Qurate Retail, Inc. [QRTEA] Filings

10-Q 1 qrtea-20220630x10q.htm 10-Q UNITED STATES

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q


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

For the quarterly period ended June 30, 2022



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

For the transition period from to

Commission File Number 001-33982

QURATE RETAIL, INC.

(Exact name of Registrant as specified in its charter)

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)

Registrant's telephone number, including area code: (720) 875-5300

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Series A common stock	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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

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


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

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

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes ☐ No ☒

The number of outstanding shares of Qurate Retail, Inc.'s common stock as of July 31, 2022 was:


Series A common stock		373,732,994
Series B common stock		8,373,512

Table of Contents

Table of Contents


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-25
Item 3. Quantitative and Qualitative Disclosures about Market Risk.		I-38
Item 4. Controls and Procedures.		I-39

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

I-2

Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(unaudited)


	June 30,		December 31,
	2022		2021

	amounts in millions
Assets
Current assets:
Cash and cash equivalents	$	561	587
Trade and other receivables, net of allowance for credit losses of $109 million and $107 million, respectively		1,142	1,679
Inventory, net		1,737	1,623
Indemnification agreement receivable		175	324
Other current assets		226	235
Total current assets		3,841	4,448
Property and equipment, net		813	1,030
Intangible assets not subject to amortization (note 5):
Goodwill		6,250	6,339
Trademarks		3,038	3,038
		9,288	9,377
Intangible assets subject to amortization, net (note 5)		666	745
Other assets, at cost, net of accumulated amortization		621	602
Total assets	$	15,229	16,202

(continued)

See accompanying notes to condensed consolidated financial statements.

I-3

Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Continued)

(unaudited)


	June 30,		December 31,
	2022		2021

	amounts in millions,
	except share amounts
Liabilities and Equity
Current liabilities:
Accounts payable	$	1,043	1,429
Accrued liabilities		1,020	1,236
Current portion of debt, $895 million and $1,315 million measured at fair value (note 6)		1,109	1,315
Other current liabilities		202	244
Total current liabilities		3,374	4,224
Long-term debt (note 6)		5,360	5,674
Deferred income tax liabilities		1,457	1,350
Preferred stock (note 7)		1,265	1,261
Other liabilities		582	707
Total liabilities		12,038	13,216
Equity
Stockholders' equity:
Series A common stock, $.01 par value. Authorized 4,000,000,000 shares; issued and outstanding 373,731,326 shares at June 30, 2022 and 371,132,684 shares at December 31, 2021		4	4
Series B common stock, $.01 par value. Authorized 150,000,000 shares; issued and outstanding 8,373,512 shares at June 30, 2022 and 8,163,190 shares at December 31, 2021		—	—
Series C common stock, $.01 par value. Authorized 400,000,000 shares; no shares issued		—	—
Additional paid-in capital		23	—
Accumulated other comprehensive earnings (loss), net of taxes		(89)	(79)
Retained earnings		3,134	2,925
Total stockholders' equity		3,072	2,850
Noncontrolling interests in equity of subsidiaries		119	136
Total equity		3,191	2,986
Commitments and contingencies (note 8)
Total liabilities and equity	$	15,229	16,202

See accompanying notes to condensed consolidated financial statements.

I-4

Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(unaudited)


	Three months ended			Six months ended
	June 30,			June 30,
	2022		2021	2022		2021

	amounts in millions, except per share amounts
Total revenue, net	$	2,953	3,504		5,836	6,841
Operating costs and expenses:
Cost of goods sold (exclusive of depreciation shown separately below)		1,978	2,240		3,980	4,435
Operating expense		198	217		394	423
Selling, general and administrative, including stock-based compensation (note 2)		461	485		906	920
Restructuring and fire related costs, net		7	—		11	—
Depreciation and amortization		134	129		264	257
(Gain) loss on sale of fixed assets, net (note 8)		(243)	—		(243)	—
		2,535	3,071		5,312	6,035
Operating income (loss)		418	433		524	806
Other income (expense):
Interest expense		(119)	(118)		(236)	(235)
Share of earnings (losses) of affiliates, net		—	(22)		(1)	(54)
Realized and unrealized gains (losses) on financial instruments, net (note 4)		7	19		37	60
Other, net		35	(23)		88	(10)
		(77)	(144)		(112)	(239)
Earnings (loss) before income taxes		341	289		412	567
Income tax (expense) benefit		(120)	(39)		(178)	(93)
Net earnings (loss)		221	250		234	474
Less net earnings (loss) attributable to the noncontrolling interests		18	28		30	46
Net earnings (loss) attributable to Qurate Retail, Inc. shareholders	$	203	222		204	428

Basic net earnings (loss) attributable to Series A and Series B Qurate Retail, Inc. shareholders per common share (note 3):	$	0.53	0.54		0.54	1.04
Diluted net earnings (loss) attributable to Series A and Series B Qurate Retail, Inc. shareholders per common share (note 3):	$	0.53	0.52		0.53	1.01

See accompanying notes to condensed consolidated financial statements.

