ltrpa_Current folio_10Q

Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2014

OR

   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                             to

Commission File Number 001-36603


LIBERTY TRIPADVISOR HOLDINGS, INC.

(Exact name of Registrant as specified in its charter)

 

 

 

Delaware
(State or other jurisdiction of
incorporation or organization)

 

46‑3337365
(I.R.S. Employer
Identification No.)

 

12300 Liberty Boulevard, Englewood, Colorado 80112

(Address, including zip code, of Registrant’s principal executive offices)

 

Registrant’s telephone number, including area code: (720) 875‑5200

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes    No 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes    No  

 Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b‑2 of the Exchange Act.

 

 

 

 

Large accelerated filer 

Accelerated filer 

Non‑accelerated filer 
(Do not check if a
smaller reporting company)

Smaller reporting company 

 

Indicate by check mark whether the Registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes     No 

The number of outstanding shares of Liberty TripAdvisor Holdings, Inc. common stock as of October 31, 2014 was:

 

 

 

 

 

 

 

 

Series A

 

Series B

 

Liberty TripAdvisor Holdings, Inc. common stock

 

70,799,533 

 

2,885,370 

 

 

 

 

 

 

 

 

 

 

 


 

Table of Contents

 

Table of Contents 

 

 

 

 

 

 

 

LIBERTY TRIPADVISOR HOLDINGS, INC. Condensed Consolidated Balance Sheets (unaudited) 

I-3

LIBERTY TRIPADVISOR HOLDINGS, INC. Condensed Consolidated Balance Sheets (Continued) (unaudited) 

I-4

LIBERTY TRIPADVISOR HOLDINGS, INC. Condensed Consolidated Statements Of Operations (unaudited) 

I-5

LIBERTY TRIPADVISOR HOLDINGS, INC. Condensed Consolidated Statements Of Comprehensive Earnings (Loss) (unaudited) 

I-6

LIBERTY TRIPADVISOR HOLDINGS, INC. Condensed Consolidated Statements Of Cash Flows (unaudited) 

I-7

LIBERTY TRIPADVISOR HOLDINGS, INC. Condensed Consolidated Statement of Equity (unaudited) 

I-8

LIBERTY TRIPADVISOR HOLDINGS, INC. Notes to Condensed Consolidated Financial Statements 

I-9

 

 

 

 

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

I-20

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

I-27

 

Item 4. Controls and Procedures.

I-28

 

 

 

Part II - Other Information 

II-1

 

Item 1. Legal Proceedings

II-1

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

II-1

 

Item 6. Exhibits

II-2

 

 

 

SIGNATURES 

II-3

EXHIBIT INDEX 

II-4

 

I-2


 

Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Balance Sheets

(unaudited)

 

 

 

 

 

 

 

 

 

    

September 30,

    

December 31,

 

 

 

2014

 

2013

 

 

 

amounts in millions

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

543 

 

354 

 

Trade and other receivables, net of allowance for doubtful accounts of $6 million and $4 million, respectively

 

 

184 

 

122 

 

Inventory, net

 

 

25 

 

12 

 

Short term marketable securities (note 4)

 

 

85 

 

131 

 

Deferred income tax assets

 

 

 

 

Other current assets

 

 

23 

 

18 

 

Total current assets

 

 

866 

 

643 

 

Investments in available-for-sale securities (note 4)

 

 

38 

 

188 

 

Property and equipment, at cost

 

 

147 

 

55 

 

Accumulated depreciation

 

 

(33)

 

(16)

 

 

 

 

114 

 

39 

 

Intangible assets not subject to amortization:

 

 

 

 

 

 

Goodwill

 

 

3,686 

 

3,460 

 

Trademarks

 

 

1,829 

 

1,832 

 

 

 

 

5,515 

 

5,292 

 

Intangible assets subject to amortization, net

 

 

887 

 

908 

 

Other assets, at cost, net of accumulated amortization

 

 

39 

 

19 

 

Total assets

 

$

7,459 

 

7,089 

 

          (continued)

See accompanying notes to condensed consolidated financial statements.

 

 

 

 

 

 

I-3


 

Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Balance Sheets (Continued)

(unaudited)

 

 

 

 

 

 

 

 

 

    

September 30,

    

December 31,

 

 

 

2014

 

2013

 

 

 

amounts in millions

 

Liabilities and Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

154 

 

42 

 

Accrued liabilities

 

 

142 

 

94 

 

Related party notes payable (note 6)

 

 

 —

 

30 

 

Current portion of debt (note 5)

 

 

76 

 

69 

 

Deferred revenue

 

 

62 

 

47 

 

Other current liabilities

 

 

 

29 

 

Total current liabilities

 

 

436 

 

311 

 

Long-term debt (note 5)

 

 

670 

 

300 

 

Deferred income tax liabilities

 

 

835 

 

853 

 

Other liabilities

 

 

133 

 

44 

 

Total liabilities

 

 

2,074 

 

1,508 

 

Equity:

 

 

 

 

 

 

Series A common stock, $.01 par value. Authorized shares 200,000,000; issued and outstanding 70,799,160 at September 30, 2014.

 

 

 

 —

 

Series B common stock, $.01 par value. Authorized shares 7,500,000; issued and outstanding 2,855,370 at September 30, 2014.

 

 

 —

 

 —

 

Series C common stock, $.01 par value. Authorized shares 200,000,000; no issued and outstanding at September 30, 2014.

