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 March 31, 2019

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

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Series A common stock

LTRPA

The Nasdaq Stock Market LLC

Series B common stock

LTRPB

The Nasdaq Stock Market LLC

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 every Interactive Data File required to be submitted 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 such files). Yes ☒   No ☐ 

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

 

 

 

 

 

Large accelerated filer ☒

Accelerated filer ☐

Non‑accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

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 April 30, 2019 was:

 

 

 

 

 

 

 

 

Series A

 

Series B

 

Liberty TripAdvisor Holdings, Inc. common stock

 

72,146,830

 

2,929,777

 

 

 

 

 

 

   

 

 


 

Table of Contents

Table of Contents

 

Part I – Financial Information

 

 

 

 

 

 

 

 

 

 

 

Item 1. Financial Statements 

 

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

I-3

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 Statements of Equity (unaudited) 

I-8

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

I-10

 

 

 

 

 

 

 

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

I-25

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

I-32

 

Item 4. Controls and Procedures

I-33

 

 

 

Part II – Other Information 

 

Item 1. Legal Proceedings

II-1

 

Item 1A. Risk Factors

II-1

 

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

II-1

 

Item 6. Exhibits

II-2

 

 

 

 

 

 

SIGNATURES 

II-3

 

 

I-2


 

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Balance Sheets

(unaudited)

 

 

 

 

 

 

 

 

    

March 31,

    

December 31,

 

 

 

2019

 

2018

 

 

 

amounts in millions

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

787

 

672

 

Accounts receivable and contract assets, net of allowance for doubtful accounts of $23 million and $21 million, respectively

 

 

236

 

212

 

Other current assets

 

 

77

 

48

 

Total current assets

 

 

1,100

 

932

 

Property and equipment, net

 

 

157

 

154

 

Intangible assets not subject to amortization:

 

 

 

 

 

 

Goodwill

 

 

2,441

 

2,443

 

Trademarks

 

 

1,268

 

1,266

 

 

 

 

3,709

 

3,709

 

Intangible assets subject to amortization, net

 

 

293

 

311

 

Other assets, at cost, net of accumulated amortization

 

 

195

 

118

 

Total assets

 

$

5,454

 

5,224

 

 

             (continued)

See accompanying notes to condensed consolidated financial statements.

 

I-3


 

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Balance Sheets (Continued)

(unaudited)

 

 

 

 

 

 

 

 

 

    

March 31,

    

December 31,

 

 

 

2019

 

2018

 

 

 

amounts in millions

 

Liabilities and Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Deferred merchant and other payables

 

$

274

 

179

 

Accrued liabilities

 

 

127

 

144

 

Current portion of debt (note 5)

 

 

222

 

220

 

Deferred revenue

 

 

101

 

63

 

Other current liabilities

 

 

30

 

 7

 

Total current liabilities

 

 

754

 

613

 

Long-term debt (note 5)

 

 

268

 

267

 

Deferred income tax liabilities

 

 

332

 

325

 

Other liabilities

 

 

337

 

283

 

Total liabilities

 

 

1,691

 

1,488

 

Equity:

 

 

 

 

 

 

Preferred stock, $.01 par value. Authorized shares 50,000,000; no shares issued.

 

 

 —

 

 —

 

Series A common stock, $.01 par value. Authorized 200,000,000 shares; issued and outstanding 72,147,009 shares at March 31, 2019 and 72,146,903 at December 31, 2018

 

 

 1

 

 1

 

Series B common stock, $.01 par value. Authorized shares 7,500,000; issued and outstanding 2,929,777 shares at March 31, 2019 and December 31, 2018

 

 

 —

 

 —

 

Series C common stock, $.01 par value. Authorized 200,000,000 shares; no shares issued.