I-5

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QURATE RETAIL, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Earnings (Loss)

(unaudited)


	Three months ended			Six months ended
	June 30,			June 30,
	2022		2021	2022	2021

	amounts in millions
Net earnings (loss)	$	221	250	234	474
Other comprehensive earnings (loss), net of taxes:
Foreign currency translation adjustments		(143)	9	(203)	(64)
Comprehensive earnings (loss) attributable to debt credit risk adjustments		145	19	174	(37)
Other comprehensive earnings (loss)		2	28	(29)	(101)
Comprehensive earnings (loss)		223	278	205	373
Less comprehensive earnings (loss) attributable to the noncontrolling interests		5	28	11	37
Comprehensive earnings (loss) attributable to Qurate Retail, Inc. shareholders	$	218	250	194	336

See accompanying notes to condensed consolidated financial statements.

I-6

Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(unaudited)


	Six months ended
	June 30,
	2022		2021

	amounts in millions
Cash flows from operating activities:
Net earnings (loss)	$	234	474
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation and amortization		264	257
Stock-based compensation		31	35
Share of (earnings) losses of affiliates, net		1	54
Realized and unrealized (gains) losses on financial instruments, net		(37)	(60)
(Gain) loss on sale of fixed assets, net		(243)	—
Deferred income tax expense (benefit)		56	(10)
Other, net		(5)	7
Changes in operating assets and liabilities
Decrease (increase) in accounts receivable		420	429
Decrease (increase) in inventory		(139)	(133)
Decrease (increase) in prepaid expenses and other assets		41	64
(Decrease) increase in trade accounts payable		(364)	(136)
(Decrease) increase in accrued and other liabilities		(317)	(279)
Net cash provided (used) by operating activities		(58)	702
Cash flows from investing activities:
Investments in and loans to cost and equity investees		(7)	(139)
Capital expenditures		(101)	(110)
Expenditures for television distribution rights		(15)	(170)
Cash proceeds from dispositions of investments		12	2
Proceeds from sale of fixed assets		256	40
Insurance proceeds		70	—
Other investing activities, net		22	(2)
Net cash provided (used) by investing activities		237	(379)
Cash flows from financing activities:
Borrowings of debt		1,355	302
Repayments of debt		(1,466)	(230)
Repurchases of Qurate Retail common stock		—	(105)
Withholding taxes on net settlements of stock-based compensation		(8)	(24)
Derivative payments to counterparties		—	(81)
Derivative proceeds from counterparties		—	24
Dividends paid to noncontrolling interest		(27)	(31)
Dividends paid to common shareholders		(10)	(13)
Other financing activities, net		(10)	(6)
Net cash provided (used) by financing activities		(166)	(164)
Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash		(39)	(15)
Net increase (decrease) in cash, cash equivalents and restricted cash		(26)	144
Cash, cash equivalents and restricted cash at beginning of period		596	814
Cash, cash equivalents and restricted cash at end of period	$	570	958

The following table reconciles cash, cash equivalents and restricted cash reported in our condensed consolidated balance sheets to the total amount presented in our condensed consolidated statements of cash flows:


		June 30,	December 31,
		2022	2021

	in millions
Cash and cash equivalents	$	561	587
Restricted cash included in other current assets		9	9
Total cash, cash equivalents and restricted cash in the condensed consolidated statement of cash flows	$	570	596

See accompanying notes to condensed consolidated financial statements.

I-7

Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Equity

(unaudited)



	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, 2022	$	—	4	—	—	(79)	2,925	136	2,986
Net earnings (loss)		—	—	—	—	—	204	30	234
Other comprehensive earnings (loss)		—	—	—	—	(10)	—	(19)	(29)
Stock-based compensation		—	—	—	30	—	—	—	30
Distribution to noncontrolling interest		—	—	—	—	—	—	(28)	(28)
Withholding taxes on net share settlements of stock-based compensation		—	—	—	(8)	—	—	—	(8)
Other		—	—	—	1	—	5	—	6
Balance at June 30, 2022	$	—	4	—	23	(89)	3,134	119	3,191



