ireland.
Interval Leisure Group, Inc.
(NASDAQ: IILG)
Leading global provider of membership and leisure
services to the vacation industry.
LendingTree, Inc.
(NASDAQ: TREE)
An online lending and real estate business that matches
consumers with lenders and loan brokers.
LMC Right Start, Inc.
(Right Start)
eCommerce and traditional retailer of premium
baby gear and products that offers parents a carefully
selected assortment of products for their babies
including travel gear, feeding products, décor and toys.
90%
90%
99%
100%
18%1
35%
29%
24%
97%
1. Liberty Interactive Corporation owns approximately 18% of Expedia common stock representing an approximate
58% voting interest. The Chairman of Expedia currently has the authority to vote these shares.
9
Annual Report 2014
ENTITY
DESCRIPTION OF OPERATING BUSINESS
OWNERSHIP
Liberty VentureS group
Quid, Inc.
Time Inc.
(NYSE: TIME)
Software company that combines natural language
processing and visualization techniques to make it easy
to analyze very large amounts of data in a relatively
short amount of time.
One of the largest media companies in the world,
with influential brands such as TIME, PEOPLE,
Sports Illustrated, InStyle, Real Simple, Wallpaper,
Travel + Leisure and Food & Wine.
Time Warner Cable Inc.
(NYSE: TWC)
Among the largest cable operators in the U.S. of
residential and commercial video, high-speed data and
voice services over its broadband cable systems.
Time Warner Inc.
(NYSE: TWX)
Media and entertainment company whose businesses
include cable networks, premium pay and basic tier
television services and television, feature film, home
video and video game production and distribution.
10%
< 1%
2%
< 1%
10
Liberty Interactive Corporation
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
Market Information
Our Series A and Series B Liberty Interactive common stock (LINTA and LINTB) had been outstanding since May 2006.
On August 9, 2012 Liberty completed the approved recapitalization of its common stock through the creation of the Liberty
Interactive common stock (which continued to trade as LINTA and LINTB) and Liberty Ventures common stock (LVNTA
and LVNTB) as tracking stocks. In order to bring Liberty into compliance with a Nasdaq listing requirement regarding
the minimum number of publicly held shares of the Series B Liberty Ventures common stock, on April 11, 2014, a two for
one stock split of Series A and Series B Liberty Ventures common stock was effected by means of a dividend that was paid
on April 11, 2014 of one share of Series A or Series B Liberty Ventures common stock to holders of each share of Series
A or Series B Liberty Ventures common stock, respectively, held by them as of 5:00 pm, New York City time, on April 4,
2014. Accordingly, the high and low sales prices of LVNTA and LVNTB common stock have been retroactively restated
in the table below. On October 3, 2014, Liberty reattributed from the Interactive Group to the Ventures Group
approximately $1 billion in cash and its Digital Commerce companies. Subsequent to the reattribution, the Interactive
Group is now referred to as the QVC Group. In connection with the reattribution, the Liberty Interactive tracking stock
trading symbol “LINTA” was changed to "QVCA" and the "LINTB" trading symbol to "QVCB," effective October 7,
2014. Each series of our common stock trades on the Nasdaq Global Select Market. The following table sets forth the
range of high and low sales prices of shares of our common stock for the years ended December 31, 2014 and 2013.
QVC Group
Series A (QVCA)
Low
High
Series B (QVCB)
High Low
2013
First quarter (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22.11 19.93 21.55 19.51
Second quarter (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24.31 19.79 23.01 19.77
Third quarter (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25.25 21.95 25.13 21.94
Fourth quarter (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29.57 22.83 29.39 23.23
2014
First quarter (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30.12 25.58 30.00 25.01
Second quarter (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30.68 27.76 31.10 27.70
Third quarter (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30.23 26.95 30.17 27.04
Fourth quarter (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30.60 22.37 31.40 23.73
F-1
Liberty Ventures
Series A (LVNTA)
Low
High
Series B (LVNTB)
High Low
2013
First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 39.75 33.64 38.43 34.09
Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43.02 36.36 42.35 37.23
Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 48.04 40.69 48.14 42.25
Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 62.20 40.91 60.65 44.64
2014
First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 74.21 55.63 74.66 60.65
Second quarter (April 1 - April 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 68.66 56.06 71.93 58.02
Second quarter (April 12 - June 30) (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 73.96 54.67 67.03 56.24
Third quarter (July 1 - August 27) (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 75.95 68.45 80.02 71.72
Third quarter (August 28 - September 30) (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 39.95 36.40 42.66 39.50
Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 38.32 25.12 39.80 29.12
(1) Previously reflected under the LINTA or LINTB ticker symbol, respectively, for the respective period through
October 6, 2014.
(2) As discussed above and in the accompanying consolidated financial statements in Part II of this report, Liberty
completed a two for one stock split on April 11, 2014 on its Series A and Series B Liberty Ventures common stock.
(3) As discussed in Part I of this report, the TripAdvisor Holdings Spin-Off was effected on August 27, 2014 as a pro-
rata dividend of shares of TripAdvisor Holdings to the stockholders of Liberty’s Series A and Series B Liberty
Ventures common stock.
Holders
As of January 31, 2015, there were approximately 2,200 and 100 record holders of our Series A and Series B Liberty
Interactive common stock, respectively, and approximately 1,800 and 100 record holders of our Series A and Series B
Liberty Ventures common stock, respectively. The foregoing numbers of record holders do not include the number of
stockholders whose shares are held nominally by banks, brokerage houses or other institutions, but include each such
institution as one shareholder.
Dividends
We have not paid any cash dividends on our common stock, and we have no present intention of so doing. Payment
of cash dividends, if any, in the future will be determined by our board of directors in light of our earnings, financial
condition and other relevant considerations.
Securities Authorized for Issuance Under Equity Compensation Plans
Information required by this item is incorporated by reference to our definitive proxy statement for our 2015 Annual
Meeting of stockholders.
F-2
Purchases of Equity Securities by the Issuer
Share Repurchase Programs
On several occasions our board of directors has authorized a share repurchase program for our Series A and Series B
Liberty Interactive common stock. On each of May 5, 2006, November 3, 2006 and October 30, 2007 our board authorized
the repurchase of $1 billion of Series A and Series B Liberty Interactive common stock for a total of $3 billion. These
previous authorizations remained effective following the LMC Split-Off, notwithstanding the fact that the Liberty
Interactive common stock ceased to be a tracking stock during the period following the LMC Split-Off and prior to the
creation of our Liberty Ventures common stock in August 2012. On February 22, 2012 the board authorized the repurchase
of an additional $700 million of Series A and Series B Liberty Interactive common. Additionally, on each of October 30,
2012 and February 27, 2014, the board authorized the repurchase of an additional $1 billion of Series A and Series B
Liberty Interactive common stock. In connection with the TripAdvisor Holdings Spin-Off during August 2014, the board
authorized $350 million for the repurchase of either the Liberty Interactive or Liberty Ventures tracking stocks. In October
2014, the board authorized the repurchase of an additional $650 million of Series A and Series B Liberty Ventures common
stock.
A summary of the repurchase activity for the three months ended December 31, 2014 is as follows:
Series A Liberty Interactive Common Stock (QVCA)
Period
October 1 - 31, 2014 . . . . . . . . . . . . . . . . . .
November 1 - 30, 2014 . . . . . . . . . . . . . . . .
December 1 - 31, 2014 . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(d) Maximum Number
(or Approximate Dollar
Value) of Shares that
Shares Purchased as Part May Yet Be purchased
(c) Total Number of
(b) Average
Price Paid per of Publicly Announced
Under the Plans or
Share
Plans or Programs
Programs
(a) Total Number
of Shares
Purchased
— $
— $
$
1,731,226
1,731,226
—
—
28.52
— $
— $
1,731,226 $
1,731,226
1.4 billion
1.4 billion
1.4 billion
F-3
Selected Financial Data.
The following tables present selected historical information relating to our financial condition and results of operations
for the past five years. The following data should be read in conjunction with our consolidated financial statements.
Summary Balance Sheet Data:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Investments in available-for-sale securities and other cost
2014
2013
December 31,
2012
amounts in millions
2011
2010
2,306
902
2,291
846
1,351
1,224
investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,633
Investment in affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
7,893
Intangibles not subject to amortization . . . . . . . . . . . . . . . . . $
Assets of discontinued operations (1) (2) . . . . . . . . . . . . . . . $
—
Total assets (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,641
7,105
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,849
Deferred income tax liabilities, noncurrent . . . . . . . . . . . . . $
—
Liabilities of discontinued operations (1) (2) . . . . . . . . . . . . $
5,780
Equity (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
107
Noncontrolling interest (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,313
1,237
8,383
7,095
24,676
6,106
2,001
1,452
11,435
4,499
1,720
851
8,424
7,428
26,255
5,905
2,023
1,748
12,051
4,489
1,168
951
8,450
349
17,339
4,848
2,046
19
6,627
134
2014
Years ended December 31,
2012
2011
2013
amounts in millions,
except per share amounts
1,110
949
8,450
89
26,600
5,970
2,706
3,877
11,442
129
2010
Summary Statement of Operations Data:
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,499
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,188
(387)
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
39
Share of earnings (losses) of affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(57)
Realized and unrealized gains (losses) on financial instruments, net . . . . . . . $
Gains (losses) on transactions, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
74
Earnings (loss) from continuing operations (3):
Liberty Capital common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liberty Interactive Corporation common stock . . . . . . . . . . . . . . . . . . . . . .
Liberty Interactive common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Liberty Ventures common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Basic earnings (loss) from continuing operations attributable to Liberty
Interactive Corporation stockholders per common share (4):
Series A and Series B Liberty Capital common stock . . . . . . . . . . . . . . .
Series A and Series B Liberty Interactive Corporation common stock . .
Series A and Series B Liberty Interactive common stock . . . . . . . . . . . . $
Series A and Series B Liberty Ventures common stock . . . . . . . . . . . . . . $
Diluted earnings (loss) from continuing operations attributable to Liberty
Interactive Corporation stockholders per common share (4):
Series A and Series B Liberty Capital common stock . . . . . . . . . . . . . . .
Series A and Series B Liberty Interactive Corporation common stock . .
Series A and Series B Liberty Interactive common stock . . . . . . . . . . . . $
Series A and Series B Liberty Ventures common stock . . . . . . . . . . . . . . $
NA
NA
575
3
578
NA
NA
1.10
0.03
NA
NA
1.09
0.03
10,219
1,136
(380)
33
(22)
(1)
NA
NA
500
54
554
9,888
1,163
(466)
47
(351)
443
NA
33
291
281
605
NA
NA
0.88
0.74
NA
—
0.48
4.26
NA
NA
0.86
0.73
NA
—
0.47
4.19
9,461
1,133
(426)
139
84
—
8,775
1,096
(626)
112
62
355
10
576
NA
NA
586
0.12
0.88
NA
NA
0.12
0.87
NA
NA
28
796
NA
NA
824
0.31
1.26
NA
NA
0.30
1.24
NA
NA
(1) 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
owned approximately 22% of the equity and 57% of the total votes of all classes of TripAdvisor common stock. On
F-4
August 27, 2014, we completed the TripAdvisor Holdings Spin-Off. TripAdvisor Holdings is comprised of Liberty’s
former interest in TripAdvisor as well as BuySeasons, Inc., Liberty’s former wholly-owned subsidiary, and corporate
level debt. Following the completion of the TripAdvisor Holdings Spin-Off, Liberty and TripAdvisor Holdings operate
as separate, publicly traded companies, and neither has any stock ownership, beneficial or otherwise, in the other. The
consolidated financial statements of Liberty have been prepared to reflect TripAdvisor Holdings as discontinued
operations. However, noncontrolling interest attributable to our former ownership interest in TripAdvisor is included
in the noncontrolling interest line item in the consolidated balance sheet from the date of acquisition until the date of
completion of the TripAdvisor Holdings Spin-Off. See note 5 of the accompanying consolidated financial statements
for further details on the TripAdvisor Holdings Spin-Off.
(2) On September 23, 2011, Liberty completed the LMC Split-Off. At the time of the LMC Split-Off, LMC owned all
the assets, businesses and liabilities previously attributed to the Capital and Starz tracking stock groups. The LMC
Split-Off was effected by means of a redemption of all of the Liberty Capital common stock and Liberty Starz common
stock of Liberty in exchange for the common stock of LMC.
(3) Includes earnings (losses) from continuing operations attributable to the noncontrolling interests of $40 million,
$45 million, $63 million, $53 million and $45 million for the years ended December 31, 2014, 2013, 2012, 2011 and
2010, respectively.
(4) Basic and diluted earnings per share have been calculated for Liberty Capital and Liberty Starz common stock for the
period subsequent to March 3, 2008 through September 23, 2011. Basic and diluted EPS have been calculated for
Liberty Interactive Corporation common stock for the periods from May 9, 2006 to August 9, 2012. Basic and diluted
EPS have been calculated for Liberty Interactive common stock and Liberty Ventures common stock subsequent to
August 9, 2012.
F-5
Management's Discussion and Analysis of Financial Condition and Results of Operations
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 consolidated financial statements and the
notes thereto.
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.
Additionally, we own entire or majority interests in consolidated subsidiaries which operate on-line commerce businesses
in a broad range of retail categories. These include Backcountry.com, Inc. ("Backcountry"), Bodybuilding.com, LLC
("Bodybuilding"), CommerceHub, Provide Commerce, Inc. ("Provide") (see discussion below), Evite, Inc. (“Evite”) and
LMC Right Start, Inc. (“Right Start”) (collectively, the “Digital Commerce” businesses). 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. CommerceHub provides a Software-as-a-Service platform
for online retailers and their suppliers (manufacturers, and distributors) to sell products to consumers without physically
owning inventory, or managing the fulfillment of those products. Provide operates an e-commerce marketplace of websites
for perishable goods, including flowers, fruits and desserts, as well as upscale personalized gifts. On December 31, 2014,
FTD Companies, Inc. ("FTD") acquired Provide from Liberty in return for approximately 10.2 million shares of FTD
common stock representing approximately 35% of the combined company and approximately $145 million in cash (the
“FTD Transaction”). Subsequent to the FTD Transaction, Liberty accounts for FTD as an equity-method affiliate based on
the ownership level and board representation. Evite is an online invitation and social event planning service on the Web.
Right Start is a retailer of products for infants through toddlers such as quality strollers, car seats, nursery and feeding
accessories, plus care and other products.
Our "Corporate and Other" category includes our corporate ownership interests in unconsolidated businesses and
corporate expenses. We hold ownership interests in Expedia, Inc., HSN, Inc., Interval Leisure Group, Inc. and LendingTree,
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.
On October 3, 2014, Liberty reattributed from the QVC Group to the Ventures Group its Digital Commerce
companies, which were valued at $1.5 billion, and approximately $1 billion in cash. In connection with the reattribution,
each holder of Liberty Interactive common stock received 0.14217 of a share of the corresponding series of Liberty
Ventures common stock for each share of Liberty Interactive common stock held as of the record date, with cash paid in
lieu of fractional shares. The distribution date for the dividend was on October 20, 2014, and the Liberty Interactive
common stock began trading ex-dividend on October 15, 2014 which resulted in an aggregate of 67.7 million shares of
Series A and Series B Liberty Ventures common stock being issued.
F-6
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. Following the reattribution, the Ventures Group is comprised primarily
of our interests in Expedia, Inc., Interval Leisure Group, Inc., LendingTree, our Digital Commerce companies, investments
in Time Warner Inc. and Time Warner Cable Inc., as well as cash in the amount of approximately $1,884 million (at
December 31, 2014), including subsidiary cash. The Ventures Group also has attributed to it certain liabilities related to
our Exchangeable Debentures 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 "QVC Group" does not represent a separate legal entity, rather it represents those businesses, assets and
liabilities that have been attributed to that group. The QVC Group is primarily focused on our video operating businesses.
Following the reattribution, the QVC Group has attributed to it the remainder of our businesses and assets, including our
wholly-owned subsidiary QVC and our 38% interest in HSN, Inc. as well as cash in the amount of approximately $422
million (at December 31, 2014), including subsidiary cash.
Discontinued Operations
On August 27, 2014, Liberty completed the TripAdvisor Holdings Spin-Off. TripAdvisor Holdings is comprised of
Liberty’s former 22% economic and 57% voting interest in TripAdvisor as well as BuySeasons, Liberty’s former wholly-
owned subsidiary, and a corporate level net debt balance of $350 million. In connection with the TripAdvisor Holdings
Spin-Off during August 2014, TripAdvisor Holdings drew down $400 million in margin loans and distributed
approximately $350 million to Liberty. This transaction has been recorded at historical cost due to the pro rata nature of
the distribution. Following the completion of the TripAdvisor Holdings Spin-Off, Liberty and TripAdvisor Holdings
operate as separate, publicly traded companies, and neither has any stock ownership, beneficial or otherwise, in the other.
The consolidated financial statements of Liberty have been prepared to reflect TripAdvisor Holdings as discontinued
operations. Accordingly, the assets and liabilities, revenue, costs and expenses, and cash flows of the businesses, assets
and liabilities owned by TripAdvisor Holdings at the time of the TripAdvisor Holdings Spin-Off have been excluded from
the respective captions in the accompanying consolidated balance sheets, statements of operations, comprehensive earnings
and cash flows in such consolidated financial statements.
Strategies and Challenges
QVC. QVC's goal is to become the preeminent global multimedia shopping community for people who love to shop,
and to offer a shopping experience that is as much about entertainment and enrichment as it is about buying. QVC's
objective is to provide an integrated shopping experience that utilizes all forms of media including television, the internet
and mobile devices. In 2015, QVC intends to employ several strategies to achieve these goals and objectives. Among these
strategies are to (i) extend the breadth, relevance and exposure of the QVC brand; (ii) source products that represent unique
quality and value; (iii) create engaging presentation content in televised programming, mobile and online; (iv) leverage
customer loyalty and continue multi-platform expansion; and (v) create a compelling and differentiated customer
experience. In addition, QVC expects to expand globally by leveraging its existing systems, infrastructure and skills in
other countries around the world.
Internationally, beyond the main QVC channels, QVC-Germany and QVC-U.K also broadcast pre-recorded shows on
additional channels that offer viewers access to a broader range of QVC programming options. These channels include
QVC Beauty & Style and QVC Plus in Germany and QVC Beauty, QVC Extra and QVC Style in the U.K.
QVC's future net revenue growth will primarily depend on international expansion, sales growth from e-commerce and
mobile platforms, additions of new customers from households already receiving QVC's television programming and
increased spending from existing customers. QVC's future net revenue may also be affected by (i) the willingness of cable
F-7
television and direct-to-home satellite system operators to continue carrying QVC's programming service; (ii) QVC's
ability to maintain favorable channel positioning, which may become more difficult due to governmental action or from
distributors converting analog customers to digital; (iii) changes in television viewing habits because of personal video
recorders, video-on-demand and internet video services; and (iv) general economic conditions.
The prolonged economic uncertainty in various regions of the world in which our subsidiaries and affiliates operate
could adversely affect demand for QVC’s products and services since a substantial portion of QVC’s revenue is derived
from discretionary spending by individuals, which typically falls during times of economic instability. Global financial
markets continue to experience disruptions, including increased volatility and diminished liquidity and credit availability.
If economic and financial market conditions in the U.S. or other key markets, including Europe and Japan, remain
uncertain, persist, or deteriorate further, QVC’s customers may respond by suspending, delaying, or reducing their
discretionary spending. A suspension, delay or reduction in discretionary spending could adversely affect revenue.
Accordingly, QVC’s ability to increase or maintain revenue and earnings could be adversely affected to the extent that
relevant economic environments remain weak or decline. Such weak economic conditions may also inhibit QVC’s
expansion into new European and other markets. QVC is currently unable to predict the extent of any of these potential
adverse effects.
F-8
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 principal reportable segment
and the Digital Commerce businesses (included in the QVC Group results through the date of reattribution and in the
Ventures Group thereafter). 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 segment,
see "Results of Operations - Businesses" below.
Operating Results
Revenue
QVC Group
2014
Years ended December 31,
2013
amounts in millions
2012
QVC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,801
1,227
Digital Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Corporate and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,028
Total QVC Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,623
1,596
—
10,219
Ventures Group
Digital Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Ventures Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
471
—
471
Consolidated Liberty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,499
NA
—
—
10,219
8,516
1,372
—
9,888
NA
—
—
9,888
Adjusted OIBDA
QVC Group
QVC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,910
53
Digital Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(24)
Corporate and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,939
Total QVC Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ventures Group
Digital Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Ventures Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
44
(18)
26
Consolidated Liberty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,965
Operating Income (Loss)
QVC Group
QVC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,279
(16)
Digital Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(57)
Corporate and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,206
Total QVC Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ventures Group
Digital Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Ventures Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
(26)
(18)
Consolidated Liberty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,188
1,841
103
(20)
1,924
NA
(11)
(11)
1,913
1,828
102
(27)
1,903
NA
(5)
(5)
1,898
1,245
(26)
(64)
1,155
—
(19)
(19)
1,136
1,268
(30)
(63)
1,175
—
(12)
(12)
1,163
Revenue. Our consolidated revenue increased 2.7% and 3.3% for the years ended December 31, 2014 and 2013,
respectively, as compared to the corresponding prior year periods. The current year and prior year increases were the result
of increased revenue at QVC ($178 million and $107 million, respectively) and the Digital Commerce companies ($102
F-9
million and $224 million, respectively). See "Results of Operations – Businesses" below for a more complete discussion
of the results of operations of certain of our subsidiaries.
Adjusted OIBDA. We define Adjusted OIBDA as revenue less cost of sales, operating expenses and selling, general
and administrative ("SG&A") expenses (excluding stock compensation). Our chief operating decision maker and
management team use this measure of performance in conjunction with other measures to evaluate our businesses and
make decisions about allocating resources among our businesses. We believe this is an important indicator of the
operational strength and performance of our businesses, including each business's ability to service debt and fund capital
expenditures. In addition, this measure allows us to view operating results, perform analytical comparisons and
benchmarking between businesses and identify strategies to improve performance. This measure of performance excludes
such costs as 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. See note 18 to the accompanying
consolidated financial statements for a reconciliation of Adjusted OIBDA to earnings (loss) from continuing operations
before income taxes.
Consolidated Adjusted OIBDA increased $52 million and $15 million for the years ended December 31, 2014 and
2013, respectively, as compared to the corresponding prior year periods. See "Results of Operations – Businesses" below
for a more complete discussion of the results of operations of certain of our subsidiaries.
Stock-based compensation. Stock-based compensation includes compensation related to (1) options and stock
appreciation rights ("SARs") for shares of our common stock that are granted to certain of our officers and employees,
(2) phantom stock appreciation rights ("PSARs") granted to officers and employees of certain of our subsidiaries pursuant
to private equity plans and (3) amortization of restricted stock grants.
We recorded $108 million, $118 million and $91 million of stock compensation expense for the years ended
December 31, 2014, 2013 and 2012, respectively. The decrease of $10 million in stock-based compensation during 2014
was primarily attributable to slightly fewer options being granted in recent years which resulted in less stock-based
compensation expense being recognized. The increase of $27 million in stock-based compensation during 2013 was
primarily attributable to the additional recognition of stock-based compensation related to the one-time exchange offer in
2012 ("2012 Option Exchange"), as more fully described in note 14, in the accompanying consolidated financial
statements. As of December 31, 2014, the total unrecognized compensation cost related to unvested Liberty equity awards
was approximately $80 million. Such amount will be recognized in our consolidated statements of operations over a
weighted average period of approximately 2.0 years.
Operating income. Our consolidated operating income increased $52 million and decreased $27 million for the
years ended December 31, 2014 and 2013, respectively, as compared to the corresponding prior year periods. See "Results
of Operations – Businesses" below for a more complete discussion of the results of operations of certain of our subsidiaries.
F-10
Other Income and Expense
Components of Other Income (Expense) are presented in the table below.
2014
Years ended December 31,
2013
amounts in millions
2012
Interest expense
QVC Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (312)
(75)
Ventures Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Liberty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (387)
(290)
(90)
(380)
(322)
(144)
(466)
Share of earnings (losses) of affiliates
QVC Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Ventures Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Liberty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
51
(12)
39
48
(15)
33
28
19
47
Realized and unrealized gains (losses) on financial
instruments, net
QVC Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Ventures Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Liberty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(22)
(35)
(57)
(12)
(10)
(22)
51
(402)
(351)
Gains (losses) on transactions, net
QVC Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Ventures Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Liberty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
—
74
74
(1)
—
(1)
—
443
443
Other, net
QVC Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Ventures Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Liberty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(43)
22
(21)
(54)
25
(29)
—
47
47
Interest expense.
Interest expense increased $7 million and decreased $86 million for the years ended December
31, 2014 and 2013, respectively, as compared to the corresponding prior year periods. The increase in interest expense for
the year ended December 31, 2014 was due to increased utilization of the QVC credit facility during the current year. The
decrease in interest expense for the year ended December 31, 2013 was the result of a slight decrease in the average debt
balance outstanding during that year and the refinancing of prior outstanding obligations for debt with more favorable
interest rates. The refinancing of debt required a premium payment on the outstanding debentures which was recognized
as a $57 million dollar extinguishment loss and was reflected in the other, net line item in the consolidated statement of
operations for the year ended December 31, 2013.
F-11
Share of earnings (losses) of affiliates. The following table presents our share of earnings (losses) of affiliates:
Years ended December 31,
2013
2014
amounts in millions
2012
QVC Group
HSN, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total QVC Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
60
(9)
51
Ventures Group
Expedia, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Ventures Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Liberty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
58
(70)
(12)
39
61
(13)
48
31
(46)
(15)
33
40
(12)
28
67
(48)
19
47
The share of earnings (losses) of affiliates for the years ended December 31, 2014 and 2013 were relatively flat based
on the operating results of the equity affiliates. The decrease in share of earnings between December 31, 2013 and 2012
was the decrease in operating results of Expedia. The change in the other category for the Ventures Group is primarily
related to alternative energy investments that generally operate at a loss but provide favorable tax attributes recorded
through the income tax (expense) benefit line item in the consolidated statement of operations.
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:
2014
Years ended December 31,
2013
amounts in millions
2012
Fair value option securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchangeable senior debentures . . . . . . . . . . . . . . . . . . . . . . . . .
Other derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 173
(230)
—
(57)
$
514
(553)
17
(22)
470
(602)
(219)
(351)
The changes in these accounts are due primarily to market factors and changes in the fair value of the underlying
stocks or financial instruments to which these relate. The significant change in other derivatives was the forward sale
contract entered into on 12 million Expedia common shares that was entered into and settled during the year ended
December 31, 2012.
Gains (losses) on transactions, net. The gain on transactions during the year ended December 31, 2014 is due to
the FTD Transaction. The gain on transactions during the year ended December 31, 2012 is due to a gain on the sale of
Expedia shares during the year.
Income taxes. Our effective tax rate for the years ended December, 31 2014, 2013 and 2012 was 30.9%, 24.8% and
31.5%, respectively. The effective tax rate is less than the U.S. federal tax rate of 35% during all years presented primarily
due to tax credits derived from our alternative energy investments. The effective tax rate during 2013 was further impacted
by a change in the corporate effective state rate for outstanding deferred tax liabilities and assets at Liberty due to a change
in the apportionment of income to various states
F-12
Net earnings. We had net earnings of $626 million, $580 million and $1,591 million for the years ended December 31,
2014, 2013 and 2012, respectively. The change in net earnings was the result of the above-described fluctuations in our
revenue, expenses and other gains and losses.
