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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2013

OR

o 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 333-184501

QVC, Inc.

(Exact name of Registrant as specified in its charter)

State of Delaware (State or other jurisdiction of incorporation or organization)	23-2414041 (I.R.S. Employer Identification Number)
1200 Wilson Drive West Chester, Pennsylvania (Address of principal executive offices)	19380 (Zip Code)

Registrant's telephone number, including area code: (484) 701-1000

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 x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No o

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

Large accelerated filer o	Accelerated filer o	Non-accelerated filer x (do not check if smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

None of the voting stock of the registrant is held by a non-affiliate of the registrant. There is no publicly traded market for any class of voting stock of the registrant. There is one holder of record of our equity, Liberty QVC Holdings, LLC, an indirect wholly-owned subsidiary of Liberty Interactive Corporation.

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QVC, Inc.

2013 QUARTERLY REPORT ON FORM 10‑Q

Table of Contents

	Part I	Page
Item 1	Financial Statements (unaudited)	I-1
	Condensed Consolidated Balance Sheets	I-1
	Condensed Consolidated Statements of Operations	I-2
	Condensed Consolidated Statements of Comprehensive Income	I-3
	Condensed Consolidated Statements of Cash Flow	I-4
	Condensed Consolidated Statement of Equity	I-5
	Notes to the Unaudited Condensed Consolidated Financial Statements	I-6
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	I-37
Item 3	Quantitative and Qualitative Disclosures about Market Risk	I-47
Item 4	Controls and Procedures	I-48
	Part II
Item 6	Exhibits	II-1
	Signatures	II-2
	Exhibit Index	II-3

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QVC, Inc.

Condensed Consolidated Balance Sheets

	September 30,			December 31,
	2013			2012
(in millions)	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	369		540
Restricted cash	13			15
Accounts receivable, less allowance for doubtful accounts of $76 million at September 30, 2013 and $74 million at December 31, 2012	730			1,055
Inventories	1,123			909
Deferred income taxes	156			151
Prepaid expenses	63			53
Total current assets	2,454			2,723
Property, plant and equipment, net of accumulated depreciation of $905 million at September 30, 2013 and $867 million at December 31, 2012	1,081			1,131
Cable and satellite television distribution rights, net	654			764
Goodwill	5,205			5,234
Other intangible assets, net	3,374			3,509
Other noncurrent assets	77			77
Total assets	$	12,845		13,438
Liabilities and equity
Current liabilities:
Current portion of debt and capital lease obligations	$	310		12
Accounts payable-trade	535			566
Accrued liabilities	716			955
Total current liabilities	1,561			1,533
Long-term portion of debt and capital lease obligations	3,552			3,465
Deferred compensation	15			12
Deferred income taxes	1,324			1,410
Other long-term liabilities	155			184
Total liabilities	6,607			6,604
Equity:
QVC, Inc. shareholder's equity:
Common stock, $0.01 par value	—			—
Additional paid-in capital	6,695			6,665
Accumulated deficit	(757		)	(161	)
Accumulated other comprehensive income	164			186
Total QVC, Inc. shareholder's equity	6,102			6,690
Noncontrolling interest	136			144
Total equity	6,238			6,834
Total liabilities and equity	$	12,845		13,438

See accompanying notes to condensed consolidated financial statements.

I-1

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QVC, Inc.

Condensed Consolidated Statements of Operations

(unaudited)

	Three months ended September 30,					Nine months ended September 30,
(in millions)	2013			2012		2013		2012
Net revenue	$	1,947		1,918		5,882		5,824
Cost of goods sold	1,222			1,216		3,701		3,680
Gross profit	725			702		2,181		2,144
Operating expenses:
Operating	176			171		520		522
Selling, general and administrative, including stock-based compensation	151			142		444		418
Depreciation	26			28		89		92
Amortization of intangible assets	113			101		324		293
	466			442		1,377		1,325
Operating income	259			260		804		819
Other (expense) income:
Equity in losses of investee	(2		)	(3	)	(3	)	(3	)
Gains on financial instruments	—			12		15		36
Interest expense, net	(52		)	(61	)	(165	)	(172	)
Foreign currency (loss) gain	(1		)	1		(2	)	(1	)
Loss on extinguishment of debt	—			—		(57	)	—
	(55		)	(51	)	(212	)	(140	)
Income before income taxes	204			209		592		679
Income tax expense	(70		)	(73	)	(213	)	(247	)
Net income	134			136		379		432
Less net income attributable to the noncontrolling interest	(9		)	(15	)	(34	)	(44	)
Net income attributable to QVC, Inc. shareholder	$	125		121		345		388

See accompanying notes to condensed consolidated financial statements.

I-2

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QVC, Inc.

Condensed Consolidated Statements of Comprehensive Income

(unaudited)

	Three months ended September 30,					Nine months ended September 30,
(in millions)	2013			2012		2013		2012
Net income	$	134		136		379		432
Foreign currency translation adjustments	68			35		(39	)	(1	)
Total comprehensive income	202			171		340		431
Comprehensive income attributable to noncontrolling interest	(11		)	(18	)	(17	)	(41	)
Comprehensive income attributable to QVC, Inc. shareholder	$	191		153		323		390

See accompanying notes to condensed consolidated financial statements.

I-3

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QVC, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

	Nine months ended September 30,
(in millions)	2013			2012
Operating activities:
Net income	$	379		432
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in losses of investee	3			3
Deferred income taxes	(84		)	(109	)
Foreign currency loss	2			1
Depreciation	89			92
Amortization of intangible assets	324			293
Change in fair value of financial instruments and noncash interest	(8		)	(30	)
Loss on extinguishment of debt	57			—
Stock-based compensation	29			21
Change in other long-term liabilities	7			15
Effects of changes in working capital items	(195		)	157
Net cash provided by operating activities	603			875
Investing activities:
Capital expenditures, net	(121		)	(165	)
Expenditures for cable and satellite television distribution rights, net	(41		)	(1	)
Cash paid for joint ventures and acquisitions of businesses, net of cash received	—			(71	)
Decrease in restricted cash	2			2
Changes in other noncurrent assets	(1		)	(1	)
Net cash used in investing activities	(161		)	(236	)
Financing activities:
Principal payments of debt and capital lease obligations	(2,161		)	(1,080	)
Principal borrowings of debt from senior secured credit facility	1,198			1,493
Proceeds from issuance of senior secured notes, net of original issue discount	1,050			500
Proceeds from master promissory note with Liberty	300			—
Payment of debt origination fees	(16		)	(8	)
Payment of bond premium fees	(46		)	—
Other financing activities	9			—
Dividends paid to Liberty	(900		)	(1,682	)
Dividend paid to noncontrolling interest	(25		)	(29	)
Net cash used in financing activities	(591		)	(806	)
Effect of foreign exchange rate changes on cash and cash equivalents	(22		)	(7	)
Net decrease in cash and cash equivalents	(171		)	(174	)
Cash and cash equivalents, beginning of period	540			560
Cash and cash equivalents, end of period	$	369		386
Effects of changes in working capital items:
Decrease in accounts receivable	$	319		332
Increase in inventories	(211		)	(129	)
Increase in prepaid expenses	(12		)	—
(Decrease) increase in accounts payable‑trade	(19		)	50
Decrease in accrued liabilities and other	(272		)	(96	)
Effects of changes in working capital items	$	(195	)	157

See accompanying notes to condensed consolidated financial statements.

I-4

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QVC, Inc.

Condensed Consolidated Statements of Equity

(unaudited)

	Common stock					Additional paid-in capital		Accumulated deficit		Accumulated other comprehensive income		Noncontrolling interest		Total equity
(in millions, except share data)	Shares		Amount
Balance, December 31, 2012	1		$	—		6,665		(161	)	186		144		6,834
Net income	—		—			—		345		—		34		379
Foreign currency translation adjustments	—		—			—		—		(22	)	(17	)	(39	)
Dividend paid to Liberty and noncontrolling interest	—		—			(8	)	(941	)	—		(25	)	(974	)
Tax benefit resulting from exercise of employee stock options	—		—			9		—		—		—		9
Stock‑based compensation	—		—			29		—		—		—		29
Balance, September 30, 2013	1		$	—		6,695		(757	)	164		136		6,238

See accompanying notes to condensed consolidated financial statements.

I-5

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

(1) Basis of Presentation

QVC, Inc. (unless otherwise indicated or required by the context, the terms "we," "our," "us," the "Company" and "QVC" refer to QVC, Inc. and its consolidated subsidiaries) is a retailer of a wide range of consumer products, which are marketed and sold primarily by merchandise‑focused televised shopping programs, the internet and mobile applications. In the United States, QVC's live programming is distributed via its nationally televised shopping program 24 hours a day, 364 days per year ("QVC-U.S."). Internationally, QVC's program services are based in Japan ("QVC-Japan"), Germany ("QVC-Germany"), the United Kingdom ("QVC-U.K.") and Italy ("QVC-Italy"). QVC-Japan distributes live programming 24 hours a day, QVC-Germany distributes its program 24 hours a day with 23 hours of live programming and QVC-U.K. distributes its program 24 hours a day with 17 hours of live programming. QVC-Italy distributes programming live for 17 hours a day on satellite and digital terrestrial television and an additional seven hours a day of recorded programming on satellite and seven hours a day of general interest programming on digital terrestrial television.

