Quarterly report pursuant to Section 13 or 15(d)

Information About Liberty's Operating Segments

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Information About Liberty's Operating Segments
 9 Months Ended
Sep. 30, 2011
Information About Liberty's Operating Segments  
Information About Liberty's Operating Segments
Information About Liberty's Operating Segments
The Company, through its ownership interests in subsidiaries and other companies, is primarily engaged in the media, communications and entertainment industries. The Company has attributed each of its businesses to one of two groups: the Starz Group and the Capital Group. Each of the businesses in the tracking stock groups is separately managed. The Company identifies its reportable segments as (A) those consolidated subsidiaries that represent 10% or more of its consolidated annual revenue, annual pre-tax earnings or total assets and (B) those equity method affiliates whose share of earnings represent 10% or more of the Company's annual pre-tax earnings. The segment presentation for prior periods has been conformed to the current period segment presentation.
The Company evaluates performance and makes decisions about allocating resources to its operating segments based on financial measures such as revenue, Adjusted OIBDA and gross margin. In addition, the Company reviews nonfinancial measures such as subscriber growth and penetration.
The Company defines Adjusted OIBDA as revenue less operating expenses, and selling, general and administrative expenses (excluding stock-based compensation). The Company 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. The Company generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current prices.
As discussed in Note 2, effective September 30, 2010, Liberty Interactive's board of directors approved a change in attribution of Starz Media from its Capital Group to its Starz Group to better align the remaining businesses of Starz Media with the legacy Starz Entertainment business to form a consolidated Starz entity that we refer to as Starz, LLC. The Starz Media Reattribution did not have any impact on the consolidated results of the Company and was reflected on a prospective basis for tracking stock purposes. This change in attribution of Starz Media changed how these entities are reviewed and operated from the Company's combined view point and thus gives rise to a new presentation for segment reporting purposes for both the current and prior year periods.
Prior to its reattribution the biggest driver of the Starz Media business unit was its theatrical production business which is no longer being operated except for the exploitation of its existing film library in home video, non-pay television and other ancillary markets. As a result, we do not expect the effect of the remaining Starz Media businesses in future periods to materially change Starz, LLC's operations prospectively. Based on this lack of comparability and the importance of maintaining the integrity of the historical tracking stock results we have included a segment reclassification adjustment for both the Starz Group and the Capital Group in order to reconcile to the historical attributed results for each group.
For the nine months ended September 30, 2011, the Company has identified the following businesses as its reportable segments:
•
Starz, LLC—consolidated subsidiary attributed to the Starz Group that provides premium networks distributed by cable operators, direct-to-home satellite providers, telephone companies and other distributors in the United States and develops, produces and acquires entertainment content and distributes such content to consumers in a wide variety of formats in the United States and throughout the world.
•
ANLBC—consolidated subsidiary attributed to the Capital Group that owns and operates the Atlanta Braves Major League Baseball franchise.
•
TruePosition, Inc.—consolidated subsidiary attributed to the Capital Group that develops and markets technology for locating wireless phones and other wireless devices enabling wireless carriers, application providers and other enterprises to provide E-911 services domestically and other location-based services to mobile users both domestically and worldwide.
The Company's reportable segments are strategic business units that offer different products and services. They are managed separately because each segment requires different technologies, distribution channels and marketing strategies. The accounting policies of the segments that are also consolidated subsidiaries are the same as those described in the Company's summary of significant policies.
Performance Measures
 
Nine months ended September 30,
 
2011
 
2010
 
Revenue
 
Adjusted
OIBDA
 
Revenue
 
Adjusted
OIBDA
 
amounts in millions
Starz Group
 
 
 
 
 
 
 
Starz, LLC
$
1,183

 
356

 
1,246

 
238

Corporate and other
1

 
(9
)
 
8

 
(10
)
Adjustment for tracking stock purposes(1)
—

 
—

 
(317
)
 
67

 
1,184

 
347

 
937

 
295

Capital Group
 
 
 
 
 
 
 
ANLBC
199

 
11

 
186

 
8

TruePosition
619

 
380

 
86

 
(11
)
Corporate and other
49

 
(1
)
 
28

 
(7
)
Adjustment for tracking stock purposes(1)
—

 
—

 
317

 
(67
)
 
867

 
390

 
617

 
(77
)
Consolidated Liberty
$
2,051

 
737

 
1,554

 
218


 
Three months ended September 30,
 
2011
 
2010
 
Revenue
 
Adjusted
OIBDA
 
Revenue
 
Adjusted
OIBDA
 
amounts in millions
Starz Group
 
 
 
 
 
 
 
Starz, LLC
$
389

 
107

 
405

 
86

Corporate and other
—

 
(3
)
 
3

 
(3
)
Adjustment for tracking stock purposes(1)
—

 
—

 
(89
)
 
6

 
389

 
104

 
319

 
89

Capital Group
 
 
 
 
 
 
 
ANLBC
104

 
19

 
95

 
13

TruePosition
32

 
7

 
60

 
17

Corporate and other
15

 
(1
)
 
7

 
1

Adjustment for tracking stock purposes(1)
—

 
—

 
89

 
(6
)
 
151

 
25

 
251

 
25

Consolidated Liberty
$
540

 
129

 
570

 
114

___________________________

(1)
As discussed above, due to the change in segments, the prior periods have been changed to reflect the current segment presentation. The adjustment is necessary to align the tracking stock subtotals to the Unaudited Attributed Financial Information for tracking stock groups found in Exhibit 99.1, wherein this change in attribution has been reflected prospectively.
Other Information

 
September 30, 2011
 
Total
assets
 
Investments
in affiliates
 
Capital
expenditures
 
amounts in millions
Starz Group
 
 
 
 
 
Starz, LLC
$
2,013

 
—

 
4

Corporate and other
622

 
—

 
—

 
2,635

 
—

 
4

Capital Group
 
 
 
 
 
ANLBC
565

 
31

 
1

TruePosition
319

 
—

 
3

Corporate and other
5,494

 
476

 
1

 
6,378

 
507

 
5

Inter-group eliminations
(98
)
 
—

 
—

Consolidated Liberty
$
8,915

 
507

 
9


The following table provides a reconciliation of segment Adjusted OIBDA to earnings (loss) from continuing operations before income taxes:
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
2011
 
2010
 
2011
 
2010
 
amounts in millions
Consolidated segment Adjusted OIBDA
$
129

 
114

 
737

 
218

Stock-based compensation
(3
)
 
(13
)
 
(24
)
 
(36
)
Gain on legal settlement
—

 
—

 
7

 
—

Depreciation and amortization
(15
)
 
(27
)
 
(56
)
 
(73
)
Interest expense
(3
)
 
(12
)
 
(13
)
 
(46
)
Liberty interest income (expense)
—

 
—

 
—

 
3

Share of earnings (losses) of affiliates, net
53

 
(59
)
 
3

 
(70
)
Realized and unrealized gains (losses) on financial instruments, net
(257
)
 
70

 
(81
)
 
124

Gains (losses) on dispositions, net
1

 
(2
)
 
(1
)
 
22

Other, net
10

 
30

 
61

 
73

Earnings (loss) from continuing operations before income taxes
$
(85
)
 
101

 
633

 
215