 

 

 —

 

 —

 

Additional paid-in capital

 

 

216

 

231

 

Accumulated other comprehensive earnings (loss), net of taxes

 

 

(29)

 

(29)

 

Retained earnings

 

 

132

 

133

 

Total stockholders' equity

 

 

320

 

336

 

Noncontrolling interests in equity of subsidiaries

 

 

3,443

 

3,400

 

Total equity

 

 

3,763

 

3,736

 

Commitments and contingencies (note 7)

 

 

 

 

 

 

Total liabilities and equity

 

$

5,454

 

5,224

 

 

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 ended

 

 

 

March 31,

 

 

    

2019

    

2018

 

 

 

amounts in millions, except

 

 

 

per share amounts

 

Total revenue, net

 

$

376

 

378

 

Operating costs and expenses:

 

 

 

 

 

 

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

 

 

94

 

87

 

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

 

 

224

 

243

 

Depreciation and amortization

 

 

42

 

39

 

 

 

 

360

 

369

 

Operating income (loss)

 

 

16

 

 9

 

Other income (expense):

 

 

 

 

 

 

Interest expense

 

 

(5)

 

(6)

 

Realized and unrealized gains (losses) on financial instruments, net

 

 

 1

 

(23)

 

Other, net

 

 

 4

 

 1

 

 

 

 

 —

 

(28)

 

Earnings (loss) before income taxes

 

 

16

 

(19)

 

Income tax (expense) benefit

 

 

(5)

 

(16)

 

Net earnings (loss)

 

 

11

 

(35)

 

Less net earnings (loss) attributable to noncontrolling interests

 

 

13

 

(4)

 

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

 

$

(2)

 

(31)

 

 

 

 

 

 

 

 

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

 

$

(0.03)

 

(0.41)

 

Diluted net earnings (loss) attributable to Series A and Series B Liberty TripAdvisor Holdings, Inc. shareholders per common share (note 3):

 

$

(0.03)

 

(0.41)

 

 

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 ended

 

 

 

March 31,

 

 

 

2019

 

2018

 

 

 

amounts in millions

Net earnings (loss)

 

$

11

 

(35)

 

Other comprehensive earnings (loss), net of taxes:

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

 1

 

15

 

Other comprehensive earnings (loss)

 

 

 1

 

15

 

Comprehensive earnings (loss)

 

 

12

 

(20)

 

Less comprehensive earnings (loss) attributable to the noncontrolling interests

 

 

14

 

 8

 

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

 

$

(2)

 

(28)

 

 

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)

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

March 31,

 

 

 

2019

 

2018

 

 

 

amounts in millions

 

Cash flows from operating activities:

    

 

    

    

    

 

Net earnings (loss)

 

$

11

 

(35)

 

Adjustments to reconcile net earnings (loss) to net cash provided by operating activities

 

 

 

 

 

 

Depreciation and amortization

 

 

42

 

39

 

Stock-based compensation

 

 

30

 

30

 

Realized and unrealized (gains) losses on financial instruments, net

 

 

(1)

 

23

 

Deferred income tax expense (benefit)

 

 

 6

 

(1)

 

Other noncash charges (credits), net

 

 

 6

 

 1

 

Changes in operating assets and liabilities

 

 

 

 

 

 

Current and other assets

 

 

(22)

 

(45)

 

Payables and other liabilities

 

 

109

 

161

 

Net cash provided (used) by operating activities

 

 

181

 

173

 

Cash flows from investing activities:

 

 

 

 

 

 

Capital expended for property and equipment, including internal-use software and website development

 

 

(17)

 

(15)

 

Purchases of short term investments and other marketable securities

 

 

(40)

 

(1)

 

Sales and maturities of short term investments and other marketable securities

 

 

15

 

44

 

Net cash provided (used) by investing activities

 

 

(42)

 

28

 

Cash flows from financing activities:

 

 

 

 

 

 

Borrowings of debt

 

 

 —

 

 5

 

Repayments of debt

 

 

 —

 

(235)

 

Shares repurchased by subsidiary

 

 

 —

 

(4)

 

Payment of withholding taxes on net share settlements of equity awards

 

 

(23)

 

(12)

 

Other financing activities, net

 

 

(1)

 

 —

 

Net cash provided (used) by financing activities

 

 

(24)

 

(246)

 

Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash

 

 

 —

 

 6

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

115

 

(39)

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

672

 

695

 

Cash, cash equivalents and restricted cash at end of period

 

$

787

 

656

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

I-7


 

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Statement of Equity

Three months ended March 31, 2019

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

Noncontrolling

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

other

 

 

 

interest in

 