On July 4, 2012, QVC entered into a joint venture with China Broadcasting Corporation, a limited liability company owned by China National Radio (''CNR''), for a 49% interest in a CNR subsidiary, CNR Home Shopping Co., Ltd. (''CNRS''). CNRS distributes live programming for 15 hours a day and recorded programming for 9 hours a day. This joint venture is being accounted for as an equity method investment recorded as equity in losses of investee in the condensed consolidated statements of operations.

The Company has a joint venture with Mitsui & Co. LTD ("Mitsui") for a television and multimedia retailing service in Japan. QVC-Japan is owned 60% by the Company and 40% by Mitsui. The Company and Mitsui share in all profits and losses based on their respective ownership interests. During the nine months ended September 30, 2013 and 2012, QVC-Japan paid dividends to Mitsui of $25 million and $29 million, respectively.

We are an indirect wholly owned subsidiary of Liberty Interactive Corporation ("Liberty") (Nasdaq: LINTA, LINTB, LVNTA and LVNTB), which owns interests in a broad range of digital commerce businesses. We are attributed to the Liberty Interactive tracking stock, which tracks the assets and liabilities of Liberty's Interactive Group (the "Interactive Group"). The Interactive Group does not represent a separate legal entity; rather, it represents those businesses, assets and liabilities that are attributed to that group. Liberty attributes to its Interactive Group those businesses primarily focused on digital commerce. Liberty also attributes to its Interactive Group its 38% ownership interest in HSN, Inc. ("HSN"), one of our two closest televised shopping competitors.

Liberty announced that its board has authorized management to pursue a plan to recapitalize (the "Recapitalization") its Liberty Interactive Group tracking stock into two new tracking stocks, one (currently the Liberty Interactive common stock) to be renamed the QVC Group common stock and the other to be designated as the Liberty Digital Commerce common stock. In the Recapitalization, record holders of Series A and Series B Liberty Interactive common stock would receive one share of the corresponding series of Liberty Digital Commerce common stock for each 10 shares of the renamed QVC Group common stock held by them as of the effective date. Liberty intends to attribute to the Liberty Digital Commerce Group its operating subsidiaries Provide Commerce, Inc.; Backcountry.com, Inc.; Bodybuilding.com, LLC; CommerceHub; Right Start and Evite along with cash and certain liabilities. The QVC Group, which is currently known as the Liberty Interactive Group, would have attributed to it our Company and Liberty’s approximate 38% interest in HSN, along with cash and certain liabilities.

The condensed consolidated financial statements include the accounts of the Company and its majority‑owned subsidiaries. All significant intercompany accounts and transactions were eliminated in consolidation.

I-6

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

The accompanying (a) condensed consolidated balance sheet as of December 31, 2012, which has been derived from audited financial statements, and (b) interim unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. 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 U.S. 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. The results of operations for any interim period are not necessarily indicative of results for the full year. These condensed consolidated financial statements should be read in conjunction with the condensed consolidated financial statements and notes thereto contained in QVC's Annual Report on Form 10-K for the year ended December 31, 2012.

The preparation of financial statements in conformity with U.S. 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. Estimates include, but are not limited to, sales returns, uncollectible receivables, inventory obsolescence, depreciable lives of fixed assets, internally‑developed software, valuation of acquired intangible assets and goodwill, income taxes and stock‑based compensation.

In February 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2013-02, which amends Accounting Standards Codification ("ASC") Topic 220, Comprehensive Income and requires that companies present information about reclassification adjustments from accumulated other comprehensive income in their interim and annual financial statements. The standard requires that companies present either in a single note, or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source and the income statement line items affected by the reclassification. If a component is not required to be reclassified to net income in its entirety, companies will instead cross reference to the related footnote for additional information. QVC adopted this guidance as of January 1, 2013, and adoption did not have an impact on QVC's condensed consolidated financial position, results of operations or cash flows.

Certain prior period amounts have been reclassified to conform with current period presentation.

(2) Cable and Satellite Television Distribution Rights, Net

Cable and satellite television distribution rights consisted of the following:

	September 30,			December 31,
(in millions)	2013			2012
Cable and satellite television distribution rights	$	2,307		2,304
Less accumulated amortization	(1,653		)	(1,540	)
Cable and satellite television distribution rights, net	$	654		764

Amortization expense for cable and satellite television distribution rights was $45 million and $41 million for the three months ended September 30, 2013 and 2012, respectively. For the nine months ended September 30, 2013 and 2012, amortization expense for cable and satellite television distribution rights was $131 million and $122 million, respectively.

As of September 30, 2013, related amortization expense for each of the next five years ended December 31 was as follows (in millions):

Remainder of 2013	$	46
2014	177
2015	168
2016	163
2017	112

I-7

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

(3) Goodwill

The changes in the carrying amount of goodwill were as follows:

(in millions)	QVC-U.S.			QVC-Japan		QVC-Germany		QVC-U.K.		QVC-Italy		Total
Balance as of December 31, 2012	$	4,190		349		334		212		149		5,234
Exchange rate fluctuations	—			(41	)	9		(1	)	4		(29	)
Balance as of September 30, 2013	$	4,190		308		343		211		153		5,205

(4) Other Intangible Assets, Net

Other intangible assets consisted of the following:

	September 30, 2013					December 31, 2012
(in millions)	Gross cost			Accumulated amortization		Gross cost		Accumulated amortization
Purchased and internally developed software	$	589		(374	)	575		(352	)
Affiliate and customer relationships	2,448			(1,757	)	2,445		(1,624	)
Debt origination fees	51			(11	)	54		(18	)
Trademarks (indefinite life)	2,428			—		2,429		—
	$	5,516		(2,142	)	5,503		(1,994	)

Amortization expense for other intangible assets was $68 million and $60 million for the three months ended September 30, 2013 and 2012, respectively. For the nine months ended September 30, 2013 and 2012, amortization expense for other intangible assets was $193 million and $171 million, respectively.

In regards to software amortization, during the third quarter of 2013, the amortization of certain capitalized software in Germany, the UK and Italy was accelerated in the amount of $6 million.

As of September 30, 2013, the related amortization expense and interest expense for each of the next five years ended December 31 was as follows (in millions):

Remainder of 2013	$	74
2014	273
2015	246
2016	206
2017	121

II-8

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

(5) Accrued Liabilities

Accrued liabilities consisted of the following:

	September 30,			December 31,
(in millions)	2013			2012
Accounts payable non-trade	$	199		264
Deferred revenue	103			85
Accrued compensation and benefits	101			100
Allowance for sales returns	76			92
Accrued interest	55			50
Sales and other taxes	47			62
Liability for consigned goods sold	47			56
Income taxes	17			154
Other	71			92
	$	716		955

(6) Long-Term Debt and Interest Rate Swap Arrangements

Long-term debt consisted of the following:

	September 30,			December 31,
(in millions)	2013			2012
7.125% Senior Secured Notes due 2017	$	—		500
7.5% Senior Secured Notes due 2019, net of original issue discount	760			988
7.375% Senior Secured Notes due 2020	500			500
5.125% Senior Secured Notes due 2022	500			500
4.375% Senior Secured Notes due 2023, net of original issue discount	750			—
5.95% Senior Secured Notes due 2043, net of original issue discount	300			—
Senior secured credit facility	673			903
Master promissory note with Liberty	300			—
Capital lease obligations	79			86
Total debt	3,862			3,477
Less current portion	(310		)	(12	)
Long-term portion of debt and capital lease obligations	$	3,552		3,465

Master Promissory Note with Liberty

On September 16, 2013, QVC entered into a master promissory note with Liberty to borrow a principal amount of $300 million. Interest on the outstanding principal balance will accrue at a fixed rate of 0.5% per annum, payable quarterly. The proceeds from this loan were used to pay down a portion of the Company's outstanding senior secured credit facility balance. The master promissory note is payable in full on March 15, 2014. All or any portion of the outstanding balance of the master promissory note may be prepaid at any time without penalty or premium. The master promissory note is unsecured and not guaranteed by any QVC subsidiaries.

II-9

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

Senior Secured Credit Facility

On March 1, 2013, we amended and restated our senior secured credit facility, which provides for a $2.0 billion revolving credit facility with a $250 million sub-limit for standby letters of credit and $1.0 billion of uncommitted incremental revolving loan commitments or incremental term loans. QVC may elect that the loans extended under the senior secured credit facility bear interest at a rate per annum equal to the ABR Rate or LIBOR, as each is defined in the senior secured credit facility agreement, plus a margin of 0.25% to 2.00% depending on various factors. Each loan may be prepaid at any time and from time to time without penalty other than customary breakage costs. Any amounts prepaid on the revolving credit facility may be reborrowed. Payment of loans may be accelerated following certain customary events of default. The senior secured credit facility is a multi-currency facility. The senior secured credit facility is secured by the stock of QVC. We had $1.3 billion available under the terms of the senior secured credit facility at September 30, 2013. The interest rate on the senior secured credit facility was 2.0% at September 30, 2013.