 

 

 —

 

 —

 

Parent’s investment

 

 

 —

 

226 

 

Additional paid-in capital

 

 

281 

 

 —

 

Accumulated other comprehensive earnings, net of taxes

 

 

(4)

 

 —

 

Retained earnings

 

 

630 

 

982 

 

Total stockholders' equity

 

 

908 

 

1,208 

 

Noncontrolling interests in equity of combined companies

 

 

4,477 

 

4,373 

 

Total equity

 

 

5,385 

 

5,581 

 

Commitments and contingencies (note 7)

 

 

 

 

 

 

Total liabilities and equity

 

$

7,459 

 

7,089 

 

 

See accompanying notes to condensed consolidated financial statements.

I-4


 

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Statements of Operations

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months

 

Nine months

 

 

 

ended

 

ended

 

 

 

September 30,

 

September 30,

 

 

    

2014

    

2013

    

2014

    

2013

 

 

 

amounts in millions, except

 

 

 

per share amounts

 

Service and other revenue

 

$

354 

 

255 

 

 

958 

 

732 

 

Net retail sales

 

 

21 

 

19 

 

 

46 

 

52 

 

Total net sales

 

 

375 

 

274 

 

 

1,004 

 

784 

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold (exclusive of depreciation shown separately below)

 

 

15 

 

14 

 

 

35 

 

42 

 

Operating expense, including stock-based compensation (note 2)

 

 

61 

 

43 

 

 

166 

 

122 

 

Selling, general and administrative, including stock-based compensation (note 2)

 

 

205 

 

129 

 

 

507 

 

352 

 

Depreciation and amortization

 

 

77 

 

78 

 

 

219 

 

233 

 

 

 

 

358 

 

264 

 

 

927 

 

749 

 

Operating income (loss)

 

 

17 

 

10 

 

 

77 

 

35 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

Interest expense, including related party

 

 

(4)

 

(3)

 

 

(9)

 

(9)

 

Other, net

 

 

(8)

 

 

 

(8)

 

 —

 

 

 

 

(12)

 

 —

 

 

(17)

 

(9)

 

Earnings (loss) before income taxes

 

 

 

10 

 

 

60 

 

26 

 

Income tax (expense) benefit

 

 

(3)

 

37 

 

 

(18)

 

38 

 

Net earnings (loss)

 

 

 

47 

 

 

42 

 

64 

 

Less earnings (loss) attributable to noncontrolling interests

 

 

 

39 

 

 

46 

 

60 

 

Net earnings (loss) attributable to Liberty TripAdvisor Holdings, Inc. shareholders

 

$

(5)

 

 

 

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net earnings (loss) attributable to Liberty TripAdvisor Holdings, Inc. shareholders per common share (note 3):

 

 

 

 

 

 

 

 

 

 

 

Series A and B common stock

 

$

(0.07)

 

0.11 

 

 

(0.05)

 

0.05 

 

Diluted net earnings (loss) attributable to Liberty TripAdvisor Holdings, Inc. stockholders per common share (note 3):

 

 

 

 

 

 

 

 

 

 

 

Series A and B common stock

 

$

(0.07)

 

0.11 

 

 

(0.05)

 

0.05 

 

 

See accompanying notes to condensed consolidated financial statements.

I-5


 

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Statements of Comprehensive Earnings (Loss)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months

 

Nine months

 

 

 

ended

 

ended

 

 

 

September 30,

 

September 30,

 

 

    

2014

    

2013

    

2014

    

2013

 

 

 

amounts in millions

 

Net earnings (loss)

 

$

 

47 

 

 

42 

 

64 

 

Other comprehensive earnings (loss), net of taxes:

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(36)

 

29 

 

 

(20)

 

(11)

 

Unrealized holding gains (losses) arising during the period

 

 

 —

 

 

 

 —

 

 —

 

Other comprehensive earnings (loss)

 

 

(36)

 

30 

 

 

(20)

 

(11)

 

Comprehensive earnings (loss)

 

 

(34)

 

77 

 

 

22 

 

53 

 

Less comprehensive earnings (loss) attributable to the noncontrolling interests

 

 

(22)

 

62 

 

 

30 

 

51 

 

Comprehensive earnings (loss) attributable to Liberty TripAdvisor Holdings, Inc. shareholders

 

$

(12)

 

15 

 

 

(8)

 

 

 

See accompanying notes to condensed consolidated financial statements.

I-6


 

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

 

 

 

 

 

 

 

 

 

Nine months

 

 

 

ended

 

 

 

September 30,

 

 

 

2014

 

2013

 

 

 

amounts in millions

 

Cash flows from operating activities:

    

 

    

    

    

 

Net earnings (loss)

 

$

42 

 

64 

 

Adjustments to reconcile net earnings to net cash provided by operating activities

 

 

 

 

 

 

Depreciation and amortization

 

 

219 

 

233 

 

Stock-based compensation

 

 

54 

 

44 

 

Excess tax benefit from stock-based compensation

 

 

(20)

 

(6)

 

Deferred income tax expense (benefit)

 

 

(59)

 

(102)

 

Other noncash charges (credits), net

 

 

 

 

Changes in operating assets and liabilities

 

 

 

 

 

 

Current and other assets

 

 

(53)

 

(40)

 

Payables and other liabilities

 

 

116 

 