Liquidity and Capital Resources
As of December 31, 2014 substantially all of our cash and cash equivalents are invested in U.S. Treasury securities,
other government securities or government guaranteed funds, AAA rated money market funds and other highly rated
financial and corporate debt instruments.
The following are potential sources of liquidity: available cash balances, cash generated by the operating activities of
our wholly-owned subsidiaries (to the extent such cash exceeds the working capital needs of the subsidiaries and is not
otherwise restricted), net proceeds from asset sales, monetization of our public investment portfolio, outstanding debt
facilities, debt and equity issuances, and dividend and interest receipts.
During the year, there were no changes to our corporate debt credit ratings or our consolidated subsidiaries' debt credit
ratings. Liberty and QVC are in compliance with their debt covenants as of December 31, 2014.
As of December 31, 2014, Liberty's liquidity position consisted of the following:
Cash and cash Marketable Available-for-
sale securities
equivalents
securities
amounts in millions
QVC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Corporate and other . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total QVC Group . . . . . . . . . . . . . . . . . . . . . . . . . . . .
347
75
422
Digital Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and other . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Ventures Group . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Liberty . . . . . . . . . . . . . . . . . . . . . . . . $
38
1,846
1,884
2,306
—
21
21
—
868
868
889
—
4
4
—
1,220
1,220
1,224
To the extent that the Company recognizes any taxable gains from the sale of assets, we may incur tax expense and
be required to make tax payments, thereby reducing any cash proceeds. Additionally, we have borrowing capacity of $1.5
billion under the QVC credit facility at December 31, 2014. As of December 31, 2014, QVC had approximately $208
million of cash and cash equivalents held in foreign subsidiaries.
F-13
Additionally, our operating businesses have generated, on average, more than $1 billion in annual cash provided by
operating activities over the prior three years and we do not anticipate any significant reductions in that amount in future
periods.
Years ended December 31,
2013
2014
2012
amounts in millions
Cash Flow Information
QVC Group cash provided (used) by operating activities . . . . $
Ventures Group cash provided (used) by operating activities .
Net cash provided (used) by operating activities . . . . . . . . . . $
QVC Group cash provided (used) by investing activities . . . . . $
Ventures Group cash provided (used) by investing activities . .
1,204
436
1,640
(281)
(177)
(458)
QVC Group cash provided (used) by financing activities . . . . $ (1,036)
970
Ventures Group cash provided (used) by financing activities .
(66)
Net cash provided (used) by financing activities . . . . . . . . . . $
Net cash provided (used) by investing activities. . . . . . . . . . . $
985
42
1,027
(356)
194
(162)
(686)
(1,522)
(2,208)
1,472
(25)
1,447
(458)
189
(269)
(1,142)
1,391
249
QVC Group
During the year ended December 31, 2014, the QVC Group uses of cash were primarily the refinancing of certain debt
obligations of approximately $3.6 billion and the repurchase of Series A Liberty Interactive common stock of $785 million.
Pending the public announcement of the Digital Commerce businesses reattribution, Liberty was blacked out from the
buyback of Series A Liberty Interactive common stock during a portion of the fourth quarter of 2014. Approximately $1
billion of cash was reattributed from the QVC Group to the Ventures Group in connection with the Digital Commerce
companies reattribution. Additionally, the QVC Group had approximately $226 million of capital expenditures during the
year. These uses of cash were funded by cash provided by operating activities and additional borrowings of debt as part
of the refinancing activities.
The projected uses of QVC Group cash are the cost to service outstanding debt, approximately $290 million in interest
payments on QVC and corporate level debt, anticipated capital improvement spending of approximately $200 million and
the continued buyback of Liberty Interactive common stock under the approved share buyback program. HSNi has
declared a special dividend in the first quarter of 2015. We expect to receive approximately $200 million in cash from the
dividend of which approximately $54 million will be passed through to the HSNi exchangeable bond holders.
Ventures Group
During the year ended December 31, 2014, the Ventures Group uses of cash were primarily the net purchases of short
term and long term marketable securities and the refinancing of certain debt obligations. These uses of cash for the
Ventures Group were funded by cash provided by operating activities (including intergroup tax payments from the QVC
Group), the cash included in the reattribution of the Digital Commerce businesses, discussed above, and the sale of certain
investments which was done on a tax neutral basis in conjunction with the retirement of certain debt obligations.
The projected uses of Ventures Group cash are approximately $55 million in interest payments to service outstanding
debt and further investments in existing or new businesses through continued acquisition activity and potential buyback of
Liberty Ventures common stock under the approved share buyback program.
Consolidated
During the year ended December 31, 2014, Liberty's primary uses of cash were $3,749 million of debt repayments,
$785 million of share repurchases, $273 million of net purchases of short term investments and other marketable securities
and $241 million of capital expenditures. These uses of cash were funded primarily with $1,640 million of cash provided
F-14
by operating activities, $4,506 million in borrowings, $334 million in cash from the disposition of a consolidated subsidiary
and cash on hand.
The projected uses of Liberty’s cash, outside of normal operating expenses (inclusive of tax payments), are the costs
to service outstanding debt, approximately $344 million for interest payments on QVC, corporate level and other subsidiary
debt, anticipated capital improvement spending of approximately $230 million, the repayment of certain debt obligations
and the continued buyback of Liberty Interactive common stock and potential buyback of Liberty Ventures common stock
under the approved share buyback program (subsequent to year end we made additional repurchases of approximately 2.0
million Liberty Interactive shares for $58 million through January 31, 2015) and additional investments in existing or new
businesses.
Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
In connection with agreements for the sale of assets by our company, we may retain liabilities that relate to events
occurring prior to the sale, such as tax, environmental, litigation and employment matters. We generally indemnify the
purchaser in the event that a third party asserts a claim against the purchaser that relates to a liability retained by us. These
types of indemnification obligations may extend for a number of years. We are unable to estimate the maximum potential
liability for these types of indemnification obligations as the sale agreements may not specify a maximum amount and the
amounts are dependent upon the outcome of future contingent events, the nature and likelihood of which cannot be
determined at this time. Historically, we have not made any significant indemnification payments under such agreements
and no amount has been accrued in the accompanying consolidated financial statements with respect to these
indemnification obligations.
We have contingent liabilities related to legal and tax proceedings and other matters arising in the ordinary course of
business. Although it is reasonably possible we 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 consolidated financial statements.
Information concerning the amount and timing of required payments, both accrued and off-balance sheet, under our
contractual obligations, excluding uncertain tax positions as it is undeterminable when payments will be made, is
summarized below.
Payments due by period
Total
Less than
1 year
4 - 5 years 5 years
After
2 - 3 years
amounts in millions
Consolidated contractual obligations
Long-term debt (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,966
4,361
Interest payments (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
270
Operating lease obligations . . . . . . . . . . . . . . . . . . . . . . . . .
1,661
Purchase orders and other obligations . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,258
47
344
33
1,624
2,048
65
691
58
23
837
960
652
53
13
1,678
6,894
2,674
126
1
9,695
(1) Amounts are reflected in the table at the outstanding principal amount, assuming the debt instruments will remain
outstanding until the stated maturity date, and may differ from the amounts stated in our consolidated balance
sheet to the extent debt instruments (i) were issued at a discount or premium or (ii) have elements which are
F-15
reported at fair value in our consolidated balance sheet. Amounts also include capital lease obligations. Amounts do
not assume additional borrowings or refinancings of existing debt.
(2) Amounts (i) are based on our outstanding debt at December 31, 2014, (ii) assume the interest rates on our variable
rate debt remain constant at the December 31, 2014 rates and (iii) assume that our existing debt is repaid at maturity.
Critical Accounting Estimates
The preparation of our financial statements in conformity with GAAP requires us 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. Listed below are the accounting estimates that we believe are critical to
our financial statements due to the degree of uncertainty regarding the estimates or assumptions involved and the
magnitude of the asset, liability, revenue or expense being reported. All of these accounting estimates and assumptions,
as well as the resulting impact to our financial statements, have been discussed with the audit committee of our board of
directors.
Fair Value Measurements
Financial Instruments. We record a number of assets and liabilities in our consolidated balance sheet at fair value
on a recurring basis, including available-for-sale ("AFS") securities, financial instruments and our exchangeable senior
debentures. 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. We use quoted market prices, or Level 1 inputs, to value all our
Fair Value Option Securities. As of December 31, 2014 and 2013, the carrying value of our Fair Value Option securities
was $1,220 million and $1,309 million, respectively.
Level 2 inputs, other than quoted market prices included within Level 1, are observable for the asset or liability, either
directly or indirectly. We use quoted market prices to determine the fair value of our exchangeable senior debentures.
However, these debentures are not traded on active markets as defined in GAAP, so these liabilities fall in Level 2. As of
December 31, 2014, the principal amount and carrying value of our exchangeable debentures were $2,481 million and
$2,574 million, respectively.
Level 3 inputs are unobservable inputs for an asset or liability. We currently have no Level 3 financial instrument
assets or liabilities.
Non-Financial Instruments. Our non-financial instrument valuations are primarily comprised of our annual
assessment of the recoverability of our goodwill and other nonamortizable intangibles, such as trademarks and our
evaluation of the recoverability of our other long-lived assets upon certain triggering events. If the carrying value of our
long-lived assets exceeds their undiscounted cash flows, we are required to write the carrying value down to fair value.
Any such writedown is included in impairment of long-lived assets in our consolidated statement of operations. A high
degree of judgment is required to estimate the fair value of our long-lived assets. We may use quoted market prices, prices
for similar assets, present value techniques and other valuation techniques to prepare these estimates. We may need to
make estimates of future cash flows and discount rates as well as other assumptions in order to implement these valuation
techniques. Due to the high degree of judgment involved in our estimation techniques, any value ultimately derived from
F-16
our long-lived assets may differ from our estimate of fair value. As each of our operating segments has long-lived assets,
this critical accounting policy affects the financial position and results of operations of each segment.
As of December 31, 2014, the intangible assets not subject to amortization for each of our significant reportable
segments were as follows:
QVC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,206
198
Digital Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5,404
2,428
61
2,489
7,634
259
7,893
Goodwill
Trademarks
amounts in millions
Total
We perform our annual assessment of the recoverability of our goodwill and other non-amortizable intangible assets
during the fourth quarter of each year. We utilize a qualitative assessment for determining whether step one of the goodwill
impairment analysis is necessary. The accounting guidance permits entities to first assess qualitative factors to determine
whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for
determining whether it is necessary to perform the two-step goodwill impairment test. In evaluating goodwill on a
qualitative basis the Company reviews the business performance of each reporting unit and evaluates other relevant factors
as identified in the relevant accounting guidance to determine whether it is more likely than not that an indicated
impairment exists for any of our reporting units. The Company considers whether there are any negative macroenomic
conditions, industry specific conditions, market changes, increased competition, increased costs in doing business,
management challenges, the legal environments and how these factors might impact company specific performance in
future periods. As part of the analysis the Company also considers fair value determinations for certain reporting units that
have been made at various points throughout the current and prior years for other purposes. During the years ended
December 31, 2014, 2013 and 2012 we recorded $7 million, $30 million and $53 million, respectively, in goodwill and
other intangibles impairments for certain of our Digital Commerce companies, primarily Evite. Continued declining
operating results as compared to budgeted results and certain trends required a Step 2 impairment test and a determination
of fair value for these subsidiaries. Fair value for these subsidiaries, including intangible assets and goodwill, was
determined using the respective companies’ projections of future operating performance and applying a combination of
market multiples and a discounted cash flow calculation (Level 3).
Carrying Value of Investments. We periodically evaluate our investments to determine if decreases in fair value
below our cost bases are other than temporary. If a decline in fair value is determined to be other than temporary, we are
required to reflect such decline in our consolidated statement of operations. Other than temporary declines in fair value of
our cost investments are recognized on a separate line in our consolidated statement of operations, and other than temporary
declines in fair value of our equity method investments are included in share of losses of affiliates in our consolidated
statement of operations.
The primary factors we consider in our determination of whether declines in fair value are other than temporary are
the length of time that the fair value of the investment is below our carrying value; the severity of the decline; and the
financial condition, operating performance and near term prospects of the investee. In addition, we consider the reason for
the decline in fair value, be it general market conditions, industry specific or investee specific; analysts' ratings and
estimates of 12 month share price targets for the investee; changes in stock price or valuation subsequent to the balance
sheet date; and our intent and ability to hold the investment for a period of time sufficient to allow for a recovery in fair
value. Fair value of our publicly traded cost and equity investments is based on the market prices of the investments at the
balance sheet date. We estimate the fair value of our other cost and equity investments using a variety of methodologies,
F-17
including cash flow multiples, discounted cash flow, per subscriber values, or values of comparable public or private
businesses. Impairments are calculated as the difference between our carrying value and our estimate of fair value. As our
assessment of the fair value of our investments and any resulting impairment losses and the timing of when to recognize
such charges requires a high degree of judgment and includes significant estimates and assumptions, actual results could
differ materially from our estimates and assumptions.
Our evaluation of the fair value of our investments and any resulting impairment charges are made as of the most
recent balance sheet date. Changes in fair value subsequent to the balance sheet date due to the factors described above are
possible. Subsequent decreases in fair value will be recognized in our consolidated statement of operations in the period
in which they occur to the extent such decreases are deemed to be other than temporary. Subsequent increases in fair value
will be recognized in our consolidated statement of operations only upon our ultimate disposition of the investment.
Retail Related Adjustments and Allowances. QVC records adjustments and allowances for sales returns, inventory
obsolescence and uncollectible receivables. Each of these adjustments is estimated based on historical experience. Sales
returns are calculated as a percent of sales and are netted against revenue in our consolidated statement of operations. For
the years ended December 31, 2014, 2013 and 2012, sales returns represented 19.4%, 19.8% and 19.4% of QVC's gross
product revenue, respectively. The inventory obsolescence reserve is calculated as a percent of QVC's inventory at the end
of a reporting period based on, among other factors, the average inventory balance for the preceding 12 months and
historical experience with liquidated inventory. The change in the reserve is included in cost of goods sold in our
consolidated statements of operations. At December 31, 2014, QVC's inventory was $882 million, which was net of the
obsolescence adjustment of $76 million. QVC's allowance for doubtful accounts is calculated as a percent of accounts
receivable at the end of a reporting period, and the change in such allowance is recorded as bad debt expense in our
consolidated statements of operations. At December 31, 2014, QVC's trade accounts receivable were $1,196 million, net
of the allowance for doubtful accounts of $91 million. Each of these estimates requires management judgment and may
not reflect actual results.
Income Taxes. We are required to estimate the amount of tax payable or refundable for the current year and the
deferred income tax liabilities and assets for the future tax consequences of events that have been reflected in our financial
statements or tax returns for each taxing jurisdiction in which we operate. This process requires our management to make
judgments regarding the timing and probability of the ultimate tax impact of the various agreements and transactions that
we enter into. Based on these judgments we may record tax reserves or adjustments to valuation allowances on deferred
tax assets to reflect the expected realizability of future tax benefits. Actual income taxes could vary from these estimates
due to future changes in income tax law, significant changes in the jurisdictions in which we operate, our inability to
generate sufficient future taxable income or unpredicted results from the final determination of each year's liability by
taxing authorities. These changes could have a significant impact on our financial position.
F-18
Results of Operations—Businesses
QVC. QVC is a retailer of a wide range of consumer products, which are marketed and sold primarily by
merchandise-focused televised shopping programs, the Internet and mobile applications. In the United States, QVC's live
programming is distributed via its nationally televised shopping program 24 hours per day, 364 days per year ("QVC-
U.S."). Internationally, QVC's program services are based in Germany ("QVC-Germany"), Japan ("QVC-Japan"), the
United Kingdom ("QVC-U.K.") and Italy ("QVC-Italy"). QVC-Germany distributes its program 24 hours per day with 17
hours of live programming, QVC-Japan distributes live programming 24 hours per day and QVC-U.K. distributes its
program 24 hours per day with 17 hours of live programming. QVC-Italy distributes programming live for 17 hours per
day on satellite and digital terrestrial television and an additional seven hours per day of recorded programming on satellite
and seven hours a day of general interest programming on digital terrestrial television.
QVC’s Japanese operations are conducted through a joint venture with Mitsui & Co. LTD ("Mitsui") for a television
and multimedia retailing service in Japan. QVC-Japan is owned 60% by QVC and 40% by Mitsui. QVC and Mitsui share
in all profits and losses based on their respective ownership interests. During the years ended December 31, 2014, 2013
and 2012, QVC-Japan paid dividends to Mitsui of $42 million, $45 million and $29 million, respectively.
Additionally, during 2012 QVC entered into a joint venture with CNR Media Group, formerly known as China
Broadcasting Corporation, a limited liability company, owned by China National Radio (''CNR'') for a 49% interest in a
CNR subsidiary, CNR Home Shopping Co., Ltd. (''CNRS''). CNRS distributes live programming for 17 hours per day and
recorded programming for 7 hours per day. The CNRS joint venture is accounted for as an equity method investment.
On April 16, 2014, QVC announced plans to expand its global presence into France. Similar to its other markets,
QVC plans to offer a highly immersive digital shopping experience, with strong integration across e-commerce, TV,
mobile and social platforms, with the launch expected in the summer of 2015.
QVC's operating results were as follows:
2014
Years ended December 31,
2013
amounts in millions
2012
Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,801
(5,547)
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,254
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(753)
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(591)
SG&A expenses (excluding stock-based compensation) .
1,910
Adjusted OIBDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(44)
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . .
(587)
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,279
8,623
(5,465)
3,158
(740)
(577)
1,841
(38)
(558)
1,245
8,516
(5,419)
3,097
(715)
(554)
1,828
(34)
(526)
1,268
F-19
Net revenue was generated from the following geographical areas:
2014
Years ended December 31,
2013
amounts in millions
2012
QVC-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
QVC-Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
QVC-Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
QVC-U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
QVC-Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
6,055
970
908
730
138
8,801
5,844
971
1,024
657
127
8,623
5,585
956
1,247
641
87
8,516
QVC's consolidated net revenue increased 2.1% and 1.3% for the years ended December 31, 2014 and 2013,
respectively, as compared to the corresponding prior years. The 2014 increase of $178 million in net revenue was primarily
comprised of $225 million due to a 2.3% increase in units sold, partially offset by $49 million of unfavorable foreign
currency rate adjustments primarily in Japan. Additionally, net revenue was positively impacted by a decrease in the return
rate from 19.8% in 2013 to 19.4% in 2014. This was driven by international improvements primarily in Germany and
Japan. The return rate improved in Germany primarily due lower return rates in all categories and to a lesser extent positive
mix shift from apparel and jewelry to home. The return rate improved in Japan primarily due to lower return rates in
jewelry, apparel and accessories and a greater mix in beauty.
The 2013 increase in net revenue of $107 million was primarily comprised of $257 million due to a 2.7% increase in
the average selling price per unit ("ASP") and $155 million due to a 1.6% increase in units sold. These amounts were
partially offset by $200 million of unfavorable foreign currency rate adjustments primarily in Japan. Additionally, net
revenue was negatively impacted by $102 million due to an increase in estimated product returns, primarily in the U.S.,
Japan and Germany as a result of the sales increases. The increase in returns in the U.S. was primarily due to sales volume
and the increases in Japan and Germany were primarily due to higher returns in the apparel and jewelry categories and a
greater mix of apparel products that return at higher rates than other categories. Overall returns as a percent of gross product
revenue increased to 19.8% in 2013 from 19.4% in 2012.
During the years ended December 31, 2014 and 2013, the changes in revenue and expenses were affected by changes
in the exchange rates for the Japanese Yen, the Euro and the U.K. Pound Sterling. In the event the U.S. Dollar strengthens
against these foreign currencies in the future, QVC's revenue and operating cash flow will be negatively affected.
The percentage increase (decrease) in net revenue for each of QVC's geographic areas in U.S. Dollars and in local
currency was as follows:
Year ended December 31, 2014 Year ended December 31, 2013
U.S. dollars Local currency U.S. dollars Local currency
QVC-US. . . . . . . . . . . . . . . . . . . . . . . .
QVC-Germany . . . . . . . . . . . . . . . . . .
QVC-Japan . . . . . . . . . . . . . . . . . . . . .
QVC-UK . . . . . . . . . . . . . . . . . . . . . . .
QVC-Italy . . . . . . . . . . . . . . . . . . . . . .
3.6 %
(0.1)%
(11.3)%
11.1 %
8.7 %
3.6 %
0.4 %
(3.8)%
6.0 %
9.0 %
4.6 %
1.6 %
(17.9)%
2.5 %
46.0 %
4.6 %
(1.7) %
0.3 %
3.7 %
41.5 %
In 2014, QVC-U.S. net revenue growth was primarily due to a 4.7% increase in units shipped offset by a 0.9%
decrease in ASP. QVC-U.S. experienced shipped sales growth in all categories except electronics. QVC-Germany's shipped
sales in local currency increased primarily in the home category offset by declines primarily in the apparel and jewelry
F-20
categories. QVC-Japan's shipped sales in local currency declined in all categories except electronics and beauty. The
declines in QVC-Japan's shipped sales in local currency were primarily due to a local consumption tax increase that became
effective April 1, 2014. QVC-U.K.'s shipped sales growth in local currency increased primarily in the beauty, home and
jewelry categories. QVC-Italy's shipped sales growth in local currency increased primarily in the beauty, accessories and
apparel categories.
In 2013, QVC-U.S. net revenue growth was primarily due to a 4.6% increase in ASP as a result of higher rates in the
beauty and accessories categories as well as a greater mix of accessories. QVC-U.S. experienced shipped sales growth in
all categories except jewelry. QVC-Germany's shipped sales in local currency increased primarily in the apparel and
accessories categories, but this growth was more than offset by declines in jewelry and electronics and an increase in
estimated product returns. QVC-Japan's shipped sales in local currency improved primarily in the apparel, home and
electronics categories, offset by declines in accessories and jewelry and an increase in estimated product returns. QVC-
U.K.'s shipped sales growth in local currency was primarily the result of increased sales in the home and beauty categories,
partially offset by declines in jewelry. QVC-Italy's sales consisted primarily of home, beauty and apparel products.
QVC's gross profit percentage was 37.0%, 36.6% and 36.4% for the years ended December 31, 2014, 2013 and 2012,
respectively. The increase in gross profit percentage in 2014 and 2013 was primarily due to improved product margins in
the U.S. and the U.K.
QVC's operating expenses are principally comprised of commissions, order processing and customer service
expenses, credit card processing fees, telecommunications expenses and production costs. Operating expenses increased
$13 million or 1.8% and $25 million or 3.5% for the years ended December 31, 2014 and 2013, respectively.
The increase in 2014 was primarily due to a $5 million increase in each of customer service, commissions expenses
and credit card processing fees and a $4 million increase in programming and production costs, partially offset by favorable
foreign currency exchange rates of $6 million. The increase in customer service expenses was primarily due to the launch
of the new European systems platform that created some short-term disruptions and resulted in additional talk times in
Germany and an increase in the U.S. due to volume associated with the sales increase. The increase in commission expenses
was primarily due to higher programming distribution costs in Japan and sales increases in the U.S. The increase in credit
card fees was primarily due to the U.S. sales increase and lower usage of the QVC branded credit card (“Q Card”) combined
with a higher mix of purchases from customers using credit cards with higher rates charged to merchants. The increase in
programming and production costs was primarily due to increased manpower costs in the U.S., partially offset by declines
in Germany as a result of a reduction in live programming from 24 to 17 hours per day.
The increase in 2013 was primarily due to a $29 million increase in credit card processing fees and a $17 million
increase in commission expense, offset by a $22 million effect of exchange rates. In regards to the increase in credit card
processing fees, QVC-U.S. reached a favorable legal settlement in 2012, which offset the related expenses. Credit card
processing fees also increased in 2013 due to the U.S. sales increase and lower usage of the Q Card combined with a higher
mix of purchases from customers using credit cards with higher rates charged to merchants. The increase in commission
expense was primarily due to the sales increase in the U.S. and additional programming distribution expenses in Japan.
QVC's SG&A expenses include personnel, information technology, provision for doubtful accounts, credit card
income and marketing and advertising expenses. Such expenses increased $14 million, and remained consistent as a percent
of net revenue, at 6.7% for the year ended December 31, 2014 and increased $23 million, and as a percent of net revenue,
from 6.5% to 6.7% for the year ended December 31, 2013 as a result of a variety of factors.
The increase in 2014 was primarily related to a $12 million increase in the provision for doubtful accounts, an $11
million increase in outside services expenses and a $10 million increase in personnel expense, partially offset by a $17
F-21
million increase in credit card income and a $3 million favorable impact of exchange rates. The increase in the provision
for doubtful accounts was primarily due to the increased use of the Easy-Pay installment program in the U.S. and to a
lesser extent in Germany. The increase in outside services expenses was primarily due to information technology and
commerce platform projects and global market expansion expenses including France. The increase in personnel expenses
was primarily due to merit, benefits and severance increases in the U.S. and the France start-up. The increase in credit card
income was primarily due to the more favorable economics of the Q Card portfolio in the U.S. and higher bank reserve
requirements associated with the U.S. regulatory environment in the prior year. QVC-U.S. amended and restated its
agreement with a large consumer financial services company (the "Bank") pursuant to which the Bank provides revolving
credit directly to QVC's customers for the sole purpose of purchasing merchandise or services with a QVC branded credit
card. The agreement provides more favorable economic terms for QVC and was effective August 1, 2014.
The increase in 2013 was primarily related to a $35 million increase in personnel expense, a $7 million increase in
information technology expense, a $5 million increase in the provision for doubtful accounts and a $2 million decrease in
credit card income, offset by a $13 million effect of exchange rates, a $12 million decrease in sales and franchise taxes and
a $3 million decrease in rent expense. The increase in personnel expense was primarily due to merit, benefits and bonus
increases in the U.S. and the U.K. as well as severance costs in Germany and the U.K. The increase in information
technology expense was primarily due to additional cloud-based software solutions in the U.S. and solutions to enhance
customer service and productivity in Germany. The increase in the provision for doubtful accounts was primarily due to
the increased use of the Easy-Pay installment program in the U.S. The decrease in credit card income was primarily due
to the overall economics, including usage, of the Q Card portfolio in the U.S. and higher bank reserve requirements. The
decrease in sales and franchise taxes was primarily due to a revision in settlement estimates and credits in the U.S. The
decrease in rent expense was primarily due to duplicate running costs including a lease cancellation accrual in the U.K. in
2012 associated with the move to its new headquarters, partially offset by higher rent expense on its new facility in 2013.
Depreciation and amortization consisted of the following:
2014
Years ended December 31,
2013
amounts in millions
2012
Affiliate agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition related amortization . . . . . . . . . . . . . . . . . . . . . .
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Software amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Channel placement amortization and related expenses . . . . .
Total depreciation and amortization . . . . . . . . . . . . . . . . . . . $
150
173
323
135
93
36
587
150
172
322
127
78
31
558
151
172
323
126
62
15
526
The increases in software amortization in 2014 and 2013 were primarily due to solutions to enhance customer service
and productivity in the U.S., Germany and Italy.