The purpose of the amendment was to, among other things, extend the maturity of our senior secured credit facility to March 1, 2018 and lower the interest rate on borrowings.

The senior secured credit facility contains certain affirmative and negative covenants, including certain restrictions with respect to, among other things: incurring additional indebtedness; creating liens on property or assets; making certain loans or investments; selling or disposing of assets; paying certain dividends and other restricted payments; dissolving, consolidating or merging; entering into certain transactions with affiliates; entering into sale or leaseback transactions; restricting subsidiary distributions; and limiting QVC's ratio of consolidated total debt to consolidated Adjusted OIBDA (as defined in note 11).

Senior Secured Notes

On March 4, 2013, QVC announced the commencement of cash tender offers (the "Offers") for any and all of its outstanding $500 million in aggregate principal amount of 7.125% Senior Secured Notes due 2017 and up to $250 million in aggregate principal amount of its 7.5% Senior Secured Notes due 2019. On March 18, 2013, $124 million of the 7.125% Senior Secured Notes due 2017 were tendered pursuant to the Offers, whereby holders of the 7.125% Senior Secured Notes due 2017 received consideration of $1,039.40 for each $1,000 principal amount of tendered 7.125% Senior Secured Notes due 2017. On March 18, 2013, $231 million of the 7.5% Senior Secured Notes due 2019 were tendered pursuant to the Offers, whereby holders of the 7.5% Senior Secured Notes due 2019 received consideration of $1,120 for each $1,000 principal amount of tendered 7.5% Senior Secured Notes due 2019. On April 17, 2013, QVC completed the redemption of the remaining $376 million principal amount of its 7.125% Senior Secured Notes due 2017, whereby holders received consideration of $1,035.63 for each $1,000 principal amount of tendered 7.125% Senior Secured Notes due 2017.

On March 18, 2013, QVC issued $750 million principal amount of 4.375% Senior Secured Notes due 2023 at an issue price of 99.968% and issued $300 million principal amount of 5.95% Senior Secured Notes due 2043 at an issue price of 99.973%. These notes are secured by the stock of QVC, pari passu with the senior secured credit facility and QVC's existing notes. Interest is payable semi-annually.

The net proceeds from the issuance of these instruments were used to reduce the outstanding principal under QVC's existing 7.125% Senior Secured Notes due 2017, the 7.5% Senior Secured Notes due 2019 and the senior secured credit facility, as well as for general corporate purposes.

Additionally, as a result of these refinancing transactions, we incurred an extinguishment loss of $57 million for the nine months ended September 30, 2013, recorded as loss on extinguishment of debt in the condensed consolidated statements of operations.

Interest Rate Swap Arrangements

In March 2013, QVC's notional interest rate swaps of $3.1 billion expired. These swap arrangements did not qualify as cash flow hedges under U.S. GAAP. Accordingly, changes in the fair value of the swaps were reflected in gain on financial instruments in the accompanying condensed consolidated statements of operations.

At December 31, 2012, the fair value of the swap instruments was a net liability position of $12 million, of which $13 million was included in accrued liabilities, offset by $1 million included in prepaid expenses in the condensed consolidated balance sheet.

I-10

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

Other Debt Related Information

QVC was in compliance with all of its debt covenants at September 30, 2013.

During the quarter, there were no significant changes to QVC's debt credit ratings.

The weighted average rate applicable to all of the outstanding debt (excluding capital leases) was 4.9% as of September 30, 2013.

(7) Leases and Transponder Service Arrangements

Future minimum payments under noncancelable operating leases and capital transponder leases with initial terms of one year or more at September 30, 2013 consisted of the following:

(in millions)	Capital transponders			Operating leases
Remainder of 2013	$	4		10
2014	12			17
2015	11			15
2016	11			12
2017	11			9
Thereafter	40			107
Total	$	89		170

The Company has entered into ten separate agreements with transponder suppliers to transmit its signals in the U.S., Germany and the U.K. via various satellites at an aggregate monthly cost of $1 million. Depreciation expense related to the transponders was $3 million and $2 million for the three months ended September 30, 2013 and 2012, respectively. For the nine months ended September 30, 2013 and 2012, depreciation expense related to the transponders was $9 million and $9 million, respectively. Total future minimum capital lease payments of $89 million include $9 million of imputed interest. Our transponder service agreement for our U.S. transponders expires at the earlier of the end of the lives of the satellites or the service agreement, which are currently estimated to be either 2019 or 2020, respectively. Our transponder service agreements for our international transponders expire between 2013 and 2022.

Expenses for operating leases, principally for data processing equipment and facilities and for satellite uplink service agreements, amounted to $7 million and $7 million for the three months ended September 30, 2013 and 2012, respectively. For the nine months ended September 30, 2013 and 2012, expenses for operating leases were $21 million and $24 million, respectively.

(8) Income Taxes

The Company calculates its interim income tax provision by applying its best estimate of the annual expected effective tax rate to its ordinary year-to-date income or loss. The tax or benefit related to significant, unusual or extraordinary items that will be separately reported or reported net of their related tax effect are individually computed and recognized in the interim period in which those items occur.

The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including, but not limited to, the expected operating income for the year, projections of the proportion of income earned and taxed in foreign jurisdictions, permanent and temporary differences as a result of differences between amounts measured and recognized in accordance with tax laws and financial accounting standards, and the likelihood of recovering deferred tax assets. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or as the tax environment changes. To the extent that the estimated annual effective tax rate changes during a quarter, the effect of the change on the prior quarters is included in the tax expense for the current quarter.

I-11

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

For the three months ended September 30, 2013, the Company recorded a tax provision of $70 million, which represented an effective tax rate of 34.3%. For the nine months ended September 30, 2013, the Company recorded a tax provision of $213 million, which represented an effective tax rate of 36.0%. The three month rate differs from U.S. federal income tax rate of 35.0% primarily due to state tax expense and state law changes, whereas the nine month rate differs from the U.S. federal income tax rate of 35.0% primarily due to state tax expense.

QVC is party to ongoing discussions with the Internal Revenue Service under the Compliance Assurance Process audit program. The Company files Federal tax returns on a consolidated basis with its parent company, Liberty. The Company, or one of its subsidiaries, files income tax returns in various states and foreign jurisdictions. As of September 30, 2013, the Company, or one of its subsidiaries, was under examination in California, Minnesota, New Jersey, New York, the City of New York and Pennsylvania, as well as in Germany and the U.K.

The amounts of the tax-related balances due to Liberty at September 30, 2013 and December 31, 2012 were $8 million and $70 million, respectively, and were included in accrued liabilities in the accompanying condensed consolidated balance sheets.

The Company entered into a Tax Liability Allocation and Indemnification Agreement (the “Tax Agreement”), dated April 26, 2004, with Liberty. The Tax Agreement establishes the methodology for the calculation and payment of income taxes in connection with the consolidation of the Company with Liberty for income tax purposes. Generally, the Tax Agreement provides that the Company will pay Liberty an amount equal to the tax liability, if any, that it would have if it were to file as a consolidated group separate and apart from Liberty, with exceptions for the treatment and timing of certain items, including but not limited to deferred intercompany transactions, credits, and net operating and capital losses. To the extent that the separate company tax expense is different from the payment terms of the Tax Agreement, the difference is recorded as either a dividend or capital contribution.

(9) Commitments and Contingencies

The Company has contingent liabilities related to legal and tax proceedings and other matters arising in the ordinary course of business. Although it is reasonably possible the Company may incur losses upon conclusion of such matters, an estimate of any loss or range of loss cannot be made. In the opinion of management, it is expected that the amounts, if any, which may be required to satisfy such contingencies will not be material in relation to the accompanying condensed consolidated financial statements.

Network and information systems, including the internet and telecommunication systems, third party delivery services and other technologies are critical to our business activities. Substantially all our customer orders, fulfillment and delivery services are dependent upon the use of network and information systems, including the use of third party telecommunication and delivery service providers. If information systems including the internet or telecommunication services are disrupted, or if the third party delivery services experience a disruption in their transportation delivery services, we could face a significant disruption in fulfilling our customer orders and shipment of our products. We have active disaster recovery programs in place to help mitigate risks associated with these critical business activities.

(10) Assets and Liabilities Measured at Fair Value

For assets and liabilities required to be reported or disclosed at fair value, U.S. GAAP provides a hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs, other than quoted market prices included within Level 1, that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability.

I-12

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

The Company's assets and liabilities measured or disclosed at fair value were as follows:

				Fair value measurements at September 30, 2013 using
(in millions)	Total			Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Current assets:
Cash equivalents	$	295		295		—		—
Current liabilities:
Debt (note 6)	300			—		300		—
Long-term liabilities:
Debt (note 6)	3,501			—		3,501		—

				Fair value measurements at December 31, 2012 using
(in millions)	Total			Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Current assets:
Cash equivalents	$	424		424		—		—
Interest rate swap arrangements (note 6)	1			—		1		—
Current liabilities:
Interest rate swap arrangements (note 6)	13			—		13		—
Long-term liabilities:
Debt (note 6)	3,626			—		3,626		—

The majority of the Company's Level 2 financial assets and liabilities are debt instruments with quoted market prices that are not considered to be traded on “active markets,” as defined in U.S. GAAP. Accordingly, the financial instruments are reported in the foregoing tables as Level 2 fair value instruments.