73 

 

Net cash provided (used) by operating activities

 

 

305 

 

269 

 

Cash flows from investing activities:

 

 

 

 

 

 

Capital expended for property and equipment

 

 

(57)

 

(41)

 

Cash paid for acquisitions, net of cash acquired

 

 

(284)

 

(32)

 

Purchases of short term investments and other marketable securities

 

 

(219)

 

(375)

 

Sales and maturities of short term investments and other marketable securities

 

 

413 

 

231 

 

Other investing activities, net

 

 

 

(4)

 

Net cash provided (used) by investing activities

 

 

(146)

 

(221)

 

Cash flows from financing activities:

 

 

 

 

 

 

Borrowings of debt

 

 

427 

 

38 

 

Repayments of debt

 

 

(33)

 

(53)

 

Distribution to Liberty

 

 

(348)

 

 —

 

Payment of minimum withholding taxes on net share settlements of equity awards

 

 

(32)

 

(10)

 

Excess tax benefit from stock-based compensation

 

 

20 

 

 

Shares issued by subsidiary

 

 

 

24 

 

Shares repurchased by subsidiary

 

 

 —

 

(142)

 

Other financing activities, net

 

 

(6)

 

 

Net cash provided (used) by financing activities

 

 

30 

 

(136)

 

Net increase (decrease) in cash and cash equivalents

 

 

189 

 

(88)

 

Cash and cash equivalents at beginning of period

 

 

354 

 

369 

 

Cash and cash equivalents at end of period

 

$

543 

 

281 

 

 

See accompanying notes to condensed consolidated financial statements.

I-7


 

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Statement of Equity

Nine months ended September 30, 2014

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncontrolling

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

interest in

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

other

 

 

 

equity of

 

 

 

 

 

Common stock

 

paid-in

 

Parent’s

 

comprehensive

 

Retained

 

combined

 

Total

 

 

 

Series A

 

Series B

 

Series C

 

capital

 

investment

 

earnings

 

earnings

 

companies

 

equity

 

 

 

amounts in millions

 

Balance at January 1, 2014

    

$

 —

    

 —

    

 —

    

 —

    

226 

    

 —

    

982 

    

4,373 

    

5,581 

 

Net earnings (loss)

 

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

(4)

 

46 

 

42 

 

Other comprehensive earnings (loss)

 

 

 —

 

 —

 

 —

 

 —

 

 —

 

(4)

 

 —

 

(16)

 

(20)

 

Stock compensation

 

 

 —

 

 —

 

 —

 

 

11 

 

 —

 

 —

 

46 

 

59 

 

Issuance of common stock upon exercise of stock options

 

 

 —

 

 —

 

 —

 

 —

 

 

 —

 

 —

 

 —

 

 

Minimum withholding taxes on net share settlements of stock-based compensation

 

 

 —

 

 —

 

 —

 

 —

 

(32)

 

 —

 

 —

 

 —

 

(32)

 

Excess tax benefits on stock-based compensation

 

 

 —

 

 —

 

 —

 

 

 

 —

 

 —

 

16 

 

20 

 

Intercompany taxes and debt forgiven by Liberty

 

 

 —

 

 —

 

 —

 

 —

 

75 

 

 —

 

 —

 

 —

 

75 

 

Fair value of stock options assumed in connection with acquisition

 

 

 —

 

 —

 

 —

 

 

 —

 

 —

 

 —

 

 

 

Change in capitalization in connection with Trip Spin-Off

 

 

 

 —

 

 —

 

277 

 

(278)

 

 —

 

 —

 

 —

 

 —

 

Distribution to Liberty

 

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

(348)

 

 —

 

(348)

 

Shares issued by subsidiary

 

 

 —

 

 —

 

 —

 

(1)

 

(7)

 

 —

 

 —

 

 

 —

 

Other

 

 

 —

 

 —

 

 —

 

 

 —

 

 —

 

 —

 

 —

 

 

Balance at September 30, 2014

 

$

 

 —

 

 —

 

281 

 

 —

 

(4)

 

630 

 

4,477 

 

5,385 

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

I-8


 

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

 

(1) Basis of Presentation

During October 2013, the Board of Directors of Liberty Interactive Corporation and its subsidiaries (“Liberty”) authorized a plan to distribute to the stockholders of Liberty’s Liberty Ventures common stock shares of a wholly‑owned subsidiary, Liberty TripAdvisor Holdings, Inc. (“TripCo” or the “Company”) (the “Trip Spin‑Off”). TripCo holds the subsidiaries TripAdvisor, Inc. (“TripAdvisor”) and BuySeasons, Inc., which includes the retail businesses of BuyCostumes.com and Celebrate Express (“BuySeasons”), both of which operate as stand‑alone operating entities. Both TripAdvisor and BuySeasons have more revenue in the third quarter, based on a higher travel research period and the Halloween period, respectively, as compared to the other quarters of the year. The Trip Spin-Off was completed on August 27, 2014 and effected as a pro‑rata dividend of shares of TripCo to the stockholders of Series A and Series B Liberty Ventures common stock of Liberty.

These financial statements have been prepared on a combined basis and represent a combination of the historical financial information of TripAdvisor, an equity method affiliate from December 20, 2011 through December 11, 2012 and a consolidated company since December 11, 2012, and the historical financial information for BuySeasons.  Financial statements for periods prior to the Trip Spin-Off were prepared as discussed above but are referred to as consolidated in this Form 10-Q. The Trip Spin-Off has been accounted for at historical cost due to the pro rata nature of the distribution.