Digital Commerce businesses. Our Digital Commerce businesses are comprised primarily of Backcountry,
Bodybuilding, CommerceHub and Provide (through December 31, 2014, see discussion below). Revenue for the Digital
Commerce businesses is seasonal due to certain holidays, which drive a significant portion of the Digital Commerce
businesses' revenue. The third quarter is generally lower, as compared to the other three quarters, due to fewer holidays.
As discussed above, on October 3, 2014, Liberty reattributed from the QVC Group (formerly known as the Interactive
Group prior to the reattribution) to the Ventures Group its Digital Commerce companies, which were valued at $1.5 billion,
and approximately $1 billion in cash.
F-22
Additionally, on December 31, 2014, FTD acquired Provide from Liberty in return for approximately 10.2 million
shares of FTD common stock representing approximately 35% of the combined company and approximately $145 million
in cash. Subsequent to the FTD Transaction, Liberty accounts for FTD as an equity-method affiliate based on the ownership
level and board representation.
The results of the Digital Commerce businesses are reflected in the Ventures Group prospectively from the date of
the reattribution. The results of the Digital Commerce businesses below reflects the consolidated results of the Digital
Commerce businesses, as included in the QVC Group for the years ended December 31, 2013 and 2012 and in the QVC
Group (through the reattribution date) and the Ventures Group from the reattribution date through December 31, 2014.
Additionally, due to the FTD Transaction, Provide’s results will no longer be consolidated in future periods. In order to
better understand the results of the remaining Digital Commerce businesses we have separately disclosed Provide’s
financial performance. Provide will not be treated as a discontinued operation due to our continuing involvement in FTD.
2014
Years ended December 31,
2013
amounts in millions
2012
Revenue
Digital Commerce businesses — continuing . . . . . . . . . . . . $ 1,032
666
Provide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,698
943
653
1,596
752
620
1,372
Adjusted OIBDA
Digital Commerce businesses — continuing . . . . . . . . . . . . $
Provide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Operating income (loss)
Digital Commerce businesses — continuing . . . . . . . . . . . . $
Provide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
90
7
97
7
(15)
(8)
74
29
103
10
(36)
(26)
56
46
102
(45)
15
(30)
Digital Commerce businesses — continuing. Revenue for the continuing consolidated Digital Commerce
businesses increased $89 million and $191 million for the years ended December 31, 2014 and 2013 as compared to the
corresponding prior year periods, respectively. The increase in revenue was due to increases at each of our subsidiaries
Backcountry ($37 million and $75 million, respectively), Bodybuilding ($34 million and $100 million, respectively) and
CommerceHub ($15 million and $13 million, respectively). Backcountry revenue increased as a result of increased order
volume and an increase in average order value. The increase in Bodybuilding revenue was primarily due to increased
order volume on flat average order values. CommerceHub revenue growth was primarily attributed to growth in active
customers (vendors and suppliers) who pay a license and setup fee and an increase in the number of aggregate transactions
processed for which CommerceHub earns a per transaction fee.
Adjusted OIBDA for the continuing Digital Commerce businesses increased $17 million and $18 million for the
years ended December 31, 2014 and 2013, respectively. The growth in Adjusted OIBDA was primarily the result of
increased revenue, as discussed above, primarily due to increases at Backcountry ($9 million and flat, respectively),
Bodybuilding ($2 million and $10 million, respectively) and CommerceHub ($8 million and $9 million, respectively).
Adjusted OIBDA represents 8.8% of revenue in 2014, as compared to 7.8% of revenue in 2013 and 7.4% in 2012. Most
F-23
of our subsidiaries experienced flat to slightly increased Adjusted OIBDA as a percentage of sales for the years ended
December 31, 2014 and 2013 which was primarily the result of improved product margins and cost containment efforts
offset by increased marketing and promotional spend and lower advertising revenue due to unfavorable pricing and a shift
to mobile applications. Additionally, for the year ended December 31, 2012 the Digital Commerce companies recorded
legal settlement expense of approximately $6 million.
Operating income (loss) for the continuing Digital Commerce businesses decreased $3 million and improved $55
million for the years ended December 31, 2014 and 2013, respectively. The slight decrease in 2014 was primarily the
result of Adjusted OIBDA growth offset by increased depreciation and stock compensation expense at these subsidiaries
combined with a $7 million impairment recorded at Evite. The significant change in operating income (loss) from 2012 is
due to the Adjusted OIBDA fluctuations, discussed above, combined with $53 million of impairments of goodwill and
other intangible assets during the year ended December 31, 2012 related to our consolidated subsidiary, Evite, as a result
of continued declining operating results and disappointing trends during 2012.
Provide. Provide comprises primarily three lines of e-commerce business––ProFlowers, gourmet foods and
personalized gifts. The ProFlowers business is the most significant portion generating approximately 60% of total revenue
for all periods presented. Provide’s business is highly seasonal with higher flower and gourmet food revenue in the first
half of the year due to sales for Valentine’s Day and Mother’s Day. Revenue for the year ended December 31, 2014
increased approximately $13 million. The increase was primarily the result of revenue growth in the gourmet foods ($10
million) and personalized gifts ($6 million) business which was offset slightly by a decrease in ProFlowers revenue ($3
million). The overall demand for ProFlowers appeared to be down from the prior year as order volume was slightly down
on a fairly flat average order value. Demand for gourmet foods and personalized gifts were up slightly. In the case of
gourmet foods, average order value was flat while average order value for gifts was significantly lower due to increased
discounting of product to move through outstanding inventory levels, particularly at RedEnvelope which is currently in
the process of being shut down. Additionally, a winter storm in the first quarter of 2014 in proximity to Valentine’s Day
caused delivery issues with flowers and reduced revenue as flowers were not delivered in time or significantly damaged.
Provide’s revenue increased $33 million or 5% for the year ended December 31, 2013. Such increase is primarily
attributable to a $28 million increase for ProFlowers due to an increase in average order value and a $13 million increase
for gourmet foods.
Provide’s Adjusted OIBDA decreased $22 million and $17 million for the years ended December 31, 2014 and 2013,
respectively. The decrease in Adjusted OIBDA in 2014 was the product of slower revenue growth than expected and the
impact of shipping issues related to the storm in the first quarter of 2014 (as discussed above). Additionally, sales and
marketing efforts were not as productive as prior periods overall increasing cost with marginal top line growth. The
decrease in 2013 was primarily due to a $19 million decrease for personalized gifts. Revenue for personalized gifts was
relatively flat year-over-year while investment in these businesses continued to grow in anticipation of revenue growth.
However, gross profit percentage dropped significantly due to higher costs related to products sold, and increased
marketing efforts did not drive increased traffic or conversion. The personalized gifts results in 2013 and 2014, particularly
RedEnvelope, ultimately led to our decision to wind down that business, which experienced Adjusted OIBDA losses of
$15 million and $14 million for the years ended December 31, 2014 and 2013, respectively.
Provide’s operating income was impacted by the items discussed above with the addition of greater depreciation and
amortization and stock based compensation. In addition, in 2013 Provide recognized a $19 million impairment charge
related to its personalized gifts line of business.
F-24
As discussed above the Provide interest was sold for cash and an interest in FTD which will be accounted for as an
equity method affiliate in future periods. Therefore, the consolidated results of Provide will no longer be included in
Liberty on a go forward basis.
Quantitative and Qualitative Disclosures about Market Risk.
We are exposed to market risk in the normal course of business due to our ongoing investing and financial activities
and the conduct of operations by our subsidiaries in different foreign countries. Market risk refers to the risk of loss arising
from adverse changes in stock prices, interest rates and foreign currency exchange rates. The risk of loss can be assessed
from the perspective of adverse changes in fair values, cash flows and future earnings. We have established policies,
procedures and internal processes governing our management of market risks and the use of financial instruments to
manage our exposure to such risks.
We are exposed to changes in interest rates primarily as a result of our borrowing and investment activities, which
include investments in fixed and floating rate debt instruments and borrowings used to maintain liquidity and to fund
business operations. The nature and amount of our long-term and short-term debt are expected to vary as a result of future
requirements, market conditions and other factors. We manage our exposure to interest rates by maintaining what we
believe is an appropriate mix of fixed and variable rate debt. We believe this best protects us from interest rate risk. We
have achieved this mix by (i) issuing fixed rate debt that we believe has a low stated interest rate and significant term to
maturity, (ii) issuing variable rate debt with appropriate maturities and interest rates and (iii) entering into interest rate
swap arrangements when we deem appropriate. As of December 31, 2014, our debt is comprised of the following amounts:
Variable rate debt
Fixed rate debt
Principal
amount
Weighted avg
interest rate
Principal
amount
dollar amounts in millions
Weighted avg
interest rate
QVC Group
QVC . . . . . . . . . . . . . . . . . . . . . . . . . $
Corporate and other . . . . . . . . . . . . $
508
—
2.0 % $
$
NA
4,124
1,192
5.0 %
5.9 %
Ventures Group
Corporate and other . . . . . . . . . . . . $
50
2.5 % $
2,092
2.5 %
We are exposed to changes in stock prices primarily as a result of our significant holdings in publicly traded securities.
We continually monitor changes in stock markets, in general, and changes in the stock prices of our holdings, specifically.
We believe that changes in stock prices can be expected to vary as a result of general market conditions, technological
changes, specific industry changes and other factors. We periodically use equity collars and other financial instruments to
manage market risk associated with certain investment positions. These instruments, when utilized, are recorded at fair
value based on option pricing models.
At December 31, 2014, the fair value of our AFS equity securities was $1,220 million. Had the market price of such
securities been 10% lower at December 31, 2014, the aggregate value of such securities would have been $122 million
lower. Our stock in Expedia and other equity method affiliates which are publicly traded securities are not reflected at fair
value in our balance sheet. These securities are also subject to market risk that is not directly reflected in our statement of
operations. Additionally, our exchangeable senior debentures are also subject to market risk. Because we mark these
instruments to fair value each reporting date, increases in the price of the respective underlying security generally result in
higher liabilities and unrealized losses in our statement of operations.
Liberty is exposed to foreign exchange rate fluctuations related primarily to the monetary assets and liabilities and the
financial results of QVC's foreign subsidiaries. Assets and liabilities of foreign subsidiaries for which the functional
F-25
currency is the local currency are translated into U.S. dollars at period-end exchange rates, and the statements of operations
are generally translated at the average exchange rate for the period. Exchange rate fluctuations on translating foreign
currency financial statements into U.S. dollars that result in unrealized gains or losses are referred to as translation
adjustments. Cumulative translation adjustments are recorded in accumulated other comprehensive earnings (loss) as a
separate component of stockholders' equity. Transactions denominated in currencies other than the functional currency are
recorded based on exchange rates at the time such transactions arise. Subsequent changes in exchange rates result in
transaction gains and losses, which are reflected in income as unrealized (based on period-end translations) or realized
upon settlement of the transactions. Cash flows from our operations in foreign countries are translated at the average rate
for the period. Accordingly, Liberty may experience economic loss and a negative impact on earnings and equity with
respect to our holdings solely as a result of foreign currency exchange rate fluctuations.
We periodically assess the effectiveness of our derivative financial instruments. With regard to interest rate swaps, we
monitor the fair value of interest rate swaps as well as the effective interest rate the interest rate swap yields, in comparison
to historical interest rate trends. We believe that any losses incurred with regard to interest rate swaps would be largely
offset by the effects of interest rate movements on the underlying debt facilities. These measures allow our management
to evaluate the success of our use of derivative instruments and to determine when to enter into or exit from derivative
instruments.
Financial Statements and Supplementary Data.
The consolidated financial statements of Liberty Interactive Corporation are filed under this Item, beginning on page
F-31. The financial statement schedules required by Regulation S-X are filed under Item 15 of this Annual Report on
Form 10(cid:3236)K.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Controls and Procedures.
Disclosure Controls and Procedures
In accordance with Exchange Act Rules 13a-15 and 15d-15, the Company carried out an evaluation, under the
supervision and with the participation of management, including its chief executive officer and its principal accounting
and financial officer (the “Executives”), of the effectiveness of its disclosure controls and procedures as of the end of the
period covered by this report. Based on that evaluation, the Executives concluded that the Company's disclosure controls
and procedures were not effective as of December 31, 2014 because of the material weakness in our internal control over
financial reporting that is described below in “Management’s Report on Internal Control Over Financial Reporting.”
However, giving full consideration to the material weakness, the Company’s management has concluded that the
Consolidated Financial Statements included in this annual report present fairly, in all material respects, the Company’s
financial position, results of operations and cash flows for the periods disclosed in conformity with U.S. generally accepted
accounting principles. KPMG LLP has issued its report dated February 26, 2015, which expressed an unqualified opinion
on those Consolidated Financial Statements.
Management’s Report on Internal Control Over Financial Reporting
See page F-28 for Management's Report on Internal Control Over Financial Reporting.
F-26
See page F-29 for Report of Independent Registered Public Accounting Firm for their attestation regarding our internal
control over financial reporting.
Changes in Internal Control Over Financial Reporting
Other than the identification of the material weakness described above, there was no change in the Company’s internal
control over financial reporting that occurred during the Company’s quarter ended December 31, 2014, and that has
materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Remediation Plan for Material Weakness in Internal Control over Financial Reporting
In response to the material weakness identified in Management’s Report on Internal Control over Financial Reporting,
the Company and QVC have developed a plan with oversight from the Audit Committee of the Board of Directors to
remediate the material weakness. The remediation efforts expected to be implemented include the following:
• Establish a more comprehensive review and approval process at QVC for authorizing user access to information
technology systems and monitoring user access to ensure that all information technology controls designed to
restrict access to operating systems, applications and data, and the ability to make program changes, are operating
in a manner that provides the Company and QVC with assurance that such access is properly restricted to the
appropriate personnel.
• Evaluate QVC’s staffing levels and responsibilities to provide for appropriate segregation of duties among the
personnel.
• Develop and implement adequate training for QVC personnel to reinforce pre-established and new information
technology controls and their financial reporting objectives enabling a better understanding of the internal control
environment to improve our ability to detect and prevent potential deficiencies.
• Engage external experts to assess and improve financial application access rights to optimize appropriate
segregation of duties and to perform a code review of relevant software applications.
The Company and QVC believe the foregoing efforts will effectively remediate the material weakness. Because the
reliability of the internal control process requires repeatable execution, the successful remediation of this material weakness
will require review and evidence of effectiveness prior to concluding that the controls are effective and there is no assurance
that additional remediation steps will not be necessary.
Although no assurance can be given as to when the remediation plan will be completed, the Company and QVC
believe the remediation efforts will be completed during the third quarter of 2015 and will test and re-evaluate the
effectiveness of QVC’s information technology general controls thereafter.
Other Information.
None.
F-27
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Liberty Interactive Corporation’s (the “Company”) management is responsible for establishing and maintaining adequate
internal control over the Company’s financial reporting, as such term is defined in Rule 13a-15(f) of the Securities
Exchange Act of 1934. The Company’s internal control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with accounting principles generally accepted in the United States of America. Because of inherent limitations,
internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies and procedures may deteriorate.
The Company’s management assessed the effectiveness of internal control over financial reporting as of December 31,
2014, using the criteria in Internal Control-Integrated Framework (1992), issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this assessment, management has concluded that, as of
December 31, 2014, our internal control over financial reporting is not effective due to the material weakness described
below.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that
there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will
not be prevented or detected on a timely basis. Based on its evaluation of internal control over financial reporting as
described above, management concluded that it did not design and maintain effective internal controls with respect to
segregation of duties and related information technology general controls (ITGCs) at QVC, Inc., a wholly owned
subsidiary. Specifically, the ITGCs were not designed and operating effectively to ensure (i) that access to applications
and data, and the ability to make program changes, were adequately restricted to appropriate personnel and (ii) that the
activities of individuals with access to modify data and make program changes were appropriately monitored.
While the control deficiency identified did not result in any misstatements a reasonable possibility exists that a material
misstatement to the annual or interim consolidated financial statements and disclosures will not be prevented or detected
on a timely basis.
The Company's independent registered public accounting firm who audited the consolidated financial statements included
in the Annual Report on Form 10-K have issued an adverse report on the effectiveness of the Company's internal control
over financial reporting. This attestation report appears on page F-29 of this Annual Report on Form 10-K.
F-28
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Liberty Interactive Corporation:
We have audited Liberty Interactive Corporation and subsidiaries’ (the Company) internal control over financial reporting
as of December 31, 2014, based on criteria established in Internal Control – Integrated Framework (1992), issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is
responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over
Financial Reporting on page F-28. Our responsibility is to express an opinion on the Company’s internal control over
financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that
there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will
not be prevented or detected on a timely basis. A material weakness related to the design and operating effectiveness of
information technology general controls over access to applications and data has been identified at the Company’s wholly
owned subsidiary, QVC, Inc., and included in management’s assessment. We also have audited, in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Liberty
Interactive Corporation and subsidiaries as of December 31, 2014 and 2013, and the related consolidated statements of
operations, comprehensive earnings (loss), cash flows, and equity for each of the years in the three-year period ended
December 31, 2014. This material weakness was considered in determining the nature, timing, and extent of audit tests
applied in our audit of the 2014 consolidated financial statements, and this report does not affect our report dated February
26, 2015, which expressed an unqualified opinion on those consolidated financial statements.
F-29
In our opinion, because of the effect of the aforementioned material weakness on the achievement of the objectives of the
control criteria, the Company has not maintained effective internal control over financial reporting as of December 31,
2014, based on criteria established in Internal Control – Integrated Framework (1992) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).
Denver, Colorado
February 26, 2015
/s/ KPMG LLP
F-30
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Liberty Interactive Corporation:
We have audited the accompanying consolidated balance sheets of Liberty Interactive Corporation and subsidiaries (the
Company) as of December 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive
earnings (loss), cash flows, and equity for each of the years in the three-year period ended December 31, 2014. These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Liberty Interactive Corporation and subsidiaries as of December 31, 2014 and 2013, and the results of their
operations and their cash flows for each of the years in the three-year period ended December 31, 2014, in conformity with
U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), Liberty Interactive Corporation and subsidiaries’ internal control over financial reporting as of December 31, 2014,
based on criteria established in Internal Control – Integrated Framework (1992) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report dated February 26, 2015 expressed an adverse opinion
on the effectiveness of the Company’s internal control over financial reporting.
Denver, Colorado
February 26, 2015
/s/ KPMG LLP
F-31
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2014 and 2013
Assets
Current assets:
2014
2013
amounts in millions
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Trade and other receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current assets of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in available-for-sale securities and other cost investments (note 7) . . . . . . . . . . . .
Investments in affiliates, accounted for using the equity method (note 8) . . . . . . . . . . . . . . . . .
Property and equipment, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,306
1,232
1,049
889
72
—
5,548
1,224
1,633
2,030
(937)
1,093
Intangible assets not subject to amortization (note 9):
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,404
2,489
7,893
1,185
65
—
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,641
Intangible assets subject to amortization, net (note 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets, at cost, net of accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent assets of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
902
1,152
1,123
412
184
653
4,426
1,313
1,237
2,201
(993)
1,208
5,872
2,511
8,383
1,587
80
6,442
24,676
(continued)
F-32
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets (Continued)
December 31, 2014 and 2013
2014
2013
amounts in millions
Liabilities and Equity
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of debt (note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax liabilities (note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
735
743
946
972
343
—
3,739
Long-term debt, including $2,574 million and $2,355 million measured at fair value
(note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax liabilities (note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent liabilities of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,105
1,849
168
—
12,861
606
903
909
925
148
265
3,756
6,106
2,001
191
1,187
13,241
Equity
Stockholders' equity (note 12):
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 447,451,702 shares at December 31,
2014 and 471,625,030 shares at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Series B Liberty Interactive common stock, $.01 par value. Authorized 150,000,000
shares; issued and outstanding 28,877,554 shares at December 31, 2014 and
28,884,103 shares at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Series A Liberty Ventures common stock, $.01 par value. Authorized
200,000,000 shares; issued and outstanding 134,525,874 shares at December 31,
2014 and 70,761,208 shares at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Series B Liberty Ventures common stock, $.01 par value. Authorized 7,500,000 shares;
issued and outstanding 6,991,127 shares at December 31, 2014 and 2,885,378 shares
at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive earnings (loss), net of taxes . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests in equity of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
5
5
—
—
1
1
—
4
(94)
5,757
5,673
107
5,780
—
1,146
99
5,685
6,936
4,499
11,435
Commitments and contingencies (note 17)
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,641
24,676
See accompanying notes to consolidated financial statements.
F-33
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Consolidated Statements Of Operations
Years ended December 31, 2014, 2013 and 2012
Total revenue, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating costs and expenses:
Cost of retail sales (exclusive of depreciation shown separately below) . . . . . . . . . . .
Operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative, including stock-based compensation (note 3). . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense):
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share of earnings (losses) of affiliates, net (note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Realized and unrealized gains (losses) on financial instruments, net (note 6) . . . . . . .
Gains (losses) on transactions, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings (loss) from continuing operations before income taxes . . . . . . . . . . . . . . . . . .
Income tax (expense) benefit (note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings (loss) from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings (loss) from discontinued operations, net of taxes (note 5) . . . . . . . . . . . . . . .
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less net earnings (loss) attributable to the noncontrolling interests . . . . . . . . . . . . . . .
Net earnings (loss) attributable to Liberty Interactive Corporation shareholders . . . . . .
Net earnings (loss) attributable to Liberty Interactive Corporation shareholders:
Liberty Interactive Corporation common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liberty Interactive common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liberty Ventures common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic net earnings (loss) from continuing operations attributable to Liberty
Interactive Corporation shareholders per common share (note 3):
Series A and Series B Liberty Interactive Corporation common stock . . . . . . . . . . .
Series A and Series B Liberty Interactive common stock . . . . . . . . . . . . . . . . . . . . . .
Series A and Series B Liberty Ventures common stock . . . . . . . . . . . . . . . . . . . . . . . .
Diluted net earnings (loss) from continuing operations attributable to Liberty
Interactive Corporation shareholders per common share (note 3):
Series A and Series B Liberty Interactive Corporation common stock . . . . . . . . . . .
Series A and Series B Liberty Interactive common stock . . . . . . . . . . . . . . . . . . . . . .
Series A and Series B Liberty Ventures common stock . . . . . . . . . . . . . . . . . . . . . . . .
Basic net earnings (loss) attributable to Liberty Interactive Corporation shareholders
per common share (note 3):
Series A and Series B Liberty Interactive Corporation common stock . . . . . . . . . . .
Series A and Series B Liberty Interactive common stock . . . . . . . . . . . . . . . . . . . . . .
Series A and Series B Liberty Ventures common stock . . . . . . . . . . . . . . . . . . . . . . . .
Diluted net earnings (loss) attributable to Liberty Interactive Corporation shareholders
per common share (note 3):
Series A and Series B Liberty Interactive Corporation common stock . . . . . . . . . . .
Series A and Series B Liberty Interactive common stock . . . . . . . . . . . . . . . . . . . . . .
Series A and Series B Liberty Ventures common stock . . . . . . . . . . . . . . . . . . . . . . . .
2014
2013
amounts in millions,
except per share amounts
10,219
$ 10,499
2012
9,888
6,684
891
1,067
662
7
9,311
1,188
6,533
862
1,029
629
30
9,083
1,136
(387)
39
(57)
74
(21)
(352)
836
(258)
578
48
626
89
537
NA
520
17
537
NA
1.10
0.03
NA
1.09
0.03
NA
1.07
0.19
NA
1.06
0.19
$
$
$
$
$
$
$
$
$
$
(380)
33
(22)
(1)
(29)
(399)
737
(183)
554
26
580
79
501
NA
438
63
501
NA
0.88
0.74
NA
0.86
0.73
NA
0.85
0.86
NA
0.83
0.85
6,307
819
955
591
53
8,725
1,163
(466)
47
(351)
443
47
(280)
883
(278)
605
986
1,591
61
1,530
294
212
1,024
1,530
—
0.48
4.26
—
0.47
4.19
0.53
0.39
15.52
0.52
0.38
15.28
See accompanying notes to consolidated financial statements.
F-34
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Consolidated Statements Of Comprehensive Earnings (Loss)
Years ended December 31, 2014, 2013 and 2012
2014
2013
2012
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 626
Other comprehensive earnings (loss), net of taxes:
amounts in millions
580
1,591
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share of other comprehensive earnings (loss) of equity affiliates . . . . . . . . . . . . . . . .
Other comprehensive earnings (loss) from discontinued operations . . . . . . . . . . . . . .
Other comprehensive earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive earnings (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less comprehensive earnings (loss) attributable to the noncontrolling interests . . . .
Comprehensive earnings (loss) attributable to Liberty Interactive Corporation
shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 338
Comprehensive earnings (loss) attributable to Liberty Interactive Corporation
shareholders:
Liberty Interactive Corporation common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NA
Liberty Interactive common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 336
2
Liberty Ventures common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 338
(192)
(18)
(1)
(211)
415
77
(73)
2
(3)
(74)
506
54
(26)
3
1
(22)
1,569
43
452
1,526
NA
387
65
452
277
222
1,027
1,526
See accompanying notes to consolidated financial statements.
F-35
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Consolidated Statements Of Cash Flows
Years ended December 31, 2014, 2013 and 2012
2014
2013
amounts in millions
(See note 4)
2012
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Adjustments to reconcile net earnings to net cash provided by operating activities:
626
580
1,591
(Earnings) loss from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash payments for stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefit from stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncash interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share of (earnings) losses of affiliates, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash receipts from returns on equity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Realized and unrealized (gains) losses on financial instruments, net . . . . . . . . . . . . . . . . . . .
(Gains) losses on transactions, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gains) losses on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noncash charges (credits), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities
(48)
662
108
(15)
(21)
6
(39)
45
57
(74)
48
7
(41)
(2)
Current and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payables and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided (used) by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(84)
405
1,640
Cash flows from investing activities:
Cash proceeds from dispositions of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds (payments) from settlement of financial instruments, net . . . . . . . . . . . . . . . . . . . . .
Investment in and loans to cost and equity investees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital expended for property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash (paid) for acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of short term investments and other marketable securities . . . . . . . . . . . . . . . . . . . .
Sales of short term investments and other marketable securities . . . . . . . . . . . . . . . . . . . . . . .
Other investing activities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided (used) by investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from financing activities:
Borrowings of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchases of Liberty Interactive common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from rights offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minimum withholding taxes on net share settlements of stock-based compensation . . . . . . . .
Excess tax benefit from stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financing activities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided (used) by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of foreign currency exchange rates on cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided (used) by discontinued operations:
163
—
(91)
(241)
—
(864)
591
(16)
(458)
4,506
(3,749)
(785)
—
(26)
21
(33)
(66)
(46)
273
Cash provided (used) by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(194)
Cash provided (used) by investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
371
Cash provided (used) by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(116)
Change in available cash held by discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
334
Net cash provided (used) by discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,404
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
902
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,306
(26)
629
118
(8)
(13)
13
(33)
35
22
1
57
30
(22)
(3)
(84)
(269)
1,027
1,137
—
(384)
(291)
(24)
(959)
400
(41)
(162)
4,361
(5,415)
(1,089)
—
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13
(57)
(2,208)
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333
(198)
(172)
15
(22)
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2,291
902
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591
91
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9
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351
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—
53
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2
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398
1,447
692
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(236)
(333)
(83)
(58)
46
(39)
(269)
2,305
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328
(128)
64
(5)
249
(20)
(15)
422
(1)
(368)
38
1,445
846
2,291
See accompanying notes to consolidated financial statements.