U.S. GAAP requires the incorporation of a credit risk valuation adjustment in the Company's fair value measurements to estimate the impact of both its own nonperformance risk and the nonperformance risk of its counterparties. The Company estimates credit risk associated with its own and its counterparties' nonperformance primarily by using observable credit default swap rates for terms similar to those of the remaining life of the instrument, adjusted for any master netting arrangements or other factors that provide an estimate of nonperformance risk. These are Level 3 inputs. However, as the credit risk valuation adjustments were not significant, the Company reported its interest rate swaps as Level 2. The counterparties to the Company's interest rate swap arrangements were all major international financial institutions.

(11) Information about QVC's Operating Segments

Each of the Company's operating segments are retailers of a wide range of consumer products, which are marketed and sold primarily by merchandise-focused televised-shopping programs as well as via the internet and mobile applications in certain markets. The Company has operations in the United States, Japan, Germany, the United Kingdom and Italy. As such, the Company has identified five reportable segments: the United States, Japan, Germany, the United Kingdom and Italy.

I-13

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

The Company evaluates performance and makes decisions about allocating resources to its operating segments based on financial measures such as net revenue, Adjusted OIBDA, gross margin, average sales price per unit, number of units shipped and revenue or sales per subscriber equivalent. The Company defines Adjusted OIBDA as revenue less cost of sales, operating expenses, and selling, general and administrative expenses (excluding stock-based compensation). The Company believes this measure is an important indicator of the operational strength and performance of its segments, including the ability to service debt and fund capital expenditures. In addition, this measure allows management to view operating results and perform analytical comparisons and benchmarking among our businesses and identify strategies to improve performance. This measure of performance excludes depreciation, amortization and stock-based compensation, that are included in the measurement of operating income pursuant to U.S. GAAP. Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with U.S. GAAP.

Performance measures

	Three months ended September 30,										Nine months ended September 30,
	2013					2012					2013				2012
(in millions)	Net revenue			Adjusted OIBDA		Net revenue		Adjusted OIBDA			Net revenue		Adjusted OIBDA		Net revenue		Adjusted OIBDA
QVC-U.S.	$	1,303		304		1,237		278			3,912		915		3,757		863
QVC-Japan	236			46		301		67			752		157		900		200
QVC-Germany	224			37		211		36			681		115		668		121
QVC-U.K.	156			26		149		21			449		71		445		62
QVC-Italy	28			(5	)	20		(5	)		88		(12	)	54		(21	)
Consolidated QVC	$	1,947		408		1,918		397			5,882		1,246		5,824		1,225

Net revenue amounts by product category are not available from our general purpose financial statements.

Other information

	Three months ended September 30,										Nine months ended September 30,
	2013					2012					2013				2012
(in millions)	Depreciation			Amortization		Depreciation		Amortization			Depreciation		Amortization		Depreciation		Amortization
QVC-U.S.	$	14		90		12		86			41		269		38		248
QVC-Japan	5			2		4		3			13		6		12		8
QVC-Germany	6			12		7		8			22		30		24		24
QVC-U.K.	(1		)	6		3		3			8		12		13		9
QVC-Italy	2			3		2		1			5		7		5		4
Consolidated QVC	$	26		113		28		101			89		324		92		293

I-14

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

	September 30, 2013					December 31, 2012
(in millions)	Total Assets			Capital expenditures		Total assets		Capital expenditures
QVC-U.S.	$	10,140		69		10,541		88
QVC-Japan	772			14		969		105
QVC-Germany	1,068			20		1,064		25
QVC-U.K.	597			8		619		22
QVC-Italy	268			10		245		6
Consolidated QVC	$	12,845		121		13,438		246

Long-lived assets, net of accumulated depreciation, by geographic area were as follows:

	September 30,			December 31,
(in millions)	2013			2012
QVC-U.S.	$	424		429
QVC-Japan	243			280
QVC-Germany	244			247
QVC-U.K.	122			128
QVC-Italy	48			47
Consolidated QVC	$	1,081		1,131

The following table provides a reconciliation of Adjusted OIBDA to income before income taxes:

	Three months ended September 30,					Nine months ended September 30,
(in millions)	2013			2012		2013		2012
Adjusted OIBDA	$	408		397		1,246		1,225
Stock‑based compensation	(10		)	(8	)	(29	)	(21	)
Depreciation and amortization	(139		)	(129	)	(413	)	(385	)
Equity in losses of investee	(2		)	(3	)	(3	)	(3	)
Gains on financial instruments	—			12		15		36
Interest expense, net	(52		)	(61	)	(165	)	(172	)
Foreign currency (loss) gain	(1		)	1		(2	)	(1	)
Loss on extinguishment of debt	—			—		(57	)	—
Income before income taxes	$	204		209		592		679

(12) Other Comprehensive Income

The change in the component of accumulated other comprehensive income, net of taxes ("AOCI"), is summarized as follows:

(in millions)	Foreign currency translation adjustments			AOCI
Balance at January 1, 2012	$	194		194
Other comprehensive income attributable to QVC, Inc. shareholder	2			2
Balance at September 30, 2012	196			196
Balance at January 1, 2013	$	186		186
Other comprehensive loss attributable to QVC, Inc. shareholder	(22		)	(22	)
Balance at September 30, 2013	164			164

I-15

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

The component of other comprehensive income is reflected in QVC's condensed consolidated statements of comprehensive income, net of taxes. The following table summarizes the tax effects related to the component of other comprehensive income:

(in millions)	Before-tax amount			Tax (expense) benefit		Net-of-tax amount
Three months ended September 30, 2013:
Foreign currency translation adjustments	$	77		(9	)	68
Other comprehensive income (loss)	77			(9	)	68
Three months ended September 30, 2012:
Foreign currency translation adjustments	$	45		(10	)	35
Other comprehensive income (loss)	45			(10	)	35
Nine months ended September 30, 2013:
Foreign currency translation adjustments	$	(52	)	13		(39	)
Other comprehensive (loss) income	(52		)	13		(39	)
Nine months ended September 30, 2012:
Foreign currency translation adjustments	$	(3	)	2		(1	)
Other comprehensive (loss) income	(3		)	2		(1	)

(13) Subsequent Events

QVC repaid $150 million of the outstanding principal balance on the master promissory note with Liberty subsequent to September 30, 2013.

(14) Guarantor/Non-guarantor Subsidiary Financial Information

The following information contains the condensed consolidating financial statements for the Company, the parent on a stand-alone basis (QVC, Inc.), the combined subsidiary guarantors (Affiliate Relations Holdings, Inc.; Affiliate Investment, Inc.; AMI 2, Inc.; ER Marks, Inc.; QVC International LLC; QVC Rocky Mount, Inc. and QVC San Antonio, LLC) and the combined non-guarantor subsidiaries pursuant to Rule 3-10 of Regulation S-X. Certain non-guarantor subsidiaries are majority-owned by QVC International LLC, which is a guarantor subsidiary.

These condensed consolidating financial statements have been prepared from the Company’s financial information on the same basis of accounting as the Company’s condensed consolidated financial statements. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions, such as management fees, royalty revenue and expense and interest income and expense. Goodwill and other intangible assets have been allocated to the subsidiaries based on management’s estimates. Certain costs have been partially allocated to all of the subsidiaries of the Company.

The subsidiary guarantors are 100% owned by the Company. All guarantees are full and unconditional and are joint and several. There are no significant restrictions on the ability of the Company to obtain funds from its U.S. subsidiaries, including the guarantors, by dividend or loan. The Company has not presented separate notes and other disclosures concerning the subsidiary guarantors as the Company has determined that such material information is available in the notes to the Company’s condensed consolidated financial statements.

The master promissory note with Liberty is not guaranteed by any QVC subsidiaries.

I-16

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

The Company adjusted the condensed consolidating financial statements to correctly classify transactions among QVC Inc., the combined subsidiary guarantors and the combined non-guarantor subsidiaries.

The adjustments to the condensed consolidating balance sheets:

•	increased intercompany accounts receivable of the combined non-guarantor subsidiaries and increased intercompany accounts payable of QVC, Inc. related to cumulative revenue net of cumulative cost of goods sold and cumulative operating expenses, which have been attributed from QVC, Inc. to the combined non-guarantor subsidiaries; and

•	increased shareholder’s equity for the combined guarantor subsidiaries and combined subsidiary guarantors with an equal and offsetting increase in the investment in subsidiaries of QVC, Inc. and its corresponding elimination.

The adjustments to the condensed consolidating statements of operations:

•	attributed elements of revenue, cost of goods sold and operating expenses from QVC, Inc. to the combined non-guarantor subsidiaries and recognized equal and offsetting increases in the equity in earnings of subsidiaries of QVC, Inc.; and

•	recognized net income attributable to noncontrolling interests of QVC, Inc. and eliminated that income in consolidation.

The adjustments to the condensed consolidating statements of cash flows:

•	attributed net cash provided by operating activities from QVC, Inc. to the combined non-guarantor subsidiaries related to revenue net of cost of goods sold and operating expenses, which have been attributed from QVC, Inc. to the combined non-guarantor subsidiaries;

•	attributed cash paid for joint ventures and acquisitions of businesses from QVC, Inc. to the combined non-guarantor subsidiaries; and

•	increased net cash provided by the financing activities of QVC, Inc. and increased net cash used in the financing activities of the non-guarantor subsidiaries.