The accompanying (a) condensed consolidated balance sheet as of December 31, 2013, which has been derived from audited financial statements, and (b) the interim unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to Form 10‑Q and Article 10 of Regulation S‑X as promulgated by the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results for such periods have been included. The results of operations for any interim period are not necessarily indicative of results for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes for the year ended December 31, 2013 as presented in Amendment No. 4 to the Company’s Registration Statement on Form S-1 filed on August 11, 2014 (the “Registration Statement”).

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. The Company considers (i) revenue recognition, (ii) recoverability of intangible assets and goodwill, (iii) recoverability and useful lives of long‑lived assets, (iv) accounting for income taxes and (v) stock‑based compensation to be its most significant estimates.

In May 2014, the FASB 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 its financial statements and related disclosures.

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

 

Spin‑Off of TripCo from Liberty Interactive Corporation

Following the Trip Spin‑Off, Liberty and TripCo operate as separate, publicly traded companies, and neither has any stock ownership, beneficial or otherwise, in the other. In connection with the Trip Spin‑Off, TripCo entered into certain agreements, including the reorganization agreement, the services agreement, the facilities sharing agreement and the tax sharing agreement, with Liberty and/or Liberty Media Corporation (“Liberty Media”) (or certain of their subsidiaries) in order to govern certain of the ongoing relationships between the companies after the Trip Spin‑Off and to provide for an orderly transition.

The reorganization agreement provides for, among other things, the principal corporate transactions (including the internal restructuring) required to effect the Trip Spin‑Off, certain conditions to the Trip Spin‑Off and provisions governing the relationship between TripCo and Liberty with respect to and resulting from the Trip Spin‑Off.

Pursuant to the services agreement, Liberty Media provides TripCo with general and administrative services including legal, tax, accounting, treasury and investor relations support. TripCo will reimburse Liberty Media for direct, out‑of‑pocket expenses incurred by Liberty Media in providing these services and TripCo will pay a services fee to Liberty Media under the services agreement that will be subject to adjustment semi‑annually. Liberty Media and TripCo will evaluate all charges for reasonableness semi‑annually and make adjustments to these charges.

Under the facilities sharing agreement, TripCo will share office space with Liberty and Liberty Media and related amenities at Liberty Media’s corporate headquarters

The tax sharing agreement provides for the allocation and indemnification of tax liabilities and benefits between Liberty and TripCo and other agreements related to tax matters. Pursuant to the tax sharing agreement, TripCo has agreed to indemnify Liberty, subject to certain limited exceptions, for losses and taxes resulting from the Trip Spin-Off to the extent such losses or taxes result primarily from, individually or in the aggregate, the breach of certain restrictive covenants made by TripCo (applicable to actions or failures to act by TripCo and its subsidiaries following the completion of the Trip Spin-Off).

In October 2014, the IRS completed its examination of the Trip 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 after Liberty’s 2014 tax year ends on December 31, 2014.

Acquisitions

During the nine months ended September 30, 2014, TripAdvisor completed four acquisitions for total cash consideration of $284 million, net of cash acquired. The total cash consideration is subject to adjustment based on the finalization of working capital adjustments and amounts retained with payment subject to certain indemnification obligations by the respective sellers. TripAdvisor acquired Vacation Home Rentals, a U.S.-based vacation rental website featuring properties around the world; London-based Tripbod, a travel community that helps connect travelers to local experts to deliver travelers relevant recommendations for trip planning; Lafourchette, a provider of an online and mobile reservations platform for restaurants in Europe; and Viator a platform for researching and booking destination activities around the world.

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Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

 

The following table presents the purchase price allocations initially recorded on our condensed consolidated balance sheet for all 2014 acquisitions (in millions):

 

 

 

 

 

Net assets (including acquired cash)

$

90 

 

Goodwill

 

238 

 

Intangible assets

 

166 

 

Deferred tax liabilities, net

 

(44)

 

Accrued expenses and other liabilities

 

(98)

 

Total purchase price consideration

$

352 

 

 

The purchase price allocation of these acquisitions are preliminary and subject to revision as more information becomes available and final valuations are available, but in any case will not be revised beyond 12 months after the acquisition date. The goodwill represents the excess value over both tangible and intangible assets acquired. The goodwill in these transactions is primarily attributable to expected operational synergies, potential new and expanded business relationships and user bases, the assembled workforces, and the future development initiatives of the assembled workforces. The unaudited condensed consolidated financial statements include the operating results of all acquired businesses from the date of acquisition. Pro-forma results of operations for all of these acquisitions have not been presented as the financial impact to the unaudited condensed consolidated financial statements, both individually and in the aggregate are not material.

(2) Stock-Based Compensation

Liberty Incentive Plans

In connection with the Trip Spin-Off in August 2014, all outstanding restricted shares, stock options and stock appreciation rights (collectively, “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.

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

ii.

A corresponding equity award relating to shares of TripCo common stock (a “TripCo Award”)

The exercise prices and number of shares subject to the adjusted Liberty Ventures Award and the TripCo 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 Liberty Ventures common stock and 3) the post-distribution trading prices of Liberty Ventures common stock and TripCo 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 TripCo Award.