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F-37
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2014, 2013 and 2012
(1) Basis of Presentation
The accompanying consolidated financial statements include the accounts of Liberty Interactive Corporation (formerly
known as Liberty Media 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.
As further discussed in note 5, on August 27, 2014, Liberty completed the spin-off to holders of its Liberty Ventures
common stock shares of its former wholly-owned subsidiary, Liberty TripAdvisor Holdings, Inc. (“TripAdvisor Holdings”)
(the “TripAdvisor Holdings Spin-Off”). TripAdvisor Holdings is comprised of Liberty’s former 22% economic and 57%
voting interest in TripAdvisor, Inc. (“TripAdvisor”) as well as BuySeasons, Inc. (“BuySeasons”), Liberty’s former wholly-
owned subsidiary, and a corporate level net debt balance of $350 million. In connection with the TripAdvisor Holdings
Spin-Off during August 2014, TripAdvisor Holdings drew down $400 million in margin loans and distributed
approximately $350 million to Liberty. This transaction has been recorded at historical cost due to the pro rata nature of
the distribution. Following the completion of the TripAdvisor Holdings Spin-Off, Liberty and TripAdvisor Holdings
operate as separate, publicly traded companies, and neither has any stock ownership, beneficial or otherwise, in the other.
The consolidated financial statements of Liberty have been prepared to reflect TripAdvisor Holdings as discontinued
operations. Accordingly, the assets and liabilities, revenue, costs and expenses, and cash flows of the businesses, assets
and liabilities owned by TripAdvisor Holdings at the time of the TripAdvisor Holdings Spin-Off have been excluded from
the respective captions in the accompanying consolidated balance sheets, statements of operations, comprehensive earnings
(loss) and cash flows in such consolidated financial statements.
Additionally, on October 3, 2014, Liberty announced that its board of directors approved the change in attribution
from the Interactive Group (which we refer to as the QVC Group) to the Ventures Group of its Digital Commerce
companies (defined below) and cash. The reattributed Digital Commerce companies are comprised of Liberty’s
subsidiaries Backcountry.com, Inc. (“Backcountry”), Bodybuilding.com, LLC (“Bodybuilding”), CommerceHub, Evite,
Inc. (“Evite”), Provide Commerce, Inc. (“Provide”) and LMC Right Start, Inc. (“Right Start”) (collectively, the “Digital
Commerce” companies). See note 2 for additional information on the reattribution.
F-38
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
On December 31, 2014, Liberty announced the closing of the acquisition by FTD Companies, Inc. ("FTD") of Provide
(the “FTD Transaction”). Under the terms of the transaction, Liberty received approximately 10.2 million shares of FTD
common stock representing approximately 35% of the combined company and approximately $145 million in cash. We
recognized a gain of $75 million as a result of this transaction, which is included in the Gains (losses) on transactions, net
line item in the consolidated statement of operations. Subsequent to completion of the transaction, Liberty accounts for
FTD as an equity-method affiliate based on the ownership level and board representation. The FTD Transaction resulted
in a non-cash investing addition of $355 million to the investments in affiliates, accounted for using the equity method line
item within the consolidated balance sheets. Given our significant continuing involvement with FTD, Provide is not
presented as a discontinued operation in the consolidated financial statements of Liberty. As of December 31, 2013, the
assets and liabilities subject to the sale are comprised of the following (amounts in millions):
December 31,
2013
Current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Property & equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
87
32
338
22
31
13
91
8
9
These net assets are not deemed material for isolated presentation as assets and liabilities held for sale in our
consolidated balance sheet as of December 31, 2013. Accordingly, these net assets are included in the above captions in
the consolidated balance sheet as of December 31, 2013.
On September 23, 2011, Liberty completed the split-off of a wholly owned subsidiary, Liberty Media Corporation
("LMC") (formerly known as Liberty CapStarz, Inc. and prior thereto known as Liberty Splitco, Inc.) (the "LMC Split-
Off"). Prior to the LMC Split-Off, Liberty's equity was structured into three separate tracking stocks, Liberty Interactive
common stock, Liberty Starz common stock and Liberty Capital common stock, which were intended to track and reflect
the economic performance of the separate businesses, assets and liabilities attributed to each group. These attributed
businesses, assets and liabilities were not separate legal entities and therefore no group could own assets, issue securities
or enter into legally binding agreements. Holders of the tracking stocks did not have direct claim to the group's stock or
assets and were not represented by separate boards of directors. At the time of the LMC Split-Off, LMC owned all the
assets, businesses and liabilities previously attributed to the Liberty Capital and Liberty Starz tracking stock groups. The
LMC Split-Off was effected by means of a redemption of all of the Liberty Capital common stock and Liberty Starz
common stock of Liberty in exchange for the common stock of LMC. This transaction was accounted for at historical cost
due to the pro rata nature of the distribution.
Following the LMC Split-Off, Liberty and LMC operate as separate, publicly traded companies, and neither has any
stock ownership, beneficial or otherwise, in the other. In connection with the LMC Split-Off, Liberty and LMC entered
F-39
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
into certain agreements in order to govern certain of the ongoing relationships between the two companies after the LMC
Split-Off and to provide for an orderly transition. These agreements include a Reorganization Agreement, a Services
Agreement, a Facilities Sharing Agreement and a Tax Sharing Agreement.
The Tax Sharing Agreement provides for the allocation and indemnification of tax liabilities and benefits between
Liberty and LMC and other agreements related to tax matters. Liberty is party to on-going discussions with the IRS under
the Compliance Assurance Process audit program. The IRS may propose adjustments that relate to tax attributes allocated
to and income allocable to LMC in the LMC Split-Off. Any potential outcome associated with any proposed adjustments
would be covered by the Tax Sharing Agreement and are not expected to have any impact on Liberty's financial position.
Pursuant to the Services Agreement, LMC will provide Liberty with general and administrative services including legal,
tax, accounting, treasury and investor relations support. Liberty will reimburse 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, Liberty will share office space with LMC and related amenities at LMC's corporate headquarters. Under these
various agreements approximately $11 million, $15 million and $12 million of these allocated expenses were reimbursed
from Liberty to LMC for the years ended December 31, 2014, 2013 and 2012, respectively.
(2) Tracking Stocks
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.
At the time of issuance of the Liberty Ventures common stock, cash of $1,346 million was reattributed to the Ventures
Group from the QVC Group. The QVC Group borrowed funds under QVC's credit facility just prior to the completion of
the recapitalization in order for Liberty to have an appropriate amount of cash available to be attributed to each tracking
stock group. The reattribution of cash between the tracking stock groups had no consolidated impact on Liberty.
On February 27, 2014, Liberty's board approved a two for one stock split of Series A and Series B Liberty Ventures
common stock, effected by means of a dividend. The stock split was done in order to bring Liberty into compliance with
a Nasdaq listing requirement regarding the minimum number of publicly held shares of the Series B Liberty Ventures
common stock. In the stock split, a dividend was paid on April 11, 2014 of one share of Series A or Series B Liberty
Ventures common stock to holders of each share of Series A or Series B Liberty Ventures common stock, respectively, held
by them as of 5:00 pm, New York City time, on April 4, 2014. The stock split has been recorded retroactively for all periods
presented for comparability purposes.
As discussed in note 1, on October 3, 2014, Liberty announced that its board of directors approved the change in
attribution from the QVC Group to the Ventures Group its Digital Commerce companies and cash, which was provided by
QVC as a result of a draw-down of QVC’s credit facility. The reattribution of the Digital Commerce companies is presented
F-40
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
on a prospective basis from the date of the reattribution in Liberty’s consolidated financial statements and attributed
financial information, with October 1, 2014 used as a proxy for the date of the reattribution.
In exchange for the Digital Commerce companies and $970 million of cash (collectively, the "Reattributed Assets"),
an inter-group interest in the Ventures Group was created in favor of the QVC Group. This inter-group interest was
represented as a number of shares of Liberty Ventures common stock issuable to the QVC Group, which we refer to as the
"Inter-Group Interest Shares" (as calculated below). Immediately following the reattribution on October 3, 2014, Liberty's
board declared a dividend of the Inter-Group Interest Shares to the holders of Series A and Series B Liberty Interactive
common stock in full elimination of the inter-group interest. In connection with the payment of the dividend, typical
antidilution adjustments were made to outstanding options of Liberty Interactive common stock equity incentive awards,
and the Liberty board has reattributed cash commensurate with the fair value of options assumed (outside of the
Reattributed Assets) to the Ventures Group relating to its assumption of liabilities related to those awards.
In the dividend, the Inter-Group Interest Shares were allocated, pro-rata, to the outstanding shares of Series A and
Series B Liberty Interactive common stock at 5:00 p.m., New York City time, on October 13, 2014, the record date for the
dividend, such that each holder of Liberty Interactive common stock received 0.14217 of a share of the corresponding
series of Liberty Ventures common stock for each share of Liberty Interactive common stock held as of the record date,
with cash paid in lieu of fractional shares. The distribution date for the dividend was on October 20, 2014, and the Liberty
Interactive common stock began trading ex-dividend on October 15, 2014. The distribution resulted in 67,671,232 shares
of combined Series A and Series B Liberty Ventures common stock being issued. The Inter-Group Interest Shares were
allocated such that the number of shares of Series A Liberty Ventures common stock and shares of Series B Liberty Ventures
common stock issued in the dividend were in the same proportion as the shares of Series A Liberty Interactive common
stock and Series B Liberty Interactive common stock outstanding on the record date, with each share of Series A Liberty
Interactive common stock and each share of Series B Liberty Interactive common stock receiving the same fraction of a
share of Series A or Series B Liberty Ventures common stock, as the case may be.
In connection with the reattribution, the Liberty Interactive tracking stock trading symbol “LINTA” was changed to
"QVCA" and the "LINTB" trading symbol to "QVCB," effective October 7, 2014. Other than the issuance of Liberty
Ventures shares in the fourth quarter of 2014, the reattribution of tracking stock groups has no consolidated impact on
Liberty.
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 QVC Group and Ventures Group, respectively. While the QVC 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 stock 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.
F-41
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
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. Following the reattribution, the Ventures Group is comprised primarily
of our interests in Expedia, Inc., Interval Leisure Group, Inc., LendingTree, our Digital Commerce companies, investments
in Time Warner Inc. and Time Warner Cable Inc., as well as cash in the amount of approximately $1,884 million (at
December 31, 2014), including subsidiary cash. The Ventures Group also has attributed to it certain liabilities related to
our Exchangeable Debentures 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 "QVC Group" does not represent a separate legal entity, rather it represents those businesses, assets and
liabilities that have been attributed to that group. The QVC Group is primarily comprised of our merchandise-focused
televised-shopping programs, Internet and mobile application businesses. Following the reattribution, the QVC Group has
attributed to it the remainder of our businesses and assets, including our wholly-owned subsidiary QVC and our 38%
interest in HSN, Inc. as well as cash in the amount of approximately $422 million (at December 31, 2014), including
subsidiary cash.
See Exhibit 99.1 to this Annual Report on Form 10-K for unaudited attributed financial information for Liberty's
tracking stock groups.
(3) Summary of Significant Accounting Policies
Cash and Cash Equivalents
Cash equivalents consist of investments which are readily convertible into cash and have maturities of three months
or less at the time of acquisition.
Receivables
Receivables are reflected net of an allowance for doubtful accounts and sales returns. A provision for bad debts is
provided as a percentage of accounts receivable based on historical experience and included in selling, general and
administrative expense. A provision for vendor receivables are determined based on an estimate of probable expected
losses and included in cost of goods sold. A summary of activity in the allowance for doubtful accounts is as follows:
Balance
beginning Charged
of year to expense Other write-offs year
Balance
Deductions- end of
Additions
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
86
76
80
amounts in millions
(2)
95
1
81
—
76
(87)
(72)
(80)
92
86
76
Inventory
Inventory, consisting primarily of products held for sale, is stated at the lower of cost or market. Cost is determined
by the average cost method, which approximates the first-in, first-out method. Assessments about the realizability of
inventory require the Company to make judgments based on currently available information about the likely method of
disposition including sales to individual customers, returns to product vendors, liquidations and the estimated recoverable
F-42
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
values of each disposition category. Inventory is stated net of inventory obsolescence reserves of $86 million and $88
million for the years ended December 31, 2014 and 2013, respectively.
Investments
All marketable equity and debt securities held by the Company are classified as available-for-sale ("AFS") and are
carried at fair value generally based on quoted market prices. U.S. generally accepted accounting principles ("GAAP")
permit 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"). Liberty had previously 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 statement 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 has elected the fair value option for those of its AFS securities which it considers
to be non-strategic ("Fair Value Option Securities"). Accordingly, changes in the fair value of Fair Value Option Securities,
as determined by quoted market prices, are reported in realized and unrealized gains (losses) on financial instruments in
the accompanying consolidated statement of operations. The total value of AFS securities for which the Company has
elected the fair value option aggregated $1,220 million and $1,309 million as of December 31, 2014 and 2013, respectively.
Other investments in which the Company's ownership interest is less than 20%, unless the Company has the ability to
exercise significant influence, and that are not considered marketable securities are carried at cost.
For those investments in affiliates in which the Company has the ability to exercise significant influence, the equity
method of accounting is used. Under this method, the investment, originally recorded at cost, is adjusted to recognize the
Company's share of net earnings or losses of the affiliate as they occur rather than as dividends or other distributions are
received. Losses are limited to the extent of the Company's investment in, advances to and commitments for the investee.
In the event the Company is unable to obtain accurate financial information from an equity affiliate in a timely manner,
the Company records its share of earnings or losses of such affiliate on a lag (see note 8). The Company's share of net
earnings or loss of affiliates also includes any other than temporary declines in fair value recognized during the period.
Changes in the Company's proportionate share of the underlying equity of an equity method investee, which result
from the issuance of additional equity securities by such equity investee, are recognized in the statement of operations
through the other, net line item. To the extent there is a difference between our ownership percentage in the underlying
equity of an equity method investee and our carrying value, such difference is accounted for as if the equity method investee
were a consolidated subsidiary.
The Company continually reviews its equity investments and its AFS securities which are not Fair Value Option
Securities to determine whether a decline in fair value below the carrying value is other than temporary. The primary
factors the Company considers in its determination are the length of time that the fair value of the investment is below the
Company's carrying value; the severity of the decline; and the financial condition, operating performance and near term
prospects of the investee. In addition, the Company considers the reason for the decline in fair value, be it general market
conditions, industry specific or investee specific; analysts' ratings and estimates of 12 month share price targets for the
investee; changes in stock price or valuation subsequent to the balance sheet date; and the Company's intent and ability to
F-43
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
hold the investment for a period of time sufficient to allow for a recovery in fair value. If the decline in fair value is deemed
to be other than temporary, the carrying value of the security is written down to fair value. In situations where the fair
value of an investment is not evident due to a lack of a public market price or other factors, the Company uses its best
estimates and assumptions to arrive at the estimated fair value of such investment. The Company's assessment of the
foregoing factors involves considerable management judgment and accordingly, actual results may differ materially from
the Company's estimates and judgments. Writedowns for AFS securities which are not Fair Value Option Securities would
be included in the consolidated statements of operations as other than temporary declines in fair values of investments.
Writedowns for equity method investments would be included in share of earnings (losses) of affiliates.
Derivative Instruments and Hedging Activities
All of the Company's derivatives, whether designated in hedging relationships or not, are recorded on the balance
sheet at fair value. If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and
of the hedged item attributable to the hedged risk are recognized in earnings. If the derivative is designated as a cash flow
hedge, the effective portions of changes in the fair value of the derivative are recorded in other comprehensive earnings
and are recognized in the statement of operations when the hedged item affects earnings. Ineffective portions of changes
in the fair value of cash flow hedges are recognized in earnings. If the derivative is not designated as a hedge, changes in
the fair value of the derivative are recognized in earnings. The Company has entered into several interest rate swap
agreements to mitigate the cash flow risk associated with interest payments related to certain of its variable rate debt. None
of the Company's derivatives are currently designated as hedges.
The fair value of the Company's derivative instruments are estimated using the Black-Scholes model. The Black-
Scholes model incorporates a number of variables in determining such fair values, including expected volatility of the
underlying security and an appropriate discount rate. The Company obtains volatility rates from pricing services based on
the expected volatility of the underlying security over the remaining term of the derivative instrument. A discount rate is
obtained at the inception of the derivative instrument and updated each reporting period in which equity collars are
outstanding, based on the Company's estimate of the discount rate at which it could currently settle the derivative
instrument. The Company considered its own credit risk as well as the credit risk of its counterparties in estimating the
discount rate. Management judgment was required in estimating the Black-Scholes variables.
F-44
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
Property and Equipment
Property and equipment consisted of the following:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Support equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Projects in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
205
935
847
43
2,030
208
976
940
77
2,201
December 31, December 31,
2014
2013
amounts in millions
Property and equipment, including significant improvements, is stated at cost. Depreciation is computed using the
straight-line method using estimated useful lives of 2 to 15 years for support equipment and 8 to 20 years for buildings
and improvements. Depreciation expense for the years ended December 31, 2014, 2013 and 2012 was $158 million,
$147 million and $142 million, respectively.
Intangible Assets
Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their
estimated residual values, and reviewed for impairment upon certain triggering events. Goodwill and other intangible
assets with indefinite useful lives (collectively, "indefinite lived intangible assets") are not amortized, but instead are tested
for impairment at least annually. Our annual impairment assessment of our indefinite-lived intangible assets is performed
during the fourth quarter of each year.
The Company utilizes a qualitative assessment for determining whether step one of the goodwill impairment analysis
is necessary. The accounting guidance permits entities to first assess qualitative factors to determine whether it is more
likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it
is necessary to perform the two-step goodwill impairment test. In evaluating goodwill on a qualitative basis the Company
reviews the business performance of each reporting unit and evaluates other relevant factors as identified in the relevant
accounting guidance to determine whether it was more likely than not that an indicated impairment exists for any of our
reporting units. The Company considers whether there are any negative macroeconomic conditions, industry specific
conditions, market changes, increased competition, increased costs in doing business, management challenges, the legal
environments and how these factors might impact company specific performance in future periods. As part of the analysis
the Company also considers fair value determinations for certain reporting units that have been made at various points
throughout the current year and prior year for other purposes.
If a step one test is considered necessary based on the qualitative factors, the Company compares the estimated fair
value of a reporting unit to its carrying value. Developing estimates of fair value requires significant judgments, including
making assumptions about appropriate discount rates, perpetual growth rates, relevant comparable market multiples, public
trading prices and the amount and timing of expected future cash flows. The cash flows employed in Liberty's valuation
analyses are based on management's best estimates considering current marketplace factors and risks as well as
assumptions of growth rates in future years. There is no assurance that actual results in the future will approximate these
forecasts. For those reporting units whose carrying value exceeds the fair value, a second test is required to measure the
F-45
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
impairment loss (the "Step 2 Test"). In the Step 2 Test, the fair value (Level 3) of the reporting unit is allocated to all of the
assets and liabilities of the reporting unit with any residual value being allocated to goodwill. Any excess of the carrying
value of the goodwill over this allocated amount is recorded as an impairment charge.
The accounting guidance also permits entities to first perform a qualitative assessment to determine whether it is more
likely than not that an indefinite-lived intangible asset is impaired. If the qualitative assessment supports that it is more
likely than not that the carrying value of the Company’s indefinite-lived intangible assets, other than goodwill, exceeds its
fair value, then a quantitative assessment is performed. If the carrying value of an indefinite-lived intangible asset exceeds
its fair value, an impairment loss is recognized in an amount equal to that excess.
Impairment of Long-lived Assets
The Company periodically reviews the carrying amounts of its property and equipment and its intangible assets (other
than goodwill and indefinite-lived intangibles) to determine whether current events or circumstances indicate that such
carrying amounts may not be recoverable. If the carrying amount of the asset group is greater than the expected
undiscounted cash flows to be generated by such asset group, including its ultimate disposition, an impairment adjustment
is to be recognized. Such adjustment is measured by the amount that the carrying value of such asset groups exceeds their
fair value. The Company generally measures fair value by considering sale prices for similar asset groups or by discounting
estimated future cash flows using an appropriate discount rate. Considerable management judgment is necessary to
estimate the fair value of asset groups. Accordingly, actual results could vary significantly from such estimates. Asset
groups to be disposed of are carried at the lower of their financial statement carrying amount or fair value less costs to sell.
Noncontrolling Interests
The Company reports noncontrolling interests of subsidiaries within equity in the balance sheet and the amount of
consolidated net income attributable to the parent and to the noncontrolling interest is presented in the statement of
operations. Also, changes in ownership interests in subsidiaries in which the Company maintains a controlling interest are
recorded in equity.
Foreign Currency Translation
The functional currency of the Company is the United States (''U.S.'') dollar. The functional currency of the Company's
foreign operations generally is the applicable local currency for each foreign subsidiary. Assets and liabilities of foreign
subsidiaries are translated at the spot rate in effect at the applicable reporting date, and the consolidated statements of
operations are translated at the average exchange rates in effect during the applicable period. The resulting unrealized
cumulative translation adjustment, net of applicable income taxes, is recorded as a component of accumulated other
comprehensive earnings in stockholders' equity.
Transactions denominated in currencies other than the functional currency are recorded based on exchange rates at the
time such transactions arise. Subsequent changes in exchange rates result in transaction gains and losses which are
reflected in the accompanying consolidated statements of operations and comprehensive earnings (loss) as unrealized
(based on the applicable period-end exchange rate) or realized upon settlement of the transactions.
F-46
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
Revenue Recognition
Retail revenue is recognized at the time of delivery to customers. The revenue for shipments in-transit is recorded as
deferred revenue and included in other current liabilities. Service revenue is recognized when the applicable criteria are
met: persuasive evidence of an arrangement exists, services have been rendered, the price is fixed and determinable and
collectability is reasonably assured.
An allowance for returned merchandise is provided as a percentage of sales based on historical experience. The total
reduction in sales due to returns for the years ended December 31, 2014, 2013 and 2012 aggregated $2,123 million, $2,134
million and $2,037 million, respectively. Sales tax collected from customers on retail sales is recorded on a net basis and
is not included in revenue.
In May 2014, the Financial Accounting Standards Board issued new accounting guidance on revenue from contracts
with customers. The new guidance requires an entity to recognize the amount of revenue to which it expects to be entitled
for the transfer of promised goods or services to customers. The updated guidance will replace most existing revenue
recognition guidance in GAAP when it becomes effective and permits the use of either a retrospective or cumulative effect
transition method. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2016. The Company has not yet selected a transition method and is currently evaluating the effect that the
updated standard will have on its revenue recognition but does not believe that the standard will significantly impact its
financial statements and related disclosures.
Cost of Sales
Cost of sales primarily includes actual product cost, provision for obsolete inventory, buying allowances received from
suppliers, shipping and handling costs and warehouse costs.
Advertising Costs
Advertising costs generally are expensed as incurred. Advertising expense aggregated $271 million, $258 million and
$247 million for the years ended December 31, 2014, 2013 and 2012, respectively. Advertising costs are reflected in the
Selling, general and administrative expense line item in our consolidated statements of operations.
Stock-Based Compensation
As more fully described in note 14, the Company has granted to its directors, employees and employees of its
subsidiaries options, restricted stock and stock appreciation rights ("SARs") to purchase shares of Liberty Interactive and/or
Liberty Ventures common stock ("Liberty common stock") (collectively, "Awards"). The Company measures the cost of
employee services received in exchange for an Award of equity instruments (such as stock options and restricted stock)
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 an Award of liability instruments (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.
F-47
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
Stock compensation expense was $108 million, $118 million and $91 million for the years ended December 31, 2014,
2013 and 2012, respectively, included in selling, general and administrative expense in the accompanying consolidated
statements of operations.
Income Taxes
The Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between the financial statement carrying value
amounts and income tax bases of assets and liabilities and the expected benefits of utilizing net operating loss and tax
credit carryforwards. The deferred tax assets and liabilities are calculated using enacted tax rates in effect for each taxing
jurisdiction in which the Company operates for the year in which those temporary differences are expected to be recovered
or settled. Net deferred tax assets are then reduced by a valuation allowance if the Company believes it more likely than
not such net deferred tax assets will not be realized. The effect on deferred tax assets and liabilities of an enacted change
in tax rates is recognized in income in the period that includes the enactment date.
When the tax law requires interest to be paid on an underpayment of income taxes, the Company recognizes interest
expense from the first period the interest would begin accruing according to the relevant tax law. Such interest expense is
included in interest expense in the accompanying consolidated statements of operations. Any accrual of penalties related
to underpayment of income taxes on uncertain tax positions is included in other income (expense) in the accompanying
consolidated statements of operations.
Earnings (Loss) Attributable to Liberty Interactive Corporation Stockholders and Earnings (Loss) Per Common Share
Net earnings (loss) attributable to Liberty stockholders is comprised of the following (amounts in millions):
Years ended December 31,
2013
2012
2014
Liberty Interactive Corporation
Net earnings (loss) from continuing operations . . . . . . . . . . .
Net earnings (loss) from discontinued operations . . . . . . . . .
NA
NA
Liberty Interactive
Net earnings (loss) from continuing operations . . . . . . . . . . . $
Net earnings (loss) from discontinued operations . . . . . . . . . $
535
(15)
Liberty Ventures
Net earnings (loss) from continuing operations . . . . . . . . . . . $
Net earnings (loss) from discontinued operations . . . . . . . . . $
3
14
NA
NA
455
(17)
54
9
(1)
295
262
(50)
281
743
Basic earnings (loss) per common share ("EPS") is computed by dividing net earnings (loss) attributable to such
common stock 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.
F-48
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
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 weighted average outstanding shares. Excluded from diluted EPS, for the period prior to the recapitalization, are
less than a million potential common shares because their inclusion would be antidilutive.
Basic WASO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Potentially dilutive shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted WASO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
559
9
568
January 1, 2012 -
August 9, 2012
number of shares in millions
Series A and Series B Liberty Interactive Common Stock
Liberty completed a recapitalization on August 9, 2012, whereby each holder of current Liberty Interactive
Corporation common stock became a holder of the same number of Liberty Interactive common stock. EPS for the period
from the recapitalization through December 31, 2014, is based on the following weighted average outstanding shares.
Excluded from diluted EPS for the year ended December 31, 2014 are approximately 1 million potential common shares
because their inclusion would be antidilutive.
Basic WASO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Potentially dilutive shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted WASO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Series A and Series B Liberty Ventures Common Stock
2014
2012
Years ended December 31,
2013
number of shares in millions
484
8
492
519
8
527
541
10
551
Liberty completed a recapitalization on August 9, 2012, whereby each holder of then-existing Liberty Interactive
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. Additionally, as part of the
recapitalization Liberty distributed subscription rights, which were priced at a discount to the market value, to all holders
of Liberty Ventures common stock, see further discussion in note 12. The rights offering, because of the discount, is
considered a stock dividend which requires retroactive treatment for prior periods for the weighted average shares
outstanding. As discussed in note 2, Liberty completed a two for one stock split on April 11, 2014 on its Series A and Series
B Liberty Ventures common stock. Therefore, all prior period outstanding share amounts have been retroactively adjusted
for comparability.