 

 

 

 

Preferred

 

Common Stock

 

paid-in

 

comprehensive

 

Retained

 

equity of

 

Total

 

 

 

Stock

 

Series A

 

Series B

 

Series C

 

capital

 

earnings (loss)

 

earnings

 

subsidiaries

 

equity

 

 

 

amounts in millions

 

Balance at January 1, 2019

    

$

 —

 

 1

    

 —

    

 —

    

231

    

(29)

    

133

    

3,400

    

3,736

 

Net earnings (loss)

 

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

(2)

    

13

    

11

 

Other comprehensive earnings (loss)

 

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

    

 1

    

 1

 

Stock-based compensation

 

 

 —

 

 —

 

 —

 

 —

 

 9

 

 —

 

 —

    

24

    

33

 

Withholding taxes on net share settlements of stock-based compensation

 

 

 —

 

 —

 

 —

 

 —

 

(23)

 

 —

 

 —

    

 —

    

(23)

 

Shares issued by subsidiary

 

 

 —

 

 —

 

 —

 

 —

 

(2)

 

 —

 

 —

    

 2

    

 —

 

Cumulative effect of accounting change (note 6)

 

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 1

    

 2

    

 3

 

Other, net 

 

 

 —

 

 —

 

 —

 

 —

 

 1

 

 —

 

 —

    

 1

    

 2

 

Balance at March 31, 2019

 

$

 —

 

 1

 

 —

 

 —

 

216

 

(29)

 

132

    

3,443

    

3,763

 

See accompanying notes to condensed consolidated financial statements.

I-8


 

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Statement of Equity

Three months ended March 31, 2018

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

Noncontrolling

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

other

 

 

 

interest in

 

 

 

 

 

Preferred

 

Common Stock

 

paid-in

 

comprehensive

 

Retained

 

equity of

 

Total

 

 

 

Stock

 

Series A

 

Series B

 

Series C

 

capital

 

earnings (loss)

 

earnings

 

subsidiaries

 

equity

 

 

 

amounts in millions

 

Balance at January 1, 2018

    

$

 —

 

 1

    

 —

    

 —

    

250

    

(23)

    

196

    

3,329

    

3,753

 

Net earnings (loss)

 

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

(31)

    

(4)

    

(35)

 

Other comprehensive earnings (loss)

 

 

 —

 

 —

 

 —

 

 —

 

 —

 

 3

 

 —

    

12

    

15

 

Stock-based compensation

 

 

 —

 

 —

 

 —

 

 —

 

 8

 

 —

 

 —

    

25

    

33

 

Withholding taxes on net share settlements of stock-based compensation

 

 

 —

 

 —

 

 —

 

 —

 

(12)

 

 —

 

 —

    

 —

    

(12)

 

Shares issued by subsidiary

 

 

 —

 

 —

 

 —

 

 —

 

(4)

 

 —

 

 —

    

 4

    

 —

 

Shares repurchased by subsidiary

 

 

 —

 

 —

 

 —

 

 —

 

(2)

 

 —

 

 —

 

(8)

 

(10)

 

Cumulative effect of accounting change

 

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 1

    

 3

    

 4

 

Balance at March 31, 2018

 

$

 —

 

 1

 

 —

 

 —

 

240

 

(20)

 

166

    

3,361

    

3,748

 

See accompanying notes to condensed consolidated financial statements.

 

 

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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”) (subsequently renamed Qurate Retail, Inc. (“Qurate Retail”)) authorized a plan to distribute to the stockholders of Liberty’s then-outstanding Liberty Ventures common stock shares of a wholly‑owned subsidiary, Liberty TripAdvisor Holdings, Inc. (“TripCo,” “Consolidated TripCo,” the “Company,” “we,” “our” or “us,” unless the context otherwise requires) (the “TripCo Spin‑Off”). TripCo does not have any operations outside of its controlling interest in its subsidiary TripAdvisor, Inc. (“TripAdvisor”) and its former wholly owned subsidiary, BuySeasons, Inc. (“BuySeasons”), which was sold on June 30, 2017. TripAdvisor’s financial performance tends to be seasonally highest in the second and third quarters of a given year, which includes the seasonal peak in consumer demand, traveler hotel and rental stays, and travel activities and experiences taken, compared to the first and fourth quarters, which represent seasonal low points.

