QVC Group, Inc 10-Q for FY2020 Q2

QVC Group, Inc. (QVCAQ)

10-Q 2020-08-10 For: 2020-06-30

Added on April 10, 2026

About this 10-Q

QVC Group, Inc filed this 10-Q on August 10, 2020, covering the quarter ended June 30, 2020 (FY2020 Q2).

Headline figures

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

Revenue: $3.42B; up 10.0% from $3.11B a year earlier
Net income: $220M; up 86.4% from net income of $118M a year earlier
Diluted EPS: $0.53; up 89.3% from $0.28 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


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


Series A common stock		387,477,851
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-22
Item 3. Quantitative and Qualitative Disclosures about Market Risk.		I-35
Item 4. Controls and Procedures.		I-35

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


	June 30,		December 31,
	2020		2019

	amounts in millions
Assets
Current assets:
Cash and cash equivalents	$	948	673
Trade and other receivables, net of allowance for doubtful accounts of $150 million and $129 million, respectively		1,324	1,854
Inventory, net		1,304	1,413
Other current assets		618	636
Total current assets		4,194	4,576
Investments in equity securities		71	76
Property and equipment, net		1,292	1,351
Intangible assets not subject to amortization (note 5):
Goodwill		6,574	6,576
Trademarks		3,168	3,168
		9,742	9,744
Intangible assets subject to amortization, net (note 5)		830	955
Other assets, at cost, net of accumulated amortization		568	603
Total assets	$	16,697	17,305


	Three months ended			Six months ended
	June 30,			June 30,
	2020		2019	2020		2019

	amounts in millions
Total revenue, net	$	3,422	3,111		6,342	6,196
Operating costs and expenses:
Cost of retail sales (exclusive of depreciation shown separately below)		2,217	1,996		4,150	4,019
Operating expense		209	197		402	393
Selling, general and administrative, including stock-based compensation (note 2)		447	424		868	849
Depreciation and amortization		144	158		286	311
		3,017	2,775		5,706	5,572
Operating income (loss)		405	336		636	624
Other income (expense):
Interest expense		(95)	(93)		(192)	(189)
Share of earnings (losses) of affiliates, net		(28)	(23)		(64)	(68)
Realized and unrealized gains (losses) on financial instruments, net (note 4)		23	(113)		(115)	(194)
Other, net		(12)	(7)		1	(15)
		(112)	(236)		(370)	(466)
Earnings (loss) before income taxes		293	100		266	158
Income tax (expense) benefit		(59)	30		(41)	38
Net earnings (loss)		234	130		225	196
Less net earnings (loss) attributable to the noncontrolling interests		14	12		25	23
Net earnings (loss) attributable to Qurate Retail, Inc. shareholders	$	220	118		200	173

Basic net earnings (loss) attributable to Series A and Series B Qurate Retail, Inc. shareholders per common share (note 3):	$	0.53	0.28		0.48	0.40
Diluted net earnings (loss) attributable to Series A and Series B Qurate Retail, Inc. shareholders per common share (note 3):	$	0.53	0.28		0.48	0.40



	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)		—	—	—	—	—	200	25	225
Other comprehensive earnings (loss)		—	—	—	—	92	—	2	94
Stock compensation		—	—	—	27	—	—	—	27
Distribution to noncontrolling interest		—	—	—	—	—	—	(30)	(30)
Other		—	—	—	(2)	—	—	—	(2)
Balance at June 30, 2020	$	—	4	—	25	37	5,091	129	5,286


	Six months ended
	June 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)	26	$	3.71



				Weighted		Aggregate
				average		intrinsic
	Series A			remaining		value
	(000's)	WAEP		life		(millions)
Outstanding at January 1, 2020	23,248	$	21.28
Granted	4,810	$	4.46
Exercised	—	$	—
Forfeited/Cancelled	(3,256)	$	19.37
Outstanding at June 30, 2020	24,802	$	18.27	4.5	years	$	31
Exercisable at June 30, 2020	11,861	$	24.37	3.2	years	$	4


	Qurate Retail Common Stock
	Three months ended		Six months ended
	June 30,		June 30,
	2020	2019	2020	2019

	number of shares in millions
Basic WASO	417	428	416	431
Potentially dilutive shares	1	—	2	—
Diluted WASO	418	428	418	431


					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		—	(2)	—	—	(2)
Balance at June 30, 2020	$	5,228	857	477	12	6,574


	Outstanding
	principal at		Carrying value
	June 30, 2020		June 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		312	327
3.75% Exchangeable Senior Debentures due 2030		433		313	318
3.5% Exchangeable Senior Debentures due 2031		221		322	422
0.75% Exchangeable Senior Debentures due 2043		—		—	2
1.75% Exchangeable Senior Debentures due 2046		332		505	488
Subsidiary level notes and facilities
QVC 5.125% Senior Secured Notes due 2022		500		500	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 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		—		(46)	(40)
Total consolidated Qurate Retail debt	$	6,658		6,641	7,412
Less current classification				(1,452)	(1,557)
Total long-term debt			$	5,189	5,855


