GCI Liberty, Inc. Series C GCI Group Common Stock When Issued

These forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including, without limitation, possible changes in market acceptance of new products and services, market conditions conducive to repurchases, the satisfaction of conditions to proposed transactions, involving GCI Liberty, the availability of acquisition opportunities, competitive issues, regulatory issues and continued access to capital on terms acceptable to Liberty Interactive. These forward-looking statements speak only as of the date of this call, and Liberty Interactive expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Liberty Interactive's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

On today's call, we will discuss certain non-GAAP financial measures, including adjusted OIBDA, adjusted net income and constant currency. The required definitions and reconciliations, including preliminary notes in Schedules 1 through 4, can be found in the earnings press release issued today, which is available on our website.

This call also may include certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding Liberty TripAdvisor Holdings. These forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements.

These forward-looking statements speak only as of the date of this call, and Liberty TripAdvisor Holdings expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in Liberty TripAdvisor Holdings' expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Now I'd like to introduce Greg Maffei, Liberty Interactive's President and CEO.

Thank you, Courtnee, and good morning to all of you out there. Today, speaking on the call, we'll also have Liberty Interactive's CFO, Mark Carleton; and QVC's President and CEO, Mike George.

During Q&A, we'll be available also to answer questions related to Liberty TripAdvisor. So we've got a lot to cover this morning.

So let's get started with some of the structural highlights. This morning we introduce our future name the Qurate Retail Group, the next generation of the QVC Group.

Mike George will go into more detail, but we're excited to have a brand that encompasses a unique set of businesses. Mike as is well deserved will become the CEO of this Company.

He's done a tremendous job driving QVC, managing company through a challenging retail environment and transitioning into the digital mobile era. Congratulations to Mike on his new job as CEO of this public company.

We closed the 8% acquisition on December 29% and we do anticipate closing the GCI acquisition on March 9 upon closing we will complete the reattribution of certain assets and liabilities expected to be valued as of that market close on March 8 and we will provide all those values post-close. I'd note that we expect to reattribute the FTD asset or investment we have to the QVC Group which is a slight change.

We will complete the split off also at that time and result in two asset-backed stocks Qurate as we said to rename QVC Group and GCI Liberty. So on to the operating businesses themselves.

At the QVC Group we had good success QVC grew revenue in all of its markets probably most importantly this Group QVC U.S. revenue was up 4%.

Zulily also posted an impressive 11% revenue growth in the fourth quarter and for the year increased active customers by 16%. Looking at repurchases in that group, the QVC Group, from November 1 through January 31 of 2018, we repurchased $209 million of QVC Group shares and for the 12 months ended 12/31/2017 we repurchased $766 million in QVC Group shares.

I note that this is relatively impressive given that we were out of the market multiple times during 2017 due to pending deals. And for the new Qurate Group, we currently anticipate repurchasing approximately $1 billion of Qurate stock in 2018.

Turning now to Liberty Ventures. GCI reported results yesterday despite the ongoing recession in Alaska that business is continue to perform well.

As I noted, we do expect to close on GCI and the subsequent split offs on March 9. Looking briefly at TripAdvisor, we were pleased to announce the investment by TCV, Technology Crossover Ventures and add Jay Hoag to the Board.

I think this is the fourth board that Jay and I have served on including Expedia. Jay is a seasoned investor with experience in this sector and I am sure he provides valuable input.

Importantly, TripAdvisor beat Q4 expectations with performance good in all segments and we continue to believe that we are making the right investments at that business in 2018 and we will drive continued growth. And with that, let me turn it over to Mark Carleton to discuss some of the financials in more detail.

Thanks Greg. Let's take a quick look at the liquidity picture.

At the end of the quarter the QVC Group had attributed cash and liquid investments of $330 million and around $6.7 billion in principal amount of attributed debt, which includes the HSNi revolving credit facility and QVC's total debt to adjusted OIBDA ratio was defined in their debt agreement was approximately 2.7 times, which includes to Zulily's adjusted OIBDA as compared to a maximum allowable ratio of 3.5. Take note that this does not include the debt at HSNi.

The HSNi leverage ratio was 1.7 times as defined in their agreement. Pay attention that HSNi's results are not consolidated in the QVC Group for the fourth quarter as the last two days of the year between closing and year end were deemed immaterial.

There is however around $30 million of cash severance costs at HSN plus $8 million of some non-stop cash stock comp and $5 million of severance costs at Cornerstone, which do get recognized, but that is not the results of operations of HSN for those couple of days. There will be ongoing expenses to realize the synergies with the deal with HSN.

And I think on Slide 43 from our Investors Day presentation, you get a sense for those synergies and what those ongoing costs are. We have got quite a few accounting updates on the Qurate side that will impact 2018.

I'll talk briefly about some of them. Due to the new FASB guidance in quarter one, Q and Zu will recognize revenue at the time of shipment rather than delivery.

This will result in a small adjustment in quarter one which really accounts for the items shipped before the end of 2017, but not delivered until 2018. So this will be the only quarter that this happens.