The accompanying (a) condensed consolidated balance sheet as of December 31, 2018, 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. Additionally, certain prior period amounts have been reclassified for comparability with the current period presentation. 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, 2018 as presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

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) recognition and recoverability of goodwill, intangible and long-lived assets and (ii) accounting for income taxes to be its most significant estimates.

Spin‑Off of TripCo from Liberty

Following the TripCo Spin‑Off, Qurate Retail and TripCo operate as separate, publicly traded companies, and neither has any stock ownership, beneficial or otherwise, in the other. In connection with the TripCo 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 TripCo 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 TripCo Spin‑Off, certain conditions to the TripCo Spin‑Off and provisions governing the relationship between TripCo and Qurate Retail with respect to and resulting from the TripCo 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 reimburses Liberty Media for direct, out‑of‑pocket expenses incurred by Liberty Media in providing these services and TripCo pays a services fee to Liberty Media under the services agreement that is subject to adjustment semi‑annually, as necessary.

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Under the facilities sharing agreement, TripCo shares office space with Liberty Media and related amenities at Liberty Media’s corporate headquarters in Englewood, Colorado.

The tax sharing agreement provides for the allocation and indemnification of tax liabilities and benefits between Qurate Retail and TripCo and other agreements related to tax matters. Pursuant to the tax sharing agreement, TripCo has agreed to indemnify Qurate Retail, subject to certain limited exceptions, for losses and taxes resulting from the TripCo 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 TripCo Spin-Off).

Under these agreements, approximately $1 million was reimbursable to Liberty Media for both of the three months ended March 31, 2019 and 2018.

(2) Stock-Based Compensation

TripCo Incentive Plans

TripCo has granted to certain of its directors and employees options to purchase shares of TripCo common stock (“Awards”). TripCo measures the cost of employee services received in exchange for an equity classified Award based on the grant-date fair value (“GDFV”) 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).

TripCo has calculated the GDFV for all of its equity classified Awards and any subsequent remeasurement of its liability classified Awards using the Black-Scholes-Merton model. TripCo estimates the expected term of the Awards based on historical exercise and forfeiture data. The volatility used in the calculation for Awards is based on the historical volatility of TripCo common stock and the implied volatility of publicly traded TripCo options. TripCo uses a zero dividend rate and the risk-free rate for Treasury Bonds with a term similar to that of the subject 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 ended

 

 

 

March 31,

 

 

    

2019

    

2018

 

 

 

amounts in millions

 

Operating expense

 

$

12

 

12

 

Selling, general and administrative expense

 

 

18

 

18

 

 

 

$

30

 

30

 

 

Stock-based compensation expense related to TripAdvisor was $27 million and $29 million for the three months ended March 31, 2019 and 2018, respectively.

 

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

TripCo - Outstanding Awards

 

The following tables present the number and weighted average exercise price (“WAEP”) of the Awards to purchase TripCo common stock granted to certain officers, employees and directors of the Company, as well as the weighted average remaining contractual life and aggregate intrinsic value of the Awards.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

average

 

 

 

 

 

 

 

 

 

 

 

remaining

 

Aggregate

 

 

 

 

 

 

 

 

contractual

 

intrinsic

 

 

 

Series A

 

WAEP

 

life

 

value

 

 

 

in thousands

 

 

 

 

in years

 

in millions

 

Outstanding at January 1, 2019

 

570

 

$

15.40

 

 

 

 

 

 

Granted

 

 —

 

$

 —

 

 

 

 

 

 

Exercised

 

 —

 

$

 —

 

 

 

 

 

 

Forfeited/Cancelled

 

 —

 

$

 —

 

 

 

 

 

 

Outstanding at March 31, 2019

 

570

 

$

15.40

 

3.0

 

$

 1

 

Exercisable at March 31, 2019

 

509

 

$

14.87

 

2.5

 

$

 1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

    

    

    

 

    

Weighted

    

    

 

 

 

 

 

 

 

 

 

average

 

 

 

 

 

 

 

 

 

 

 

remaining

 

Aggregate

 

