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Liberty Media Corp. Interactive Common S Reports Operating Results (10-Q)

August 08, 2012 | About:
10qk

10qk

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Liberty Media Corp. Interactive Common S (LINTA) filed Quarterly Report for the period ended 2012-06-30.

Liberty Interactive Corp has a market cap of $10.12 billion; its shares were traded at around $19.48 with a P/E ratio of 17.4 and P/S ratio of 1.1. Liberty Interactive Corp had an annual average earning growth of 19.3% over the past 10 years.

Highlight of Business Operations:

Revenue. Our consolidated revenue increased 5.3% or $120 million and 6.2% or $275 million for the three and six months ended June 30, 2012, respectively, as compared to the corresponding prior year periods. The three month increase was due to increased revenue at QVC ($76 million) and the E-commerce companies ($44 million). The six month increase was due to increased revenue at QVC ($173 million) and the E-commerce companies ($102 million). See "Results of Operations—Businesses" below for a more complete discussion of the results of operations of certain of our subsidiaries.

QVC's consolidated net revenue increased 4.0% and 4.6% during the three and six months ended June 30, 2012, respectively, as compared to the corresponding periods in the prior year. The three month increase in net revenue was comprised of $85 million due to a 4.0% increase in the average sales price per unit ("ASP"), $36 million due to a 1.7% increase in units sold and a $16 million increase in shipping and handling and other miscellaneous revenue. These increases were offset by a $34 million impact of estimated product returns and unfavorable foreign currency exchange rates in all markets, except Japan, of $27 million. Returns as a percent of gross product revenue increased from 19.7% to 20.0% primarily due to an increase in the return rates in beauty, jewelry and apparel due to the mix of products sold within those categories. The six

month increase in net revenue was comprised of $153 million due to a 3.6% increase in ASP, $84 million due to a 2.0% increase in units sold and a $31 million increase in shipping and handling and other miscellaneous revenue. These increases were offset by a $65 million impact of estimated product returns and unfavorable foreign currency exchange rates in all markets except Japan of $30 million. Returns as a percent of gross product revenue increased from 19.6% to 19.9% primarily due to an increase in apparel sales as a percentage of the total mix of products sold.

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 decreased 2.8% or $5 million and 0.3% or $1 million for the three and six month periods ended June 30, 2012, respectively, as compared to the corresponding periods in the prior year. For the three month period ended June 30, 2012, the $5 million decrease was primarily due to a $3 million favorable foreign currency exchange rate impact and a $2 million decrease in credit card processing fees. For the six month period ended June 30, 2012, the $1 million decrease was primarily due to a $7 million favorable foreign currency exchange rate impact and a $3 million decrease in credit card processing fees offset by a $4 million increase in commissions expense and a $4 million increase in programming expenses. For the three and six months ended June 30, 2012, the decreases in credit card processing fees were due to a change in U.S. legislation associated with customer debit card purchases resulting in lower fees charged. For the six months ended June 30, 2012, the increase in commissions expense was primarily due to higher sales volume and the increase in programming expenses were due primarily to additional manpower costs.

E-commerce businesses. Our E-commerce businesses are comprised primarily of Provide, Backcountry, Bodybuilding and Celebrate. Revenue for the E-commerce businesses is seasonal due to certain holidays, which drive a significant portion of the e-commerce businesses' revenue. The third quarter is generally lower, as compared to the other three quarters, due to fewer holidays. Revenue increased $44 million and $102 million for the three and six months ended June 30, 2012 as compared to the corresponding prior year periods. Each of our respective E-commerce businesses reported an increase in revenue, with the exception of one of our subsidiaries, for the three and six months ended June 30, 2012 as compared to the corresponding prior year periods. Such increases were the result of increased marketing efforts driving additional traffic, greater conversion resulting from investments in site optimization and broader inventory offerings. Adjusted OIBDA for the E-commerce businesses decreased $13 million and $8 million for the three and six months ended June 30, 2012 representing 5.9% and 7.4% of revenue in 2012, as compared to 10.4% and 9.7% in 2011. The decrease in Adjusted OIBDA for the respective periods was the result of legal settlements ($5 million), increased spending in paid search as a percentage of revenue, increased promotional activity to move seasonal inventory and lower advertising revenue due to pricing and a shift to mobile applications. Additionally, as a result of changes in senior management at one of our E-commerce subsidiaries we put in place a management compensation arrangement to retain key personnel for transition purposes at that particular subsidiary, which was largely recorded in the first six months of 2012 ($5 million). Operating income was lower by $20 million and $13 million as a result of the discussion above as well as increased stock compensation for the three and six months ended June 30, 2012 as compared to the corresponding prior year periods.

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