And the impact of this shift in future quarters is really minimal. We will have 90 days of sales in each quarter the way we did before, but we will quantify any impacts that come out of this as it goes forward.

This change doesn't impact HSN at all as they were already recognizing revenue at the time of shipment. Also starting in Q1, QVC, HSN and Zu will begin to recognize our branded credit card fee income as revenue rather than an offset to SG&A expenses.

Previously we just recorded those fees as a reduction of expense. It will now be presented broadly.

We will talk about these amounts as we get throughout the year for comparison purposes to make sure everything is clear. Purchase accounting amortization in 2017 was about $390 million related to QVC and Zulily.

In 2018, the amortization from the Liberty purchase QVC it will be fully amortized and rolled up and done. However, we have purchased amortization associated with Zulily and we will have some new amortization associated with HSN.

We expect the HSN and Zu counting amortization to be approximately $260 million in 2018, none of which is tax deductible and those numbers will trend downward in subsequent years. At Q, we also are tweaking a little bit our methodology for recording incentive compensation.

Accruals in 2018 will now accrued a little more evenly throughout the year and earlier in the year that will give us a headwind that let's call it $8 million to $12 million in the first half of the year given that we have a lower accruals of incentive compensation in the first half of 2017. So it may have a little bit of an impact in the quarters on OIBDA margin, but really will balance out over the year.

I want to comment briefly on tax reform and how it will benefit or impact these companies starting in 2018. For Qurate overall tax reform is a net positive.

It's good to have a lower tax rates. We generate a lot of taxable income and have historically been a full tax split payer.

This is somewhat offset by our inability to immediately recognize tax benefits and all of our interest payments on debt as a result of the 30% especially on the exchangeable bonds. In 2018, we expect to be restricted on our ability to utilize deductions on $75 million to $125 million of interest expense.

Note that this calculation is based on OIBDA the for tax purposes, which excludes certain international markets and some other adjustments, but that's currently what our estimate is. We'll continue to look at our capital structure and we'll do - we can do to reduce this negative impact, especially as things get more restrictive in 2022.

But we're paying careful attention to our capital structure and really what our after-tax costs of all these different pieces of financing are. We would also note that QVC shareholders are being made whole as the reattribution of the exchangeable bonds, we made at fair value.

Same way we value these in any other transfers and there's additional cash being reattributed to compensate for the increased value - for the increased amount of the liability relating to the exchangeable bond. So we calculated that impact in there.

Going forward, we'd expect a low double-digit effective cash tax rate on worldwide or Qurate, which includes federal state and foreign income taxes, after taking into account the deductions from interest and from the green energy investments. And GCI in general, GCI will continue.

It will benefit from a lower tax rate going forward. At the end of 2017 and do the tax rate change, we accelerated some one-time - tax deductions for stock awards into 2017 rather than having those benefits come in at the new rate.

We accelerated them and got them into 2017 at the old rate and that resulted in incremental stock comp of $21 million at the QVC Group and $15 million at Liberty ventures. And you'll see these amounts included in the corporate level SG&A allocations of $44 million and $23 million per QVC Group and Ventures Group respectively in quarter four and you'll see those numbers in our press release.

So with that, I'll hand it over to Mike George for additional comments on Qurate?

Thank you, Mark. As Greg mentioned, earlier today we announced the plan introduction of the Qurate Retail Group, plus much more than just a new name.

Qurate captures the essence of who we are and what distinguishes us in the marketplace and reflects the size and scope of our aspirations for our new company. At Qurate, we believe in a third way to shock, beyond traditional brick and mortar or transactional e-commerce, we serve consumers who crave engaging, shopping experiences over in personal transaction and every facet of our business is in service to our customer, but our mission that reinforces for passions and for values.

QVC is a Zulily, HSN, Ballard Designs, Garnet Hill, Grandin Road, Frontgate, and Improvements. These are all distinct business, but all united by common believes.

Cross our companies, we offer Qurate collections of unique products and events made personal and relevant power of storytelling, in which are customers to distinctive video and other direct video and other direct marketing platforms talked just for them. And form deep connections with our customers, ensuring that we walk with them, as fastest royalty, innovation and grow.

Our new name reflects our unmatched expertise in duration, we Qurate products, we Qurate experiences, conversations, and communities with millions of highly engaged shoppers. And loss of Qurate large audiences across multiple platforms for our thousands of brand vendor partners.

And all that is thanks to the incredible passion and dedication of our team members. But we do all this through a unique platform of extraordinary scale.

In 2018 we generated pro forma revenue of $14 billion and served 23 million customers. We're the largest video commerce retailer globally reached approximately 370 million TV homes and 16 networks including our joint venture in China.

And we are the third largest multi category e-commerce and mobile commerce retailer in North America according to Internet retailer. Now looking back at 2017, I'm enormously proud of what our team has accomplished.

