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

November 06, 2012 | About:
Gordon Pape

10qk

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Liberty Media Corp. Interactive Common S (LINTA) filed Quarterly Report for the period ended 2012-09-30.

Liberty Interactive Corp has a market cap of $10.32 billion; its shares were traded at around $20.6 with a P/E ratio of 16.4 and P/S ratio of 1.1. Liberty Interactive Corp had an annual average earning growth of 19.3% over the past 10 years.
This is the annual revenues and earnings per share of LINTA over the last 10 years. For detailed 10-year financial data and charts, go to 10-Year Financials of LINTA.


Highlight of Business Operations:

Revenue. Our consolidated revenue increased 3.0% or $63 million and 5.2% or $338 million for the three and nine months ended September 30, 2012, respectively, as compared to the corresponding prior year periods. The three month increase was due to increased revenue at QVC ($32 million) and the E-commerce companies ($31 million). The nine month increase was due to increased revenue at QVC ($205 million) and the E-commerce companies ($133 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 1.7% and 3.6% during the three and nine months ended September 30, 2012, respectively, as compared to the corresponding periods in the prior year. The three month increase in net revenue was comprised of $34 million due to a 1.6% increase in units sold, $13 million due to a 0.6% increase in average sales price per unit ("ASP"), a $21 million increase in shipping and handling revenue and, to a lesser extent, other miscellaneous revenue and a favorable returns provision. These increases were offset by unfavorable foreign currency exchange rates in all markets of $36 million. Returns as a percent of gross product revenue decreased from 20.7% to 20.1% primarily as a result of a positive mix shift from apparel products to beauty products in Germany and the U.K. The nine month increase in net revenue was comprised of $165 million due to a 2.6% increase in ASP, $118 million due to a 1.9% increase in units sold and a $52 million increase in shipping and handling and other miscellaneous revenue. These increases were offset by a $64 million impact of estimated product returns associated with the sales increase and unfavorable foreign currency exchange rates in all markets, except Japan, of $66 million. Returns as a percent of gross product revenue remained flat at 20.0%.

For the three month period ended September 30, 2012, the $9 million decrease was primarily due to a $3 million decrease in commissions expense, a $2 million decrease in customer service expenses and a $2 million decrease in credit card processing fees. For the nine month period ended September 30, 2012, the $10 million decrease was primarily due to a $5 million decrease in customer service expenses and a $5 million decrease in credit card processing fees. The decrease in commissions expense was primarily due to a higher percentage of revenue from e-commerce. The decrease in customer service expenses was primarily due to lower manpower costs as a result of more electronic ordering from customers. The decrease in credit card processing fees was due to a change in U.S. legislation associated with customer debit card purchases resulting in lower fees charged to merchants. Subsequent to September 30, 2012, QVC reached an approximate $20 million net legal settlement regarding credit card interchange fees, which will be recorded as a gain in operating expenses in the fourth quarter of 2012.

QVC's SG&A expenses include personnel, information technology, the provision for doubtful accounts, credit card income and marketing and advertising expenses. Such expenses increased from 6.7% to 7.0% and increased from 6.5% to 6.8% as a percentage of net revenue for the three and nine month periods ended September 30, 2012, respectively. SG&A expenses increased $8 million and $34 million for the three and nine month periods ended September 30, 2012, respectively, as compared to the corresponding periods in the prior year, due to a variety of factors.

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 $31 million and $133 million for the three and nine months ended September 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 nine months ended September 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 $5 million and $13 million for the three and nine months ended September 30, 2012 representing 1.4% and 5.8% of revenue in 2012, as compared to 3.6% and 8.1% in 2011. The decrease in Adjusted OIBDA for the respective periods was the result of 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, for the nine months ended the e-commerce companies recorded legal settlements ($5 million) and 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 ($5 million), which were largely recorded in the first six months of 2012. Operating income was lower by $54 million and $67 million due primarily to an impairment of goodwill at Celebrate as a result of continued declining operating results and disappointing third quarter trends. Additionally, the discussion above pertaining to Adjusted OIBDA contributed to the decreased results as well as increased stock compensation for the three and nine months ended September 30, 2012 as compared to the corresponding prior year periods.

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