 

 

 

 

 

 

 

contractual

 

intrinsic

 

 

 

Series B

 

WAEP

 

life

 

value

 

 

 

in thousands

 

 

 

 

in years

 

in millions

 

Outstanding at January 1, 2019

 

1,797

 

$

27.83

 

 

 

 

 

 

Granted

 

27

 

$

14.28

 

 

 

 

 

 

Exercised

 

 —

 

$

 —

 

 

 

 

 

 

Forfeited/Cancelled

 

 —

 

$

 —

 

 

 

 

 

 

Outstanding at March 31, 2019

 

1,824

 

$

27.63

 

5.8

 

$

 —

 

Exercisable at March 31, 2019

 

899

 

$

27.83

 

5.7

 

$

 —

 

During the three months ended March 31, 2019, TripCo granted 27 thousand options to purchase shares of Series B TripCo common stock and 35 thousand performance-based RSUs of Series B TripCo common stock to our CEO. Such options had a GDFV of $6.41 per share. The RSUs had a GDFV of $14.17 per share at the time they were granted. The options vest on December 31, 2019, and the RSUs cliff vest in one year, subject to the satisfaction of certain performance objectives. Performance objectives, which are subjective, are considered in determining the timing and amount of the compensation expense recognized. When the satisfaction of the performance objectives becomes probable, the Company records compensation expense. The probability of satisfying the performance objectives is assessed at the end of each reporting period.

There were no options to purchase shares of Series A common stock granted during the three months ended March 31, 2019.

As of March 31, 2019, the total unrecognized compensation cost related to unvested Awards was approximately $4 million. Such amount will be recognized in the Company's consolidated statements of operations over a weighted average period of approximately one year.

As of March 31, 2019, TripCo reserved 2.4 million shares of Series A and Series B common stock for issuance under exercise privileges of outstanding stock Awards.

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

TripAdvisor Equity Grant Awards

The following table presents the number and WAEP of the Awards to purchase TripAdvisor common stock granted to certain officers, employees and directors of TripAdvisor.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

average

 

 

 

 

 

 

TripAdvisor

 

 

 

 

remaining

 

Aggregate

 

 

 

stock

 

 

 

 

contractual

 

intrinsic

 

 

 

options

 

WAEP

 

life

 

value

 

 

 

in thousands

 

 

 

 

in years

 

in millions

 

Outstanding at January 1, 2019

 

6,041

 

$

54.00

 

 

 

 

 

 

Granted

 

537

 

$

54.16

 

 

 

 

 

 

Exercised

 

(109)

 

$

42.66

 

 

 

 

 

 

Cancelled or expired

 

(83)

 

$

72.11

 

 

 

 

 

 

Outstanding at March 31, 2019

 

6,386

 

$

53.97

 

6.5

 

$

37

 

Exercisable at March 31, 2019

 

3,453

 

$

60.63

 

4.8

 

$

14

 

The weighted average GDFV of options granted was $22.32 for the three months ended March 31, 2019.

As of March 31, 2019, the total unrecognized compensation cost related to unvested TripAdvisor stock options was approximately $44 million and will be recognized over a weighted average period of approximately 3.0 years. The total intrinsic value of stock options exercised was $1 million and $3 million for the three months ended March 31, 2019 and 2018, respectively.

Additionally, during the three months ended March 31, 2019, TripAdvisor granted 2,391 thousand of primarily service-based restricted stock units (“RSUs”) and market-based restricted stock units (“MSUs”) under the 2018 Stock and Annual Incentive Plan. The RSUs’ fair value was measured based on the quoted price of TripAdvisor common stock at the date of grant. As the MSUs provide for vesting based upon TripAdvisor’s total shareholder return, or “TSR,” performance, the potential outcomes of future stock prices and TSR of TripAdvisor and the Nasdaq Composite Total Return Index, was used to calculate the GDFV of these awards. The weighted average GDFV for RSUs and MSUs granted during the three months ended March 31, 2019 was $54.21 per share. As of March 31, 2019, the total unrecognized compensation cost related to TripAdvisor RSUs and MSUs was approximately $320 million and will be recognized over a weighted average period of approximately 3.0 years.