Our U.S. team stayed focused on returning the U.S.

to healthy sales growth, successfully accelerating sales throughout the year and achieving full-year sales growth, while also increasing full-year operating income margins by 120 basis points and full-year adjusted OIBDA margins by 70 basis points once you normalize for about $9 billion associated with HSNi integration cost and $26 million associated with sort of refilling our incentive compensation pool in 2017 since we get paid incentive comp in 2016. Our international teams had a stellar year.

We grew multiple currency revenue in every international market, and we significantly expanded operating income margins of 220 basis points and adjusted OIBDA margins up 130 basis points. Our Zulily team built tremendous momentum in the second half of the year and returned to double-digit sales growth with strong customer file expansion in Q4.

We successfully closed the HSNi transaction, develop and deploy a rigorous integration plan and significantly increased our cost synergy targets. And finally, we completed a major reorganization of our leadership team to align with the expanded aspirations and vision we've established as Qurate.

Now looking more specifically at our Q4 results. We were thrilled with the strong sales momentum with QVC U.S., QVC International, and Zulily all achieving their highest revenue growth of the year.

I would note as Mark mentioned that these results do not include HSNi. Looking at QVC U.S., revenue increased 4% in Q4 and 7% volume growth and 2% lower average selling prices.

Operating income was up 21% and adjusted OIBDA declined slightly. Adjusting for $7 million of HSNi inflation cost and $6 million in increased incentive compensation, we had adjusted OIBDA growth about 2% with OIBDA margin down 40 basis points.

That 40 bps erosion in the fourth quarter primarily reflects somewhat higher inventory obsolescence charges, higher marketing investment, and ASP deleverage, with some pressure on warehouse and freight cost. These were partially offset by lower bad debt expense and by the implementation of the number of price cost reduction actions.

I am proud of our team success returning the U.S. to healthy growth, and I just note several highlights behind that growth in the quarter.

First, we grow balanced growth across categories, while keeping our commitment that increase newness and diversity in our assortments. Second, every important measure of customer engagement increased, and third, we successfully deployed a heavier level of marketing spend to profitably require high quality new customers and digital platforms.

The result was an outstanding new customer class and solid growth of existing customer as well. So let me go through each of these in a little more detail.

You'll recall that when our U.S. business turned down in Q3 2016, I pointed to this perfect storm - largely we felt independent pressures affecting five businesses, electronics, kitchen, jewelry, hair care and handbags.

Those businesses represented about third of sales and declined approximately 20% back in the second half of 2016. Through focused efforts in each of those categories they are collectively now growing largely in line with the rest of the business, in fact sales gains at all categories except jewelry in Q4.

We saw particular strength in home, led by top kitchen cook brands, Copper Chef, KitchenAid and Vitamix, and Keurig, [indiscernible] and household items from Duraflame, Shark and Philips. In fashion, we saw strength in footwear from Bionic and parts as well as longstanding brand Susan Graver [indiscernible] and Joan Rivers and more developing brand like [indiscernible] and Barefoot Dreams.

Beauty delivered solid growth led by philosophy [indiscernible] and Peter Thomas Roth. Electronic generated gains for the second consecutive quarter with strength from Amazon, Apple, Bose and Ray.

And while jewelry did decline in Q4, the rate of decline slowed significantly from Q3 and productivity increased as we reduced airtime. And as part of both of these categories, we do continue to win in the freshness and discovery.

We had 166 new brands in Q4. That's a 41% increase over the prior year, including the widely popular catch mold and toys, five footwear and handbags and [indiscernible] and Bluetooth items trackers from Tommy.

Our customers also got a very positive response to the Martha Stewart launch in the second half of last year. We continue to add new culinary and food categories, Garden, Fashion, Skin Care and we are continuing to expand in the new items as we look into 2018.

And we will also continue to increase consumer engagement with the QVC brand across platforms. And Black FTV total viewing minutes on QVC and QVC to increase 3% in Q4.

So that viewership growth we believe will validates our connection with our loyal customers and lower risk of core cutting that we face given our customer demographics and given their behavior. Further this viewership does not include our third network, Beauty iQ, which reached approximately £45 million.

Viewership also grew dramatically on digital and interactive platforms. The number of net installations of our Roku app exceeded a 1 million at year end.

The number of minutes are live and video-on-demand content was streamed onto Roku increased nearly 300% in Q4. On Facebook Live, we simulcast 700 hours of live video per month, 400 hours in prior quarter and the number of video views in minutes viewed on Facebook Live increased 220% and 360% respectively.

And on our own digital platforms, the number of unique visitors increased 9%, digital session rose 8%, and the number of live streaming minutes across our mobile and e-commerce platforms increased 290% in the quarter. Overall, e-commerce sales continue to hit record levels with e-commerce representing 59% of U.S.

sales and mobile representing 64% of all e-commerce orders in the quarter. These viewership successes along with stepped-up marketing investment, allowed us to drive new record levels of new customer acquisition.

We attracted 912,000 new customers in the U.S. in Q4.

That's the second largest quarterly new customer class in our history, 5% year-over-year increase in just 5,000 customers below our all-time record. And nearly 84% of the new customers made their first purchase on digital platforms also a record with 47% on mobile.