Following the Trip Spin-Off, employees of Liberty hold Awards in both Liberty Ventures common stock and TripCo common stock.  The compensation expense relating to employees of Liberty is recorded at Liberty. Therefore, compensation expense related to options resulting from the Trip Spin-Off will not be recognized in the Company’s consolidated financial statements.

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Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

 

Liberty TripAdvisor Holdings-Outstanding Awards

The following table presents the number and weighted average exercise price (“WAEP”) of the Awards to purchase TripCo common stock granted to certain officers, employees and directors of Liberty.

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

 

    

Weighted

    

 

 

 

 

 

 

 

 

 

average

 

 

 

 

 

 

 

 

 

 

remaining

 

Aggregate

 

 

 

 

 

 

 

 

contractual

 

intrinsic

 

 

 

Series A

 

WAEP

 

life

 

value

 

 

 

(in thousands)

 

 

 

 

(in years)

 

(in millions)

 

Outstanding at January 1, 2014

 

 —

 

$

 —

 

 

 

 

 

 

Granted

 

 —

 

$

 —

 

 

 

 

 

 

Exercised

 

(1)

 

$

9.39 

 

 

 

 

 

 

Forfeited/Cancelled

 

 —

 

$

 —

 

 

 

 

 

 

Trip Spin-Off adjustment

 

1,846 

 

$

13.90 

 

 

 

 

 

 

Outstanding at September 30, 2014

 

1,845 

 

$

13.90 

 

4.5 

 

$

37 

 

Exercisable at September 30, 2014

 

1,034 

 

$

13.58 

 

4.2 

 

$

21 

 

 

There were 44 thousand shares of Series B options issued as part of the Trip Spin-Off with a WAEP of $11.21. There was no other activity during the period related to the Series B options.

Included in the accompanying condensed consolidated statements of operations are the following amounts of stock‑based compensation, the majority of which relates to TripAdvisor as discussed below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months

 

Nine months

 

 

 

ended September 30,

 

ended September 30,

 

 

    

2014

    

2013

    

2014

    

2013

 

 

 

amounts in millions

 

Operating expense

 

$

 

 

 

22 

 

20 

 

Selling, general and administrative expense

 

 

12 

 

 

 

32 

 

24 

 

 

 

$

20 

 

14 

 

 

54 

 

44 

 

 

TripAdvisor Equity Grant Awards

The following table presents the number and weighted average exercise price (“WAEP”) of the Awards to purchase TripAdvisor common stock granted to certain officers, employees and directors of TripAdvisor.

 

 

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

 

    

Weighted

    

 

 

 

 

 

 

 

 

 

average

 

 

 

 

 

TripAdvisor

 

 

 

 

remaining

 

Aggregate

 

 

 

stock

 

 

 

 

contractual

 

intrinsic

 

 

 

options

 

WAEP

 

life

 

value

 

 

 

(in thousands)

 

 

 

 

(in years)

 

(in millions)

 

Outstanding at January 1, 2014

 

9,470 

 

$

40.18 

 

 

 

 

 

 

Assumed options from acquisition

 

101 

 

$

16.36 

 

 

 

 

 

 

Granted

 

557 

 

$

96.42 

 

 

 

 

 

 

Exercised

 

(1,139)

 

$

33.67 

 

 

 

 

 

 

Cancelled or expired

 

(234)

 

$

45.05 

 

 

 

 

 

 

Outstanding at September 30, 2014

 

8,755 

 

$

44.21 

 

5.3 

 

$

416 

 

Exercisable at September 30, 2014

 

3,845 

 

$

31.68 

 

2.9 

 

$

230 

 

Vested or expected to vest after September 30, 2014

 

8,203 

 

$

43.38 

 

5.1 

 

$

396 

 

 

As of September 30, 2014, the total unrecognized compensation cost related to unvested TripAdvisor stock options was approximately $93 million and will be recognized over a weighted average period of approximately 2.8 years. The total intrinsic value of stock options exercised for the nine months ended September 30, 2014 and 2013 was $71 million and $45 million, respectively.

Additionally, during the nine months ended September 30, 2014, TripAdvisor granted 618 thousand service based RSUs under their 2011 Incentive Plan for which the fair value was measured based on the quoted price of TripAdvisor common stock at the date of grant. The weighted average grant date fair value for RSU’s granted during the nine months ended September 30, 2014 was $96.15 per share. As of September 30, 2014, the total unrecognized compensation cost related to TripAdvisor RSUs was approximately $57 million and will be recognized over a weighted average period of approximately 3 years.

 

(3) Earnings (Loss) Per Common Share

Basic earnings (loss) per common share (“EPS”) is computed by dividing net earnings (loss) 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.

The Company issued 73,685,924 common shares, which is the aggregate number of shares of Series A and Series B common stock outstanding upon the completion of the Trip Spin-Off on August 27, 2014.  The same number of shares is being used for both basic and diluted earnings per share for all periods prior to the date of the Trip Spin-Off as no Company equity awards were outstanding prior to the Trip Spin-Off.

 

 

 

 

 

 

 

 

 

 

TripCo Common Stock

 

    

Three months ended 

 

 

Nine months ended

 

 

 

September 30, 2014

 

 

September 30, 2014

 

 

 

number of shares in millions

Basic EPS

 

73 

 

 

73 

 

Potentially dilutive shares

 

 

 

 

Diluted EPS

 

74 

 

 

74 

 

 

 

 

 

 

 

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Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

 

(4) 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 are inputs, other than quoted market prices included within Level 1, that 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.

