QVC Group, Inc 10-Q for FY2020 Q3

QVC Group, Inc. (QVCAQ)

10-Q 2020-11-05 For: 2020-09-30

Added on April 10, 2026

About this 10-Q

QVC Group, Inc filed this 10-Q on November 5, 2020, covering the quarter ended September 30, 2020 (FY2020 Q3).

Headline figures

Quarter ended September 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $3.38B; up 9.5% from $3.09B a year earlier
Net income: $338M; compared with a net loss of $770M a year earlier
Diluted EPS: $0.80; compared with -$1.85 a year earlier

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incorporation or organization)	Identification No.)
State of Delaware (State or other jurisdiction of incorporation or organization)	84-1288730 (I.R.S. Employer Identification No.)

12300 Liberty Boulevard Englewood, Colorado (Address of principal executive offices)	80112 (Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Series A common stock	QRTEA	The Nasdaq Stock Market LLC
Series B common stock	QRTEB	The Nasdaq Stock Market LLC
8.0% Series A Cumulative Redeemable Preferred Stock	QRTEP	The Nasdaq Stock Market LLC


Large Accelerated Filer ☒	Accelerated Filer ☐	Non-accelerated Filer ☐	Smaller Reporting Company ☐	Emerging Growth Company ☐


Series A common stock		387,844,870
Series B common stock		29,376,619


PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
QURATE RETAIL, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (unaudited)		I-3
QURATE RETAIL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (unaudited)		I-5
QURATE RETAIL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Comprehensive Earnings (Loss) (unaudited)		I-6
QURATE RETAIL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (unaudited)		I-7
QURATE RETAIL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Equity (unaudited)		I-8
QURATE RETAIL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (unaudited)		I-10
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		I-24
Item 3. Quantitative and Qualitative Disclosures about Market Risk.		I-38
Item 4. Controls and Procedures.		I-38

PART II—OTHER INFORMATION		II-1
Item 1. Legal Proceedings		II-1
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		II-1
Item 6. Exhibits		II-2

SIGNATURES		II-3


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



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


	September 30,		December 31,
	2020		2019

	amounts in millions
Assets
Current assets:
Cash and cash equivalents	$	1,044	673
Trade and other receivables, net of allowance for doubtful accounts of $147 million and $129 million, respectively		1,142	1,854
Inventory, net		1,481	1,413
Other current assets		702	636
Total current assets		4,369	4,576
Property and equipment, net		1,282	1,351
Intangible assets not subject to amortization (note 5):
Goodwill		6,601	6,576
Trademarks		3,168	3,168
		9,769	9,744
Intangible assets subject to amortization, net (note 5)		799	955
Other assets, at cost, net of accumulated amortization		573	679
Total assets	$	16,792	17,305


	Three months ended			Nine months ended
	September 30,			September 30,
	2020		2019	2020		2019

	amounts in millions
Total revenue, net	$	3,383	3,089		9,725	9,285
Operating costs and expenses:
Cost of retail sales (exclusive of depreciation shown separately below)		2,178	2,026		6,328	6,045
Operating expense		203	200		605	593
Selling, general and administrative, including stock-based compensation (note 2)		455	424		1,323	1,273
Depreciation and amortization		141	146		427	457
Impairment of intangible assets		—	1,020		—	1,020
		2,977	3,816		8,683	9,388
Operating income (loss)		406	(727)		1,042	(103)
Other income (expense):
Interest expense		(98)	(93)		(290)	(282)
Share of earnings (losses) of affiliates, net		(32)	(36)		(96)	(104)
Realized and unrealized gains (losses) on financial instruments, net (note 4)		(12)	(45)		(127)	(239)
Gains (losses) on transactions, net		223	—		224	(1)
Other, net		(65)	(4)		(65)	(18)
		16	(178)		(354)	(644)
Earnings (loss) before income taxes		422	(905)		688	(747)
Income tax (expense) benefit		(70)	150		(111)	188
Net earnings (loss)		352	(755)		577	(559)
Less net earnings (loss) attributable to the noncontrolling interests		14	15		39	38
Net earnings (loss) attributable to Qurate Retail, Inc. shareholders	$	338	(770)		538	(597)