In combination of strong new customer growth and increased engagement from our existing and reactivated customers had 2% increase in total customers in the quarter. Now turning to QVC International, our team delivered another history of outstanding quarters, strong growth and revenue profits and customer serve.

Revenue grew 6% in constant currency with unit volume up 5% and ASP up 2%. We generated revenue growth in every market and sales growth in every category except of our products.

And we increased the number of new and the number of total customers 4% each in Q4. And the number of total customers was a quarterly record and the number of new customers was the third fast quarter ever.

Our Japanese business continued its momentum, growing local currency revenue for the sixth consecutive quarter. Our UK business rebounded after a softer start to the year with strong sales gains.

And our German and Italian businesses generated especially strong margin gains. And in our China joint-venture the local currency revenue 12% and we generated positive OIBDA for the second consecutive quarter.

Turning to Zulily, for the quarter revenue increased to 11% and 12% order growth. That strong sales momentum is largely due to the team success growing the customer base and ending the year with a record 5.8 million active customers, that's a 16% year-over-year increase.

This 800,000 customer increase is the largest annual increase since 2014 and driven by shifted marketing focus from member signups to driving customer purchases and remarketing to existing members and customers, as well as improving the customer experience and building customer loyalty. Also encouraged by early results from this Zulily credit card are launched in late September, leveraging the success with QVC's proprietary two card program.

Total accounts exceeded expectations, reaching over 100 by year end. Importantly, we saw higher average order values and increased overall spend from customers with this Zulily card compared with non-card customers.

Now I have expected - we did experience a number of gross margin pressures that Zulily in the quarter, including higher supply chain costs as we wrapped our recently automated Pennsylvania performance center, higher mix of international business, driving increased shipping cost, deleverage from lower average selling prices and higher marketing promotions. Our supply chain teams remain focused on optimizing the Zulily performance network and we are confident that was the improving cost performance as we move to 2018.

In addition, the merchandizing team is focused on increasing ASPs with the ASP trend improving month-over-month through the quarter. The improving momentum in sales and customer accounts in mid-summer is a real credit to the innovative spirit to drive of Darrell and his Zulily team and we are absolutely delighted that Lori Twomey, Zulily's Chief Merchant, took on the additional roles Interim President, of Zulily as Darrell moved in his new role leading our new ventures team.

We believe Zulily team, to build on the teams get momentum. Our leadership capability or passion for the customer and are passion for great product is a really powerful combination to growth of the business.

Finally, let me turn to HSNi. We successfully closed our acquisition at the end of December.

And we saw HSN revenue decline, 8% in Q4. They did experience decelerating performance through the year.

These difficult trends reflects both some underlying challenges in the business and undoubtedly the distractions of the acquisition. Excluding transaction related costs, operating income and adjusted OIBDA increased have decide to sales erosion.

These change primarily reflect the anniversary in about $16 million of costs that we incurred in Q4 of the prior year related to problems with the automation of HSN's fulfillment center in Piney Flats, Tennessee. HSN also benefited from improved products margins and 5% low operating costs.

We believe Mike Fitzharris and our HSN team have the ability to turn around the performance. We'll focus on improving the business fundamental as we always do and building more balanced in the worst product assortments, introducing a higher mix of new items in brands, carrying more items in brands per hours and day, and moderating promotional intensity.

We'll also work on strengthening the on-air presentation and continuing to build on the online advances the team has implemented in recent years. Finally, we'll ensure we're managing cost consistent with the size and performance of the business.

At Cornerstone Brands, which consists of Frontgate, Grandin Road, Ballard Designs, Garnet Hill and Improvements, sales and adjusted OIBDA declined 7% and 5% respectively in Q4. Now excluding the prior year impacts of 53 week and excluding the divestiture of TravelSmith and Chasing Fireflies and sales declined 1%, primarily driven by softness of Frontgate offset by a growth at Ballard Designs, Grandin Road, and Garnet Hill.

Cornerstone catalog circulation decreased 8%, consistent with the team's ongoing efforts to rebalance investments throughout the digital and retail segment to better fuel overall demand. The Cornerstone retail store footprint expanded with the Q4 opening of Ballard Designs, South Park Mall in Charlotte, as well as the relocation of Frontgate and TIPS Mall in Atlanta.

This will bring the total count of four in-stores to 10, with additional Ballard Designs towards plan in 2018. The sales as a percent of revenue improved 70 basis points to prior year on improved product and shipping margins, as well as selective price increase is lower promotional stimulus across the brands.

Claire Stafford, who led an impressive turnaround of the Garnet Hill business is now leading Cornerstone for us and is focusing with her team on creating a clear and price positioning for each brand, providing innovative and differentiated products to our customers, and ultimately increasing customer acquisition and retention rates along with driving more efficient marketing and improved gross profit enhancement through more full price selling and increases in direct sourcing. As we shown on Investor Day we estimate expect with operating synergies and range 200 to 220 million HSNi acquisition ramping over the next two to four years.