	June 30,		December 31,
	2020		2019

	amounts in millions,
	except share amounts
Liabilities and Equity
Current liabilities:
Accounts payable	$	936	1,091
Accrued liabilities		1,146	1,173
Current portion of debt, including $1,452 million and $1,557 million measured at fair value (note 6)		1,452	1,557
Other current liabilities		216	180
Total current liabilities		3,750	4,001
Long-term debt (note 6)		5,189	5,855
Deferred income tax liabilities		1,746	1,716
Other liabilities		726	761
Total liabilities		11,411	12,333
Equity
Stockholders' equity:
Preferred stock, $.01 par value. Authorized 50,000,000 shares; no shares issued		—	—
Series A common stock, $.01 par value. Authorized 4,000,000,000 shares; issued and outstanding 387,467,859 shares at June 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 29,381,251 shares at June 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		25	—
Accumulated other comprehensive earnings (loss), net of taxes		37	(55)
Retained earnings		5,091	4,891
Total stockholders' equity		5,157	4,840
Noncontrolling interests in equity of subsidiaries		129	132
Total equity		5,286	4,972
Commitments and contingencies (note 7)
Total liabilities and equity	$	16,697	17,305


	Six months ended
	June 30,
	2020		2019

	amounts in millions
Cash flows from operating activities:
Net earnings (loss)	$	225	196
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		286	311
Stock-based compensation		27	37
Share of (earnings) losses of affiliates, net		64	68
Realized and unrealized (gains) losses on financial instruments, net		115	194
Deferred income tax expense (benefit)		1	(21)
Other, net		4	9
Changes in operating assets and liabilities
Decrease (increase) in accounts receivable		531	544
Decrease (increase) in inventory		108	(38)
Decrease (increase) in prepaid expenses and other assets		37	62
(Decrease) increase in trade accounts payable		(152)	(352)
(Decrease) increase in accrued and other liabilities		(48)	(417)
Net cash provided (used) by operating activities		1,198	593
Cash flows from investing activities:
Investments in and loans to cost and equity investees		(55)	(76)
Capital expenditures		(108)	(167)
Expenditures for television distribution rights		(10)	(124)
Other investing activities, net		7	—
Net cash provided (used) by investing activities		(166)	(367)
Cash flows from financing activities:
Borrowings of debt		753	1,909
Repayments of debt		(1,477)	(1,912)
Repurchases of Qurate Retail common stock		—	(296)
Withholding taxes on net settlements of stock-based compensation		(2)	(8)
Dividends paid to noncontrolling interest		(30)	(28)
Other financing activities, net		2	(25)
Net cash provided (used) by financing activities		(754)	(360)
Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash		(3)	1
Net increase (decrease) in cash, cash equivalents and restricted cash		275	(133)
Cash, cash equivalents and restricted cash at beginning of period		681	660
Cash, cash equivalents and restricted cash at end of period	$	956	527


Remainder of 2020	$	187
2021	$	244
2022	$	142
2023	$	80
2024	$	74


Senior debentures	$	782
QVC senior secured notes	$	4,250


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

	in millions
Home	$	657	231	92	197	1,177
Apparel		344	108	141	37	630
Beauty		320	158	12	—	490
Accessories		247	65	97	—	409
Electronics		173	22	3	—	198
Jewelry		92	50	12	—	154
Other revenue		41	6	6	—	53
Total Revenue	$	1,874	640	363	234	3,111


	Three months ended June 30,			Six months ended June 30,
		2020	2019		2020	2019

	amounts in millions
QxH	$	388	395		681	747
QVC International		119	106		216	207
Zulily		45	7		47	24
Corporate and other		13	5		5	(5)
Consolidated Qurate Retail	$	565	513		949	973


	June 30, 2020
	Total assets		Investments in affiliates	Capital expenditures

	amounts in millions
QxH	$	12,265	38	82
QVC International		2,235	—	10
Zulily		1,081	—	11
Corporate and other		1,116	77	5
Consolidated Qurate Retail	$	16,697	115	108


	Cash and cash
	equivalents

	amounts in millions
QVC	$	795
Zulily		3
Corporate and other		150
Total Qurate Retail	$	948

		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	5.1	%
Corporate and other	$	—	—	%	$	2,208	5.1	%

10.1		Qurate Retail, Inc. 2020 Omnibus Incentive Plan (incorporated by reference to Annex A to Qurate Retail, Inc.’s Proxy Statement on Schedule 14A, filed with the SEC on April 14, 2020 (File No. 001-33982).
10.2		Time-Based Restricted Stock Units Agreement between the Registrant and Gregory B. Maffei under the Qurate Retail, Inc. 2016 Omnibus Incentive Plan.*
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: August 10, 2020	By:	/s/ MICHAEL A.GEORGE
		Michael A. George President and Chief Executive Officer
Date: August 10, 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	$	5,286
Reconciling items:
Zulily, llc ("Zulily") net assets		(669)
Cornerstone Brands, Inc. ("Cornerstone") net assets (1)		(240)
Equity investment in Cornerstone held by Liberty LLC (1)		30
Tax sharing agreement with GCI Liberty, Inc.		88
Liberty LLC Net Assets	$	4,495

Qurate Retail Net Earnings	$	225
Reconciling items:
Zulily net (earnings) loss		4
Cornerstone net (earnings) loss (1)		(1)
Cornerstone equity method investment share of earnings (loss)		—
GCI Liberty, Inc. tax sharing expense		4
Liberty LLC Net Earnings	$	232