 

(3) Earnings (Loss) Per Common Share (EPS)

Basic earnings (loss) per common share (“EPS”) is computed by dividing net earnings (loss) attributable to TripCo shareholders by the weighted average number of common shares outstanding (“WASO”) 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

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

of the periods presented. Excluded from EPS for both the three months ended March 31, 2019 and 2018 are 2 million potential common shares, because their inclusion would be antidilutive.

 

 

 

 

 

 

 

Liberty TripAdvisor Holdings Common Stock

 

 

Three months ended

 

 

March 31,

 

 

2019

 

2018

 

 

number of shares in millions

Basic WASO

 

75

 

75

Potentially dilutive shares

 

 —

 

 —

Diluted WASO

 

75

 

75

 

(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 material 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:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2019

 

December 31, 2018

 

 

 

 

 

 

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

    

$

99

    

79

    

20

    

145

 

140

 

 5

 

Marketable securities

 

$

40

 

 —

 

40

 

15

 

 —

 

15

 

Variable postpaid forward

 

$

21

 

 —

 

21

 

20

 

 —

 

20

 

On June 6, 2016, TripCo entered into a variable postpaid forward transaction with a financial institution with respect to 7 million shares of TripAdvisor common stock held by the Company with a forward floor price of $38.90 per share and a forward cap price of $98.96 per share.  TripCo borrowed $259 million against the variable postpaid forward on June 23, 2016 (see note 5). The asset associated with this instrument is included in the other assets, at cost, net of accumulated amortization in the accompanying condensed consolidated balance sheets. 

The fair value of Level 2 cash equivalents and marketable securities were obtained from pricing sources for identical or comparable instruments, rather than direct observations of quoted prices in active markets. Marketable securities are included in other current assets and other assets in the accompanying condensed consolidated balance sheets. The fair value of Level 2 derivative assets were derived from a Black-Scholes-Merton model using observable market data as the significant inputs.

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Other Financial Instruments

Other financial instruments not measured at fair value on a recurring basis include trade receivables, trade payables, accrued and other current liabilities, current portion of debt and long-term debt. With the exception of debt, the carrying amount approximates fair value due to the short maturity of these instruments as reported on our condensed consolidated balance sheets. The carrying value of our debt bears interest at a variable rate and therefore is also considered to approximate fair value.

(5) Debt

Outstanding debt at March 31, 2019 and December 31, 2018 is summarized as follows:

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

 

2019

 

2018

 

 

 

amounts in millions

 

TripCo margin loans

 

$

222

 

220

 

TripCo variable postpaid forward

 

 

268

 

267

 

TripAdvisor Credit Facilities

 

 

 —

 

 —

 

Total consolidated TripCo debt

 

$

490

 

487

 

Debt classified as current

 

 

(222)

 

(220)

 

Total long-term debt

 

$

268

 

267

 

TripCo Margin Loans and Variable Postpaid Forward

On August 21, 2014, a wholly owned subsidiary of TripCo (“TripSPV”) entered into two margin loan agreements, which aggregated total borrowings of $400 million. Interest on the margin loans accrued at a rate of 3.25% plus LIBOR per year. Interest on the margin loans was paid in kind and added to the principal amount on the loans.

In connection with the variable postpaid forward transaction entered into on June 6, 2016, as described in note 4, TripCo borrowed $259 million against the variable postpaid forward on June 23, 2016.  The term of the forward is four years. At maturity, the accreted loan amount due is approximately $272 million. The proceeds from the forward were used to repay $200 million in principal and $29 million of paid in kind interest on the margin loans with the remainder being used for general corporate purposes.

On June 23, 2016, TripCo amended the terms of the margin loan agreements with respect to the remaining borrowings of $200 million. 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 TripCo 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 and margin calls. The initial margin call would require the outstanding balance to be reduced to $150 million if at any time the closing price per share of TripAdvisor common stock were to fall below a certain minimum value. On November 7, 2017, pursuant to another amendment to the margin loan agreements, interest on the margin loans accrued at a rate of 2.4% plus LIBOR per year. The interest can be paid in kind or cash at the election of TripCo. The Company expects that interest on the loan will be paid in kind and added to the principal amount

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

on the loan. The term of the loan is three years and the maturity date is June 21, 2019. Accordingly, the loans are classified as current as of March 31, 2019.