This consist of procurement savings, reductions in duplicate functions, business process integration and MSO distribution and marketing spend optimization. And we recognize that the turnaround of HSN and Cornerstone will take time however new leadership teams are in place we're often strong start integrating our companies and we are highly optimistic about the long-term opportunities.

Looking at capital spending QVC's CapEx in 2017 was $152 million [indiscernible] estimate of $180 million to $190 million, cumulative CapEx was about $50 million to $70 million and that's up from their typical run rate primarily due investments to automated Pennsylvania performance center. For 2018, we anticipate CapEx of about $290 to $300 million in that's for all the companies in the Qurate Retail Group.

So in closing, we are excited about the formation of Qurate, as we combine the best of retail media and social will continue to distinguish ourselves from other retailers, across our new company we're focused on five share priorities. First, to engage in inspire our teams to make a difference every day; second, to drive product leadership to highly Qurate, differentiated and proprietary installments; third, we create the most engaging and inspiring shopping experiences across all customer tough points, online, on-air, in-catalog, in-store and through our amazing customer service representatives and fulfillment teams, fourth to go wherever the consumers going insuring we are accessible on the newest and most popular digital and video platform and highly personal and increasingly personalized ways.

And finally, as we launch in the company we are focused on unified our technology operations, people practices, corporate support across our global footprint and across all the retail brand to ensure we can operate at the best cost and the best quality with the highest ethical standards. And to achieve these big goals, we're fortunate to ever the best teams in retail at the conclusion of a momentous year for our company I do want to extend my welcome and appreciation to all of our new team members joining us from HSN and Cornerstone.

The engagement, the commitment and the enthusiasm and all of you have demonstrated for what you do and for the possibilities and lease priority company and they absolutely affect us. And you join as you know equally dedicated teams at QVC and Zulily and together we will play an outsides world and will transformation of retailing for coming generations.

And with that, I will turn it back to Mark.

Thank you, Mike. At the end of the quarter talking about the Liberty Ventures liquidity, the Group attributed cash and liquid investments of $573 million and $1.9 billion in principle amount of attributed debt.

As previously mentioned as part of the GCI transaction reattribution and the spilt off we put in place a $1 billion margin loan against some of our Liberty Broadband shares and you will see that as a part of the capital structure of GCI Liberty starting in quarter one. The value of the public equity method securities including Liberty Broadband and other public holdings attributed to the group was $4.7 billion and $2.3 billion respectively at the end of the quarter.

And with that, I will hand it back to Greg.

Thank you, Mike, and Mark. And this will be our last Liberty Interactive earnings call.

I'd like to thank our shareholders who have loyal in Liberty Interactive. I hope you have your continued interest in the Liberty family would Qurate and GCI Liberty.

And with that operator, we'd like to open it up for questions.

Thanks so much. Maybe just a few on HSN and Cornerstone those results are maybe just little bit worse than we thought but historically you've seen as you go into some of these closings maybe the business is slow down a little?

How should we think about the integration of HSN and Cornerstone and how that will be reflected in the results of those units as you look out over the next couple quarters Mike? And then on the corporate SG&A, I wanted to understand how much of that allocation at the end of the year was one-time versus ongoing?

And then on tax rate, just want to make sure I understood the message that the cash tax rate will be low double-digit percentages, but what that might mean also for the effective tax rate on the P&L? Thanks everyone.

Thanks Eric. Let me take the first question.

HSN and Cornerstone, it's really hard to exactly attribute the impact of the acquisition, but we were obviously making massive changes with our HSN partners through the last few months of the year. So I do think some of the deceleration reflects all the distractions that going to that kind of a process.

And that doesn't turn overnight for sure as we have our volume cycles and as we sort of evolve the business to the model that we think makes the most sense. I'm hesitant to put a timeframe on how long it takes to turn or exactly what's the impact in the first half is.

I think what you can assume is that as you've seen over the years when occasionally the QVC business struggles and has a few quarters of struggle as you get in the U.S. and another time that in Germany or Japan, we take a pretty methodical approach to just, let's make sure we are building much more healthy assortment.

And usually over a few quarters you can see a meaningful impact from that. So we are confident about where HSN and Cornerstone are headed.

We are very excited on the Cornerstone side. There is a big opportunity to just accelerate the performance of Frontgate biggest part of the portfolio by moving down much more proprietary and direct source model.

Lots of opportunities. Those will take some quarters to play out, but we feel really good about where we can take them.

And we do think there is opportunities to continue to manage the cost side tightly as well as we kind of protect the healthy return in the revenue line.

Okay. Great.

Mike, thank you. On the one timers, Mark maybe you can reiterate how much of it will do the acceleration of options?

Yes. And that total was $21 million at the QVC Group and $15 million at Liberty Ventures, so there is really one-time on the acceleration of those options.

Just last one on the tax rate going forward. I just want to make sure, Mark that I understood the messaging on tax and what it also might mean for the P&L tax rate at QVC as well?

Thanks guys.