The adjustments had no impact to the Company's condensed consolidated balance sheets, condensed consolidated statements of operations, condensed consolidated statements of comprehensive income, condensed consolidated statements of changes in equity or condensed consolidated statements of cash flows for any current and previously reported period.

I-17

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

Condensed consolidating balance sheets

September 30, 2013
(in millions)	Parent issuer- QVC, Inc.			Combined subsidiary guarantors		Combined non-guarantor subsidiaries		Eliminations		Consolidated- QVC, Inc. and subsidiaries
Assets
Current assets:
Cash and cash equivalents	$	8		170		191		—		369
Restricted cash	11			—		2		—		13
Accounts receivable, net	494			—		236		—		730
Inventories	800			—		323		—		1,123
Deferred income taxes	139			—		17		—		156
Prepaid expenses	19			—		44		—		63
Total current assets	1,471			170		813		—		2,454
Property, plant and equipment, net	248			65		768		—		1,081
Cable and satellite television distribution rights, net	—			533		121		—		654
Goodwill	4,169			—		1,036		—		5,205
Other intangible assets, net	1,165			2,050		159		—		3,374
Other noncurrent assets	11			—		66		—		77
Investments in subsidiaries	4,829			1,702		—		(6,531	)	—
Total assets	$	11,893		4,520		2,963		(6,531	)	12,845
Liabilities and equity
Current liabilities:
Current portion of debt and capital lease obligations	$	302		—		8		—		310
Accounts payable-trade	292			—		243		—		535
Accrued liabilities	281			58		377		—		716
Intercompany accounts payable (receivable)	867			(761	)	(106	)	—		—
Total current liabilities	1,742			(703	)	522		—		1,561
Long-term portion of debt and capital lease obligations	3,496			—		56		—		3,552
Deferred compensation	14			—		1		—		15
Deferred income taxes	404			933		(13	)	—		1,324
Other long-term liabilities	135			—		20		—		155
Total liabilities	5,791			230		586		—		6,607
Equity:
QVC, Inc. shareholder's equity	6,102			4,290		2,241		(6,531	)	6,102
Noncontrolling interest	—			—		136		—		136
Total equity	6,102			4,290		2,377		(6,531	)	6,238
Total liabilities and equity	$	11,893		4,520		2,963		(6,531	)	12,845

I-18

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

Condensed consolidating balance sheet - Adjusted

December 31, 2012
(in millions)	Parent issuer- QVC, Inc.			Combined subsidiary guarantors		Combined non-guarantor subsidiaries		Eliminations		Consolidated- QVC, Inc. and subsidiaries
Assets
Current assets:
Cash and cash equivalents	$	75		165		300		—		540
Restricted cash	13			—		2		—		15
Accounts receivable, net	747			—		308		—		1,055
Inventories	691			—		218		—		909
Deferred income taxes	131			—		20		—		151
Prepaid expenses	19			—		34		—		53
Total current assets	1,676			165		882		—		2,723
Property, plant and equipment, net	247			67		817		—		1,131
Cable and satellite television distribution rights, net	—			618		146		—		764
Goodwill	4,169			—		1,065		—		5,234
Other intangible assets, net	1,280			2,049		180		—		3,509
Other noncurrent assets	14			—		63		—		77
Investments in subsidiaries	4,844			1,838		—		(6,682	)	—
Total assets	$	12,230		4,737		3,153		(6,682	)	13,438
Liabilities and equity
Current liabilities:
Current portion of debt and capital lease obligations	$	2		—		10		—		12
Accounts payable-trade	324			—		242		—		566
Accrued liabilities	402			106		447		—		955
Intercompany accounts payable (receivable)	829			(816	)	(13	)	—		—
Total current liabilities	1,557			(710	)	686		—		1,533
Long-term portion of debt and capital lease obligations	3,404			—		61		—		3,465
Deferred compensation	11			—		1		—		12
Deferred income taxes	431			964		15		—		1,410
Other long-term liabilities	137			17		30		—		184
Total liabilities	5,540			271		793		—		6,604
Equity:
QVC, Inc. shareholder's equity	6,690			4,466		2,216		(6,682	)	6,690
Noncontrolling interest	—			—		144		—		144
Total equity	6,690			4,466		2,360		(6,682	)	6,834
Total liabilities and equity	$	12,230		4,737		3,153		(6,682	)	13,438

I-19

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

Condensed consolidating statements of operations

Three months ended September 30, 2013
(in millions)	Parent issuer- QVC, Inc.			Combined subsidiary guarantors		Combined non-guarantor subsidiaries		Eliminations		Consolidated- QVC, Inc. and subsidiaries
Net revenue	$	1,319		190		675		(237	)	1,947
Cost of goods sold	833			26		427		(64	)	1,222
Gross profit	486			164		248		(173	)	725
Operating expenses:
Operating	39			49		88		—		176
Selling, general and administrative, including stock-based compensation	237			1		86		(173	)	151
Depreciation	10			1		15		—		26
Amortization of intangible assets	51			37		25		—		113
Intercompany management expense (income)	14			(1	)	(13	)	—		—
	351			87		201		(173	)	466
Operating income	135			77		47		—		259
Other (expense) income:
Equity in losses of investee	—			—		(2	)	—		(2	)
Interest expense, net	(52		)	—		—		—		(52	)
Foreign currency (loss) gain	(9		)	—		8		—		(1	)
Intercompany interest (expense) income	(4		)	13		(9	)	—		—
	(65		)	13		(3	)	—		(55	)
Income before income taxes	70			90		44		—		204
Income tax expense	(21		)	(27	)	(22	)	—		(70	)
Equity in earnings of subsidiaries, net of tax	85			3		—		(88	)	—
Net income	134			66		22		(88	)	134
Less net income attributable to the noncontrolling interest	(9		)	—		(9	)	9		(9	)
Net income attributable to QVC, Inc. shareholder	$	125		66		13		(79	)	125

I-20

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

Condensed consolidating statements of operations - Adjusted

Three months ended September 30, 2012
(in millions)	Parent issuer- QVC, Inc.			Combined subsidiary guarantors		Combined non-guarantor subsidiaries		Eliminations		Consolidated- QVC, Inc. and subsidiaries
Net revenue	$	1,249		180		719		(230	)	1,918
Cost of goods sold	801			27		454		(66	)	1,216
Gross profit	448			153		265		(164	)	702
Operating expenses:
Operating	37			46		88		—		171
Selling, general and administrative, including stock-based compensation	226			—		80		(164	)	142
Depreciation	9			1		18		—		28
Amortization of intangible assets	52			33		16		—		101
Intercompany management expense (income)	14			(5	)	(9	)	—		—
	338			75		193		(164	)	442
Operating income	110			78		72		—		260
Other (expense) income:
Equity in losses of investee	—			—		(3	)	—		(3	)
Gains on financial instruments	12			—		—		—		12
Interest expense, net	(61		)	—		—		—		(61	)
Foreign currency (loss) gain	(6		)	2		5		—		1
Intercompany interest (expense) income	(3		)	12		(9	)	—		—
	(58		)	14		(7	)	—		(51	)
Income before income taxes	52			92		65		—		209
Income tax expense	(17		)	(30	)	(26	)	—		(73	)
Equity in earnings of subsidiaries, net of tax	101			23		—		(124	)	—
Net income	136			85		39		(124	)	136
Less net income attributable to the noncontrolling interest	(15		)	—		(15	)	15		(15	)
Net income attributable to QVC, Inc. shareholder	$	121		85		24		(109	)	121

I-21

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

Condensed consolidating statements of operations

Nine months ended September 30, 2013
(in millions)	Parent issuer- QVC, Inc.			Combined subsidiary guarantors		Combined non-guarantor subsidiaries		Eliminations		Consolidated- QVC, Inc. and subsidiaries
Net revenue	$	3,959		555		2,065		(697	)	5,882
Cost of goods sold	2,512			74		1,300		(185	)	3,701
Gross profit	1,447			481		765		(512	)	2,181
Operating expenses:
Operating	114			143		263		—		520
Selling, general and administrative, including stock-based compensation	700			1		255		(512	)	444
Depreciation	28			4		57		—		89
Amortization of intangible assets	153			107		64		—		324
Intercompany management expense (income)	46			(8	)	(38	)	—		—
	1,041			247		601		(512	)	1,377
Operating income	406			234		164		—		804
Other (expense) income:
Equity in losses of investee	—			—		(3	)	—		(3	)
Gains on financial instruments	12			—		3		—		15
Interest expense, net	(164		)	(1	)	—		—		(165	)
Foreign currency (loss) gain	(12		)	(1	)	11		—		(2	)
Loss on extinguishment of debt	(57		)	—		—		—		(57	)
Intercompany interest (expense) income	(11		)	37		(26	)	—		—
	(232		)	35		(15	)	—		(212	)
Income before income taxes	174			269		149		—		592
Income tax expense	(52		)	(87	)	(74	)	—		(213	)
Equity in earnings of subsidiaries, net of tax	257			29		—		(286	)	—
Net income	379			211		75		(286	)	379
Less net income attributable to the noncontrolling interest	(34		)	—		(34	)	34		(34	)
Net income attributable to QVC, Inc. shareholder	$	345		211		41		(252	)	345