Basic net earnings (loss) attributable to Series A and Series B Qurate Retail, Inc. shareholders per common share (note 3):	$	0.81	(1.85)		1.29	(1.40)
Diluted net earnings (loss) attributable to Series A and Series B Qurate Retail, Inc. shareholders per common share (note 3):	$	0.80	(1.85)		1.28	(1.40)



	Stockholders' Equity
						Accumulated
					Additional	other		Noncontrolling
	Preferred		Common stock		paid-in	comprehensive	Retained	interest in equity	Total
	stock		Series A	Series B	capital	earnings (loss)	earnings	of subsidiaries	equity

	amounts in millions
Balance at January 1, 2020	$	—	4	—	—	(55)	4,891	132	4,972
Net earnings (loss)		—	—	—	—	—	538	39	577
Other comprehensive earnings (loss)		—	—	—	—	71	—	4	75
Stock compensation		—	—	—	44	—	—	—	44
Distribution to noncontrolling interest		—	—	—	—	—	—	(46)	(46)
Distribution of dividends to common shareholders		—	—	—	—	—	(1,898)	—	(1,898)
Other		—	—	—	(17)	—	—	—	(17)
Balance at September 30, 2020	$	—	4	—	27	16	3,531	129	3,707


	Nine months ended
	September 30, 2020
	Options Granted (000's)	Weighted Average GDFV

Series A Qurate Retail common stock, QVC and HSN employees (1)	4,166	$	1.94
Series A Qurate Retail common stock, Zulily employees (1)	618	$	1.94
Series A Qurate Retail common stock, Qurate Retail employees (2)	84	$	4.65



				Weighted		Aggregate
				average		intrinsic
	Series A			remaining		value
	(000's)	WAEP		life		(millions)
Outstanding at January 1, 2020	23,248	$	21.28
Granted	4,868	$	4.53
Exercised	(212)	$	0.50
Forfeited/Cancelled	(4,447)	$	18.74
Special Dividend adjustment	15,145	$	11.19
Outstanding at September 30, 2020	38,602	$	11.22	4.3	years	$	45
Exercisable at September 30, 2020	20,002	$	14.59	3.2	years	$	7


	Qurate Retail Common Stock
	Three months ended		Nine months ended
	September 30,		September 30,
	2020	2019	2020	2019

	number of shares in millions
Basic WASO	417	417	417	426
Potentially dilutive shares	4	1	3	1
Diluted WASO	421	418	420	427


					Corporate and
	QxH		QVC Int'l	Zulily	Other	Total

	amounts in millions
Balance at January 1, 2020	$	5,228	859	477	12	6,576
Foreign currency translation adjustments		—	25	—	—	25
Balance at September 30, 2020	$	5,228	884	477	12	6,601


	Outstanding
	principal at		Carrying value
	September 30, 2020		September 30, 2020		December 31, 2019

	amounts in millions
Corporate level debentures
8.5% Senior Debentures due 2029	$	287		285	285
8.25% Senior Debentures due 2030		504		502	502
4% Exchangeable Senior Debentures due 2029		431		355	327
3.75% Exchangeable Senior Debentures due 2030		432		342	318
3.5% Exchangeable Senior Debentures due 2031		218		371	422
0.75% Exchangeable Senior Debentures due 2043		—		—	2
1.75% Exchangeable Senior Debentures due 2046		332		614	488
Subsidiary level notes and facilities
QVC 5.125% Senior Secured Notes due 2022		—		—	500
QVC 4.375% Senior Secured Notes due 2023		750		750	750
QVC 4.85% Senior Secured Notes due 2024		600		600	600
QVC 4.45% Senior Secured Notes due 2025		600		599	599
QVC 4.75% Senior Secured Notes due 2027		575		575	—
QVC 4.375% Senior Secured Notes due 2028		500		500	—
QVC 5.45% Senior Secured Notes due 2034		400		399	399
QVC 5.95% Senior Secured Notes due 2043		300		300	300
QVC 6.375% Senior Secured Notes due 2067		225		225	225
QVC 6.25% Senior Secured Notes due 2068		500		500	500
QVC Bank Credit Facilities		—		—	1,235
Deferred loan costs		—		(51)	(40)
Total consolidated Qurate Retail debt	$	6,654		6,866	7,412
Less current classification				(1,682)	(1,557)
Total long-term debt			$	5,184	5,855