What we're saying is, we have excess interest deductions that exceed the 30% of EBITDA. And what to think about going toward to some degree will depend on our ability to mitigate that through actions with either by debt reduction or generation or more income.

Part of this relates to the accreditation of the exchangeable bonds over time that they become larger tax shield over time. So this is somewhat of a moving target.

Albert do you want to add anything?

I think that just one thing to remember. To the extent to our excess deduction, we will be able to claim those in the future, but otherwise I think it's a - we are continuing to work through what the numbers are going to be.

Mark do you want to add anything?

I think effectively the statutory rate will go down just because of what the effective tax rates are from what the statutory rates were before, but it will be impacted by amortization and by limits on what the interest is and all of those will drive the components on it. But I think overall it will be down just because the statutory effective rate is down.

Perfect. Thank you.

Thank you.

Hi, good morning. Thank you for taking the question.

Can you talk about QVC US versus gross margin in the quarter? What was in that inventory obsolescence and how - I know you guys don't guide, but just how to think of pressure from warehouse and distribution costs next year?

Sure. Thanks Heather.

The way I will think about it is, inventory obsolescence charge that sort of based on the rate of change in inventory as well as the usage of liquidation activity. It tends to be fairly sensitive to both your prior period growth in inventory and your current period growth of inventory growth.

So as I look at the U.S. number, a decent amount of that charge really just reflects the fact that we had an unusually low charge in Q4 of 2016 that we anniversary and a little bit of that reflects some inventory growth.

I would say looking forward we're not especially concerned about inventory. It's something they always pay attention to.

But we don't see inventory obsolescence and inherently a long-term drive on the business. It does tend to bounce around a fair amount from quarter-to-quarter and add usually they impact in Q4 that will be indicative of what we would expect over time.

The other impact on gross margin as you touched on with just when we do have ASP declines, you're shipping out a lot of units for fewer dollars and so inherently have some deleverage on the fright and warehouse line. So those were the two things that pressure gross margins.

The latter - will continue to the extent that you have ASP declines. It will reverse when you're in a period of rising ASPs.

We've seen both and then inventory obsolescence should be somewhat more neutral over the mid to long-term. And then we felt actually very good about the fact that in our debt product margin, we're very stable in the quarter.

And into the underlying kind of product health of the business felt that talk to us.

Thank you. And as a follow-up, fair number of retailers are talking reinvesting, some of the tax form benefit into their business and how are you thinking of spending any of those incremental dollars?

The way we think about it is, we've been one of the fortunate few retailers to have a wonderfully healthy balance sheet and cash flow and so we've never been shy about investing where we think there's a healthy return for that investment. And tax reform further enables that, but I would say you independent of tax reform.

You will see this kind of continue to do what we've historically done, which is we'll lean into investments, we will. Certainly, we're leading into technology investment community and e-commerce investments building at more resources in those areas as an example that we're leaning into marketing.

And you've seen some about over the last several months. It's working for us, so we want to continue that.

And then beyond that it really doesn't matter of paying attention to the marketplace. And making sure we're sure priced competitive in the market.

We feel good about the teamwork tracking to the business and what kind of make those decisions as they come

And if I could have if you look historically reiterate my point, we've been a huge free cash flow generator. We reinvested that not only in share repurchase, but also in acquisitions like the cash that we spent on buying the half of Zulily.

Like the money that was effectively reinvested alongside in the Liberty Ventures effort, which came originally from QVC cash generation is fueled the charter investment. So I think there is an opportunity to do a lot of things with that cash flow that are attractive.

I think we've done well with that in the past and as Mike said first and foremost we look in the business for things that have a great rate of return, but we'll find other things if we can't find the business.

Great. Thank you so much.

Hi, good morning. Thanks for taking my questions.

I guess first Mike, obviously a very impressive multi-quarter turn a QVC. When you look at some of the issues at H, do you see any similarity and is there any risk that some of the strength that Q1 driven by share gains from H?

And that as a follow-up Easy Pay it's been a while since you spoke about it either you've made some adjustments over the past kind of 18 months how do we view that use of the tool and how it's performance been? Thank you.

Thanks for the questions. So as look at QVC performing versus HSN, I don't think share gain tends to be major store for us.

We historically believe that and now we just kind of see inside the numbers, we continue to believe that. We were actually pleased that we moved through the acquisition process to find that the customer overlap between QVC and HSN was less than we expected.

So to the largest majority of both companies businesses or consumers we don't cross shop. And so we always believe that fairly niche business were in its more about growing the total category if you will and getting more people to really attracted that our way of shopping as opposed to share shift between and H and Q.

So I'm not at all worried that there is a sort of fixed high and we are able to grow H and Q or vice versa. We get a chance just introduce more customers to the Q brands to do all the things we talk about the leverage the combined scale of resources to be that much more effected in attractive vendors and serving customers and to grow the total pie.

