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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 September 30, 2023

OR

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: (720875-5300

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 October 31, 2023 was:

Series A common stock

380,697,040

Series B common stock

8,700,380

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-27

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

I-42

Item 4. Controls and Procedures.

I-42

PART II—OTHER INFORMATION

II-1

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

II-1

Item 5. Other Information

II-1

Item 6. Exhibits

II-2

SIGNATURES

II-3

I-2

QURATE RETAIL, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(unaudited)

    

September 30,

    

December 31,

 

2023

2022

amounts in millions

Assets

Current assets:

Cash and cash equivalents

$

1,099

 

1,275

Trade and other receivables, net of allowance for credit losses of $92 million and $111 million, respectively

 

952

 

1,394

Inventory, net

 

1,229

 

1,346

Indemnification agreement receivable

21

50

Other current assets

 

184

 

210

Total current assets

 

3,485

 

4,275

Property and equipment, net

 

506

 

570

Intangible assets not subject to amortization (note 5):

Goodwill

 

3,457

 

3,501

Trademarks

 

2,698

 

2,718

 

6,155

 

6,219

Intangible assets subject to amortization, net (note 5)

 

567

 

612

Operating lease right-of-use assets

577

585

Other assets, at cost, net of accumulated amortization

 

147

 

310

Total assets

$

11,437

 

12,571

(continued)

See accompanying notes to condensed consolidated financial statements.

I-3

QURATE RETAIL, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Continued)

(unaudited)

September 30,

December 31,

 

2023

2022

 

amounts in millions,

 

except share amounts

 

Liabilities and Equity

    

    

    

    

Current liabilities:

Accounts payable

$

813

 

976

Accrued liabilities

 

804

 

1,133

Current portion of debt, $307 million and $614 million measured at fair value (note 6)

 

730

 

828

Other current liabilities

 

109

 

162

Total current liabilities

 

2,456

 

3,099

Long-term debt (note 6)

 

4,835

 

5,525

Deferred income tax liabilities

 

1,515

 

1,440

Preferred stock (note 7)

1,270

1,266

Operating lease liabilities

539

518

Other liabilities

 

129

 

198

Total liabilities

 

10,744

 

12,046

Equity

Stockholders' equity:

Series A common stock, $.01 par value. Authorized 4,000,000,000 shares; issued and outstanding 380,510,994 shares at September 30, 2023 and 374,390,323 shares at December 31, 2022

 

4

 

4

Series B common stock, $.01 par value. Authorized 150,000,000 shares; issued and outstanding 8,700,380 shares at September 30, 2023 and 8,373,512 shares at December 31, 2022

 

 

Series C common stock, $.01 par value. Authorized 4,000,000,000 shares; no shares issued

Additional paid-in capital

 

90

 

53

Accumulated other comprehensive earnings (loss), net of taxes

 

28

 

18

Retained earnings

 

468

 

337

Total stockholders' equity

 

590

 

412

Noncontrolling interests in equity of subsidiaries

 

103

 

113

Total equity

 

693

 

525

Commitments and contingencies (note 8)

Total liabilities and equity

$

11,437

 

12,571

See accompanying notes to condensed consolidated financial statements.

I-4

QURATE RETAIL, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(unaudited)

Three months ended

Nine months ended

 

September 30,

September 30,

 

    

2023

    

2022

    

2023

    

2022

 

amounts in millions, except per share amounts

 

Total revenue, net

$

2,479

 

2,744

 

7,772

 

8,580

Operating costs and expenses:

Cost of goods sold (exclusive of depreciation shown separately below)

 

1,603

 

1,905

 

5,146

 

5,885

Operating expense

 

186

 

205

 

573

 

599

Selling, general and administrative, including stock-based compensation (note 2)

 

415

 

464

 

1,359

 

1,370

Restructuring, penalties and fire related costs, net of (recoveries) (note 8)

19

(134)

(189)

(123)

Depreciation and amortization

 

105

 

107

 

309

 

371

Impairment of intangible assets (note 5)

3,081

3,081

Gains on sale of intangible asset and sale leaseback transactions (note 8)

(277)

(119)

(520)

 

2,328

 

5,351

 

7,079

 

10,663

Operating income (loss)

 

151

 

(2,607)

 

693

 

(2,083)

Other income (expense):

Interest expense

 

(119)

 

(107)

 

(336)

 

(343)

Dividend and interest income

14

2

39

5

Realized and unrealized gains (losses) on financial instruments, net (note 4)

 

(15)

 

(8)

 

(95)

 

29

Loss on disposition of Zulily, net

(64)

Gain (loss) on extinguishment of debt

1

14

45

8

Tax sharing income (expense) with Liberty Broadband

(4)

36

(12)

78

Other, net

 

5

 

21

 

13

 

69

 

(118)

 

(42)

 

(410)

 

(154)

Earnings (loss) before income taxes

 

33

 

(2,649)

 

283

 

(2,237)

Income tax (expense) benefit

 

(21)

 

(87)

 

(119)

 

(265)

Net earnings (loss)

12

(2,736)

164

(2,502)

Less net earnings (loss) attributable to the noncontrolling interests

 

11

 

11

 

36

 

41

Net earnings (loss) attributable to Qurate Retail, Inc. shareholders

$

1

 

(2,747)

128

 

(2,543)

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

$

0.00

 

(7.21)

0.33

(6.69)

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

$

0.00

 

(7.21)

0.33

(6.69)

See accompanying notes to condensed consolidated financial statements.