Additionally, as discussed in note 2, on October 3, 2014, Liberty attributed from the QVC Group to the Ventures
Group its Digital Commerce companies. In exchange for the Reattributed Assets, Inter-Group Interest Shares in the
Ventures Group were created in favor of the QVC Group. Immediately following the reattribution on October 3, 2014,
Liberty's board declared a dividend of the Inter-Group Interest Shares to the holders of Series A and Series B Liberty
Interactive common stock in full elimination of the inter-group interest. The Inter-Group Interest Shares were allocated,
F-49
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
pro-rata, to the outstanding shares of Series A and Series B Liberty Interactive common stock at 5:00 p.m., New York City
time, on October 13, 2014, the record date for the dividend, such that each holder of Liberty Interactive common stock
received 0.14217 of a share of the corresponding series of Liberty Ventures common stock for each share of Liberty
Interactive common stock held as of the record date, with cash paid in lieu of fractional shares. The distribution date for
the dividend was on October 20, 2014, and the Liberty Interactive common stock began trading ex-dividend on October
15, 2014. The reattribution of the Digital Commerce companies is presented on a prospective basis from the date of the
reattribution in Liberty’s consolidated financial statements, with October 1, 2014 used as a proxy for the date of the
reattribution.
EPS for the period from the recapitalization through December 31, 2014, is based on the following weighted average
outstanding shares. Excluded from diluted EPS for the year ended December 31, 2014 are less than a million potential
common shares because their inclusion would be antidilutive.
Basic WASO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Potentially dilutive shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted WASO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012
2014
Years ended December 31,
2013
number of shares in millions
87
1
88
73
1
74
66
1
67
Reclasses and adjustments
Certain prior period amounts have been reclassified for comparability with the current year presentation.
Estimates
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) recurring and non-recurring fair value measurements, (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 consolidated
financial statements.
F-50
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
(4) Supplemental Disclosures to Consolidated Statements of Cash Flows
2014
Years ended December 31,
2013
amounts in millions
2012
Cash paid for acquisitions:
Fair value of assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . $
Intangibles not subject to amortization . . . . . . . . . . . . . . . . . .
Intangibles subject to amortization . . . . . . . . . . . . . . . . . . . . .
Net liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets (liabilities) . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid for acquisitions, net of cash acquired . . . . . . . . $
—
—
—
—
—
—
—
7
12
2
(7)
10
—
24
13
45
40
(19)
(8)
12
83
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 362
362
411
Cash paid for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
44
410
133
(5) Discontinued Operations
On August 27, 2014, Liberty completed the TripAdvisor Holdings Spin-Off to holders of its Liberty Ventures
common stock shares of its former wholly-owned subsidiary, TripAdvisor Holdings. TripAdvisor Holdings is comprised
of Liberty’s former 22% economic and 57% voting interest in TripAdvisor, as well as BuySeasons, Liberty’s former
wholly-owned subsidiary, and a corporate level net debt balance of $350 million. In connection with the TripAdvisor
Holdings Spin-Off during August 2014, TripAdvisor Holdings drew down $400 million in margin loans and distributed
approximately $350 million to Liberty. This transaction has been recorded at historical cost due to the pro rata nature of
the distribution. Following the completion of the TripAdvisor Holdings Spin-Off, Liberty and TripAdvisor Holdings
operate as separate, publicly traded companies, and neither has any stock ownership, beneficial or otherwise, in the other.
The consolidated financial statements of Liberty have been prepared to reflect TripAdvisor Holdings as discontinued
operations. Accordingly, the assets and liabilities, revenue, costs and expenses, and cash flows of the businesses, assets
and liabilities owned by TripAdvisor Holdings at the time of the TripAdvisor Holdings Spin-Off have been excluded
from the respective captions in the accompanying consolidated balance sheets, statements of operations, comprehensive
earnings and cash flows in such consolidated financial statements.
In connection with the TripAdvisor Holdings Spin-off, Liberty and TripAdvisor Holdings entered into a tax sharing
agreement (the “Tax Sharing Agreement”). The Tax Sharing Agreement provides for the allocation and indemnification
of tax liabilities and benefits between Liberty and TripAdvisor Holdings and other agreements related to tax matters.
Among other things, pursuant to the Tax Sharing Agreement, TripAdvisor Holdings has agreed to indemnify Liberty,
subject to certain limited exceptions, for losses and taxes resulting from the TripAdvisor Holdings Spin-Off to the extent
such losses or taxes result primarily from, individually or in the aggregate, the breach of certain restrictive covenants
F-51
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
made by TripAdvisor Holdings (applicable to actions or failures to act by TripAdvisor Holdings and its subsidiaries
following the completion of the TripAdvisor Holdings Spin-Off).
In October 2014, the IRS completed its examination of the TripAdvisor Holdings Spin-Off and notified Liberty that
it agreed with the nontaxable characterization of the transaction. Liberty expects to execute a Closing Agreement with the
IRS documenting this conclusion during 2015.
Certain combined financial information for TripAdvisor Holdings, which is included in the discontinued operations
line items of the consolidated Liberty balance sheets as of December 31, 2013, is as follows (amounts in millions):
Current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Investments in available-for-sale securities and other cost investments . . . . $
Property & equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Debt, including current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
December 31, 2013
653
188
39
3,460
1,832
905
34
265
369
836
Certain combined financial information for TripAdvisor Holdings, which is included in earnings (loss) from
discontinued operations, is as follows (amounts in millions, except per share amounts):
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Earnings (loss) before income taxes . . . . . . . . . . . . . . . . . . . . $
Income tax (expense) benefit . . . . . . . . . . . . . . . . . . . . . . . . . . $
Earnings (loss) attributable to Liberty Interactive
2014
Years ended December 31,
2013
1,033
(27)
53
883
68
(20)
166
1,102
(116)
2012
Corporation shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(1)
(8)
988
F-52
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
Earnings per share impact of discontinued operations
The combined impact from discontinued operations, discussed above, is as follows:
Years ended December 31,
2013
2014
2012
Basic earnings (loss) from discontinued operations attributable to Liberty
shareholders per common share (note 3):
Series A and Series B Liberty Interactive Corporation common stock . . . . . . . . . $
NA
Series A and Series B Liberty Interactive common stock . . . . . . . . . . . . . . . . . . . . $ (0.03)
0.16
Series A and Series B Liberty Ventures common stock . . . . . . . . . . . . . . . . . . . . . . $
NA
(0.03)
0.12
0.53
(0.09)
11.26
Diluted earnings (loss) from discontinued operations attributable to Liberty
shareholders per common share (note 3):
Series A and Series B Liberty Interactive Corporation common stock . . . . . . . . . $
NA
Series A and Series B Liberty Interactive common stock . . . . . . . . . . . . . . . . . . . . $ (0.03)
0.16
Series A and Series B Liberty Ventures common stock . . . . . . . . . . . . . . . . . . . . . . $
NA
(0.03)
0.12
0.52
(0.09)
11.09
The assets and liabilities included in the TripAdvisor Holdings Spin-Off, and their resulting impacts on the attributed
consolidated statements of operations, were included in discontinued operations based on which group owned the assets
at the time of the TripAdvisor Holdings Spin-Off.
(6) 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, other than quoted market prices included within Level 1, are observable for the asset or liability, either directly or
indirectly. Level 3 inputs are unobservable inputs for the asset or liability. The Company does not have any recurring
assets or liabilities measured at fair value that would be considered Level 3.
F-53
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
The Company's assets and liabilities measured at fair value are as follows:
Description
Total
for identical
assets
(Level 1)
December 31, 2014
Quoted prices
in active
markets
Significant
other
observable
inputs
(Level 2) Total
amounts in millions
December 31, 2013
Quoted prices
in active
markets
for identical
assets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,147
Short term marketable securities . . . . . . . . . . . . $
889
Available-for-sale securities . . . . . . . . . . . . . . . . $ 1,220
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,574
2,147
277
1,203
—
—
612
17
2,574
762
412
1,309
2,355
762
62
1,047
—
—
350
262
2,355
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. Accordingly, the debt instruments are reported
in the foregoing table as Level 2 fair value.
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:
2014
Years ended December 31,
2013
amounts in millions
2012
Fair Value Option Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 173
(230)
Exchangeable senior debentures . . . . . . . . . . . . . . . . . . . . . . . .
—
Other financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(57)
$
514
(553)
17
(22)
470
(602)
(219)
(351)
(7) 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 generally 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 statement 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 considers to be non-strategic ("Fair Value Option Securities").
Accordingly, changes in the fair value of Fair Value Option Securities, as determined by quoted market prices, are reported
F-54
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
in realized and unrealized gains (losses) on financial instruments in the accompanying 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:
December 31,
December 31,
2014
2013
amounts in millions
QVC Group
Other cost investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Total attributed QVC Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4
4
Ventures Group
Time Warner Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Time Warner Cable Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other AFS investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total attributed Ventures Group . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Liberty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
375
815
30
1,220
1,224
4
4
306
741
262
1,309
1,313
(8) 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 December 31, 2014 and the carrying
amount at December 31, 2013:
QVC Group
dollars in millions
December 31, 2014
Percentage Market
ownership
value
Carrying
amount
December 31, 2013
Carrying
amount
293
50
343
477
—
417
894
1,237
HSN, Inc. (2) . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . various
Total QVC Group . . . . . . . . . . . . . . . . . . .
Ventures Group
38 % $ 1,521 $ 328
47
375
N/A
Expedia (1)(2) . . . . . . . . . . . . . . . . . . . . . . .
FTD (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . various
18 % $ 1,992
35 % $ 355
N/A
514
355
389
1,258
$ 1,633
Total Ventures Group . . . . . . . . . . . . . . . .
Consolidated Liberty . . . . . . . . . . . . . . . . . . .
F-55
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
The following table presents Liberty's share of earnings (losses) of affiliates:
2014
Years ended December 31,
2013
amounts in millions
2012
QVC Group
HSN, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total QVC Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
60
(9)
51
Ventures Group
Expedia, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Ventures Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Liberty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
58
(70)
(12)
39
61
(13)
48
31
(46)
(15)
33
40
(12)
28
67
(48)
19
47
(1) 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, previously held as collateral, were released to the
counterparty. In the fourth quarter of 2012, when the forward contract settled, the difference between the fair value
of the Expedia shares and the carrying value of the shares ($443 million) was recognized in the gain (loss) on
transactions, net line item in the statement of operations. Liberty owns an approximate 18% equity interest and 58%
voting interest in Expedia. Liberty has entered into governance arrangements pursuant to which Mr. Barry Diller,
Chairman of the Board and Senior Executive Officer of Expedia, may vote its interests of Expedia, subject to certain
limitations. Additionally, through our governance arrangements with Mr. Diller, we have the right to appoint and
have appointed 20% of the members of Expedia's board of directors, which is currently comprised of 10 members.
Therefore, we determined based on these arrangements that we have significant influence and have accounted for the
investment as an equity method affiliate.
(2) During the years ended December 31, 2014, 2013 and 2012, Expedia, Inc. paid dividends aggregating $15 million,
$13 million and $23 million, respectively, and HSN, Inc. paid dividends of $22 million and $16 million during the
years ended December 31, 2014 and December 31, 2013, respectively, which were recorded as reductions to the
investment balances.
(3) As discussed in note 1, FTD acquired Liberty’s formerly wholly-owned subsidiary, Provide, on December 31, 2014.
In exchange for Provide, Liberty received approximately 10.2 million shares of FTD common stock representing
approximately 35% of the combined company and approximately $145 million in cash. Subsequent to completion of
the transaction, Liberty accounts for FTD as an equity-method affiliate based on the ownership level and board
representation.
F-56
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
HSN, Inc.
Liberty records the share of earnings (loss) for HSN, Inc. on a quarter lag due to timeliness considerations and
access to financial information. Summarized unaudited financial information for HSN, Inc., on a quarter lag, is as
follows:
HSN, Inc. Consolidated Balance Sheets
September 30, September 30,
2014
amounts in millions
2013
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
863
180
10
262
14
1,329
474
76
216
15
548
1,329
773
171
10
266
6
1,226
412
90
231
11
482
1,226
HSN, Inc. Consolidated Statements of Operations
Trailing twelve months ended September 30,
2013
amounts in millions
2012
2014
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense), net . . . . . . . . . . . . . . . . . . . . . .
Income tax (expense) benefit . . . . . . . . . . . . . . . . . . . . .
Income (loss) from continuing operations . . . . . . . . .
Discontinued operations, net of tax . . . . . . . . . . . . . . . .
Net earnings (loss) attributable to HSN shareholders . .
$
3,490
(2,246)
1,244
(928)
(43)
273
(7)
—
(100)
166
—
166
$
3,367
(2,152)
1,215
(898)
(40)
277
(7)
1
(98)
173
1
174
3,206
(2,039)
1,167
(877)
(38)
252
(27)
(18)
(78)
129
(8)
121
F-57
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
(9) Goodwill and Other Intangible Assets
Goodwill
Changes in the carrying amount of goodwill are as follows:
Digital
QVC
Commerce Total
amounts in millions
Foreign currency translation adjustments . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at January 1, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,349
(37)
—
—
Balance at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,312
—
—
(106)
—
Balance at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,206
Impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sale of subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
558
—
7
(5)
560
(7)
(352)
—
(3)
198
5,907
(37)
7
(5)
5,872
(7)
(352)
(106)
(3)
5,404
Goodwill recognized from acquisitions primarily relates to assembled workforces, website community and other
intangible assets that do not qualify for separate recognition.
As presented in the accompanying consolidated balance sheets, trademarks is the other significant indefinite lived
intangible asset.
Intangible Assets Subject to Amortization
Intangible assets subject to amortization are comprised of the following:
December 31, 2014
December 31, 2013
Gross
carrying Accumulated carrying carrying
amount
amortization amount
amount
amounts in millions
Gross
Net
Net
Accumulated carrying
amortization amount
Television distribution rights . . . . . . . . . . . . . . . . . . . . $ 2,308
2,488
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
735
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,531
(1,847)
(2,015)
(484)
(4,346)
461
473
251
1,185
2,324
2,620
804
5,748
(1,700)
(1,940)
(521)
624
680
283
(4,161) 1,587
The weighted average life of these amortizable intangible assets was approximately 9 years, at the time of acquisition.
However, amortization is expected to match the usage of the related asset and will be on an accelerated basis as
demonstrated in table below.
Amortization expense for intangible assets with finite useful lives was $504 million, $482 million and $449 million
for the years ended December 31, 2014, 2013 and 2012, respectively. Based on its amortizable intangible assets as of
F-58
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
December 31, 2014, Liberty expects that amortization expense will be as follows for the next five years (amounts in
millions):
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 470
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 421
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 262
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7
Impairments
Continued declining operating results as compared to budgeted results and certain trends related to certain Digital
Commerce companies required a Step 2 impairment test and a determination of fair value for those subsidiaries. Fair value
for those subsidiaries, including the related intangibles and goodwill, were determined using the respective companies'
projections of future operating performance and applying a combination of market multiples (market approach) and
discounted cash flow (income approach) calculations (Level 3). As of December 31, 2014 accumulated goodwill
impairment losses for the Digital Commerce companies was $111 million.
F-59
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
(10) Debt
Debt is summarized as follows:
Outstanding
principal
December 31, December 31,
Carrying value
2014
2014
amounts in millions
December 31,
2013
QVC Group
Corporate level notes and debentures
8.5% Senior Debentures due 2029 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
8.25% Senior Debentures due 2030 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1% Exchangeable Senior Debentures due 2043 . . . . . . . . . . . . . . . . . . . . . .
Subsidiary level notes and facilities
QVC 7.5% Senior Secured Notes due 2019 . . . . . . . . . . . . . . . . . . . . . . . . . .
QVC 3.125% Senior Secured Notes due 2019. . . . . . . . . . . . . . . . . . . . . . . .
QVC 7.375% Senior Secured Notes due 2020. . . . . . . . . . . . . . . . . . . . . . . .
QVC 5.125% Senior Secured Notes due 2022. . . . . . . . . . . . . . . . . . . . . . . .
QVC 4.375% Senior Secured Notes due 2023. . . . . . . . . . . . . . . . . . . . . . . .
QVC 4.850% Senior Secured Notes due 2024. . . . . . . . . . . . . . . . . . . . . . . .
QVC 4.45% Senior Secured Notes due 2025 . . . . . . . . . . . . . . . . . . . . . . . . .
QVC 5.45% Senior Secured Notes due 2034 . . . . . . . . . . . . . . . . . . . . . . . . .
QVC 5.95% Senior Secured Notes due 2043 . . . . . . . . . . . . . . . . . . . . . . . . .
QVC Bank Credit Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other subsidiary debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total QVC Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Ventures Group
Corporate level debentures
4% Exchangeable Senior Debentures due 2029 . . . . . . . . . . . . . . . . . . . . . . $
3.75% Exchangeable Senior Debentures due 2030 . . . . . . . . . . . . . . . . . . . .
3.5% Exchangeable Senior Debentures due 2031 . . . . . . . . . . . . . . . . . . . . .
0.75% Exchangeable Senior Debentures due 2043 . . . . . . . . . . . . . . . . . . . .
Subsidiary level notes and facilities
Other subsidiary debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Ventures Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Total consolidated Liberty debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Less debt classified as current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchangeable Senior Debentures
287
504
400
—
400
500
500
750
600
600
400
300
508
75
5,824
438
438
355
850
61
2,142
7,966
285
501
444
—
399
500
500
750
600
599
399
300
508
75
5,860
294
291
325
1,220
61
2,191
8,051
(946)
7,105
285
501
423
761
—
500
500
750
—
—
—
300
922
141
5,083
284
270
316
1,062
—
1,932
7,015
(909)
6,106
Each $1,000 original principal amount of the 0.75% Exchangeable Senior Debentures is exchangeable for a basket of
6.3040 shares of common stock of Time Warner Cable Inc., 5.1635 shares of common stock of Time Warner Inc. and
0.6454 shares of Time, 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
F-60
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
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 (“Liberty 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.
Each $1,000 debenture of Liberty LLC's 4% Exchangeable Senior Debentures is exchangeable at the holder's option
for the value of 3.2265 shares of Sprint common stock and 0.7860 shares of CenturyLink, Inc. ("CenturyLink") common
stock. Liberty LLC may, at its election, pay the exchange value in cash, Sprint and CenturyLink common stock or a
combination thereof. Liberty LLC, at its option, may redeem the debentures, in whole or in part, for cash generally equal
to the face amount of the debentures plus accrued interest.
Each $1,000 debenture of Liberty LLC's 3.75% Exchangeable Senior Debentures is exchangeable at the holder's
option for the value of 2.3578 shares of Sprint common stock and 0.5746 shares of CenturyLink common stock. Liberty
LLC may, at its election, pay the exchange value in cash, Sprint and CenturyLink common stock or a combination thereof.
Liberty, at its option, may redeem the debentures, in whole or in part, for cash equal to the face amount of the debentures
plus accrued interest.
Each $1,000 debenture of Liberty LLC's 3.5% Exchangeable Senior Debentures (the "Motorola Exchangeables") was
exchangeable at the holder's option for the value of 5.2598 shares of Motorola Solutions, Inc. and 4.6024 shares of Motorola
Mobility Holdings, Inc., as a result of Motorola Inc.'s separation of Motorola Mobility Holdings, Inc. ("MMI") in a 1 for 8
stock distribution, and the subsequent 1 for 7 reverse stock split of Motorola, Inc. (which has been renamed Motorola
Solutions, Inc. ("MSI")), effective January 4, 2011. MMI was acquired on May 22, 2012 for $40 per share in cash. Pursuant
to the indenture, the cash paid to shareholders in the MMI acquisition was to be paid to the holders of the Motorola
Exchangeables as an extraordinary distribution. Liberty LLC made a cash payment of $184.096 per debenture in the second
quarter of 2012 for a total payment of $111 million. The remaining exchange value is payable, at Liberty's option, in cash
or MSI stock or a combination thereof. Liberty LLC, at its option, may redeem the debentures, in whole or in part, for cash
generally equal to the adjusted principal amount of the debentures plus accrued interest. As a result of a cash distribution
made by Liberty LLC in 2007, the cash disbursement discussed above and various principal payments made to holders of
the Motorola Exchangeables, the adjusted principal amount of each $1,000 debenture is $592, as of December 31, 2014.
Each $1,000 original principal amount of the 1% Exchangeable Senior Debentures due 2043 (the “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, for certain triggering events (primarily the
increase in an average trading period at the end of the quarter for HSNi reference shares above 130% or below 98% of the
adjusted principal amount at the end of a quarter) after the calendar quarter ended 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
F-61
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
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. In January 2015 HSNi declared a special dividend of
$10 per share from which Liberty anticipates receiving approximately $200 million in cash in February 2015. Pursuant to
the debentures a portion of the special dividend ($54 million) will be passed through to the holders of the notes and will
reduce the outstanding principal balance in March 2015.
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.
Liberty has elected to account for all of its 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. Liberty will review
the triggering events on a quarterly basis to determine whether a triggering event has occurred to require current
classification of certain Exchangeables, see additional discussion below.
Liberty has sold, split-off or otherwise disposed of all of its shares of Motorola, Sprint and CenturyLink common
stock which underlie the respective Exchangeable Senior Debentures. Because such exchangeable debentures are
exchangeable at the option of the holder at any time and Liberty can no longer use owned shares to redeem the debentures,
Liberty has classified for financial reporting purposes the portion of the debentures that could be redeemed for cash as a
current liability. Such amount aggregated $910 million at December 31, 2014. Although such amount has been classified
as a current liability for financial reporting purposes, the Company believes the probability that the holders of such
instruments will exchange a significant principal amount of the debentures prior to maturity is remote.
F-62
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
Interest on the Company's exchangeable debentures is payable semi-annually based on the date of issuance. At
maturity, all of the Company's exchangeable debentures are payable in cash.
Senior Debentures
Interest on the Senior Debentures is payable semi-annually based on the date of issuance.
The Senior Debentures are stated net of an aggregate unamortized discount of $5 million at December 31, 2014 and
2013. Such discount is being amortized to interest expense in the accompanying consolidated statements of operations.
QVC Senior Secured Notes
On March 18, 2014, QVC issued $400 million principal amount of new 3.125% Senior Secured Notes due 2019 at an
issue price of 99.828% and $600 million principal amount of new 4.85% Senior Secured Notes due 2024 at an issue price
of 99.927% (collectively, the “March Notes”). The March Notes are secured by the capital stock of QVC and certain of
QVC’s subsidiaries and have equal priority to QVC’s senior secured credit facility. The net proceeds from the March Notes
offerings were used to repay indebtedness under QVC’s senior secured credit facility and for working capital and other
general corporate purposes.
On August 21, 2014, QVC issued $600 million principal amount of 4.45% Senior Secured Notes due 2025 at an issue
price of 99.860% and new $400 million principal amount 5.45% Senior Secured Notes due 2034 at an issue price of
99.784% (collectively, the “August Notes”). The August Notes are secured by the capital stock of QVC and certain of
QVC’s subsidiaries and have equal priority to QVC’s senior secured credit facility. The net proceeds from the August Notes
offerings were used for the redemption of QVC’s 7.5% Senior Secured Notes due 2019 (the “Redemption”) on
September 9, 2014 and for working capital and other general corporate purposes.
As a result of the Redemption, QVC incurred an extinguishment loss of $48 million for the year ended December 31,
2014. As a result of refinancing transactions in the prior year, QVC recorded extinguishment losses of $57 million for the
year ended December 31, 2013. Losses on early extinguishment of debt are recorded in other, net in the Company's
consolidated statements of operations.
During prior years, QVC issued $500 million principal amount of 7.375% Senior Secured Notes due 2020 at par,
$1,000 million principal amount of QVC 7.50% Senior Secured Notes due 2019 at an issue price of 98.278% of par, $500
million principal amount of 5.125% Senior Secured Notes due 2022 at par, $750 million principal amount of 4.375%
Senior Secured Notes due 2023 at par and $300 million principal amount of 5.95% Senior Secured Notes due 2043 at par.
QVC was in compliance with all of its debt covenants related to its outstanding senior notes at December 31, 2014.
QVC Bank Credit Facilities
The QVC Bank Credit Facility 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
F-63
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
or incremental term loans. The loans are scheduled to mature on March 1, 2018. The Bank Credit Facility contains
covenants customary to those generally contained in bank credit facilities. Borrowings under the Bank Credit Facility bear
interest at either the alternate 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. The interest rate on the senior secured credit facility was 2.0% at December 31,
2014. 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 Bank Credit Facility is secured by the stock of
QVC. Availability under the QVC Credit Agreement at December 31, 2014 was $1.5 billion. QVC was in compliance with
all debt covenants related to the bank Credit Facility at December 31, 2014.
QVC Interest Rate Swap Arrangements
In prior years QVC entered into forward interest rate swap arrangements with an aggregate notional amount of $3.1
billion. Such arrangements matured in March 2013 and no further interest swap arrangements were entered into. 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 consolidated
statements of operations.
Other Subsidiary Debt
Other subsidiary debt at December 31, 2014 is comprised of capitalized satellite transponder lease obligations and
bank debt of certain subsidiaries.
Five Year Maturities
The annual principal maturities of Liberty's debt, based on stated maturity dates, for each of the next five years is as
follows (amounts in millions):
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
47
26
39
533
427
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. The fair value, based on quoted prices of
F-64
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
instruments but not considered to be active markets (Level 2), of Liberty's publicly traded debt securities that are not
reported at fair value in the accompanying consolidated balance sheets is as follows (amounts in millions):
Senior debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
882
QVC senior secured notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,118
2014
2013
845
2,861
December 31,
Due to the variable rate nature, Liberty believes that the carrying amount of its subsidiary debt not discussed above
approximated fair value at December 31, 2014.
(11) Income Taxes
Income tax benefit (expense) consists of:
2014
Years ended December 31,
2013
amounts in millions
2012
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (157)
(32)
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(110)
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (299)
Deferred:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59
(23)
5
41
Income tax benefit (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (258)
(97)
(26)
(82)
(205)
(19)
47
(6)
22
(183)
(167)
(26)
(139)
(332)
19
28
7
54
(278)
The following table presents a summary of our domestic and foreign earnings from continuing operations before
income taxes:
2014
Years ended December 31,
2013
amounts in millions
2012
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 676
160
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 836
575
162
737
667
216
883
F-65
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
Income tax benefit (expense) differs from the amounts computed by applying the U.S. federal income tax rate of 35%
as a result of the following:
2014
Years ended December 31,
2013
amounts in millions
2012
Computed expected tax benefit (expense) . . . . . . . . . . . . . . . . $ (293)
(7)
State and local income taxes, net of federal income taxes . . . .
(2)
Foreign taxes, net of foreign tax credits . . . . . . . . . . . . . . . . . .
Sale of consolidated subsidiary . . . . . . . . . . . . . . . . . . . . . . . . .
14
Impairment of intangible assets not deductible for tax
(3)
purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
Dividends received deductions . . . . . . . . . . . . . . . . . . . . . . . . .
58
Alternative energy tax credits . . . . . . . . . . . . . . . . . . . . . . . . . .
(2)
Change in valuation allowance affecting tax expense . . . . . . .