I think the issue that HSN faced is somewhat similar we think with HSN QVC over the year some or more you need to HSN but also like things that are - and sort of excited to partner with the terrific team we have seen move the business forward. On Easy Pay, I would say that the headline metrics on Easy Pay for a few quarter now has been to keep relatively stable and I think that the fair characterization of Q4, better slight increasing the number of payment were pretty modest so I would say on balance you have been stable and we are going to try to keep it pretty stable going forward.

And of course as you seeing you now had three or four quarter of I think four quarter they improve bad debt rates that have been good guide of the P&L so I think were managing it very tightly.

Great. Thanks so much.

Great. Thank you very much for taking my question.

I'd be curious to hear what feedback you've gotten from the vendors that sell to HSN? If you had a lot of interest in some of those brands and personalities perhaps introducing some product on QVC or appearing on the network and particularly with QVC's international properties?

Yes, thanks Alex. I can simply say that every HSN vendor almost has asked about getting on QVC and most QVC vendors of asked about getting on HSN.

So there is definitely lot of letters that excitement as you would expect in the vendor community. And so approach it thoughtfully we do want to keep the product portfolio the QVC U.S.

and HSN for discrete and separate so that again we are growing the total pie not just trading off vendors cross the two businesses. But there is a big opportunity internationally as you mentioned so both looking at on QVC vendors that are international but for whatever reason haven't made sense to us make it go on the HSN and similarly looking at HSN vendors that could be on QVC International.

We aren't have some of that was probably way to accelerated. But a lot of other opportunities there's opportunity to work with new build and just give a couple of micro examples but you build a really strong food business, growing food business at QVC much stronger than what has been build HSN.

You don't want to say products appear in both networks but some of the vendors behind those products know how to build great compelling gourmet food assortments for QVC. They're now excited about going to build the new government for HSN we think that's going to be a really just a median opportunity and I could go through a dozen examples like that.

Including our own proprietary sourcing capability where we going to launch the back half of year. Three new fashion brand in HSN they were all developed - they are all being developed and source by QVC's direct sourcing team.

The team that had enormous success building great business [indiscernible] and anybody one of our most successful recent launches, they'll now be introducing new product that HSN. So I think lots of good ways to get leverage from our vendors and drug sourcing capabilities that still keep the product portfolios a very separate.

Great. Thank you very much Mike.

Thanks.

Good morning. Thanks for taking the question.

Two quick ones if I could. First of all on FTD lets behind QVC which rational for that and looks like the only non-cable assets really that's going to be at GCI Liberty is the LendingTree stake.

So why not we allocate that as well less cash. And I guess second more broadly ones the GCI Liberty transactions complete you are going to have two standalone vehicles out there which are primarily charter driven is there rational for having taken separate and if not can you talk about what the barriers would be to point them together?

Thanks.

Sure. Thank you, James.

On FTD, frankly as the value of FTD has declined in the marketplace. It has become less of a meaningful asset and putting it over at Q where it's more rational and frankly if we ever have to take a tax loss because of our investment being higher than the current market.

There's more capital gains to offset QVC, so it's more attractive. As far as LendingTree, we like the business, it does not necessarily fit particularly well with either.

We've done a hell of a job. Doug led them as team.

There are some reasons why from a regulatory perspective having what we call good assets over the venture side, formally ventures side will become GCI Liberty side makes sense and LendingTree qualifies that and given our ownership position over 25% the largest holder. The fact that we will have GCI Liberty and Liberty broadband in the marketplace, it's probably sub optimal on management time and board time to have two.

We have no obviously current plan or intent to merge them, but after a year passes they have enough common ownership. It's not inconceivable that could happen.

My understanding is that they have 50% common ownership. It could happen in less than a year.

But as I said, we have no plan or intent. We just explored and understand the options.

Thank you.

Okay. Great.

Thanks for taking the question. I was curious about whether the QVC and HSN customers seem to be reacting at all to the tax cuts.

Are you seeing any spending energy from that? Do you expect to see anything from that over the year?

Barton, as always I don't want to comment on kind of in period performance or customer response. So I think we'll have to see over time how the costumer responds to those tax cuts, but I think we are premature to make any - have any expectation on what that might look like.

Okay. All right.

So let me try different question. One of the things I think that is an opportunity that you guys have not yet tapped as putting QVC on the skinny bundles like the swings in the YouTube, TVs.

And I know in the past, you've said your customers aren't really there, but I do know that if you guys got on those bundles, I think your equity at least investors I think would like some of the future proofing there. And I was just wondering if you could updated on what you see in terms of the timing of being able to move there?

The potential to do some innovation on those platforms could be interesting. Just how long do you think it is before you get there?

Is there any reason those guys wouldn't want you or any resistance if they've had to put you on there? Or is it just that it's not been worth your while your customers aren't there?

Yes. It's a great question.

We definitely - we're intrigued by that space. How big these skinny bundles will get?

I think, we'll all need to see. But we would like to be there.

There is now reason we can't be there. I do think, we do some innovative things on those bundles.

So well I don't have any specific things to update you on. I would say all of the players in that space and we're in ongoing discussions with them.