The Company’s assets and liabilities measured at fair value are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2014

 

December 31, 2013

 

 

 

 

 

 

Quoted prices

 

Significant

 

 

 

Quoted prices

 

Significant

 

 

 

 

 

 

in active

 

other

 

 

 

in active

 

other

 

 

 

 

 

 

markets for

 

observable

 

 

 

markets for

 

observable

 

 

 

 

 

 

identical assets

 

inputs

 

 

 

identical assets

 

inputs

 

Description

 

Total

 

(Level 1)

 

(Level 2)

 

Total

 

(Level 1)

 

(Level 2)

 

 

 

amounts in millions

 

Cash equivalents

    

$

23 

    

23 

    

 —

    

156 

    

156 

    

 —

 

Marketable securities

 

$

85 

 

 —

 

85 

 

131 

 

 —

 

131 

 

Available-for-sale securities

 

$

38 

 

 —

 

38 

 

188 

 

 —

 

188 

 

 

The fair value of Level 2 marketable securities and available‑for‑sale securities were obtained from pricing sources for identical or comparable instruments, rather than direct observations of quoted prices in active markets.

Other Financial Instruments

Other financial instruments not measured at fair value on a recurring basis include trade receivables, related party receivables, trade payables, accrued and other current liabilities. The carrying amount approximates fair value due to the short maturity of these instruments as reported on our condensed consolidated balance sheets.

(5) Debt

Outstanding debt at September 30, 2014 and December 31, 2013 is summarized as follows:

 

 

 

 

 

 

 

 

 

 

September 30,

 

December 31,

 

 

 

2014

 

2013

 

 

 

amounts in millions

 

TripAdvisor term loan and revolving credit facility

    

$

310 

    

340 

 

TripCo debt

 

 

400 

 

 —

 

Chinese credit facilities

 

 

36 

 

29 

 

Total consolidated TripCo debt

 

$

746 

 

369 

 

Less debt classified as current

 

 

(76)

 

(69)

 

Total long-term debt

 

$

670 

 

300 

 

 

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Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

 

TripAdvisor Term Loan Facility Due 2016 and Revolving Credit Facility

On December 20, 2011, TripAdvisor entered into a Credit Agreement, which provides $600 million of borrowing including:

·

a Term Loan Facility, or Term Loan, in an aggregate principal amount of $400 million with a term of five years due December 2016; and

·

a Revolving Credit Facility in an aggregate principal amount of $200 million available in U.S. dollars, Euros and British pound sterling with a term of five years expiring December 2016.

As of September 30, 2014, the Term Loan and loans under the Revolving Credit Facility bear interest at LIBOR plus 150 basis points, or the Eurocurrency Spread, or the alternate base rate (“ABR”) plus 50 basis points, and undrawn amounts are currently subject to a commitment fee of 22.5 basis points.

As of September 30, 2014, TripAdvisor used a one‑month interest period Eurocurrency Spread which is approximately 1.7% per annum. Interest is payable on a monthly basis while TripAdvisor is borrowing under the one‑month interest rate period. The current interest rates are based on current assumptions, leverage and LIBOR rates and do not take into account that rates will reset periodically.

The Term Loan principal is currently payable in quarterly installments on the last day of each calendar quarter equal to 2.5% of the original principal amount, with the balance due on the final maturity date. Principal payments aggregating  $30 million were made during the nine months ended September 30, 2014.  

The Revolving Credit Facility includes $40 million of borrowing capacity available for letters of credit and $40 million for borrowings on same‑day notice. As of September 30, 2014, there were no outstanding borrowings under the TripAdvisor Revolving Credit Facility.

As of September 30, 2014, TripAdvisor was in compliance with all of its debt covenants.

BuySeasons Debt

See note 6 for a discussion regarding the significant items related to BuySeasons debt obligations.

TripCo Debt

On August 21, 2014, a wholly owned subsidiary of TripCo, entered into two margin loan agreements which aggregated total borrowings of $400 million. Prior to the Trip Spin-Off, approximately $348 million of such amount was distributed to Liberty. Common Stock and Class B Common Stock of TripAdvisor were pledged as collateral pursuant to these agreements. Each agreement contains language that indicates that the Company, as borrower and transferor of underlying shares as collateral, has the right to exercise all voting, consensual and other powers of ownership pertaining to the transferred shares for all purposes, provided that Liberty agrees that it will not vote the shares in any manner that would reasonably be expected to give rise to transfer or certain other restrictions. Similarly, the loan agreements indicate that no lender party shall have any voting rights with respect to the shares transferred, except to the extent that a lender party buys any shares in a sale or other disposition made pursuant to the terms of the loan agreements. The agreements also contain certain restrictions related to additional indebtedness. Interest on the margin loans will accrue at a rate of 3.65% plus LIBOR for six months and 3.25% thereafter to be paid in kind or cash at the election of TripCo. The

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Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

 

Company expects that interest on the loan will be paid in kind and added to the principal amount on the loan. The term of the loan is three years and the maturity date is August 22, 2017.