I-22

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

Condensed consolidating statements of operations - Adjusted

Nine months ended September 30, 2012
(in millions)	Parent issuer- QVC, Inc.			Combined subsidiary guarantors		Combined non-guarantor subsidiaries		Eliminations		Consolidated- QVC, Inc. and subsidiaries
Net revenue	$	3,804		534		2,168		(682	)	5,824
Cost of goods sold	2,421			81		1,363		(185	)	3,680
Gross profit	1,383			453		805		(497	)	2,144
Operating expenses:
Operating	110			137		275		—		522
Selling, general and administrative, including stock-based compensation	666			—		249		(497	)	418
Depreciation	26			3		63		—		92
Amortization of intangible assets	148			98		47		—		293
Intercompany management expense (income)	54			(20	)	(34	)	—		—
	1,004			218		600		(497	)	1,325
Operating income	379			235		205		—		819
Other (expense) income:
Equity in losses of investee	—			—		(3	)	—		(3	)
Gains on financial instruments	36			—		—		—		36
Interest (expense) income	(173		)	—		1		—		(172	)
Foreign currency (loss) gain	(11		)	2		8		—		(1	)
Intercompany interest (expense) income	(10		)	37		(27	)	—		—
	(158		)	39		(21	)	—		(140	)
Income before income taxes	221			274		184		—		679
Income tax expense	(81		)	(84	)	(82	)	—		(247	)
Equity in earnings of subsidiaries, net of tax	292			57		—		(349	)	—
Net income	432			247		102		(349	)	432
Less net income attributable to the noncontrolling interest	(44		)	—		(44	)	44		(44	)
Net income attributable to QVC, Inc. shareholder	$	388		247		58		(305	)	388

I-23

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

Condensed consolidating statements of comprehensive income

Three months ended September 30, 2013
(in millions)	Subsidiary issuer- QVC, Inc.			Combined subsidiary guarantors		Combined non-guarantor subsidiaries		Eliminations		Consolidated- QVC, Inc. and subsidiaries
Net income	$	134		66		22		(88	)	134
Foreign currency translation adjustments	68			—		68		(68	)	68
Total comprehensive income	202			66		90		(156	)	202
Comprehensive income attributable to noncontrolling interest	(11		)	—		(11	)	11		(11	)
Comprehensive income attributable to QVC, Inc. shareholder	$	191		66		79		(145	)	191

Three months ended September 30, 2012
(in millions)	Subsidiary issuer- QVC, Inc.			Combined subsidiary guarantors		Combined non-guarantor subsidiaries		Eliminations		Consolidated- QVC, Inc. and subsidiaries
Net income	$	136		85		39		(124	)	136
Foreign currency translation adjustments	35			—		35		(35	)	35
Total comprehensive income	171			85		74		(159	)	171
Comprehensive income attributable to noncontrolling interest	(18		)	—		(18	)	18		(18	)
Comprehensive income attributable to QVC, Inc. shareholder	$	153		85		56		(141	)	153

I-24

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

Condensed consolidating statements of comprehensive income

Nine months ended September 30, 2013
(in millions)	Subsidiary issuer- QVC, Inc.			Combined subsidiary guarantors		Combined non-guarantor subsidiaries		Eliminations		Consolidated- QVC, Inc. and subsidiaries
Net income	$	379		211		75		(286	)	379
Foreign currency translation adjustments	(39		)	—		(39	)	39		(39	)
Total comprehensive income	340			211		36		(247	)	340
Comprehensive income attributable to noncontrolling interest	(17		)	—		(17	)	17		(17	)
Comprehensive income attributable to QVC, Inc. shareholder	$	323		211		19		(230	)	323

Nine months ended September 30, 2012
(in millions)	Subsidiary issuer- QVC, Inc.			Combined subsidiary guarantors		Combined non-guarantor subsidiaries		Eliminations		Consolidated- QVC, Inc. and subsidiaries
Net income	$	432		247		102		(349	)	432
Foreign currency translation adjustments	(1		)	—		(1	)	1		(1	)
Total comprehensive income	431			247		101		(348	)	431
Comprehensive income attributable to noncontrolling interest	(41		)	—		(41	)	41		(41	)
Comprehensive income attributable to QVC, Inc. shareholder	$	390		247		60		(307	)	390

I-25

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

Condensed consolidating statements of cash flows

Nine months ended September 30, 2013
(in millions)	Parent issuer- QVC, Inc.			Combined subsidiary guarantors		Combined non-guarantor subsidiaries		Eliminations		Consolidated- QVC, Inc. and subsidiaries
Operating activities:
Net cash provided by operating activities	$	355		217		31		—		603
Investing activities:
Capital expenditures, net	(58		)	(3	)	(60	)	—		(121	)
Expenditures for cable and satellite television distribution rights, net	—			(41	)	—		—		(41	)
Decrease in restricted cash	2			—		—		—		2
Changes in other noncurrent assets	3			—		(4	)	—		(1	)
Intercompany investing activities	272			165		—		(437	)	—
Net cash provided by (used in) investing activities	219			121		(64	)	(437	)	(161	)
Financing activities:
Principal payments of debt and capital lease obligations	(2,154		)	—		(7	)	—		(2,161	)
Principal borrowings of debt from senior secured credit facility	1,198			—		—		—		1,198
Proceeds from issuance of senior secured notes, net of original issue discount	1,050			—		—		—		1,050
Proceeds from master promissory note with Liberty	300			—		—		—		300
Payment of debt origination fees	(16		)	—		—		—		(16	)
Payment of bond premium fees	(46		)	—		—		—		(46	)
Other financing activities	9			—		—		—		9
Dividends paid to Liberty	(900		)	—		—		—		(900	)
Dividend paid to noncontrolling interest	—			—		(25	)	—		(25	)
Net short-term intercompany debt borrowings (repayments)	38			55		(93	)	—		—
Intercompany financing activities	(120		)	(388	)	71		437		—
Net cash used in financing activities	(641		)	(333	)	(54	)	437		(591	)
Effect of foreign exchange rate changes on cash and cash equivalents	—			—		(22	)	—		(22	)
Net (decrease) increase in cash and cash equivalents	(67		)	5		(109	)	—		(171	)
Cash and cash equivalents, beginning of period	75			165		300		—		540
Cash and cash equivalents, end of period	$	8		170		191		—		369

I-26

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

Condensed consolidating statements of cash flows - Adjusted

Nine months ended September 30, 2012
(in millions)	Parent issuer- QVC, Inc.			Combined subsidiary guarantors		Combined non-guarantor subsidiaries		Eliminations		Consolidated- QVC, Inc. and subsidiaries
Operating activities:
Net cash provided by operating activities	$	418		252		205		—		875
Investing activities:
Capital expenditures, net	(38		)	(2	)	(125	)	—		(165	)
Expenditures for cable and satellite television distribution rights, net	—			(1	)	—		—		(1	)
Cash paid for joint ventures and acquisitions of businesses, net of cash received	—			—		(71	)	—		(71	)
Decrease in restricted cash	2			—		—		—		2
Changes in other noncurrent assets	4			(1	)	(4	)	—		(1	)
Intercompany investing activities	485			231		—		(716	)	—
Net cash provided by (used in) investing activities	453			227		(200	)	(716	)	(236	)
Financing activities:
Principal payments of debt and capital lease obligations	(1,073		)	—		(7	)	—		(1,080	)
Principal borrowings of debt from senior secured credit facility	1,493			—		—		—		1,493
Proceeds from issuance of senior secured notes	500			—		—		—		500
Payment of debt origination fees	(8		)	—		—		—		(8	)
Dividends paid to Liberty	(1,682		)	—		—		—		(1,682	)
Dividend paid to noncontrolling interest	—			—		(29	)	—		(29	)
Net short-term intercompany debt borrowings (repayments)	123			(35	)	(88	)	—		—
Intercompany financing activities	(211		)	(554	)	49		716		—
Net cash used in financing activities	(858		)	(589	)	(75	)	716		(806	)
Effect of foreign exchange rate changes on cash and cash equivalents	—			—		(7	)	—		(7	)
Net increase (decrease) in cash and cash equivalents	13			(110	)	(77	)	—		(174	)
Cash and cash equivalents, beginning of period	3			223		334		—		560
Cash and cash equivalents, end of period	$	16		113		257		—		386

I-27

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

The following tables present the statements as they were previously reported and the adjustments to each financial statement line item.