There is nothing that we've heard in all of those discussions that would suggest anything other than a matter of when as opposed to it. Clearly some of those bundles - the swing would be good example, the swing bundle have been a little more targeted at a male audience maybe more targeted younger audience.

So less strong fit at least as it looks today, but that could evolve over time whereas other bundles are maybe a little more in line with our customer. That said, where we can say is especially a high priority of ours or the providers because really isn't where our customer is today.

We know that was absolute confidence that as soon as our customers migrate to those kinds of platforms, there will be a compelling economic reason for both us and the providers to put us on those platforms. So we've always looking at those platforms as only opportunity, not all of risk.

I believe there is simply no economic rationale cannot be on them just a matter of when. If the customer chooses to migrate to them and then I think we will be there.

Okay. That's great.

Thank you.

Thanks. I just had two questions related to tax.

Between the Investor Day and year end, you guys I think put out a release sending about $400 million more to QVC to compensate QVC holders for the drop in the federal tax rate that meet the tax shield on the exchangeable worth less. Was any of that money to compensate QVC for the interest deductibility cap that's going to get more punitive particularly after 2022?

Or is that just the federal rate dropping?

Albert do you want to comment on this?

Sure. In connection with the amount that will be reattributed, both the change in the rate and the limitations on interest deduction prospectively, we are taking into account and determining the amount to be paid in connection with the reattribute.

Okay. Great.

And then my second question is as you guys think about your leverage. As we go through time and this cap becomes more relevant.

Are you just looking at - is it important, let me put it this way for every dollar of interest to have a tax yield associated with it or you're just looking more about whatever your net cost of debt is relative to whatever you think you can do with that capital?

I think it's a - I do not believe it is black and white is that because I think there are issues around the fact that what is the rate on the debt? What is the alternative use of proceeds, you could do if you're going to talk about what purchasing the debt.

We're purchasing other income, purchasing other income streams to make sure that you have a sufficient amount of income that you have non-deductibility and the fact that it's only deferral of the deduction, not in the elimination deduction. I don't think you can sit there and say it's a one shot.

Here is the calculation. I think there are many factors that are going to weigh how exactly?

How much of it we try and fix real time in any one period or they defer the deduction. Albert, I don't know if you have anything else.

What can we do is to the extent we make future acquisitions or able to global business. We will have incremental deductions which are offset that income.

Understood.

And so something that will kind of monitor as we go forward.

Right and you can be certain that we look at - we look at the after tax cost of whatever financing we're using against whatever returns we're projecting. So the impact of those restrictions we factor into what the best way to finance a particular company or an acquisition or a division might be.

Understood. That's helpful.

Thank you.

Thanks guys. Two questions one on the international business, which performed way above expectations.

So wondering, Mike, if you could just talk to the different countries, which ones performed better, which once performed - and on the viewership and this is the second quarter in a row that you've seen an improvement in viewership? Correct me if I'm wrong on that one.

I was wondering if there's any things specifically what you're doing to drive the minutes on the book on the broadcast TV platforms. Thanks.

Thanks. Thank you for the question.

In terms of the International profile, other things have been excited about is just how balance that performance did across the international markets. Yes it's hard to get every market working well at the same time and keep what we did at the growth in every single market.

So on balance I would say we feel good about the performance across the board. I would say Japan was particularly standout and has been out for a few quarters.

UK, it came back very strongly after a little bit softer started the year. So those two in particular I would say probably our strongest performance, but I think that the big takeaway on international is probably more the balance and the kind of consistency of growth across the businesses.

While the growth rate was not quite strong in Germany and Italy, it is still good and we saw very nice margin performance in those markets. So we like the balance.

On viewership, you're right, it is the second quarter where we're seeing absolutely increasing and viewing minutes on traditional broadcast TV platforms before taking into account, all these other ways that we get the minutes on live stream platforms. So it's great to see the conditional broadcast platforms working.

It's hard to point to any one thing. This probably much this kind of cause-and-effect where we both new people turning on turn on the TV, but we know what we're operating compelling products, engaging program me and they're going to stick around and be engaged and view and when they view, they buy.

So to me it's much a reflection of just getting in the business strong. Getting an exciting and diverse product mix, getting more newness on the networks, continuing to lean into what we call our destination programming, while we attract large audiences around certain kind of tuning shows that are on every week.

I think all those things are helping to contribute what's been some very nice usually performance.

I have a follow-up if I may. And I get the two media events and in the current quarter, which is the Olympics as well as Florida from school shooting.

Just curious what the impact is on I guess on viewership in minutes?

Again I can't comment on anything related to the current quarter, we shared on past calls that when you have externalities, like that there's always some impact on viewership. But what I want to be specific about that or connected it to the kind of current events.

Okay, thank you.

Thanks.

Operator, I believe we're through with our question. I want to - as I said the Liberty Interactive earnings call we announced, the formation of Liberty Interactive in November of 2015 was actually on the earnings call and which I announced I was joining the Company.

So it's been a pretty good run, and I want to thank you all for your participation. Hope you will have continued interest in Liberty and both Qurate and GCI Liberty going forward.