	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 March 31, 2022	$	—	4	—	7	(104)	2,929	127	2,963
Net earnings (loss)		—	—	—	—	—	203	18	221
Other comprehensive earnings (loss)		—	—	—	—	15	—	(13)	2
Stock-based compensation		—	—	—	16	—	—	—	16
Distribution to noncontrolling interest		—	—	—	—	—	—	(13)	(13)
Withholding taxes on net share settlements of stock-based compensation		—	—	—	(1)	—	—	—	(1)
Other		—	—	—	1	—	2	—	3
Balance at June 30, 2022	$	—	4	—	23	(89)	3,134	119	3,191

I-8

Table of Contents



	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, 2021	$	—	4	—	—	72	3,478	135	3,689
Net earnings (loss)		—	—	—	—	—	428	46	474
Other comprehensive income (loss)		—	—	—	—	(92)	—	(9)	(101)
Stock-based compensation		—	—	—	33	—	—	—	33
Series A Qurate Retail stock repurchases		—	—	—	(105)	—	—	—	(105)
Distribution to noncontrolling interest		—	—	—	—	—	—	(31)	(31)
Withholding taxes on net share settlements of stock-based compensation		—	—	—	(24)	—	—	—	(24)
Other		—	—	—	(70)	—	3	—	(67)
Reclassification		—	—	—	166	—	(166)	—	—
Balance at June 30, 2021	$	—	4	—	—	(20)	3,743	141	3,868



	Stockholders' Equity
			Common stock					Accumulated
			Qurate		Additional	other		Noncontrolling
	Preferred		Retail		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 March 31, 2021	$	—	4	—	—	(48)	3,636	128	3,720
Net earnings (loss)		—	—	—	—	—	222	28	250
Other comprehensive income (loss)		—	—	—	—	28	—	—	28
Stock-based compensation		—	—	—	18	—	—	—	18
Series A Qurate Retail stock repurchases		—	—	—	(64)	—	—	—	(64)
Distribution to noncontrolling interest		—	—	—	—	—	—	(15)	(15)
Withholding taxes on net share settlements of stock-based compensation		—	—	—	(3)	—	—	—	(3)
Other		—	—	—	(68)	—	2	—	(66)
Reclassification		—	—	—	117	—	(117)	—	—
Balance at June 30, 2021	$	—	4	—	—	(20)	3,743	141	3,868

See accompanying notes to condensed consolidated financial statements.

I-9

Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(unaudited)

(1) Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of Qurate Retail, Inc. and its controlled subsidiaries (collectively, "Qurate Retail," the "Company," “Consolidated Qurate Retail,” “us,” “we,” or “our” unless the context otherwise requires). All significant intercompany accounts and transactions have been eliminated in consolidation. Qurate Retail is made up of wholly-owned subsidiaries QVC, Inc. (“QVC”), which includes HSN, Inc. (“HSN”), Cornerstone Brands, Inc. (“Cornerstone”), Zulily, LLC (“Zulily”), and other cost and equity method investments.

Qurate Retail is primarily engaged in the video and online commerce industries in North America, Europe and Asia. The businesses of the Company’s wholly-owned subsidiaries, QVC, Cornerstone and Zulily, are seasonal due to a higher volume of sales in the fourth calendar quarter related to year-end holiday shopping.

The accompanying (a) condensed consolidated balance sheet as of December 31, 2021, which has been derived from audited financial statements, and (b) the interim unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results for such periods have been included. Additionally, certain prior period amounts have been reclassified for comparability with current period presentation. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in Qurate Retail's Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 10-K”).

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Qurate Retail considers (i) fair value measurements, (ii) accounting for income taxes, and (iii) estimates of retail-related adjustments and allowances to be its most significant estimates.

In December 2019, a new coronavirus (“COVID-19”) was reported to have surfaced in Wuhan, China and has subsequently spread across the globe causing a global pandemic, impacting all countries where Qurate Retail operates. As a result of the spread of COVID-19, certain local governmental agencies have imposed travel restrictions, local quarantines or stay at home restrictions to contain the spread, which has caused a significant disruption to most sectors of the economy.

Management is not presently aware of any events or circumstances arising from COVID-19 that would require the Company to update the estimates, judgments or revise the carrying value of our assets or liabilities. Management's estimates may change, however, as new events occur and additional information is obtained, and any such changes will be recognized in the consolidated financial statements. Actual results could differ from estimates, and any such differences may be material to our financial statements.