(28)
Impact of change in state rate on deferred taxes . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5)
Income tax benefit (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (258)
(258)
(15)
(7)
—
(2)
9
54
(27)
66
(3)
(183)
(309)
—
5
—
(16)
13
48
(8)
—
(11)
(278)
During 2014 and 2013, Liberty changed its estimate of the effective state tax rate used to measure its net deferred tax
liabilities, based on expected changes to the Company’s state apportionment factors. The change in 2014 was caused by
the sale of a consolidated subsidiary (Provide) on December 31, 2014. The change in state apportionment factors during
2013 also changed the potential utilization of the Company’s state net operating loss carryforwards, which resulted in a
valuation allowance being recorded for certain state net operating loss carryforwards that may expire unused. In both years,
the rate change required an adjustment to the recognized deferred taxes at the corporate level. During 2014, 2013 and 2012,
Liberty offset federal tax liabilities with tax credits derived from its alternative energy investments.
F-66
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and
deferred income tax liabilities are presented below:
December 31,
2014
2013
amounts in millions
Deferred tax assets:
Net operating and capital loss carryforwards . . . . . . . . . . . . . . . . . . . . $
Foreign tax credit carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued stock compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other future deductible amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
90
88
41
143
134
496
(54)
442
74
129
27
85
119
434
(52)
382
Deferred tax liabilities:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discount on exchangeable debentures . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred gain on debt retirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
703
1,284
1,009
257
10
3,263
Net deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,821
569
1,416
958
313
52
3,308
2,926
The Company's deferred tax assets and liabilities are reported in the accompanying consolidated balance sheets as
follows:
Current deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Long-term deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
972
1,849
Net deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,821
925
2,001
2,926
December 31,
2013
2014
amounts in millions
The Company's valuation allowance increased $2 million in 2014. The entire change in valuation allowance affected
tax expense.
At December 31, 2014, Liberty had net operating losses (on a tax effected basis) and foreign tax credit carryforwards
for income tax purposes aggregating approximately $90 million and $88 million, respectively, of which, $9 million will
expire in 2017 and $169 million will expire beyond 2020 if not utilized to reduce domestic, state or foreign income tax
liabilities in future periods. These net operating losses and foreign tax credit carryforwards are expected to be utilized
prior to expiration, except for $54 million of net operating losses which based on current projections of domestic, state and
foreign income may expire unused.
F-67
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
A reconciliation of unrecognized tax benefits is as follows:
Years ended December 31,
2014
2013
amounts in millions
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Additions based on tax positions related to the current year . . . . . . . .
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . .
Reductions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . .
Lapse of statute and settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
124
16
20
(3)
(21)
136
122
19
1
(3)
(15)
124
As of December 31, 2014, the Company had recorded tax reserves of $136 million related to unrecognized tax benefits
for uncertain tax positions. If such tax benefits were to be recognized for financial statement purposes, $68 million would
be reflected in the Company's tax expense and affect its effective tax rate. Liberty's estimate of its unrecognized tax
benefits related to uncertain tax positions requires a high degree of judgment. The Company has tax positions for which
the amount of related unrecognized tax benefits could change during 2015. The amount of unrecognized tax benefits related
to these issues could change as a result of potential settlements, lapsing of statute of limitations and revisions of estimates.
It is reasonably possible that the amount of the Company's gross unrecognized tax benefits may decrease within the next
twelve months by up to $23 million.
As of December 31, 2014, the Company's 2001 through 2010 tax years are closed for federal income tax purposes,
and the IRS has completed its examination of the Company's 2010 through 2012 tax years. The Company's tax loss
carryforwards from its 2010 through 2012 tax years are still subject to adjustment. The Company's 2013 and 2014 tax
years are being examined currently as part of the IRS's Compliance Assurance Process ("CAP") program. Various states
are currently examining the Company's prior years state income tax returns. QVC is currently under audit in the U.K.,
Germany and Italy. As of December 31, 2014, no material assessments have resulted from these audits.
As of December 31, 2014, the Company had recorded $28 million of accrued interest and penalties related to uncertain
tax positions.
(12) Stockholders' Equity
Preferred Stock
Liberty's preferred stock is issuable, from time to time, with such designations, preferences and relative participating,
optional or other rights, qualifications, limitations or restrictions thereof, as shall be stated and expressed in a resolution or
resolutions providing for the issue of such preferred stock adopted by Liberty's Board of Directors. As of December 31,
2014, no shares of preferred stock were issued.
F-68
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
Common Stock
Series A Liberty Interactive and Liberty Ventures common stock has one vote per share, and Series B Liberty
Interactive and Liberty Ventures common stock has ten votes per share. Each share of the Series B common stock is
exchangeable at the option of the holder for one share of Series A common stock of the same group. The Series A and
Series B common stock participate on an equal basis with respect to dividends and distributions.
As of December 31, 2014, Liberty reserved for issuance upon exercise of outstanding stock options approximately
24.9 million shares of Series A Liberty Interactive common stock and approximately 1.0 million shares of Series B Liberty
Interactive common stock. As of December 31, 2014, Liberty reserved for issuance upon exercise of outstanding stock
options approximately 4.0 million shares of Series A Liberty Ventures common stock and approximately 1.5 million shares
of Series B Liberty Ventures common stock.
In addition to the Series A and Series B Liberty Interactive and Ventures common stock there are 4 billion and 200
million shares of Series C Liberty Interactive and Ventures common stock authorized for issuance, respectively. As of
December 31, 2014, no shares of any Series C Liberty Interactive and Ventures common stock were issued or outstanding.
As discussed in note 2, on February 27, 2014, Liberty’s board approved a two for one stock split of Series A and
Series B Liberty Ventures common stock, to be effected by means of a dividend. The stock split was done in order to bring
Liberty into compliance with a Nasdaq listing requirement regarding the minimum number of publicly held shares of the
Series B Liberty Ventures common stock. In the stock split, a dividend was paid on April 11, 2014 to holders of Series A
and Series B Liberty Ventures common stock of one share of Series A or Series B Liberty Ventures common stock for each
share of Series A or Series B Liberty Ventures common stock, respectively, held by them as of 5:00 pm, New York City
time, on April 4, 2014. The stock split has been recorded retroactively for all periods presented for comparability purposes.
Additionally, as discussed in note 2, on October 3, 2014, Liberty attributed from the QVC Group to the Ventures
Group its Digital Commerce companies. Holders of Liberty Interactive common shares received 0.14217 shares of Liberty
Ventures common shares for each share of Liberty Interactive common shares held, as of the record date. The shares issued
and subsequently distributed to Liberty Interactive common stock shareholders in the form of a dividend did not require
retroactive treatment.
Purchases of Common Stock
During the year ended December 31, 2012 the Company repurchased 44,668,431 shares of Series A Liberty Interactive
common stock for aggregate cash consideration of $815 million.
During the year ended December 31, 2013 the Company repurchased 46,305,637 shares of Series A Liberty Interactive
common stock for aggregate cash consideration of $1,089 million.
During the year ended December 31, 2014 the Company repurchased 27,356,993 shares of Series A Liberty Interactive
common stock for aggregate cash consideration of $785 million.
F-69
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
All of the foregoing shares were repurchased pursuant to a previously announced share repurchase program and have
been retired and returned to the status of authorized and available for issuance.
During 2012, in connection with the creation of the Liberty Ventures tracking stock, the Company distributed
subscription rights to purchase shares of Series A Liberty Ventures common stock (each, a “Series A Right”). Each whole
Series A Right entitled its holder to subscribe, at a per share subscription price of $35.99, for one share of Series A Liberty
Ventures common stock. In the fourth quarter of 2012, the Company issued approximately 9 million shares in connection
with the rights offering and raised approximately $328 million of cash.
(13) Transactions with Officers and Directors
Chief Executive Officer Compensation Arrangement
In December 2014, the Compensation Committee (the "Committee") of Liberty approved a compensation
arrangement, including term options discussed in note 14, for its President and Chief Executive Officer (the "CEO"). The
arrangement provides for a five year employment term beginning January 1, 2015 and ending December 31, 2019, with an
annual base salary of $960,750, increasing annually by 5% of the prior year's base salary, and an annual target cash bonus
equal to 250% of the applicable year's annual base salary. The arrangement also provides that, in the event the CEO is
terminated for "cause," he will be entitled only to his accrued base salary and any amounts due under applicable law and
he will forfeit all rights to his unvested term options. If, however, the CEO is terminated by Liberty without cause or if he
terminates his employment for “good reason,” the arrangement provides for him to receive his accrued base salary, his
accrued but unpaid bonus and any amounts due under applicable law, a severance payment of 1.5 times his base salary
during the year of his termination, a payment equal to $11,750,000 pro rated based upon the elapsed number of days in the
calendar year of termination, a payment equal to $17.5 million, and for his unvested term options to generally vest pro rata
based on the portion of the term elapsed through the termination date plus 18 months and for all vested and accelerated
options to remain exercisable until their respective expiration dates. If the CEO terminates his employment without “good
reason,” he will be entitled to his accrued base salary, his accrued but unpaid bonus and any amounts due under applicable
law and a payment of the $11,750,000 and for his unvested term options to generally vest pro rata based on the portion of
the term elapsed through the termination date and all vested and accelerated options to remain exercisable until their
respective expiration dates. Lastly, in the case of the CEO's death or his disability, the arrangement provides that he will
be entitled only to his accrued base salary and any amounts due under applicable law, a payment of 1.5 times his base
salary during that year, a payment equal to $11,750,000 pro rated based upon the elapsed number of days in the calendar
year of termination, a payment equal to $17.5 million and for his unvested term options to fully vest and for his vested and
accelerated term options to remain exercisable until their respective expiration dates.
In addition, beginning in 2015, the CEO will receive annual performance-based options to purchase shares of QVCB
and LVNTB with a term of 7 years (the “Performance Options”) and performance-based restricted stock units with respect
to QVCB and LVNTB (the “Performance RSUs” and together with the Performance Options, the “Performance Awards”)
during the employment term. Grants of Performance Awards will be allocated between Liberty and Liberty Media
Corporation. The aggregate target amount to be allocated between Liberty and Liberty Media will be $16 million with
respect to calendar year 2015, $17 million with respect to calendar year 2016, $18 million with respect to calendar year
2017, $19 million with respect to calendar year 2018 and $20 million with respect to calendar year 2019. Vesting of the
F-70
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
Performance Awards will be determined based on satisfaction of performance metrics that will be set by Liberty and Liberty
Media’s respective compensation committees in the first quarter of each applicable year, except that the CEO will forfeit his
unvested Performance Awards if his employment is terminated for any reason before the end of the applicable year. In
addition, Liberty and Liberty Media’s compensation committees may grant additional Performance Awards, with a value of
up to 50% of the target amount allocated to Liberty for the relevant year (the “Above Target Awards”), and the compensation
committees may determine to establish additional performance metrics with respect to such Above Target Awards.
Salary compensation related to services provided is allocated from LMC to Liberty pursuant to the Services
Agreement. Any cash bonus attributable to the performance of Liberty is paid directly by Liberty.
(14) Stock-Based Compensation
Liberty – Incentive Plans
Pursuant to the Liberty Interactive Corporation 2000 Incentive Plan, as amended from time to time (the "2000 Plan"),
and the Liberty Interactive Corporation 2007 Incentive Plan, as amended from time to time (the "2007 Plan") the Company
has granted to certain of its employees stock options and SARs (collectively, "Awards") to purchase shares of Liberty
common stock. The 2000 Plan and 2007 Plan provide for Awards to be issued in respect of a maximum of 1.9 million
shares and 3.5 million shares, respectively, of Liberty common stock. No additional grants may be made pursuant to these
plans. On June 24, 2010, stockholders of the Company approved the Liberty Interactive Corporation 2010 Incentive Plan,
as amended from time to time (the "2010 Plan"). The 2010 Plan provides for Awards to be made in respect of a maximum
of 45.6 million shares of Liberty common stock. Additionally, pursuant to the Liberty Interactive Corporation 2012
Incentive Plan, as amended (the "2012 Plan"), the Company may grant Awards to be made in respect of a maximum of 47
million shares of Liberty common stock. Awards generally vest over 4-5 years and have a term of 7-10 years. Liberty
issues new shares upon exercise of equity awards.
Pursuant to the Liberty Interactive Corporation 2011 Nonemployee Director Incentive Plan, as amended from time to
time (the "2011 NDIP"), the Liberty Board of Directors has the full power and authority to grant eligible nonemployee
directors stock options, SARs, stock options with tandem SARs, and restricted stock.
In connection with the TripAdvisor Holdings Spin-Off in August 2014, all outstanding Awards with respect to Liberty
Ventures common stock (“Liberty Ventures Award”) were adjusted pursuant to the anti-dilution provisions of the incentive
plans under which the equity awards were granted, such that a holder of a Liberty Ventures Award received:
i.
ii.
An adjustment to the exercise price or base price, as applicable, and the number of shares subject to the Liberty
Ventures Award (as so adjusted, an “Adjusted Liberty Ventures Award”) and
A corresponding equity award relating to shares of TripAdvisor Holdings common stock (a “TripAdvisor
Holdings Award”)
The exercise prices and number of shares subject to the Adjusted Liberty Ventures Award and the TripAdvisor
Holdings Award were determined based on 1) the exercise prices and number of shares subject to the Liberty Ventures
Award, 2) the pre-distribution trading price of the Liberty Ventures common stock and 3) the post-distribution trading
F-71
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
prices of Liberty Ventures common stock and TripAdvisor Holdings common stock, such that all of the pre-distribution
intrinsic value of the Liberty Ventures Award was allocated between the Adjusted Liberty Ventures Award and the
TripAdvisor Holdings Award.
Following the TripAdvisor Holdings Spin-Off, employees of Liberty hold Awards in both Liberty Ventures common stock
and TripAdvisor Holdings common stock. The compensation expense relating to employees of Liberty is recorded at Liberty.
Additionally, outstanding stock options, relating to Liberty Interactive common stock, were adjusted, using a similar
methodology as described above, in connection with the stock dividend related to the reattribution of the Digital Commerce
businesses from the QVC Group to the Ventures Group during October 2014.
Liberty – Grants
During the year ended December 31, 2014, Liberty granted, primarily to QVC employees, 1.9 million options to
purchase shares of Series A Liberty Interactive common stock which had a weighted average grant-date fair value of $12.04
per share. Liberty also granted approximately 20 thousand options to purchase shares of Series A Liberty Ventures common
stock which had a weighted average grant-date fair value of $16.55 per share. Such options primarily vest on a semi-annual
basis over a 4 year vesting period.
In December 2014, Liberty granted 646 thousand options of Series B Liberty Interactive common stock and 1.4 million
options of Series B Liberty Ventures common stock to the CEO of Liberty in connection with a new employment agreement
(see note 13). Such options had a weighted average grant-date fair value of $10.50 per share and $15.52 per share,
respectively. Of those options, one half vest on December 24, 2018 and the other half vest on December 24, 2019.
During the year ended December 31, 2013, Liberty granted, primarily to QVC employees, 4.3 million options to
purchase shares of Series A Liberty Interactive common stock. Such options had a weighted average grant-date fair value
of $8.26 per share. Liberty also granted approximately 7 thousand options to purchase shares of Series A Liberty Ventures
common stock. Such options had a weighted average grant-date fair value of $57.37 per share.
During the year ended December 31, 2012, the Company granted approximately 3.4 million options to purchase shares
of Series A Liberty Interactive common stock. Such options had a weighted average grant-date fair value of $8.44. During
the year ended December 31, 2012, the Company also granted 36 thousand options to purchase shares of Series A Liberty
Ventures common stock, which options had a weighted average grant-date fair value of $27.29 per share.
During the fourth quarter of 2012, the Company entered into a series of transactions with certain officers of Liberty
and its subsidiaries, associated with certain outstanding stock options, in order to recognize tax deductions in that year
versus future years (the "2012 Option Exchange"). On December 4, 2012 (the "Grant Date"), pursuant to the approval of
the Compensation Committee of its Board of Directors, the Company effected the acceleration of (i) each unvested in-the-
money option to acquire shares of Series A Liberty Interactive common stock and (ii) each unvested in-the-money option
to acquire shares of Series A Liberty Ventures common stock, in each case, held by certain of its and its subsidiaries'
officers (collectively, the “Eligible Optionholders”). Following this acceleration, also on the Grant Date, each Eligible
Optionholder exercised, on a net settled basis, substantially all of his or her outstanding in-the-money vested and unvested
options to acquire Series A Liberty Interactive shares and Series A Liberty Ventures shares (the “Eligible Options”), and:
F-72
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
• with respect to each vested Eligible Option, the Company granted the Eligible Optionholder a vested new option
•
with substantially the same terms and conditions as the exercised vested Eligible Option;
and with respect to each unvested Eligible Option:
•
•
the Eligible Optionholder sold to the Company, for cash, the shares of Series A Liberty Interactive or Series
A Liberty Ventures, as applicable, received upon exercise of such unvested Eligible Option and used the
proceeds of that sale to purchase from the Company an equal number of restricted Series A Liberty Interactive
or Series A Liberty Ventures shares, as applicable, which have a vesting schedule identical to that of the
exercised unvested Eligible Option; and
the Company granted the Eligible Optionholder an unvested new option, with substantially the same terms
and conditions as the exercised unvested Eligible Option, except that (a) the number of shares underlying the
new option is equal to the number of shares underlying such exercised unvested Eligible Option less the
number of restricted shares purchased from the Company as described above and (b) the exercise price of the
new option is the closing price per Series A Liberty Interactive or Series A Liberty Ventures share, as
applicable, on The Nasdaq Global Select Market on the Grant Date.
In connection with the 2012 Option Exchange, Liberty granted 20.1 million and 905 thousand options to purchase
shares of Series A Liberty Interactive common stock and Series A Liberty Ventures common stock, respectively. Such
options had a weighted average grant-date fair value of $7.15 and $26.58 per share, respectively.
The 2012 Option Exchange was considered a modification under ASC 718 - Stock Compensation and resulted in
incremental compensation expense in 2012 of $17 million and $4 million for the Liberty Interactive (now QVC) and
Liberty Ventures groups, respectively. Incremental compensation expense is also being recognized over the remaining
vesting periods of the new unvested options and the restricted shares and is included in unrecognized compensation.
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. For grants made in 2014, 2013 and 2012, the range of
expected terms was 1.3 to 9.0 years. The volatility used in the calculation for Awards is based on the historical volatility
of Liberty's stocks 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.
F-73
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
The following table presents the range of volatilities used by Liberty in the Black-Scholes Model for the 2014, 2013
and 2012 Liberty Interactive and Liberty Ventures grants.
Volatility
2014 grants
Liberty Interactive options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liberty Ventures options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33.6 % - 39.7 %
41.1 % - 43.7 %
2013 grants
Liberty Interactive options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liberty Ventures options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
38.3 % - 38.7 %
43.7 % - 49.9 %
2012 grants
Liberty Interactive options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liberty Ventures options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28.2 % - 47.51 %
47.5 % - 49.94 %
Liberty - Outstanding Awards
The following table presents 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, as well as the weighted average remaining life and aggregate intrinsic value of the Awards. As discussed in note
2, on February 27, 2014, Liberty’s board approved a two for one stock split of Series A and Series B Liberty Ventures
common stock, to be effected by means of a dividend. The stock split has been recorded retroactively for all periods
presented for comparability purposes.
Awards
(000's) WAEP
Outstanding at January 1, 2014 . . . . . . . . . . . . . . . . 30,607 $ 17.98
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,879 $ 29.19
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,016) $ 15.84
Forfeited/Cancelled . . . . . . . . . . . . . . . . . . . . . . . (1,005) $ 20.96
(565) $ 17.38
Stock dividend adjustment . . . . . . . . . . . . . . . . . .
Series A
Liberty Interactive
Weighted Aggregate
intrinsic
average
remaining
value
life
Series B
Weighted Aggregate
average
intrinsic
remaining
value
life
(in millions)
Awards
(in millions) (000's) WAEP
432 $ 17.92
646 $ 29.87
—
— $
— $
—
(34) $ 16.51
1,044 $ 24.78
398 $ 16.51
297
220
Outstanding at December 31, 2014. . . . . . . . . . . . . . 24,900 $ 17.49 4.4 years $
Exercisable at December 31, 2014 . . . . . . . . . . . . . . 16,879 $ 16.38 4.1 years $
4.5 years $
0.5 years $
5
5
Outstanding at January 1, 2014 . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/Cancelled . . . . . . . . . . . . . . . . . . . . . . .
Adjustment for the TripAdvisor Holdings Spin-Off .
Stock dividend adjustment . . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2014. . . . . . . . . . . . . .
Exercisable at December 31, 2014 . . . . . . . . . . . . . .
Series A
Liberty Ventures
Weighted Aggregate
intrinsic
average
remaining
value
life
Awards
(000's) WAEP
1,932 $ 28.71
20 $ 38.10
(398) $ 19.57
(1) $ 34.30
28 $ 14.63
2,416 $ 22.15
3,997 $ 19.10 4.3 years $
3,094 $ 18.87 4.1 years $
Awards
(in millions) (000's) WAEP
44 $ 23.35
1,406 $ 37.63
—
— $
—
— $
— $
—
57 $ 20.76
Series B
Weighted Aggregate
intrinsic
average
remaining
value
life
(in millions)
74
58
1,507 $ 36.24 6.6 years $
101 $ 16.82 0.5 years $
2
2
F-74
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
As of December 31, 2014, the total unrecognized compensation cost related to unvested awards of Liberty employees
was approximately $80 million, including incremental compensation under the Option Exchange. Such amount will be
recognized in the Company's consolidated statements of operations over a weighted average period of approximately
2.0 years.
Liberty – Exercises
The aggregate intrinsic value of all options exercised during the years ended December 31, 2014, 2013 and 2012 was
$91 million, $76 million and $339 million, respectively. The aggregate intrinsic value of options exercised for the year
ended December 31, 2012 includes approximately $242 million related to the intrinsic value of options exercised as a
result of the 2012 Option Exchange.
Liberty – Restricted Stock
Associated with the 2012 Option Exchange the Company issued unvested restricted shares of Liberty Interactive and
Liberty Ventures common stock, of which 639 thousand and 177 thousand shares, respectively, remain unvested as of
December 31, 2014. These shares continue to vest over the next year, and since the 2012 Option Exchange was accounted
for as a modification, the compensation expense associated with these restricted shares was treated as incremental
compensation, as discussed above, and is included in the total unrecognized compensation costs under the outstanding
Awards section above. The Company had approximately 1.3 million shares and 249 thousand shares of unvested restricted
Liberty Interactive and Liberty Ventures common stock, respectively, held by certain directors, officers and employees of
the Company as of December 31, 2014, not issued under the Option Exchange. These Series A unvested restricted shares
of Liberty Interactive and Liberty Ventures had a weighted average grant date fair value of $17.49 and $4.07 per share,
respectively.
The aggregate fair value of all restricted shares of Liberty common stock that vested during the years ended December
31, 2014, 2013 and 2012 was $19 million, $16 million and $12 million, respectively.
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.
(15) Employee Benefit Plans
Subsidiaries of Liberty sponsor 401(k) plans, which provide their employees an opportunity to make contributions to
a trust for investment in Liberty common stock, as well as other mutual funds. The Company's subsidiaries make matching
contributions to their plans based on a percentage of the amount contributed by employees. Employer cash contributions
F-75
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
to all plans aggregated $27 million, $24 million and $19 million, respectively, for the years ended December 31, 2014,
2013 and 2012, respectively.
(16) Other Comprehensive Earnings (Loss)
Accumulated other comprehensive earnings (loss) included in Liberty's consolidated balance sheets and consolidated
statements of equity reflect the aggregate of foreign currency translation adjustments, unrealized holding gains and losses
on AFS securities and Liberty's share of accumulated other comprehensive earnings of affiliates. The 2013 and 2012 tax
(expense) benefit and before-tax amounts have been revised to be consistent with the 2014 presentation.
The change in the components of accumulated other comprehensive earnings (loss), net of taxes ("AOCI"), is
summarized as follows:
Foreign
currency
Share of AOCI
AOCI
of
translation of equity discontinued
adjustments affiliates operations
AOCI
amounts in millions
Balance at January 1, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
158
(6)
—
152
Other comprehensive earnings (loss) attributable to Liberty Interactive
Corporation stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive earnings (loss) attributable to Liberty Interactive
Corporation stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive earnings (loss) attributable to Liberty Interactive
(7)
151
(48)
103
3
(3)
2
(1)
Corporation stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution to stockholders for TripAdvisor Holdings Spin-Off . . . . . . . .
Balance at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(178)
—
(75)
(18)
—
(19)
—
—
(4)
148
(3)
(3)
(49)
99
(3)
6
—
(199)
6
(94)
F-76
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
The components of other comprehensive earnings (loss) are reflected in Liberty's consolidated statements of
comprehensive earnings (loss) net of taxes. The following table summarizes the tax effects related to each component of
other comprehensive earnings (loss).
Tax
Before-tax (expense) Net-of-tax
benefit amount
amount
amounts in millions
Year ended December 31, 2014:
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (241)
(29)
Share of other comprehensive earnings (loss) of equity affiliates . . . . . . . . . . . . . . . . . .
(2)
Other comprehensive earnings (loss) from discontinued operations . . . . . . . . . . . . . . . .
Other comprehensive earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (272)
Year ended December 31, 2013:
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Share of other comprehensive earnings (loss) of equity affiliates . . . . . . . . . . . . . . . . . .
Other comprehensive earnings (loss) from discontinued operations . . . . . . . . . . . . . . . .
Other comprehensive earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Year ended December 31, 2012:
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Share of other comprehensive earnings (loss) of equity affiliates . . . . . . . . . . . . . . . . . .
Other comprehensive earnings (loss) from discontinued operations . . . . . . . . . . . . . . . .
Other comprehensive earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(65)
3
(5)
(67)
(47)
5
2
(40)
49
11
1
61
(8)
(1)
2
(7)
21
(2)
(1)
18
(192)
(18)
(1)
(211)
(73)
2
(3)
(74)
(26)
3
1
(22)
(17) Commitments and Contingencies
Operating Leases
Liberty leases business offices, has entered into satellite transponder lease agreements and uses certain equipment
under lease arrangements. Rental expense under such arrangements amounted to $47 million, $50 million and $52 million
for the years ended December 31, 2014, 2013 and 2012, respectively.
A summary of future minimum lease payments under noncancelable operating leases as of December 31, 2014
follows (amounts in millions):
Years ending December 31:
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
33
30
28
28
25
126
It is expected that in the normal course of business, leases that expire generally will be renewed or replaced by
leases on other properties; thus, it is anticipated that future lease commitments will not be less than the amount shown for
2014.
F-77
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
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 consolidated financial statements.
(18) 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 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, separately reported litigation settlements 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.
For the year ended December 31, 2014, Liberty has identified the following consolidated subsidiary as its reportable
segment:
• 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 and
mobile transactions through its domestic and international websites.
Additionally, for presentation purposes Liberty is providing financial information of the Digital Commerce businesses
on an aggregated basis. The consolidated 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
F-78
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
literature, Liberty believes the information is relevant and helpful for a more complete understanding of the consolidated
results.
• Digital Commerce—the aggregation of certain consolidated subsidiaries and equity affiliate that market and sell
a wide variety of consumer products via the Internet. Categories of consumer products include perishable and
personal gift offerings (Provide, prior to December 31, 2014 and our equity affiliate, FTD, as of December 31,
2014), active lifestyle gear and clothing (Backcountry), fitness and health goods (Bodybuilding), digital
invitations (Evite), infant and juvenile-related products (Right Start) and a drop-ship solutions company
(CommerceHub).