I-5

QURATE RETAIL, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Earnings (Loss)

(unaudited)

Three months ended

Nine months ended

 

September 30,

September 30,

 

    

2023

    

2022

    

2023

    

2022

 

amounts in millions

 

Net earnings (loss)

$

12

 

(2,736)

 

164

 

(2,502)

Other comprehensive earnings (loss), net of taxes:

Foreign currency translation adjustments

 

(47)

 

(127)

 

(51)

 

(330)

Recognition of previously unrealized losses (gains) on debt, net

(14)

(32)

(14)

Credit risk on fair value debt instruments gains (loss)

1

30

82

204

Other comprehensive earnings (loss)

 

(46)

 

(111)

 

(1)

 

(140)

Comprehensive earnings (loss)

 

(34)

 

(2,847)

 

163

 

(2,642)

Less comprehensive earnings (loss) attributable to the noncontrolling interests

 

8

 

5

 

25

 

16

Comprehensive earnings (loss) attributable to Qurate Retail, Inc. shareholders

$

(42)

 

(2,852)

 

138

 

(2,658)

See accompanying notes to condensed consolidated financial statements.

I-6

QURATE RETAIL, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(unaudited)

Nine months ended

 

September 30,

 

    

2023

    

2022

 

amounts in millions

 

Cash flows from operating activities:

Net earnings (loss)

$

164

 

(2,502)

Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:

Depreciation and amortization

 

309

 

371

Impairment of intangible assets

3,081

Stock-based compensation

 

40

 

46

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

 

95

 

(29)

Gain on sale of intangible asset and sale leaseback transactions

(119)

(520)

Gain on insurance proceeds, net of fire related costs

(225)

(139)

Insurance proceeds received for operating expenses and business interruption losses

226

96

Loss on disposition of Zulily, net

64

(Gain) loss on extinguishment of debt

(45)

(8)

Deferred income tax expense (benefit)

 

62

 

45

Other, net

 

13

 

(59)

Changes in operating assets and liabilities

Decrease (increase) in accounts receivable

 

378

 

483

Decrease (increase) in inventory

63

(163)

Decrease (increase) in prepaid expenses and other assets

90

98

(Decrease) increase in trade accounts payable

(103)

(418)

(Decrease) increase in accrued and other liabilities

(410)

(419)

Net cash provided (used) by operating activities

 

602

 

(37)

Cash flows from investing activities:

Capital expenditures

 

(151)

 

(171)

Expenditures for television distribution rights

(111)

(36)

Cash proceeds from dispositions of investments

71

12

Cash paid for disposal of Zulily

(35)

Proceeds from sale of fixed assets

202

701

Insurance proceeds received for fixed asset loss

54

184

Payments for settlements of financial instruments

(179)

Proceeds from settlements of financial instruments

167

Other investing activities, net

14

Net cash provided (used) by investing activities

 

18

 

704

Cash flows from financing activities:

Borrowings of debt

 

1,137

 

2,069

Repayments of debt

 

(1,893)

 

(2,577)

Dividends paid to noncontrolling interest

 

(35)

 

(39)

Dividends paid to common shareholders

(8)

(11)

Indemnification agreement settlement

26

Other financing activities, net

(3)

(13)

Net cash provided (used) by financing activities

 

(776)

 

(571)

Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash

 

(17)

 

(59)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

(173)

 

37

Cash, cash equivalents and restricted cash at beginning of period

 

1,285

 

596

Cash, cash equivalents and restricted cash at end of period

$

1,112

 

633

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:

September 30,

December 31,

2023

2022

in millions

Cash and cash equivalents

$

1,099

1,275

Restricted cash included in other current assets

13

10

Total cash, cash equivalents and restricted cash in the condensed consolidated statement of cash flows

$

1,112

1,285

See accompanying notes to condensed consolidated financial statements.

I-7

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, 2023

$

4

53

18

337

113

525

Net earnings (loss)

 

128

36

164

Other comprehensive earnings (loss)

 

10

(11)

(1)

Stock-based compensation

36

36

Distribution to noncontrolling interest

(35)

(35)

Withholding taxes on net share settlements of stock-based compensation

(1)

(1)

Other

2

3

5

Balance at September 30, 2023

$

4

90

28

468

103

693

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 June 30, 2023

$

4

79

71

467

106

727

Net earnings (loss)

 

1

11

12

Other comprehensive earnings (loss)

 

(43)

(3)

(46)

Stock-based compensation

11

11

Distribution to noncontrolling interest

(11)

(11)

Balance at September 30, 2023

$

4

90

28

468

103

693

I-8

QURATE RETAIL, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Equity (continued)

(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)

 

(2,543)

41

(2,502)

Other comprehensive earnings (loss)

 

(115)

(25)

(140)

Stock-based compensation

44

44

Distribution to noncontrolling interest

(39)

(39)

Withholding taxes on net share settlements of stock-based compensation

(7)

(7)

Other

1

5

6

Balance at September 30, 2022

$

4

38

(194)

387

113

348

Stockholders' Equity

Accumulated

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 June 30, 2022

$

4

23

(89)

3,134

119

3,191

Net earnings (loss)

 

(2,747)

11

(2,736)

Other comprehensive income (loss)

 

(105)

(6)

(111)

Stock-based compensation

14

14

Distribution to noncontrolling interest

(11)

(11)

Withholding taxes on net share settlements of stock-based compensation

1

1

Balance at September 30, 2022

$

4

38

(194)

387

113

348