During the three months ended March 31, 2019, TripCo recorded $3 million and $1 million of non-cash interest related to the amended margin loans and variable postpaid forward, respectively.

As of March 31, 2019, the values of TripAdvisor’s shares pledged as collateral pursuant to the margin loan agreements and variable postpaid forward, determined based on the trading price of the Common Stock and on an as-if converted basis for the Class B Common Stock, are as follows:

 

 

 

 

 

 

 

   

 

Number of Shares

   

   

 

 

 

 

Pledged as

 

 

 

 

   

 

Collateral as of

   

Share value as of

 

Pledged Collateral

 

March 31, 2019

 

March 31, 2019

 

   

 

amounts in millions

 

Common Stock

 

18.2

 

$

934

 

Class B Common Stock

 

12.8

 

$

659

 

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.

TripAdvisor Credit Facilities

TripAdvisor is party to a credit agreement, with a group of lenders, which, among other things, provides for a $1.2 billion unsecured revolving credit facility (the “2015 Credit Facility”) with a maturity date of May 12, 2022. Borrowings under the 2015 Credit Facility generally bear interest, at TripAdvisor’s option, at a rate per annum equal to either (i) the Eurocurrency Borrowing rate, or the adjusted LIBOR for the interest period in effect for such borrowing; plus an applicable margin ranging from 1.25% to 2.00%, based on TripAdvisor’s leverage ratio; or (ii) the Alternate Base Rate Borrowing, which is the greatest of (a) the Prime Rate in effect on such day, (b) the New York Fed Bank Rate in effect on such day plus 1/2 of 1.00% per annum and (c) the Adjusted LIBOR (or LIBOR multiplied by the Statutory Reserve Rate) for an interest period of one month plus 1.00%; in addition to an applicable margin ranging from 0.25% to 1.00%, based on TripAdvisor’s leverage ratio. TripAdvisor may borrow from the 2015 Credit Facility in U.S. dollars, Euros and British pound sterling. In addition, TripAdvisor’s 2015 Credit Facility includes $15 million of borrowing capacity available for letters of credit and $40 million for Swing Line borrowings on same-day notice. As of March 31, 2019, TripAdvisor had issued $3 million of outstanding letters of credit under the 2015 Credit Facility. TripAdvisor is also required to pay a quarterly commitment fee, at an applicable rate ranging from 0.15% to 0.30%, on the daily unused portion of the revolving credit facility for each fiscal quarter and additional fees in connection with the issuance of letters of credit. As of March 31, 2019, TripAdvisor’s unused revolver capacity was subject to a commitment fee of 0.15%, given TripAdvisor’s leverage ratio.

As of both March 31, 2019 and December 31, 2018, TripAdvisor had no outstanding borrowings under the 2015 Credit Facility. During the three months ended March 31, 2018, TripAdvisor made a net repayment of $230 million on the 2015 Credit Facility. These net repayments were primarily made from a one-time cash repatriation of $325 million of foreign earnings to the United States during the  first quarter of 2018. For both the three months ended March 31, 2019 and 2018, TripAdvisor recorded total interest expense and commitment fees on the 2015 Credit Facility of $1 million to interest expense on its condensed consolidated statement of operations. All unpaid interest and commitment fee amounts as of March 31, 2019 and December 31, 2018 were not material.

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

There is no specific repayment date prior to the maturity date for any borrowings under this credit agreement. TripAdvisor may voluntarily repay any outstanding borrowing under the 2015 Credit Facility at any time without premium or penalty, other than customary breakage costs with respect to Eurocurrency loans. Additionally, TripAdvisor believes that the likelihood of the lender exercising any subjective acceleration rights, which would permit the lenders to accelerate repayment of any outstanding borrowings, is remote. As such, TripAdvisor classifies any borrowings under this facility as long-term debt. The 2015 Credit Facility contains a number of covenants that, among other things, restrict TripAdvisor’s ability to: incur additional indebtedness, create liens, enter into sale and leaseback transactions, engage in mergers or consolidations, sell or transfer assets, pay dividends and distributions, make investments, loans or advances, prepay certain subordinated indebtedness, make certain acquisitions, engage in certain transactions with affiliates, amend material agreements governing certain subordinated indebtedness, and change its fiscal year. The 2015 Credit Facility also requires TripAdvisor to maintain a maximum leverage ratio and contains certain customary affirmative covenants and events of default, including a change of control. If an event of default occurs, the lenders under the 2015 Credit Facility will be entitled to take various actions, including the acceleration of all amounts due under the 2015 Credit Facility.