Due to the TripAdvisor Holdings Spin-Off completed on August 27, 2014, TripAdvisor is no longer considered a
separate reportable segment. Prior to the completion of the TripAdvisor Holdings Spin-Off, BuySeasons was included in
the Digital Commerce segment.
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.
Performance Measures
Years ended December 31,
2014
2013
Revenue
Adjusted
OIBDA Revenue
Adjusted
OIBDA
2012
Adjusted
Revenue OIBDA
amounts in millions
QVC Group
QVC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,801
1,227
Digital Commerce (1) . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and other . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
10,028
Total QVC Group . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,910
53
(24)
1,939
8,623
1,596
—
10,219
1,841
103
(20)
1,924
8,516
1,372
—
9,888
1,828
102
(27)
1,903
Ventures Group
471
Digital Commerce (1) . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Corporate and other . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Ventures Group . . . . . . . . . . . . . . . . . . . . . . . . .
471
Consolidated Liberty . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,499
44
(18)
26
1,965
NA
—
—
10,219
NA
(11)
(11)
1,913
NA
—
—
9,888
NA
(5)
(5)
1,898
(1) As discussed in note 2, on October 3, 2014, Liberty completed the reattribution from the QVC Group (formerly
referred to as the Interactive Group, prior to the reattribution), to the Ventures Group its Digital Commerce companies.
The reattribution of the Digital Commerce companies is presented on a prospective basis from the date of the
reattribution in Liberty’s consolidated financial statements, with October 1, 2014 used as a proxy for the date of the
reattribution. Accordingly, Revenue and Adjusted OIBDA attributable to the Digital Commerce companies are
included in the QVC Group for the period through September 30, 2014 and are included in the Ventures Group for the
period beginning October 1, 2014.
F-79
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
Other Information
Total
assets
December 31, 2014
Investments
in
affiliates
Capital
expenditures Assets (1)
Total
December 31, 2013
Investments
in
affiliates
Capital
expenditures
QVC Group
QVC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,466
NA
Digital Commerce (1)(2) . . . . . . . . . . . . . . . . .
546
Corporate and other . . . . . . . . . . . . . . . . . . . . .
13,012
Total QVC Group . . . . . . . . . . . . . . . . . . . . . .
Ventures Group
Digital Commerce (2) . . . . . . . . . . . . . . . . . . . .
Corporate and other (1) . . . . . . . . . . . . . . . . . . .
Total Ventures Group . . . . . . . . . . . . . . . . . . .
Inter-group eliminations . . . . . . . . . . . . . . . . . .
693
5,135
5,828
(199)
Consolidated Liberty . . . . . . . . . . . . . . . . . . . $ 18,641
47
NA
328
375
355
903
1,258
—
1,633
amounts in millions
183 13,031
1,218
613
226 14,862
43
—
15
—
15
—
NA
9,984
9,984
(170)
241 24,676
51
—
292
343
NA
894
894
—
1,237
217
74
—
291
NA
—
—
—
291
(1) Total assets of discontinued operations at December 31, 2013 are included in the table above. BuySeasons and
TripAdvisor total assets are included in the Corporate and other line item in the QVC Group and Ventures Group,
respectively.
(2) As discussed in note 2, on October 3, 2014, Liberty completed the reattribution from the QVC Group (formerly
referred to as the Interactive Group, prior to the reattribution), to the Ventures Group its Digital Commerce companies.
The reattribution of the Digital Commerce companies is presented on a prospective basis from the date of the
reattribution in Liberty’s consolidated financial statements, with October 1, 2014 used as a proxy for the date of the
reattribution. Accordingly, total assets, investments and affiliates and capital expenditures attributable to the Digital
Commerce companies are included in the QVC Group for the period through September 30, 2014 and are included in
the Ventures Group for the period beginning October 1, 2014.
F-80
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
The following table provides a reconciliation of segment Adjusted OIBDA to earnings (loss) from continuing
operations before income taxes:
2014
Years ended December 31,
2013
amounts in millions
2012
Consolidated segment Adjusted OIBDA . . . . . . . . . . . . . . . $ 1,965
(108)
(662)
(7)
(387)
39
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . .
Impairment of intangible assets . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share of earnings (loss) of affiliates, net . . . . . . . . . . . . . .
Realized and unrealized gains (losses) on financial
instruments, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains (losses) on transactions, net . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings (loss) from continuing operations before income
(57)
74
(21)
1,913
(118)
(629)
(30)
(380)
33
(22)
(1)
(29)
1,898
(91)
(591)
(53)
(466)
47
(351)
443
47
taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
836
737
883
Revenue by Geographic Area
Revenue by geographic area based on the location of customers is as follows:
2014
Years ended December 31,
2013
amounts in millions
2012
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,617
912
Japan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,003
Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
967
Other foreign countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 10,499
7,332
1,029
971
887
10,219
6,873
1,251
957
807
9,888
Long-lived Assets by Geographic Area
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other foreign countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
529
176
210
178
$ 1,093
550
220
245
193
1,208
December 31,
2014
2013
amounts in millions
F-81
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
(19) Quarterly Financial Information (Unaudited)
1st
Quarter
3rd
2nd
Quarter Quarter Quarter
amounts in millions,
except per share amounts
4th
2014:
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,434 2,483
259
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Earnings from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
87
Net earnings (loss) attributable to Liberty Interactive Corporation stockholders:
246
91
2,330 3,252
444
271
239
129
Series A and Series B Liberty Interactive common stock . . . . . . . . . . . . . . . . . $
Series A and Series B Liberty Ventures common stock . . . . . . . . . . . . . . . . . . . $
110
(28)
105
(28)
83
37
222
36
Basic net earnings (loss) from continuing operations attributable to Liberty
Interactive Corporation stockholders per common share:
Series A and Series B Liberty Interactive common stock . . . . . . . . . . . . . . . . . $ 0.23
Series A and Series B Liberty Ventures common stock . . . . . . . . . . . . . . . . . . . $ (0.45)
Diluted net earnings (loss) from continuing operations attributable to Liberty
Interactive Corporation stockholders per common share:
Series A and Series B Liberty Interactive common stock . . . . . . . . . . . . . . . . . $ 0.23
Series A and Series B Liberty Ventures common stock . . . . . . . . . . . . . . . . . . . $ (0.45)
Basic net earnings (loss) attributable to Liberty Interactive Corporation
0.23
(0.47)
0.18
0.47
0.47
0.28
0.23
(0.47)
0.18
0.46
0.46
0.28
stockholders per common share:
Series A and Series B Liberty Interactive common stock . . . . . . . . . . . . . . . . . $ 0.22
Series A and Series B Liberty Ventures common stock . . . . . . . . . . . . . . . . . . . $ (0.38)
0.22
(0.38)
0.17
0.51
0.47
0.28
Diluted net earnings (loss) attributable to Liberty Interactive Corporation
stockholders per common share:
Series A and Series B Liberty Interactive common stock . . . . . . . . . . . . . . . . . $ 0.22
Series A and Series B Liberty Ventures common stock . . . . . . . . . . . . . . . . . . . $ (0.38)
0.21
(0.38)
0.17
0.50
0.46
0.28
F-82
LIBERTY INTERACTIVE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2014, 2013 and 2012
1st
Quarter
3rd
2nd
Quarter Quarter Quarter
amounts in millions,
except per share amounts
4th
2013:
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,417 2,384 2,225 3,193
406
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
260
Earnings from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net earnings (loss) attributable to Liberty Interactive Corporation stockholders:
264
41
197
122
269
131
Series A and Series B Liberty Interactive common stock . . . . . . . . . . . . . . . . . $
Series A and Series B Liberty Ventures common stock . . . . . . . . . . . . . . . . . . . $
95
(68)
109
11
77
36
157
84
Basic net earnings (loss) from continuing operations attributable to Liberty
Interactive Corporation stockholders per common share:
Series A and Series B Liberty Interactive common stock . . . . . . . . . . . . . . . . . $
0.19
Series A and Series B Liberty Ventures common stock . . . . . . . . . . . . . . . . . . . $ (0.97)
Diluted net earnings (loss) from continuing operations attributable to Liberty
Interactive Corporation stockholders per common share:
Series A and Series B Liberty Interactive common stock . . . . . . . . . . . . . . . . . $
0.18
Series A and Series B Liberty Ventures common stock . . . . . . . . . . . . . . . . . . . $ (0.97)
Basic net earnings (loss) attributable to Liberty Interactive Corporation
0.22
0.07
0.16
0.47
0.32
1.18
0.21
0.07
0.15
0.46
0.32
1.16
stockholders per common share:
0.18
Series A and Series B Liberty Interactive common stock . . . . . . . . . . . . . . . . . $
Series A and Series B Liberty Ventures common stock . . . . . . . . . . . . . . . . . . . $ (0.93)
0.21
0.15
0.15
0.49
0.31
1.15
Diluted net earnings (loss) attributable to Liberty Interactive Corporation
stockholders per common share:
0.18
Series A and Series B Liberty Interactive common stock . . . . . . . . . . . . . . . . . $
Series A and Series B Liberty Ventures common stock . . . . . . . . . . . . . . . . . . . $ (0.93)
0.21
0.15
0.15
0.49
0.31
1.14
F-83
Unaudited Attributed Financial Information for Tracking Stock Groups
Our Liberty Interactive common stock is intended to reflect the separate performance of our QVC Group (formerly
referred to as the Interactive Group), which, subsequent to the reattribution, is comprised of our subsidiary, QVC, Inc.
(“QVC”) and our interest in HSN, Inc. Our Liberty Ventures common stock is intended to reflect the separate performance
of our Ventures Group which, subsequent to the reattribution, consists of our on-line commerce businesses
Backcountry.com, Inc. ("Backcountry"), Bodybuilding.com, LLC ("Bodybuilding"), CommerceHub, Evite, Inc. (“Evite”)
and LMC Right Start, Inc. (“Right Start”) (collectively, the “Digital Commerce” businesses), and our interest in equity
method investments of Expedia, Inc., Interval Leisure Group, Inc., FTD Companies, Inc. (“FTD”) (included in the Digital
Commerce businesses) and LendingTree, Inc. (“LendingTree”) and available-for-sale securities Time Warner, Time Warner
Cable and AOL.
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.
On October 3, 2014, Liberty reattributed from the Interactive Group to the Ventures Group its Digital Commerce
businesses, which were valued at $1.5 billion, and approximately $1 billion in cash. In connection with the reattribution,
each holder of Liberty Interactive common stock received 0.14217 of a share of the corresponding series of Liberty
Ventures common stock for each share of Liberty Interactive common stock held as of the record date, with cash paid in
lieu of fractional shares. The distribution date for the dividend was on October 20, 2014, and the Liberty Interactive
common stock began trading ex-dividend on October 15, 2014. The Interactive Group is referred to as the QVC Group
subsequent to the reattribution. The reattribution of the Digital Commerce companies is presented on a prospective basis
from the date of the reattribution in Liberty’s consolidated financial statements, with October 1, 2014 used as a proxy for
the date of the reattribution.
On December 31, 2014, Liberty announced the closing of the acquisition by FTD of Provide. Under the terms of the
transaction, Liberty received approximately 10.2 million shares of FTD common stock representing approximately 35%
of the combined company and approximately $145 million in cash. Subsequent to completion of the transaction, Liberty
accounts for FTD as an equity-method affiliate based on the ownership level and board representation. Given our
significant continuing involvement with FTD, Provide is not presented as a discontinued operation in the consolidated
financial statements of Liberty.
The following tables present our assets and liabilities as of December 31, 2014 and 2013 and revenue, expenses and
cash flows for the three years ended December 31, 2014, 2013 and 2012. The tables further present our revenue, expenses
and cash flows that are attributed to the QVC Group and the Ventures Group, respectively, as if the recapitalization had
occurred at the beginning 2012, for comparative purposes. Therefore, the attributed earnings presented in the Unaudited
Attributed Financial Information Statements are not the same as those reflected in the Liberty Interactive Corporation
consolidated financial statements for the year ended December 31, 2012. The earnings attributed to the QVC Group and
Ventures Group for purposes of those financial statements only relate to the period after the tracking stocks were issued.
F-84
The financial information in this Exhibit should be read in conjunction with our consolidated financial statements for the
year ended December 31, 2014 included in this Annual Report on Form 10-K.
Notwithstanding the following attribution of assets, liabilities, revenue, expenses and cash flows to the QVC Group
and the Ventures Group, our tracking stock structure does not affect the ownership or the respective legal title to our assets
or responsibility for our liabilities. We and our subsidiaries are each responsible for our respective liabilities. Holders of
Liberty Interactive common stock and Liberty Ventures common stock are holders of our common stock and are subject
to risks associated with an investment in our company and all of our businesses, assets and liabilities. The issuance of
Liberty Interactive common stock and Liberty Ventures common stock does not affect the rights of our creditors or creditors
of our subsidiaries.
F-85
SUMMARY ATTRIBUTED FINANCIAL DATA
QVC Group
December 31, 2014 December 31, 2013
amounts in millions
Summary balance sheet data:
Current assets ....................................................................................................... $
Investments in affiliates, accounted for using the equity method ......................... $
Intangible assets not subject to amortization, net ................................................. $
Total assets ........................................................................................................... $
Long-term debt ..................................................................................................... $
Long-term deferred income tax liabilities ............................................................ $
Attributed net assets ............................................................................................. $
2,783
375
7,634
13,012
5,851
1,033
4,280
3,245
343
8,383
14,862
5,044
1,207
6,378
Years ended December 31,
2014
2013
2012
amounts in millions
Summary operations data:
Revenue ...................................................................................................................... $ 10,028
Cost of sales ...............................................................................................................
Operating expenses ....................................................................................................
Selling, general and administrative expenses (1) .......................................................
Depreciation and amortization ...................................................................................
Impairment of intangible assets ..................................................................................
Operating income (loss) ...........................................................................................
Interest expense ..........................................................................................................
Share of earnings (losses) of affiliates, net .................................................................
Realized and unrealized gains (losses) on financial instruments, net .........................
Gains (losses) on transactions, net .............................................................................
Other income (expense), net .......................................................................................
Income tax benefit (expense) .....................................................................................
Earnings (loss) from continuing operations .............................................................
Earnings (loss) from discontinued operations, net of taxes ........................................
Net earnings (loss) ...................................................................................................
Less net earnings (loss) attributable to noncontrolling interests ................................
(6,378)
(854)
(940)
(643)
(7)
1,206
(312)
51
(22)
—
(43)
(306)
574
(15)
559
39
520
Net earnings (loss) attributable to Liberty Interactive Corporation shareholders .... $
10,219
(6,533)
(862)
(1,010)
(629)
(30)
1,155
(290)
48
(12)
(1)
(54)
(346)
500
(17)
483
45
438
9,888
(6,307)
(819)
(943)
(591)
(53)
1,175
(322)
28
51
—
—
(357)
575
(46)
529
63
466
(1) Includes stock-based compensation of $83 million, $110 million and $84 million for the years ended December 31,
2014, 2013 and 2012, respectively.
F-86
SUMMARY ATTRIBUTED FINANCIAL DATA (Continued)
Ventures Group
December 31, 2014 December 31, 2013
amounts in millions
Summary balance sheet data:
Cash and cash equivalents ........................................................................................... $
Investments in available-for-sale securities and other cost investments ..................... $
Investments in affiliates, accounted for using the equity method ................................ $
Intangible assets not subject to amortization, net ........................................................ $
Long-term debt, including current portion .................................................................. $
Deferred tax liabilities, including current portion ....................................................... $
Attributed net assets (liabilities) .................................................................................. $
1,884
1,220
1,258
259
2,191
1,987
1,393
307
1,309
894
—
1,932
1,885
558
2014
Years ended December 31,
2013
amounts in millions
2012
Summary operations data:
Revenue .................................................................................................................. $
Cost of sales ...........................................................................................................
Operating expenses ................................................................................................
Selling, general and administrative expenses (1) ...................................................
Depreciation and amortization ...............................................................................
Operating income (loss) .........................................................................................
Interest expense ......................................................................................................
Share of earnings (losses) of affiliates, net .............................................................
Realized and unrealized gains (losses) on financial instruments, net .....................
Gains (losses) on transactions, net .........................................................................
Other, net ................................................................................................................
Income tax benefit (expense) .................................................................................
Earnings (loss) from continuing operations .........................................................
Earnings (loss) from discontinued operations, net of taxes ....................................
Net earnings (loss) .............................................................................................
Less net earnings (loss) attributable to noncontrolling interests ............................
Net earnings (loss) attributable to Liberty Interactive Corporation shareholders $
471
(306)
(37)
(127)
(19)
(18)
(75)
(12)
(35)
74
22
48
4
63
67
50
17
—
—
—
(19)
—
(19)
(90)
(15)
(10)
—
25
163
54
43
97
34
63
—
—
—
(12)
—
(12)
(144)
19
(402)
443
47
79
30
1,032
1,062
(2)
1,064
(1) Includes stock-based compensation of $25 million, $8 million and $7 million for the years ended December 31,
2014, 2013 and 2012, respectively.
F-87
BALANCE SHEET INFORMATION
December 31, 2014
(unaudited)
Attributed (note 1)
QVC
Group
Ventures Inter-group Consolidated
eliminations
Group
Liberty
Assets
Current assets:
Cash and cash equivalents ................................................................ $
Trade and other receivables, net ........................................................
Inventory, net ....................................................................................
Short-term marketable securities ......................................................
Other current assets ...........................................................................
Total current assets .........................................................................
422
1,196
882
21
262
2,783
1,884
36
167
868
9
2,964
—
—
—
—
(199)
(199)
2,306
1,232
1,049
889
72
5,548
amounts in millions
4
1,220
—
1,224
Investments in available-for-sale securities and other cost
investments (note 2) ............................................................................
Investments in affiliates, accounted for using the equity method
(note 3) ................................................................................................
Property and equipment, net ................................................................
Intangible assets not subject to amortization, net ................................
Intangible assets subject to amortization, net ......................................
Other assets, at cost, net of accumulated amortization ........................
375
1,026
7,634
1,130
60
Total assets ..................................................................................... $ 13,012
Liabilities and Equity
Current liabilities:
Intergroup payable (receivable) ........................................................ $
Accounts payable ..............................................................................
Accrued liabilities .............................................................................
Current portion of debt (note 4) ........................................................
Deferred tax liabilities.......................................................................
Other current liabilities .....................................................................
Total current liabilities ....................................................................
Long-term debt (note 4) ......................................................................
Deferred income tax liabilities ............................................................
Other liabilities ....................................................................................
Total liabilities ................................................................................
Equity/Attributed net assets (liabilities) ..............................................
Noncontrolling interests in equity of subsidiaries ...............................
(5)
629
688
9
—
269
1,590
5,851
1,033
157
8,631
4,280
101
Total liabilities and equity .............................................................. $ 13,012
F-88
1,258
67
259
55
5
5,828
5
106
55
937
1,171
74
2,348
1,254
816
11
4,429
1,393
6
5,828
—
—
—
—
—
(199)
—
—
—
—
(199)
—
(199)
—
—
—
(199)
—
—
(199)
1,633
1,093
7,893
1,185
65
18,641
—
735
743
946
972
343
3,739
7,105
1,849
168
12,861
5,673
107
18,641
BALANCE SHEET INFORMATION
December 31, 2013
(unaudited)
Attributed (note 1)
QVC
Group
Ventures
Group
Inter-group
eliminations
Consolidated
Liberty
amounts in millions
Assets
Current assets:
Cash and cash equivalents ............................................................. $
Trade and other receivables, net .....................................................
Inventory, net .................................................................................
Short-term marketable securities ...................................................
Other current assets ........................................................................
Current assets of discontinued operations ......................................
Total current assets ......................................................................
595
1,148
1,123
—
354
25
3,245
307
4
—
412
—
628
1,351
—
—
—
—
(170)
—
(170)
902
1,152
1,123
412
184
653
4,426
4
1,309
—
1,313
Investments in available-for-sale securities and other cost
investments (note 2) .........................................................................
Investments in affiliates, accounted for using the equity method
(note 3) .............................................................................................
Property and equipment, net .............................................................
Intangible assets not subject to amortization, net .............................
Intangible assets subject to amortization, net ...................................
Other assets, at cost, net of accumulated amortization .....................
Noncurrent assets of discontinued operations ..................................
343
1,208
8,383
1,587
80
12
Total assets .................................................................................. $ 14,862
Liabilities and Equity
Current liabilities:
Intergroup payable (receivable) ..................................................... $
Accounts payable ...........................................................................
Accrued liabilities ..........................................................................
Current portion of debt (note 4) .....................................................
Deferred tax liabilities....................................................................
Other current liabilities ..................................................................
Current liabilities of discontinued operations ................................
Total current liabilities .................................................................
Long-term debt (note 4) ...................................................................
Deferred income tax liabilities .........................................................
Other liabilities .................................................................................
Noncurrent liabilities of discontinued operations .............................
Total liabilities .............................................................................
Equity/Attributed net assets (liabilities) ...........................................
Noncontrolling interests in equity of subsidiaries ............................
221
606
883
39
—
145
22
1,916
5,044
1,207
191
2
8,360
6,378
124
Total liabilities and equity ........................................................... $ 14,862
F-89
894
—
—
—
—
6,430
9,984
(221)
—
20
870
1,095
3
243
2,010
1,062
790
—
1,189
5,051
558
4,375
9,984
—
—
—
—
—
—
(170)
—
—
—
—
(170)
—
—
(170)
—
4
—
(4)
(170)
—
—
(170)
1,237
1,208
8,383
1,587
80
6,442
24,676
—
606
903
909
925
148
265
3,756
6,106
2,001
191
1,187
13,241
6,936
4,499
24,676
STATEMENT OF OPERATIONS INFORMATION
Year ended December 31, 2014
(unaudited)
Attributed (note 1)
QVC
Group
Ventures
Group
Consolidated
Liberty
amounts in millions
Total revenue, net ........................................................................................... $ 10,028
Operating costs and expenses:
471
10,499
Cost of retail sales (exclusive of depreciation shown separately below) .....
Operating .....................................................................................................
Selling, general and administrative, including stock-based compensation
(note 5) ......................................................................................................
Depreciation and amortization .....................................................................
Impairment of intangible assets ...................................................................
Operating income (loss) .................................................................................
Other income (expense):
Interest expense ............................................................................................
Share of earnings (losses) of affiliates, net (note 3) .....................................
Realized and unrealized gains (losses) on financial instruments, net ..........
Gains (losses) on transactions, net ...............................................................
Other, net......................................................................................................
Earnings (loss) from continuing operations before income taxes...................
Income tax benefit (expense) .......................................................................
Net earnings (loss) from continuing operations ............................................
Net earnings (loss) from discontinued operations, net of taxes....................
Net earnings (loss) ..........................................................................................
Less net earnings (loss) attributable to noncontrolling interests ..................
Net earnings (loss) attributable to Liberty Interactive Corporation
6,378
854
940
643
7
8,822
1,206
(312)
51
(22)
—
(43)
(326)
880
(306)
574
(15)
559
39
306
37
127
19
—
489
(18)
(75)
(12)
(35)
74
22
(26)
(44)
48
4
63
67
50
shareholders ................................................................................................. $
520
17
6,684
891
1,067
662
7
9,311
1,188
(387)
39
(57)
74
(21)
(352)
836
(258)
578
48
626
89
537
F-90
STATEMENT OF OPERATIONS INFORMATION
Year ended December 31, 2013
(unaudited)
Attributed (note 1)
QVC
Group
Ventures
Group
amounts in millions
Consolidated
Liberty
10,219
6,533
862
1,029
629
30
9,083
1,136
(380)
33
(22)
(1)
(29)
(399)
737
(183)
554
26
580
79
501
Total revenue, net ............................................................................................ $ 10,219
Operating costs and expenses:
Cost of retail sales (exclusive of depreciation shown separately below) ......
Operating ......................................................................................................
Selling, general and administrative, including stock-based compensation
(note 5) .......................................................................................................
Depreciation and amortization ......................................................................
Impairment of intangible assets ....................................................................
Operating income (loss) ..................................................................................
Other income (expense):
Interest expense .............................................................................................
Share of earnings (losses) of affiliates, net (note 3) ......................................
Realized and unrealized gains (losses) on financial instruments, net ...........
Gains (losses) on transactions, net ................................................................
Other, net.......................................................................................................
Earnings (loss) from continuing operations before income taxes....................
Income tax benefit (expense) ........................................................................
Earnings (loss) from continuing operations, net of taxes ................................
Earnings (loss) from discontinued operations, net of taxes ...........................
Net earnings (loss) ...........................................................................................
Less net earnings (loss) attributable to noncontrolling interests ...................
Net earnings (loss) attributable to Liberty Interactive Corporation
6,533
862
1,010
629
30
9,064
1,155
(290)
48
(12)
(1)
(54)
(309)
846
(346)
500
(17)
483
45
—
—
—
19
—
—
19
(19)
(90)
(15)
(10)
—
25
(90)
(109)
163
54
43
97
34
shareholders ................................................................................................. $
438
63
F-91
STATEMENT OF OPERATIONS INFORMATION
Year ended December 31, 2012
(unaudited)
Attributed (note 1)
QVC
Group
Ventures
Group
Consolidated
Liberty
amounts in millions
Total revenue, net ........................................................................................... $
Operating costs and expenses:
Cost of retail sales (exclusive of depreciation shown separately below) .....
Operating .....................................................................................................
Selling, general and administrative, including stock-based compensation
(note 5) ......................................................................................................
Depreciation and amortization .....................................................................
Impairment of intangible assets ...................................................................
Operating income (loss) .................................................................................
Other income (expense):
Interest expense ............................................................................................
Share of earnings (losses) of affiliates, net (note 3) .....................................
Realized and unrealized gains (losses) on financial instruments, net ..........
Gains (losses) on transactions, net ...............................................................
Other, net......................................................................................................
Earnings (loss) before income taxes ...............................................................
Income tax benefit (expense) .......................................................................
Earnings (loss) from continuing operations ...................................................
Earnings (loss) from discontinued operations, net of taxes ..........................
Net earnings (loss) ..........................................................................................
Less net earnings (loss) attributable to noncontrolling interests ..................
Net earnings (loss) attributable to Liberty Interactive Corporation
9,888
6,307
819
943
591
53
8,713
1,175
(322)
28
51
—
—
(243)
932
(357)
575
(46)
529
63
—
—
—
12
—
—
12
(12)
(144)
19
(402)
443
47
(37)
(49)
79
30
1,032
1,062
(2)
9,888
6,307
819
955
591
53
8,725
1,163
(466)
47
(351)
443
47
(280)
883
(278)
605
986
1,591
61
shareholders ................................................................................................ $
466
1,064
1,530
F-92
STATEMENT OF CASH FLOWS INFORMATION
Year ended December 31, 2014
(unaudited)
Attributed (note 1)
QVC Group
Ventures Group
Consolidated Liberty
amounts in millions
Cash flows from operating activities:
Net earnings (loss) ..................................................................................................... $
Adjustments to reconcile net earnings to net cash provided by operating activities:
(Earnings) loss from discontinued operations .........................................................
Depreciation and amortization ................................................................................
Stock-based compensation ......................................................................................
Cash payments for stock-based compensation ........................................................
Excess tax benefit from stock-based compensation ................................................
Noncash interest expense ........................................................................................
Share of (earnings) losses of affiliates, net ..............................................................
Cash receipts from returns on equity investments ...................................................
Realized and unrealized (gains) losses on financial instruments, net ......................