Qurate Retail has entered into certain agreements with Liberty Media Corporation ("LMC") (for accounting purposes, a related party of the Company), a separate publicly traded company. These agreements include a reorganization agreement, services agreement and facilities sharing agreement. As a result of certain corporate transactions, LMC and Qurate Retail may have obligations to each other for certain tax related matters. Neither Qurate Retail nor LMC has any stock ownership, beneficial or otherwise, in the other. In connection with a split-off transaction that occurred in the first quarter of 2018 (the “GCI Liberty Split-Off”), Qurate Retail and GCI Liberty, Inc. (“GCI Liberty”) entered into a tax sharing agreement. Pursuant to the tax sharing agreement, GCI Liberty agreed to indemnify Qurate Retail for taxes and tax-related losses resulting from the GCI Liberty Split-Off to the extent such taxes or tax-related losses (i) result primarily from, individually or in the aggregate, the breach of certain restrictive covenants made by GCI Liberty (applicable to actions or failures to act by GCI Liberty and its subsidiaries following the completion of the GCI Liberty Split-Off), or (ii) result from Section 355(e) of the Internal Revenue Code applying to the GCI Liberty Split-Off as a result of the GCI Liberty Split-Off being part of a plan (or series of related transactions) pursuant to which one or more persons acquire, directly or indirectly, a 50-

I-10

Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

percent or greater interest (measured by vote or value) in the stock of GCI Liberty (or any successor corporation). Following a merger between Liberty Broadband Corporation (“Liberty Broadband”) and GCI Liberty, Liberty Broadband (for accounting purposes, a related party of the Company) has assumed the tax sharing agreement.

In December 2019, the Company entered into an amendment to the services agreement in connection with LMC’s entry into a new employment arrangement with Gregory B. Maffei, the Company’s Chairman of the Board (the “Chairman” or “Mr. Maffei”). Under the amended services agreement, components of his compensation will either be paid directly to him by each of the Company, Liberty TripAdvisor Holdings, Inc., and Liberty Broadband (collectively, the “Service Companies”) or reimbursed to LMC, in each case, based on allocations among LMC and the Service Companies set forth in the amended services agreement, currently set at 13% for the Company.

The reorganization agreement with LMC provides for, among other things, provisions governing the relationship between Qurate Retail and LMC, including certain cross-indemnities. Pursuant to the services agreement, LMC provides Qurate Retail with certain general and administrative services including legal, tax, accounting, treasury and investor relations support. Qurate Retail reimburses LMC for direct, out-of-pocket expenses incurred by LMC in providing these services and for Qurate Retail's allocable portion of costs associated with any shared services or personnel based on an estimated percentage of time spent providing services to Qurate Retail. Under the facilities sharing agreement, LMC shares office space and related amenities at its corporate headquarters with Qurate Retail. Under these various agreements, approximately $2 million and $3 million was reimbursable to LMC for the three months ended June 30, 2022 and 2021, respectively, and $5 million and $6 million was reimbursable to LMC for the six months ended June 30, 2022 and 2021, respectively. Qurate Retail had a tax sharing payable to LMC and Liberty Broadband in the amount of approximately $55 million and $96 million as of June 30, 2022 and December 31, 2021, respectively, included in Other liabilities in the condensed consolidated balance sheets.

Revision of Prior Period Financial Information

The Company has revised its condensed consolidated financial statements and related notes included herein to correct immaterial errors in depr

Qurate Retail, Inc. [QRTEA] Filings
Qurate Retail, Inc. [QRTEB] Filings
Qurate Retail, Inc. [QRTEP] Filings
10-Q	[2022-08-05]
10-Q	[2022-05-06]
10-K	[2022-02-25]
10-Q	[2021-11-04]
10-Q	[2021-08-06]
10-Q	[2021-05-07]
10-K	[2021-02-26]
10-Q	[2020-11-05]
10-Q	[2020-08-10]
10-Q	[2020-05-08]
10-K	[2020-02-26]
10-Q	[2019-11-12]
10-Q	[2019-08-08]
10-Q	[2019-05-10]
10-K	[2019-02-28]
10-Q	[2018-11-09]
10-Q	[2018-08-08]
10-Q	[2018-05-10]
10-K	[2018-03-01]
10-Q	[2017-11-09]
10-Q	[2017-08-08]
10-Q	[2017-05-09]
10-K	[2017-02-28]
10-Q	[2016-11-08]
10-Q	[2016-08-05]
10-Q	[2016-05-09]
10-K	[2016-02-26]
10-Q	[2015-11-05]
10-Q	[2015-08-05]
10-Q	[2015-05-08]
10-K	[2015-02-27]
10-Q	[2014-11-05]
10-Q	[2014-08-05]
10-Q	[2014-05-08]
10-K	[2014-02-28]
10-Q	[2013-11-05]
10-Q	[2013-08-06]
10-Q	[2013-05-08]
10-K	[2013-02-28]
10-Q	[2012-11-06]
10-Q	[2012-08-08]
10-Q	[2012-05-08]
10-K	[2012-02-23]

Qurate Retail, Inc. [QRTEA] Filings

Qurate Retail, Inc. [QRTEB] Filings

Qurate Retail, Inc. [QRTEP] Filings