TripAdvisor also maintains two credit facilities in China (jointly, the “TripAdvisor Chinese Credit Facilities”) as of March 31, 2019. TripAdvisor’s Chinese subsidiary is party to a $30 million, one-year revolving credit facility with Bank of America that is currently subject to review on a periodic basis with no specific expiration period. TripAdvisor is also party to a RMB 70,000,000 (approximately $10 million) one-year revolving credit facility with J.P. Morgan Chase Bank. TripAdvisor’s Chinese Credit Facilities generally bear interest at a rate based on the People’s Bank of China benchmark, including certain adjustments which may be made in accordance with market conditions at the time of borrowing. As of March 31, 2019 and December 31, 2018, there were no outstanding borrowings under the TripAdvisor Chinese Credit Facilities.

Debt Covenants

As of March 31, 2019, each of the Company and TripAdvisor was in compliance with its respective debt covenants.

(6) Leases

In February 2016 and subsequently, the Financial Accounting Standards Board (“FASB”) issued new guidance which revises the accounting for leases (“ASC 842”). Under the new guidance, entities that lease assets are required to recognize assets and liabilities on the balance sheet related to the rights and obligations created by those leases regardless of whether they are classified as finance or operating leases. In addition, new disclosures are required to meet the objective of enabling users of the financial statements to better understand the amount, timing, and uncertainty of cash flows arising from leases. We adopted this guidance on January 1, 2019 and elected the optional transition method that allowed for a cumulative-effect adjustment in the period of adoption.  Results for reporting periods beginning after January 1, 2019 are presented under the new guidance, while prior period amounts were not adjusted and continue to be reported under the accounting standards in effect for those periods.

We elected the following practical expedients that are available in transition upon the adoption of ASC 842 and for ongoing accounting policy: 1) the “practical expedients package of three”, which allows us to not reassess the following: a) whether any expired or existing contracts are or contain a  lease as of the adoption date, b) the lease classification of any expired or existing leases as of the adoption date; and c) the accounting treatment for initial direct costs for existing leases as of the adoption date; 2) the “short-term lease recognition exemption”, which allows entities to forego recognition of right-of-use (“ROU”) assets and lease liabilities for leases with a lease term of twelve months or less and which also do not include an option to renew the lease term that the entity is reasonably certain to exercise; 3) elect by asset class as an accounting policy, to combine  lease and non-lease components as a single component and subsequently account for the combined single component as the lease component; and 4) apply the portfolio approach to similar types of leases where

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

the Company does not reasonably expect the outcome to differ materially from applying the new guidance to individual leases.

TripAdvisor’s lease contracts contain both lease and non-lease components. TripAdvisor accounts separately for the lease and non-lease components of office space leases and certain other leases, such as data center leases. However, for certain categories of equipment leases, such as network equipment and others, TripAdvisor accounts for the lease and non-lease components as a single lease component. Additionally, for certain equipment leases that have similar characteristics, TripAdvisor applies a portfolio approach to effectively account for operating lease ROU assets and lease liabilities, hence TripAdvisor does not expect the outcome to differ materially from applying the new guidance to individual leases.

The adoption of ASC 842 did not have a material impact to our consolidated statement of operations and statement of cash flows during the three months ended March 31, 2019. The effect of the adoption on our unaudited condensed consolidated balance sheet as of January 1, 2019 for the adoption of ASC 842 is as follows:

 

 

 

 

 

 

 

 

 

Balance at December 31, 2018

 

Adjustments due to ASC 842

 

Balance at January 1, 2019

 

 

in millions

Assets:

 

 

 

 

 

 

 

Other current assets

$

48

 

(3)

 

45

 

Property and equipment, net