 

As of September 30, 2014, the values of shares pledged as collateral pursuant to the remaining margin loan agreements are as follows:

 

 

 

 

 

 

 

   

 

Number of Shares Pledged

   

   

   

 

as Collateral as of

   

Share value as of

Pledged Collateral

 

September 30, 2014

   

September 30, 2014

   

 

amounts in millions

Common Stock

 

18.2 

 

$

1,664 

 

Class B Common Stock

 

12.8 

 

$

1,170 

 

 

The outstanding margin loans contain various affirmative and negative covenants that restrict the activities of the borrower. The loan agreements do not include any financial covenants.

 

Fair Value

Due to the variable rate nature, TripCo believes that the carrying amount of its debt approximated fair value at September 30, 2014 and December 31, 2013.

(6) Related Party Transactions

During the nine months ended September 30, 2014, the promissory note agreement between Liberty and BuySeasons, as borrower, was amended to increase the total borrowing capacity from $30 million to $50 million. The interest rate on this loan was 6.25%. During August 2014, prior to completion of the Trip Spin-Off, Liberty forgave the balance of $46 million pursuant to the BuySeasons note.

Additionally, income taxes payable of $29 million due to Liberty was forgiven upon completion of the Trip Spin-Off and have been reflected as contributed capital in the consolidated statement of equity.  

(7) Commitments and Contingencies

Leases

On June 20, 2013, TripAdvisor entered into an additional lease to move its headquarters to Needham, Massachusetts in 2015. TripAdvisor is the deemed owner (for accounting purposes only) of the new building during the construction period under build to suit lease accounting. As building construction began in the fourth quarter of 2013, TripAdvisor recorded project construction costs incurred by the landlord as an asset and a corresponding long term liability in “Property and equipment, at cost” and “Other liabilities,” respectively, in TripAdvisor’s condensed consolidated balance sheets. The asset and corresponding long term liability will increase as additional building costs are incurred by the landlord during the construction period. At the completion of construction of the new building (estimated to be May 2015), the lease will be evaluated to determine whether or not it meets the criteria for “sale‑leaseback” treatment. From the beginning of construction through September 30, 2014 approximately $50 million of these non-cash costs have been capitalized.

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Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

 

Litigation

In the ordinary course of business, the Company and its subsidiaries are parties to legal proceedings and claims involving alleged infringement of third‑party intellectual property rights, defamation, and other claims. Although it is reasonably possible that the Company 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 condensed consolidated financial statements.

(8) Segment Information

TripCo, through its ownership interests in subsidiaries and other companies, is primarily engaged in the on‑line commerce industries. TripCo identifies its reportable segments as (A) those consolidated companies 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 TripCo’s annual pre‑tax earnings.

TripCo 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, TripCo reviews nonfinancial measures such as unique website visitors, conversion rates and active customers, as appropriate.

TripCo defines Adjusted OIBDA as revenue less cost of sales, operating expenses, and selling, general and administrative expenses (excluding stock‑based compensation). TripCo 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. TripCo generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current prices.

For the nine months ended September 30, 2014, TripCo has identified the following consolidated company as its reportable segment:

·

TripAdvisor, Inc.—an online travel research company, empowering users to plan and maximize their travel experience.

TripCo’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 companies are the same as those described in the Company’s summary of significant accounting policies included in the financial statements for the years ended December 31, 2013,  2012 and 2011 included in the Registration Statement.

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Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

 

Performance Measures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended  September 30,

 

 

 

2014

 

2013

 

 

 

 

 

 

Adjusted

 

 

 

Adjusted

 

 

 

Revenue

 

OIBDA

 

Revenue

 

OIBDA

 

 

 

amounts in millions

 

TripAdvisor

    

$

354 

    

119 

    

255 

    

104 

 

Corporate and other

 

 

21 

 

(5)

 

19 

 

(2)

 

Consolidated TripCo

 

$

375 

 

114 

 

274 

 

102 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30,

 

 

 

2014

 

2013

 

 

 

 

 

 

Adjusted

 

 

 

Adjusted

 

 

 

Revenue

 

OIBDA

 

Revenue

 

OIBDA

 

 

 

amounts in millions

 

TripAdvisor

    

$

958 

    

370 

    

732 

    

326 

 

Corporate and other

 

 

46 

 

(20)

 

52 

 

(14)

 

Consolidated TripCo

 

$

1,004 

 

350 

 

784 

 

312 

 

Other Information

 

 

 

 

 

 

 

 

 

 

September 30, 2014

 

 

 

Total

 

Capital

 

 

 

assets

 

expenditures

 

 

 

amounts in millions

 

TripAdvisor

    

$

7,359 

    

55 

 

Corporate and other

 

 

100 

 

 

Consolidated TripCo

 

$

7,459 

 

57 

 

 

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Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

 

The following table provides a reconciliation of segment Adjusted OIBDA to earnings (loss) before income taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months

 

Nine months

 

 

 

ended September 30,

 

ended September 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

 

 

amounts in millions

 

Consolidated segment Adjusted OIBDA

    

$

114 

    

102 

    

 

350 

    

312 

 

Stock-based compensation

 

 

(20)

 

(14)

 

 

(54)

 

(44)

 

Depreciation and amortization

 

 

(77)

 

(78)

 

 

(219)

 

(233)

 

Interest expense

 

 

(4)

 

(3)

 

 

(9)

 

(9)

 

Other, net

 

 

(8)

 

 

 

(8)

 

 —

 

Earnings (loss) before income taxes

 

$

 

10 

 

 

60 

 

26 

 

 