	September 30,		December 31,
	2020		2019

	amounts in millions,
	except share amounts
Liabilities and Equity
Current liabilities:
Accounts payable	$	1,147	1,091
Accrued liabilities		1,101	1,173
Current portion of debt, including $1,682 million and $1,557 million measured at fair value (note 6)		1,682	1,557
Other current liabilities		226	180
Total current liabilities		4,156	4,001
Long-term debt (note 6)		5,184	5,855
Deferred income tax liabilities		1,744	1,716
Preferred stock (note 7)		1,248	—
Other liabilities		753	761
Total liabilities		13,085	12,333
Equity
Stockholders' equity:
Series A common stock, $.01 par value. Authorized 4,000,000,000 shares; issued and outstanding 387,810,463 shares at September 30, 2020 and 386,691,461 shares at December 31, 2019		4	4
Series B common stock, $.01 par value. Authorized 150,000,000 shares; issued and outstanding 29,376,619 shares at September 30, 2020 and 29,278,424 shares at December 31, 2019		—	—
Series C common stock, $.01 par value. Authorized 400,000,000 shares; no shares issued		—	—
Additional paid-in capital		27	—
Accumulated other comprehensive earnings (loss), net of taxes		16	(55)
Retained earnings		3,531	4,891
Total stockholders' equity		3,578	4,840
Noncontrolling interests in equity of subsidiaries		129	132
Total equity		3,707	4,972
Commitments and contingencies (note 8)
Total liabilities and equity	$	16,792	17,305


	Nine months ended
	September 30,
	2020		2019

	amounts in millions
Cash flows from operating activities:
Net earnings (loss)	$	577	(559)
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		427	457
Impairment of intangible assets		—	1,020
Stock-based compensation		46	54
Share of (earnings) losses of affiliates, net		96	104
Realized and unrealized (gains) losses on financial instruments, net		127	239
(Gains) losses on transactions, net		(224)	1
Deferred income tax expense (benefit)		19	(165)
Other, net		52	10
Changes in operating assets and liabilities
Decrease (increase) in accounts receivable		720	575
Decrease (increase) in inventory		(63)	(209)
Decrease (increase) in prepaid expenses and other assets		69	53
(Decrease) increase in trade accounts payable		52	(192)
(Decrease) increase in accrued and other liabilities		(43)	(478)
Net cash provided (used) by operating activities		1,855	910
Cash flows from investing activities:
Investments in and loans to cost and equity investees		(88)	(109)
Capital expenditures		(165)	(249)
Expenditures for television distribution rights		(41)	(128)
Cash proceeds from dispositions of investments		269	—
Net cash provided (used) by investing activities		(25)	(486)
Cash flows from financing activities:
Borrowings of debt		1,300	2,215
Repayments of debt		(2,077)	(2,179)
Repurchases of Qurate Retail common stock		—	(392)
Withholding taxes on net settlements of stock-based compensation		(3)	(6)
Dividends paid to noncontrolling interest		(46)	(34)
Dividends paid to common shareholders		(626)	—
Other financing activities, net		(12)	(72)
Net cash provided (used) by financing activities		(1,464)	(468)
Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash		5	(3)


Remainder of 2020	$	92
2021	$	267
2022	$	157
2023	$	103
2024	$	75


Senior debentures	$	846
QVC senior secured notes	$	4,481


	Three months ended
	September 30, 2019
		QxH	QVC Int'l	Zulily	Corp and other	Total

	in millions
Home	$	670	236	95	187	1,188
Apparel		334	107	141	39	621
Beauty		303	161	12	—	476
Accessories		199	63	90	—	352
Electronics		209	21	3	—	233
Jewelry		98	59	12	—	169
Other revenue		41	3	6	—	50
Total Revenue	$	1,854	650	359	226	3,089


	Three months ended September 30,			Nine months ended September 30,
		2020	2019		2020	2019

	amounts in millions
QxH	$	380	346		1,061	1,093
QVC International		132	106		348	313
Zulily		27	8		74	32
Corporate and other		27	(4)		32	(9)
Consolidated Qurate Retail	$	566	456		1,515	1,429


	September 30, 2020
	Total assets		Investments in affiliates	Capital expenditures

	amounts in millions
QxH	$	11,928	38	121
QVC International		2,294	—	19
Zulily		1,085	—	17
Corporate and other		1,485	14	8
Consolidated Qurate Retail	$	16,792	52	165