(Gains) losses on transactions, net ..........................................................................
(Gains) losses on extinguishment of debt ................................................................
Impairment of intangible assets ..............................................................................
Deferred income tax expense (benefit) ...................................................................
Intergroup tax allocation .........................................................................................
Intergroup tax payments ..........................................................................................
Other noncash charges (credits), net .......................................................................
Changes in operating assets and liabilities
Current and other assets ........................................................................................
Payables and other liabilities ................................................................................
Net cash provided (used) by operating activities ...............................................
Cash flows from investing activities:
Cash proceeds from dispositions ................................................................................
Investment in and loans to cost and equity investees .................................................
Capital expended for property and equipment ...........................................................
Purchases of short term investments and other marketable securities ........................
Sales of short term investments and other marketable securities ...............................
Other investing activities, net.....................................................................................
Net cash provided (used) by investing activities .....................................................
Cash flows from financing activities:
Borrowings of debt ....................................................................................................
Repayments of debt ...................................................................................................
Intergroup receipts (payments), net ............................................................................
Repurchases of Liberty Interactive common stock ....................................................
Taxes paid in lieu of shares issued for stock-based compensation .............................
Excess tax benefit from stock-based compensation ...................................................
Other financing activities, net ....................................................................................
Net cash provided (used) by financing activities.....................................................
Effect of foreign currency exchange rates on cash .......................................................
Net cash provided (used) by discontinued operations:
Cash provided (used) by operating activities .............................................................
Cash provided (used) by investing activities ..............................................................
Cash provided (used) by financing activities .............................................................
Change in available cash held by discontinued operations ........................................
Net cash provided (used) by discontinued operations .............................................
Net increase (decrease) in cash and cash equivalents ...........................................
Cash and cash equivalents at beginning of period ................................................
Cash and cash equivalents at end of period ..........................................................
$
F-93
559
15
643
83
(13)
(20)
6
(51)
22
22
—
48
7
(160)
169
(388)
(3)
(80)
345
1,204
—
(4)
(226)
(73)
52
(30)
(281)
4,360
(3,563)
(1,035)
(785)
(25)
20
(8)
(1,036)
(46)
(20)
—
3
3
(14)
(173)
595
422
67
(63)
19
25
(2)
(1)
—
12
23
35
(74)
—
—
119
(169)
388
1
(4)
60
436
163
(87)
(15)
(791)
539
14
(177)
146
(186)
1,035
—
(1)
1
(25)
970
—
293
(194)
368
(119)
348
1,577
307
1,884
626
(48)
662
108
(15)
(21)
6
(39)
45
57
(74)
48
7
(41)
—
—
(2)
(84)
405
1,640
163
(91)
(241)
(864)
591
(16)
(458)
4,506
(3,749)
—
(785)
(26)
21
(33)
(66)
(46)
273
(194)
371
(116)
334
1,404
902
2,306
STATEMENT OF CASH FLOWS INFORMATION
Year ended December 31, 2013
(unaudited)
Cash flows from operating activities:
Net earnings (loss) ...........................................................................................
Adjustments to reconcile net earnings to net cash provided by operating
activities: .........................................................................................................
(Earnings) loss from discontinued operations ..............................................
Depreciation and amortization .....................................................................
Stock-based compensation ...........................................................................
Cash payments for stock-based compensation .............................................
Excess tax benefit from stock-based compensation ......................................
Noncash interest expense .............................................................................
Share of losses (earnings) of affiliates, net ...................................................
Cash receipts from return on equity investments ..........................................
Realized and unrealized gains (losses) on financial instruments, net ...........
(Gains) losses on transactions, net ................................................................
(Gains) losses on extinguishment of debt .....................................................
Impairment of intangible assets ....................................................................
Deferred income tax (benefit) expense .........................................................
Intergroup tax allocation ...............................................................................
Intergroup tax payments ...............................................................................
Other noncash charges (credits), net .............................................................
Changes in operating assets and liabilities
Current and other assets .............................................................................
Payables and other current liabilities .........................................................
Net cash provided (used) by operating activities ...............................
Cash flows from investing activities:
Cash proceeds from dispositions .....................................................................
Investments in and loans to cost and equity investees .....................................
Capital expended for property and equipment .................................................
Cash paid for acquisitions, net of cash acquired ..............................................
Purchases of short term and other marketable securities .................................
Sales of short term investments and other marketable securities .....................
Other investing activities, net ..........................................................................
Net cash provided (used) by investing activities ........................................
Cash flows from financing activities:
Borrowings of debt ..........................................................................................
Repayments of debt .........................................................................................
Repurchases of Liberty Interactive common stock ..........................................
Taxes paid in lieu of shares issued for stock-based compensation ..................
Excess tax benefit from stock-based compensation ........................................
Other financing activities, net .........................................................................
Net cash provided (used) by financing activities .......................................
Effect of foreign currency rates on cash ............................................................
Net cash provided (used) by discontinued operations:
Cash provided (used) by operating activities ...................................................
Cash provided (used) by investing activities ...................................................
Cash provided (used) by financing activities ...................................................
Change in available cash held by discontinued operations ..............................
Net cash provided (used) by discontinued operations ................................
Net increase (decrease) in cash and cash equivalents ........................................
Cash and cash equivalents at beginning of period ...........................................
Cash and cash equivalents at end period .........................................................
F-94
Attributed (note 1)
QVC Group
Ventures Group
amounts in millions
Consolidated
Liberty
$
483
97
580
17
629
110
(8)
(13)
12
(48)
16
12
1
57
30
(132)
272
(52)
(14)
(81)
(306)
985
1
(4)
(291)
(24)
—
—
(38)
(356)
3,520
(3,052)
(1,089)
(21)
13
(57)
(686)
(24)
(13)
(6)
(1)
(2)
(22)
(103)
698
595
$
(43)
—
8
—
—
1
15
19
10
—
—
—
110
(272)
52
11
(3)
37
42
1,136
(380)
—
—
(959)
400
(3)
194
841
(2,363)
—
—
—
—
(1,522)
—
346
(192)
(171)
17
—
(1,286)
1,593
307
(26)
629
118
(8)
(13)
13
(33)
35
22
1
57
30
(22)
—
—
(3)
(84)
(269)
1,027
1,137
(384)
(291)
(24)
(959)
400
(41)
(162)
4,361
(5,415)
(1,089)
(21)
13
(57)
(2,208)
(24)
333
(198)
(172)
15
(22)
(1,389)
2,291
902
STATEMENT OF CASH FLOWS INFORMATION
Year ended December 31, 2012
(unaudited)
Attributed (note 1)
QVC Group
Ventures Group
amounts in millions
Consolidated
Liberty
Cash flows from operating activities:
Net earnings (loss) ............................................................................................................
Adjustments to reconcile net earnings to net cash provided by operating activities:
$
(Earnings) loss from discontinued operations ...............................................................
Depreciation and amortization ......................................................................................
Stock-based compensation ............................................................................................
Cash payments for stock-based compensation ..............................................................
Excess tax benefit from stock-based compensation ......................................................
Noncash interest expense ..............................................................................................
Share of losses (earnings) of affiliates, net ...................................................................
Cash receipts from return on equity investments ..........................................................
Realized and unrealized gains (losses) on financial instruments, net ...........................
(Gains) losses on transactions, net ................................................................................
Impairment of intangible assets .....................................................................................
Deferred income tax (benefit) expense .........................................................................
Intergroup tax allocation ................................................................................................
Intergroup tax payments ................................................................................................
Other noncash charges (credits), net .............................................................................
Changes in operating assets and liabilities
Current and other assets ..............................................................................................
Payables and other current liabilities ..........................................................................
Net cash provided (used) by operating activities ....................................................
Cash flows from investing activities:
Cash proceeds from dispositions ......................................................................................
Proceeds (settlements) of financial instruments, net ........................................................
Investments in and loans to cost and equity investees .....................................................
Capital expended for property and equipment .................................................................
Cash paid for acquisitions, net of cash acquired ..............................................................
Purchases of short term investments and other marketable securities .............................
Sales of short term investments and other marketable securities .....................................
Other investing activities, net ...........................................................................................
Net cash provided (used) by investing activities ...........................................................
Cash flows from financing activities:
Borrowings of debt ...........................................................................................................
Repayments of debt ..........................................................................................................
Intergroup receipts (payments), net ..................................................................................
Reattribution of cash between groups ..............................................................................
Repurchases of Liberty common stock ............................................................................
Proceeds from rights offering ...........................................................................................
Taxes paid in lieu of shares issued for stock-based compensation ..................................
Excess tax benefit from stock-based compensation .........................................................
Other financing activities, net ...........................................................................................
Net cash provided (used) by financing activities ..........................................................
Effect of foreign currency rates on cash ..............................................................................
Net cash provided (used) by discontinued operations:
Cash provided (used) by operating activities ...................................................................
Cash provided (used) by investing activities ....................................................................
Cash provided (used) by financing activities ...................................................................
Change in available cash held by discontinued operations ..............................................
Net cash provided (used) by discontinued operations ..................................................
Net increase (decrease) in cash and cash equivalents .........................................................
Cash and cash equivalents at beginning of period ........................................................
Cash and cash equivalents at end period .......................................................................
$
529
46
591
84
(12)
(56)
9
(28)
11
(51)
—
53
(177)
152
(33)
1
(77)
430
1,472
—
—
(59)
(333)
(83)
—
46
(29)
(458)
2,305
(1,385)
160
(1,346)
(815)
—
(112)
56
(5)
(1,142)
(20)
(2)
(4)
6
—
—
(148)
846
698
1,062
1,591
(1,032)
—
7
—
(8)
—
(19)
34
402
(443)
—
123
(152)
33
1
(1)
(32)
(25)
692
(258)
(177)
—
—
(58)
—
(10)
189
—
(115)
(160)
1,346
—
328
(16)
8
—
1,391
—
(13)
426
(7)
(368)
38
1,593
—
1,593
(986)
591
91
(12)
(64)
9
(47)
45
351
(443)
53
(54)
—
—
2
(78)
398
1,447
692
(258)
(236)
(333)
(83)
(58)
46
(39)
(269)
2,305
(1,500)
—
—
(815)
328
(128)
64
(5)
249
(20)
(15)
422
(1)
(368)
38
1,445
846
2,291
F-95
Notes to Attributed Financial Information
(unaudited)
(1) 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. At the time
of issuance of Liberty Ventures common stock, cash of $1,346 million was reattributed to the Ventures Group from
the QVC Group. The QVC Group borrowed funds under QVC's credit facility in connection with the completion of
the recapitalization to have the appropriate amount of cash available to be attributed to each Group.
On October 3, 2014, Liberty reattributed from the QVC Group to the Ventures Group its Digital Commerce companies,
which were valued at $1.5 billion, and approximately $1 billion in cash. In connection with the reattribution, each
holder of Liberty Interactive common stock received 0.14217 of a share of the corresponding series of Liberty Ventures
common stock for each share of Liberty Interactive common stock held as of the record date, with cash paid in lieu of
fractional shares. The distribution date for the dividend was on October 20, 2014, and the Liberty Interactive common
stock began trading ex-dividend on October 15, 2014. The reattribution of the Digital Commerce companies is
presented on a prospective basis from the date of the reattribution in Liberty’s consolidated financial statements, with
October 1, 2014 used as a proxy for the date of the reattribution. Accordingly, the financial results of the Digital
Commerce companies are reflected in the QVC through the period ending September 30, 2014 and are reflected in the
Ventures group for the period beginning October 1, 2014.
Subsequent to the reattribution, the QVC Group is comprised of our consolidated subsidiary, QVC and our interest in
HSN, Inc. Accordingly, the accompanying attributed financial information for the QVC Group includes the foregoing
investment, as well as the assets, liabilities, revenue, expenses and cash flows of QVC. We have also attributed certain
of our debt obligations (and related interest expense) to the QVC Group based upon a number of factors, including
the cash flow available to the QVC Group and its ability to pay debt service and our assessment of the optimal
capitalization for the QVC Group. The specific debt obligations attributed to each of the QVC Group and the Ventures
Group are described in note 4 below. In addition, we have allocated certain corporate general and administrative
expenses between the QVC Group and the Ventures Group as described in note 5 below.
The QVC Group is primarily comprised of our merchandise-focused televised-shopping programs, Internet and mobile
application businesses. Accordingly, we expect that businesses that we may acquire in the future that we believe are
complementary to this strategy will also be attributed to the QVC Group.
Subsequent to the reattribution, the Ventures Group consists of all of our businesses not included in the QVC Group
including our Digital Commerce businesses and interests in equity method investments of Expedia, Inc., Interval
Leisure Group, Inc., FTD and LendingTree and available-for-sale securities Time Warner, Time Warner Cable and
AOL. Accordingly, the accompanying attributed financial information for the Ventures Group includes these
investments, as well as the assets, liabilities, revenue, expenses and cash flows of the Digital Commerce businesses.
In addition, we have attributed to the Ventures Group all of our senior exchangeable debentures (and related interest
expense). See note 4 below for the debt obligations attributed to the Ventures Group.
F-96
Any businesses that we may acquire in the future that we do not attribute to the QVC Group will be attributed to the
Ventures Group.
(2) Investments in available-for-sale securities, including non-strategic securities, and other cost investments are
summarized as follows:
December 31, 2014 December 31, 2013
amounts in millions
QVC Group
Other cost investments ......................................................... $
Total QVC Group ..............................................................
Ventures Group
Time Warner Inc. .................................................................
Time Warner Cable Inc. .......................................................
Other AFS investments ..........................................................
Total Ventures Group .........................................................
Consolidated Liberty .............................................................. $
4
4
375
815
30
1,220
1,224
4
4
306
741
262
1,309
1,313
(3) The following table presents information regarding certain equity method investments:
December 31, 2014
Share of earnings (losses)
Percentage
ownership
Carrying
value
Market
value
dollar amounts in millions
2014
Years ended December 31,
2013
2012
QVC Group
HSN, Inc. (2) ...........................................
Other .......................................................
Total QVC Group .................................
38 % $
various
328
47
375
1,521
N/A
Ventures Group
Expedia, Inc. (1)(2) .................................
FTD .........................................................
Other .......................................................
Total Ventures Group ............................
Consolidated Liberty .................................
18 %
35
various
514
355
389
1,258
$ 1,633
1,992
355
N/A
60
(9)
51
58
N/A
(70)
(12)
39
61
(13)
48
31
N/A
(46)
(15)
33
40
(12)
28
67
N/A
(48)
19
47
(1) 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, previously held as collateral, were released to the
counterparty. In the fourth quarter when the forward contract settled, the difference between the fair value of the
Expedia shares and the carrying value of the shares ($443 million) was recognized in the gain (loss) on dispositions,
net line item in the statement of operations. Liberty owns an approximate 18% equity interest and 58% voting interest
in Expedia. Liberty has entered into governance arrangements pursuant to which Mr. Barry Diller, Chairman of the
Board and Senior Executive Officer of Expedia, may vote its interests of Expedia, subject to certain limitations.
Additionally, through our governance arrangements with Mr. Diller, we have the right to appoint and have appointed
20% of the members of Expedia's board of directors, which is currently comprised of 10 members. Therefore, we
determined based on these arrangements that we have significant influence through our arrangements with Expedia
and have accounted for the investment as an equity method affiliate.
F-97
(2) During the year ended December 31, 2014, Expedia, Inc. and HSN, Inc. paid dividends aggregating $15 million and
$22 million, respectively, which were recorded as reductions to the investment balances.
(4) Debt attributed to the Interactive Group and the Ventures Group is comprised of the following:
December 31, 2014
Outstanding
principal
Carrying
value
amounts in millions
QVC Group
Corporate level notes and debentures
8.5% Senior Debentures due 2029 ...........................................................
8.25% Senior Debentures due 2030 .........................................................
1% Exchangeable Senior Debentures due 2043 ......................................
$
Subsidiary level notes and facilities
QVC 7.5% Senior Secured Notes due 2019 ............................................
QVC 3.125% Senior Secured Notes due 2019 ........................................
QVC 7.375% Senior Secured Notes due 2020 ........................................
QVC 5.125% Senior Secured Notes due 2022 ........................................
QVC 4.375% Senior Secured Notes due 2023 ........................................
QVC 4.850% Senior Secured Notes due 2024 ........................................
QVC 4.45% Senior Secured Notes due 2025 ..........................................
QVC 5.45% Senior Secured Notes due 2034 ..........................................
QVC 5.95% Senior Secured Notes due 2043 ..........................................
QVC Bank Credit Facilities .....................................................................
Other subsidiary debt ...............................................................................
Total QVC Group ..................................................................................
Ventures Group
Corporate level debentures
4% Exchangeable Senior Debentures due 2029 ......................................
3.75% Exchangeable Senior Debentures due 2030 .................................
3.5% Exchangeable Senior Debentures due 2031 ...................................
0.75% Exchangeable Senior Debentures due 2043 .................................
Subsidiary level notes and facilities
287
504
400
—
400
500
500
750
600
600
400
300
508
75
5,824
438
438
355
850
Other subsidiary debt ...............................................................................
Total Ventures Group .............................................................................
Total consolidated Liberty debt ...............................................................
Less debt classified as current .................................................................
Total long-term debt ..............................................................................
61
2,142
7,966
$
285
501
444
—
399
500
500
750
600
599
399
300
508
75
5,860
294
291
325
1,220
61
2,191
8,051
(946)
7,105
(5)
Cash compensation expense for our corporate employees will be allocated among the QVC Group and the
Ventures Group based on the estimated percentage of time spent providing services for each group. On a semi-
annual basis estimated time spent will be determined through an interview process and a review of personnel
duties unless transactions significantly change the composition of companies and investments in either respective
group which would require a more timely reevaluation of estimated time spent. Other general and administrative
expenses will be charged directly to the groups whenever possible and are otherwise allocated based on estimated
usage or some other reasonably determined methodology. Amounts allocated from the QVC Group to the
Ventures Group was determined to be $18 million, $11 million and $5 million for the years ended December 31,
2014, 2013 and 2012, respectively. We note that stock compensation related to each tracking stock group is
F-98
determined based on actual options outstanding for each respective tracking stock group, therefore, as it relates
to periods prior to the Split-Off, no stock compensation expense was recognized by the Ventures group.
While we believe that this allocation method is reasonable and fair to each group, we may elect to change the
allocation methodology or percentages used to allocate general and administrative expenses in the future.
(6)
We have accounted for income taxes for the QVC Group and the Ventures Group in the accompanying attributed
financial information in a manner similar to a stand-alone company basis. To the extent this methodology differs
from our tax sharing policy, differences have been reflected in the attributed net assets of the groups.
QVC Group
Income tax benefit (expense) consists of:
Years ended December 31,
2013
2014
2012
Current:
Federal ....................................................................................
State and local .........................................................................
Foreign ....................................................................................
Deferred:
Federal ....................................................................................
State and local .........................................................................
Foreign ....................................................................................
Income tax benefit (expense) ....................................................
amounts in millions
$ (325)
(31)
(110)
$ (466)
$ 143
12
5
160
$ (306)
(370)
(26)
(82)
(478)
195
(57)
(6)
132
(346)
(369)
(25)
(140)
(534)
151
19
7
177
(357)
Income tax benefit (expense) differs from the amounts computed by applying the U.S. federal income tax rate of
35% as a result of the following:
Years ended December 31,
2014
2013
2012
amounts in millions
Computed expected tax benefit (expense) ..........................................
State and local income taxes, net of federal income taxes ..................
Foreign taxes, net of foreign tax credits ..............................................
Sale of consolidated subsidiary ...........................................................
Change in valuation allowance affecting tax expense .........................
Impairment of intangible assets not deductible for tax purposes ........
Dividends received deductions ...........................................................
Impact of change in state rate on deferred taxes .................................
Other, net.............................................................................................
Income tax benefit (expense) ..............................................................
$
$
(308)
(14)
(2)
14
—
(3)
4
1
2
(306)
(296)
(24)
(7)
(23)
(2)
5
3
(2)
(346)
(326)
(4)
5
(8)
(16)
3
—
(11)
(357)
F-99
The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and
deferred income tax liabilities are presented below:
December 31,
2014
2013
amounts in millions
Deferred tax assets:
Net operating and capital loss carryforwards .............................................................................
Foreign tax credit carryforwards ................................................................................................
Accrued stock compensation .....................................................................................................
Other accrued liabilities .............................................................................................................
Other future deductible amounts ................................................................................................
Deferred tax assets ................................................................................................................
Valuation allowance ...................................................................................................................
Net deferred tax assets ..........................................................................................................
$
40
88
18
139
193
478
(47)
431
58
129
26
79
134
426
(48)
378
Deferred tax liabilities:
Intangible assets .........................................................................................................................
Other deferred tax liabilities ......................................................................................................
Deferred tax liabilities ...........................................................................................................
Net deferred tax liabilities ............................................................................................................
1,242
23
1,265
834
$
1,417
—
1,417
1,039
The Company's deferred tax assets and liabilities are reported in the accompanying balance sheet information as
follows:
Current deferred tax (assets) liabilities ......................................................... $
Long-term deferred tax liabilities .................................................................
Net deferred tax liabilities ........................................................................
$
Ventures Group
Income tax benefit (expense) consists of:
December 31,
2014
2013
amounts in millions
(199)
1,033
834
(168)
1,207
1,039
Current:
Federal .........................................................................................
State and local .............................................................................
Foreign.........................................................................................
Deferred:
Federal .........................................................................................
State and local .............................................................................
Foreign.........................................................................................
$
$
$
Income tax benefit (expense) .........................................................
$
Years ended December 31,
2014
2013
2012
amounts in millions
168
(1)
—
167
(84)
(35)
—
(119)
48
273
—
—
273
(214)
104
—
(110)
163
202
(1)
1
202
(132)
9
—
(123)
79
F-100
Income tax benefit (expense) differs from the amounts computed by applying the U.S. federal income tax rate of
35% as a result of the following:
Years ended December 31,
2014
2013
2012
Computed expected tax benefit (expense) .................................................................. $
State and local income taxes, net of federal income taxes ..........................................
Foreign taxes, net of foreign tax credits ......................................................................
Impact of change in state rate on deferred taxes .........................................................
Change in valuation allowance affecting tax expense .................................................
Dividends received deductions ...................................................................................
Alternative energy tax credits .....................................................................................
Other, net.....................................................................................................................
Income tax benefit (expense) ......................................................................................
$
amounts in millions
38
15
9
7
—
—
63
(29)
(4)
(2)
4
6
54
58
(1)
(7)
163
48
17
4
—
—
—
10
48
—
79
The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and
deferred income tax liabilities are presented below:
December 31,
2014
2013
amounts in millions
Deferred tax assets:
Net operating and capital loss carryforwards .....................................
Other ...................................................................................................
Deferred tax assets .........................................................................
Valuation allowance ...........................................................................
Net deferred tax assets ...................................................................
$
50
39
89
(8)
81
Deferred tax liabilities:
Investments .........................................................................................
Intangible assets .................................................................................
Discount on exchangeable debentures ................................................
Deferred gain on debt retirements ......................................................
Other ...................................................................................................
Deferred tax liabilities ...................................................................
Net deferred tax liabilities .....................................................................
676
43
1,022
257
70
2,068
$ 1,987
16
14
30
(4)
26
569
—
965
313
64
1,911
1,885
The Company's deferred tax assets and liabilities are reported in the accompanying balance sheet information as
follows:
Current deferred tax liabilities ....................................
Long-term deferred tax liabilities ...............................
Net deferred tax liabilities ......................................
$ 1,171
816
$ 1,987
1,095
790
1,885
December 31,
2014
2013
amounts in millions
F-101
Intergroup payable (receivable)
The intergroup balance, at December 31, 2014, is primarily a result of timing of tax benefits.
(7)
The Liberty Interactive Stock and the Liberty Ventures Stock have voting and conversion rights under our
restated charter. Following is a summary of those rights. Holders of Series A common stock of each group is
entitled to one vote per share, and holders of Series B common stock of each group are entitled to ten votes per
share. Holders of Series C common stock of each group, if issued, are entitled to 1/100th of a vote per share in
certain limited cases and will otherwise not be entitled to vote. In general, holders of Series A and Series B
common stock will vote as a single class. In certain limited circumstances, the board may elect to seek the
approval of the holders of only Series A and Series B Liberty Interactive Stock or the approval of the holders of
only Series A and Series B Liberty Ventures Stock.
At the option of the holder, each share of Series B common stock will be convertible into one share of Series A
common stock of the same group. At the discretion of our board, the common stock related to one group may be
converted into common stock of the same series that is related to the other group.
F-102
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Corporate Data
Board of directors
audit committee
stock information
John C. Malone
Chairman of the Board
Liberty Interactive Corporation
Michael A. George
President and CEO
QVC, Inc.
M. Ian G. Gilchrist
Retired Investment Banker
Gregory B. Maffei
President and CEO
Liberty Interactive Corporation
Evan D. Malone, Ph.D.
President
NextFab Studio, LLC
David E. Rapley
Retired President and CEO
Rapley Consulting, Inc.
M. LaVoy Robison
Director
The Anschutz Foundation
Larry E. Romrell
Retired Executive Vice President
Tele-Communications, Inc.
Andrea L. Wong
President, International Production
Sony Pictures Television
President, International
Sony Pictures Entertainment
M. LaVoy Robison (Chairman)
M. Ian G. Gilchrist
David E. Rapley
Larry E. Romrell
Series A and B Liberty Interactive
Common Stock (QVCA/B) and Series
A and B Liberty Ventures Common
Stock (LVNTA/B) trade on the
NASDAQ Global Select Market.
nominating & corporate
governance committee
David E. Rapley (Chairman)
M. Ian G. Gilchrist
Larry E. Romrell
Andrea L. Wong
cusip numBers
QVCA – 53071M 104
QVCB – 53071M 203
LVNTA – 53071M 880
LVNTB – 53071M 872
senior officers
John C. Malone
Chairman of the Board
Gregory B. Maffei
President and CEO
Richard N. Baer
Senior Vice President
and General Counsel
Mark D. Carleton
Senior Vice President
Albert E. Rosenthaler
Senior Vice President
Christopher W. Shean
Senior Vice President
and CFO
transfer agent
Liberty Interactive Corporation
Shareholder Services
c/o Computershare
P.O. Box 43023
Providence, RI 02940-3023
Phone: (781) 575-4593
Toll free: (866) 367-6355
www.computershare.com
Telecommunication Device for
the Deaf (TDD) (800) 952-9245
investor relations
Courtnee Ulrich
Joe Hoelscher
Shane Kleinstein
Mindy Billinghurst
investor@libertyinteractive.com
(877) 772-1518
corporate secretarY
on tHe internet
executive committee
Pamela L. Coe
Gregory B. Maffei
John C. Malone
compensation committee
M. Ian G. Gilchrist (Chairman)
David E. Rapley
Andrea L. Wong
corporate Headquarters
12300 Liberty Boulevard
Englewood, CO 80112
(720) 875-5300
Visit Liberty Interactive Corporation’s
website at www.libertyinteractive.com
financial statements
Liberty Interactive Corporation
financial statements are filed
with the Securities and Exchange
Commission. Copies of these financial
statements can be obtained from the
Transfer Agent or through the Liberty
Interactive Corporation website.
Annual Report 2014 liberty interaCtive
Corporation
12300 Liberty Boulevard
Englewood, CO 80112
www.libertyinteractive.com
720.875.5300