Condensed consolidating balance sheets - As previously reported

December 31, 2012
(in millions)	Parent issuer- QVC, Inc.			Combined subsidiary guarantors		Combined non-guarantor subsidiaries		Eliminations		Consolidated- QVC, Inc. and subsidiaries
Assets
Current assets:
Cash and cash equivalents	$	75		165		300		—		540
Restricted cash	13			—		2		—		15
Accounts receivable, net	747			—		308		—		1,055
Inventories	691			—		218		—		909
Deferred income taxes	131			—		20		—		151
Prepaid expenses	19			—		34		—		53
Total current assets	1,676			165		882		—		2,723
Property, plant and equipment, net	247			67		817		—		1,131
Cable and satellite television distribution rights, net	—			618		146		—		764
Goodwill	4,169			—		1,065		—		5,234
Other intangible assets, net	1,280			2,049		180		—		3,509
Other noncurrent assets	14			—		63		—		77
Investments in subsidiaries	3,789			1,838		—		(5,627	)	—
Total assets	$	11,175		4,737		3,153		(5,627	)	13,438
Liabilities and equity
Current liabilities:
Current portion of debt and capital lease obligations	$	2		—		10		—		12
Accounts payable-trade	324			—		242		—		566
Accrued liabilities	402			106		447		—		955
Intercompany accounts (receivable) payable	(226		)	(411	)	637		—		—
Total current liabilities	502			(305	)	1,336		—		1,533
Long-term portion of debt and capital lease obligations	3,404			—		61		—		3,465
Deferred compensation	11			—		1		—		12
Deferred income taxes	431			964		15		—		1,410
Other long-term liabilities	137			17		30		—		184
Total liabilities	4,485			676		1,443		—		6,604
Equity:
QVC, Inc. shareholder's equity	6,690			4,061		1,566		(5,627	)	6,690
Noncontrolling interest	—			—		144		—		144
Total equity	6,690			4,061		1,710		(5,627	)	6,834
Total liabilities and equity	$	11,175		4,737		3,153		(5,627	)	13,438

I-28

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

Condensed consolidating balance sheets - Adjustments

December 31, 2012
(in millions)	Parent issuer- QVC, Inc.			Combined subsidiary guarantors		Combined non-guarantor subsidiaries		Eliminations		Consolidated- QVC, Inc. and subsidiaries
Assets
Current assets:
Cash and cash equivalents	$	—		—		—		—		—
Restricted cash	—			—		—		—		—
Accounts receivable, net	—			—		—		—		—
Inventories	—			—		—		—		—
Deferred income taxes	—			—		—		—		—
Prepaid expenses	—			—		—		—		—
Total current assets	—			—		—		—		—
Property, plant and equipment, net	—			—		—		—		—
Cable and satellite television distribution rights, net	—			—		—		—		—
Goodwill	—			—		—		—		—
Other intangible assets, net	—			—		—		—		—
Other noncurrent assets	—			—		—		—		—
Investments in subsidiaries	1,055			—		—		(1,055	)	—
Total assets	$	1,055		—		—		(1,055	)	—
Liabilities and equity
Current liabilities:
Current portion of debt and capital lease obligations	$	—		—		—		—		—
Accounts payable-trade	—			—		—		—		—
Accrued liabilities	—			—		—		—		—
Intercompany accounts payable (receivable)	1,055			(405	)	(650	)	—		—
Total current liabilities	1,055			(405	)	(650	)	—		—
Long-term portion of debt and capital lease obligations										—
Deferred compensation	—			—		—		—		—
Deferred income taxes	—			—		—		—		—
Other long-term liabilities	—			—		—		—		—
Total liabilities	1,055			(405	)	(650	)	—		—
Equity:
QVC, Inc. shareholder's equity	—			405		650		(1,055	)	—
Noncontrolling interest	—			—		—		—		—
Total equity	—			405		650		(1,055	)	—
Total liabilities and equity	$	1,055		—		—		(1,055	)	—

I-29

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

Condensed consolidating statements of operations - As previously reported

Three months ended September 30, 2012
(in millions)	Parent issuer- QVC, Inc.			Combined subsidiary guarantors		Combined non-guarantor subsidiaries		Eliminations		Consolidated- QVC, Inc. and subsidiaries
Net revenue	$	1,301		180		667		(230	)	1,918
Cost of goods sold	817			27		438		(66	)	1,216
Gross profit	484			153		229		(164	)	702
Operating expenses:
Operating	44			46		81		—		171
Selling, general and administrative, including stock-based compensation	226			—		80		(164	)	142
Depreciation	9			1		18		—		28
Amortization of intangible assets	52			33		16		—		101
Intercompany management expense (income)	14			(5	)	(9	)	—		—
	345			75		186		(164	)	442
Operating income	139			78		43		—		260
Other (expense) income:
Equity in losses of investee	—			—		(3	)	—		(3	)
Gains on financial instruments	12			—		—		—		12
Interest expense, net	(61		)	—		—		—		(61	)
Foreign currency (loss) gain	(6		)	2		5		—		1
Intercompany interest (expense) income	(3		)	12		(9	)	—		—
	(58		)	14		(7	)	—		(51	)
Income before income taxes	81			92		36		—		209
Income tax expense	(17		)	(30	)	(26	)	—		(73	)
Equity in earnings of subsidiaries, net of tax	57			23		—		(80	)	—
Net income	121			85		10		(80	)	136
Less net income attributable to the noncontrolling interest	—			—		(15	)	—		(15	)
Net income (loss) attributable to QVC, Inc. shareholder	$	121		85		(5	)	(80	)	121

I-30

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

Condensed consolidating statements of operations - Adjustments

Three months ended September 30, 2012
(in millions)	Parent issuer- QVC, Inc.			Combined subsidiary guarantors		Combined non-guarantor subsidiaries		Eliminations		Consolidated- QVC, Inc. and subsidiaries
Net revenue	$	(52	)	—		52		—		—
Cost of goods sold	(16		)	—		16		—		—
Gross profit	(36		)	—		36		—		—
Operating expenses:
Operating	(7		)	—		7		—		—
Selling, general and administrative, including stock-based compensation	—			—		—		—		—
Depreciation	—			—		—		—		—
Amortization of intangible assets	—			—		—		—		—
Intercompany management expense (income)	—			—		—		—		—
	(7		)	—		7		—		—
Operating income	(29		)	—		29		—		—
Other (expense) income:
Equity in losses of investee	—			—		—		—		—
Gains on financial instruments	—			—		—		—		—
Interest expense, net	—			—		—		—		—
Foreign currency (loss) gain	—			—		—		—		—
Intercompany interest (expense) income	—			—		—		—		—
	—			—		—		—		—
Income before income taxes	(29		)	—		29		—		—
Income tax expense	—			—		—		—		—
Equity in earnings of subsidiaries, net of tax	44			—		—		(44	)	—
Net income	15			—		29		(44	)	—
Less net income attributable to the noncontrolling interest	(15		)	—		—		15		—
Net income attributable to QVC, Inc. shareholder	$	—		—		29		(29	)	—

I-31

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

Condensed consolidating statements of operations - As previously reported

Nine months ended September 30, 2012
(in millions)	Parent issuer- QVC, Inc.			Combined subsidiary guarantors		Combined non-guarantor subsidiaries		Eliminations		Consolidated- QVC, Inc. and subsidiaries
Net revenue	$	3,963		534		2,009		(682	)	5,824
Cost of goods sold	2,470			81		1,314		(185	)	3,680
Gross profit	1,493			453		695		(497	)	2,144
Operating expenses:
Operating	132			137		253		—		522
Selling, general and administrative, including stock-based compensation	666			—		249		(497	)	418
Depreciation	26			3		63		—		92
Amortization of intangible assets	148			98		47		—		293
Intercompany management expense (income)	54			(20	)	(34	)	—		—
	1,026			218		578		(497	)	1,325
Operating income	467			235		117		—		819
Other (expense) income:
Equity in losses of investee	—			—		(3	)	—		(3	)
Gains on financial instruments	36			—		—		—		36
Interest (expense) income	(173		)	—		1		—		(172	)
Foreign currency (loss) gain	(11		)	2		8		—		(1	)
Intercompany interest (expense) income	(10		)	37		(27	)	—		—
	(158		)	39		(21	)	—		(140	)
Income before income taxes	309			274		96		—		679
Income tax expense	(81		)	(84	)	(82	)	—		(247	)
Equity in earnings of subsidiaries, net of tax	160			57		—		(217	)	—
Net income	388			247		14		(217	)	432
Less net income attributable to the noncontrolling interest	—			—		(44	)	—		(44	)
Net income (loss) attributable to QVC, Inc. shareholder	$	388		247		(30	)	(217	)	388

I-32

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

Condensed consolidating statements of operations - Adjustments

Nine months ended September 30, 2012
(in millions)	Parent issuer- QVC, Inc.			Combined subsidiary guarantors		Combined non-guarantor subsidiaries		Eliminations		Consolidated- QVC, Inc. and subsidiaries
Net revenue	$	(159	)	—		159		—		—
Cost of goods sold	(49		)	—		49		—		—
Gross profit	(110		)	—		110		—		—
Operating expenses:
Operating	(22		)	—		22		—		—
Selling, general and administrative, including stock-based compensation	—			—		—		—		—
Depreciation	—			—		—		—		—
Amortization of intangible assets	—			—		—		—		—
Intercompany management expense (income)	—			—		—		—		—
	(22		)	—		22		—		—
Operating income	(88		)	—		88		—		—
Other (expense) income:
Equity in losses of investee	—			—		—		—		—
Gains on financial instruments	—			—		—		—		—
Interest expense (income)	—			—		—		—		—
Foreign currency (loss) gain	—			—		—		—		—
Intercompany interest (expense) income	—			—		—		—		—
	—			—		—		—		—
Income before income taxes	(88		)	—		88		—		—
Income tax expense	—			—		—		—		—
Equity in earnings of subsidiaries, net of tax	132			—		—		(132	)	—
Net income	44			—		88		(132	)	—
Less net income attributable to the noncontrolling interest	(44		)	—		—		44		—
Net income attributable to QVC, Inc. shareholder	$	—		—		88		(88	)	—