	Cash and cash
	equivalents

	amounts in millions
QVC	$	574
Zulily		18
Corporate and other		452
Total Qurate Retail	$	1,044

		Borrowing capacity
		amount in billions
Fourth Amended and Restated Credit Facility	$	2.9


	Variable rate debt				Fixed rate debt
			Weighted				Weighted
	Principal		average		Principal		average
	amount		interest rate		amount		interest rate

	dollar amounts in millions
QxH and QVC International	$	—	—	%	$	4,450	5.0	%
Corporate and other	$	—	—	%	$	2,204	5.1	%

4.1		Certificate of Designations of 8.0% Series A Cumulative Redeemable Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on August 26, 2020 (File No. 001-33982)).
4.2		Specimen Certificate for shares of 8.0% Series A Cumulative Redeemable Preferred Stock (incorporated by reference to Exhibit 4.2 to the Registrant’s Registration Statement on Form 8-A filed on August 27, 2020 (File No. 001-33982)).
10.1		Fourth Supplemental Indenture, dated August 20, 2020, by and among QVC, Inc., Affiliate Investment, Inc., Affiliate Relations Holdings, Inc., AMI 2, Inc., ER Marks, Inc., QVC Global Holdings I, Inc., QVC Global Holdings II, Inc., QVC Rocky Mount, Inc., QVC San Antonio, LLC, QVC Deutschland GP, Inc., HSN, Inc., HSNi, LLC, HSN Holding LLC, AST Sub, Inc., Home Shopping Network En Espanol, L.L.C., Home Shopping Network En Espanol, L.P., H.O.T. Networks Holdings (Delaware) LLC, HSN of Nevada LLC, Ingenious Designs LLC, NLG Merger Corp., Ventana Television, Inc., and Ventana Television Holdings, Inc., as guarantors, and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to QVC Inc.’s Current Report on Form 8-K filed on August 20, 2020 (File No. 001-38654) (the “August 2020 Form 8-K”)).
10.2		Form of 4.375% Senior Secured Notes due 2028 (incorporated by reference to Exhibit 4.3 to the August 2020 Form 8-K).
31.1		Rule 13a-14(a)/15d-14(a) Certification*
31.2		Rule 13a-14(a)/15d-14(a) Certification*
32		Section 1350 Certification**
99.1		Reconciliation of Qurate Retail, Inc. Net Assets and Net Earnings to Liberty Interactive LLC Net Assets and Net Earnings**
101.INS		Inline XBRL Instance Document* - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document*
101.CAL		Inline XBRL Taxonomy Calculation Linkbase Document*
101.LAB		Inline XBRL Taxonomy Label Linkbase Document*
101.PRE		Inline XBRL Taxonomy Presentation Linkbase Document*
101.DEF		Inline XBRL Taxonomy Definition Document*
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)*

	QURATE RETAIL, INC.
Date: November 5, 2020	By:	/s/ MICHAEL A.GEORGE
		Michael A. George President and Chief Executive Officer
Date: November 5, 2020	By:	/s/ BRIAN J. WENDLING
		Brian J. Wendling Chief Accounting Officer and Principal Financial Officer


/s/ MICHAEL A. GEORGE
Michael A. George President and Chief Executive Officer


/s/ BRIAN J. WENDLING
Brian J. Wendling
Chief Accounting Officer and Principal Financial Officer



Qurate Retail Net Assets	$	3,707
Reconciling items:
Zulily, llc ("Zulily") net assets		(675)
Cornerstone Brands, Inc. ("Cornerstone") net assets (1)		(261)
Equity investment in Cornerstone held by Liberty LLC (1)		37
Tax sharing agreement with GCI Liberty, Inc.		115
Preferred Stock liability (2)		1,248
Preferred restricted stock unit liability (2)		37
Accrued preferred dividends payable (2)		4
Liberty LLC Net Assets	$	4,212

Qurate Retail Net Earnings	$	577
Reconciling items:
Zulily net (earnings) loss		2
Cornerstone net (earnings) loss (1)		(22)
Cornerstone equity method investment share of earnings (loss)		8
GCI Liberty, Inc. tax sharing expense		30
Accrued preferred dividends payable (2)		4
Liberty LLC Net Earnings	$	599