 

 

 

 

 

 

 

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Table of Contents

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain statements in this Quarterly Report on Form 10-Q 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; the recoverability of our goodwill and other long-lived assets; our projected sources and uses of cash; and the anticipated non-material impact of certain contingent liabilities related to legal and tax proceedings and other matters arising in the ordinary course of business. 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 products and services and the ability of our company and our subsidiaries to adapt to changes in demand;

·

competitor responses to products and services;

·

the levels and quality of online traffic to our businesses’ websites and the ability of our subsidiaries to convert visitors into consumers or contributors;

·

the expansion of social integration and member acquisition efforts with social media by our subsidiaries;

·

the impact of changes in search engine algorithms and dynamics or search engine disintermediation;

·

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;

·

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;

·

availability of qualified personnel;

·

changes in, or failure or inability to comply with, government regulations, including, without limitation, regulations of the FCC and adverse outcomes from regulatory proceedings;

·

changes in the business models of our subsidiaries;

·

changes in the nature of key strategic relationships with partners, vendors and joint venturers;

·

general economic and business conditions and industry trends including the current economic downturn and those which result in declines or disruptions in the travel industry;

·

consumer spending levels, including the availability and amount of individual consumer debt;

·

costs related to the maintenance and enhancement of brand awareness by our subsidiaries;

·

advertising spending levels;

·

rapid technological changes;

·

our failure, and the failure of our subsidiaries, to protect the security of personal information about customers, subjecting each of us to potentially costly government enforcement actions or private litigation and reputational damage;

·

the regulatory and competitive environment of the industries in which our subsidiaries operate; and

·

fluctuations in foreign currency exchange rates and political unrest in international markets.

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Table of Contents

 

For additional risk factors, please see Amendment No. 4 to the Registration Statement on Form S-1 (File No. 333-1957057) filed on August 11, 2014. These forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Quarterly 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.

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

During October 2013, the Board of Directors of Liberty Interactive Corporation and its subsidiaries (“Liberty”) authorized a plan to distribute to the stockholders of Liberty’s Liberty Ventures common stock shares of a wholly‑owned subsidiary Liberty TripAdvisor Holdings, Inc. (“TripCo” or the “Company”) which holds the subsidiaries TripAdvisor, Inc. (“TripAdvisor”) and BuySeasons, Inc. which includes the retail businesses BuyCostumes.com and Celebrate Express (“BuySeasons”) (the “Trip Spin‑Off”). The transaction was completed on August 27, 2014 and was effected as a pro‑rata dividend of shares of TripCo to the stockholders of Series A and Series B Liberty Ventures common stock of Liberty. The Trip Spin‑Off is intended to be tax‑free and has been accounted for at historical cost due to the pro rata nature of the distribution to shareholders of Liberty Ventures common stock.

The financial information represents a combination of the historical results of TripAdvisor and BuySeasons as discussed in note 1 in the accompanying condensed consolidated financial statements. These financial statements refer to the combination of TripAdvisor and BuySeasons as “TripCo,” “the Company,” “us,” “we” and “our” in the notes to the consolidated financial statements. All significant intercompany accounts and transactions have been eliminated in the condensed consolidated financial statements.

Our “Corporate and Other” category includes our interest in BuySeasons and corporate expenses.

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Table of Contents

 

Results of Operations—ConsolidatedSeptember 30, 2014 and 2013

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. 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months

 

Nine months

 

 

 

ended

 

ended

 

 

 

September 30,

 

September 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

 

 

amounts in millions

 

Revenue

    

 

    

    

    

    

 

    

    

    

 

TripAdvisor

 

$

354 

 

255 

 

 

958 

 

732 

 

Corporate and other

 

 

21 

 

19 

 

 

46 

 

52 

 

Consolidated TripCo

 

$

375 

 

274 

 

 

1,004 

 

784 

 

Adjusted OIBDA

 

 

 

 

 

 

 

 

 

 

 

TripAdvisor

 

$

119 

 

104 

 

 

370 

 

326 

 

Corporate and other

 

 

(5)

 

(2)

 

 

(20)

 

(14)

 

Consolidated TripCo

 

$

114 

 

102 

 

 

350 

 

312 

 

Operating Income (Loss)

 

 

 

 

 

 

 

 

 

 

 

TripAdvisor

 

$

23 

 

16 

 

 

98 

 

53 

 

Corporate and other

 

 

(6)

 

(6)

 

 

(21)

 

(18)

 

Consolidated TripCo

 

$

17 

 

10 

 

 

77 

 

35 

 

 

Revenue.  Our consolidated revenue increased approximately $101 million and $220 million during the three and nine months ended September 30, 2014, respectively, as compared to the corresponding periods in the prior year. The increase was due to revenue growth at TripAdvisor impacted by a slight increase of $2 million and a decrease of $6 million in revenue at BuySeasons for the three and nine months ended September 30, 2014, respectively, as compared to the corresponding prior year periods. The decrease in revenue for BuySeasons during the nine months ended September 30, 2014, as compared to the corresponding prior period, was due to 7% fewer orders and a 5% decrease in average order value. See “Results of Operations—TripAdvisor” below for a more complete discussion of the results of operations of TripAdvisor.

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 8 to the accompanying September 30, 2014 condensed consolidated financial statements for a reconciliation of Adjusted OIBDA to earnings (loss) before income taxes.

 

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