I-33

---

QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

Condensed consolidating statements of cash flows - As previously reported

Nine months ended September 30, 2012
(in millions)	Parent issuer- QVC, Inc.			Combined subsidiary guarantors		Combined non-guarantor subsidiaries		Eliminations		Consolidated- QVC, Inc. and subsidiaries
Operating activities:
Net cash provided by operating activities	$	506		252		117		—		875
Investing activities:
Capital expenditures, net	(38		)	(2	)	(125	)	—		(165	)
Expenditures for cable and satellite television distribution rights	—			(1	)	—		—		(1	)
Cash paid for joint ventures and acquisitions of businesses, net of cash received	(16		)	—		(55	)	—		(71	)
Decrease in restricted cash	2			—		—		—		2
Changes in other noncurrent assets and liabilities	4			(1	)	(4	)	—		(1	)
Intercompany investing activities	304			231		—		(535	)	—
Net cash provided by (used in) investing activities	256			227		(184	)	(535	)	(236	)
Financing activities:
Principal payments of debt and capital lease obligations	(1,073		)	—		(7	)	—		(1,080	)
Principal borrowings of debt from senior secured credit facility	1,493			—		—		—		1,493
Proceeds from issuance of senior secured notes	500			—		—		—		500
Payment of debt origination fees	(8		)	—		—		—		(8	)
Dividends paid to Liberty	(1,682		)	—		—		—		(1,682	)
Dividend paid to noncontrolling interest	—			—		(29	)	—		(29	)
Net short-term intercompany debt borrowings (repayments)	25			(21	)	(4	)	—		—
Intercompany financing activities	(4		)	(568	)	37		535		—
Net cash used in financing activities	(749		)	(589	)	(3	)	535		(806	)
Effect of foreign exchange rate changes on cash and cash equivalents	—			—		(7	)	—		(7	)
Net increase (decrease) in cash and cash equivalents	13			(110	)	(77	)	—		(174	)
Cash and cash equivalents, beginning of period	3			223		334		—		560
Cash and cash equivalents, end of period	$	16		113		257		—		386

I-34

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

Condensed consolidating statements of cash flows - Adjustments

Nine months ended September 30, 2012
(in millions)	Parent issuer- QVC, Inc.			Combined subsidiary guarantors		Combined non-guarantor subsidiaries		Eliminations		Consolidated- QVC, Inc. and subsidiaries
Operating activities:
Net cash (used in) provided by operating activities	$	(88	)	—		88		—		—
Investing activities:
Capital expenditures, net	—			—		—		—		—
Expenditures for cable and satellite television distribution rights, net	—			—		—		—		—
Cash paid for joint ventures and acquisitions of businesses, net of cash received	16			—		(16	)	—		—
Decrease in restricted cash	—			—		—		—		—
Changes in other noncurrent assets	—			—		—		—		—
Intercompany investing activities	181			—		—		(181	)	—
Net cash provided by (used in) investing activities	197			—		(16	)	(181	)	—
Financing activities:
Principal payments of debt and capital lease obligations	—			—		—		—		—
Principal borrowings of debt from senior secured credit facility	—			—		—		—		—
Proceeds from issuance of senior secured notes	—			—		—		—		—
Payment of debt origination fees	—			—		—		—		—
Dividends paid to Liberty	—			—		—		—		—
Dividend paid to noncontrolling interest	—			—		—		—		—
Net short-term intercompany debt borrowings (repayments)	98			(14	)	(84	)	—		—
Intercompany financing activities	(207		)	14		12		181		—
Net cash used in financing activities	(109		)	—		(72	)	181		—
Effect of foreign exchange rate changes on cash and cash equivalents	—			—		—		—		—
Net increase (decrease) in cash and cash equivalents	—			—		—		—		—
Cash and cash equivalents, beginning of period	—			—		—		—		—
Cash and cash equivalents, end of period	$	—		—		—		—		—

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

The effect of the adjustment on equity as of January 1, 2012 was as follows:

(in millions)	Parent issuer- QVC, Inc.			Combined subsidiary guarantors		Combined non-guarantor subsidiaries		Eliminations		Consolidated- QVC, Inc. and subsidiaries
As previously reported	$	7,890		3,465		1,716		(5,052	)	8,019
Adjustment	—			450		465		(915	)	—
Adjusted	$	7,890		3,915		2,181		(5,967	)	8,019

The adjusted net income for each prior interim period in the current fiscal year is presented in the below tables.

(in millions)	Parent issuer- QVC, Inc.			Combined subsidiary guarantors		Combined non-guarantor subsidiaries		Eliminations		Consolidated- QVC, Inc. and subsidiaries
Three months ended June 30, 2013:
Net income - Adjusted	$	139		66		26		(92	)	139
Six months ended June 30, 2013
Net income - Adjusted	245			145		53		(198	)	245
Three months ended March 31, 2013:
Net income - Adjusted	106			79		27		(106	)	106

(in millions)	Parent issuer- QVC, Inc.			Combined subsidiary guarantors		Combined non-guarantor subsidiaries		Eliminations		Consolidated- QVC, Inc. and subsidiaries
Three months ended June 30, 2013:
Net income (loss) - As previously reported	$	139		66		(23	)	(43	)	139
Six months ended June 30, 2013
Net income (loss) - As previously reported	245			145		(31	)	(114	)	245
Three months ended March 31, 2013:
Net income (loss) - As previously reported	106			79		(8	)	(71	)	106

(in millions)	Parent issuer- QVC, Inc.			Combined subsidiary guarantors		Combined non-guarantor subsidiaries		Eliminations		Consolidated- QVC, Inc. and subsidiaries
Three months ended June 30, 2013:
Net income - Adjustment	$	—		—		49		(49	)	—
Six months ended June 30, 2013
Net income - Adjustment	—			—		84		(84	)	—
Three months ended March 31, 2013:
Net income - Adjustment	—			—		35		(35	)	—

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Certain statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our business, product and marketing strategies; Liberty’s proposed Recapitalization of its Liberty Interactive Group tracking stock into the QVC Group tracking stock and a new Liberty Digital Commerce tracking stock; new service offerings; revenue growth and subscriber trends; the recoverability of our goodwill and other long-lived assets; our projected sources and uses of cash and the anticipated impact of certain contingent liabilities related to legal and tax proceedings and other matters arising in the ordinary course of business. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. The following include some but not all of the factors that could cause actual results or events to differ materially from those anticipated:

•	customer demand for our products and services and our ability to adapt to changes in demand;

•	competitor responses to our products and services;

•	the levels of online traffic on our websites and our ability to convert visitors into customers or contributors;

•	uncertainties inherent in the development and integration of new business lines and business strategies;

•	our future financial performance, including availability, terms and deployment of capital;

•	our ability to successfully integrate and recognize anticipated efficiencies and benefits from the businesses we acquire;

•	the ability of suppliers and vendors to deliver products, equipment, software and services;

•	the outcome of any pending or threatened litigation;

•	availability of qualified personnel;

•	changes in, or failure or inability to comply with, government regulations, including, without limitation, regulations of the Federal Communications Commission, and adverse outcomes from regulatory proceedings;

•	changes in the nature of key strategic relationships with partners, distributors, suppliers and vendors;

•	general economic and business conditions and industry trends, including the current economic downturn in certain regions of the world;

•	consumer spending levels, including the availability and amount of individual consumer debt;

•	advertising spending levels;

•	changes in distribution and viewing of television programming, including the expanded deployment of personal video recorders, video on demand and IP television;

•	increased digital TV penetration and the impact on channel positioning of our programs;

•	rapid technological changes;

•	if we fail to protect the security of personal information about our customers, we could be subject to costly government enforcement actions or private litigation and our reputation could suffer;

•	the regulatory and competitive environment of the industries in which we operate;

•	threatened terrorist attacks and ongoing military action around the world;

•	fluctuation in foreign currency exchange rates and political unrest in international markets;

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•	Liberty's dependence on our cash flow for servicing its debt and for other purposes; and

•	The risks identified under "Risk Factors" in Item 1A. of our annual report on Form 10-K for the year ended December 31, 2012.

These forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Quarterly Report, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based.

The following discussion and analysis provides information concerning our results of operations and financial condition. This discussion should be read in conjunction with our accompanying condensed consolidated financial statements and the notes thereto and our Annual Report on Form 10-K for the year ended December 31, 2012.

Overview

QVC is a retailer of a wide range of consumer products, which are marketed and sold primarily by merchandise-focused televised shopping programs, the internet and mobile applications. In the United States, QVC's live programming is distributed via its nationally televised shopping program 24 hours a day, 364 days per year. Internationally, QVC's program services are based in Japan, Germany, the United Kingdom and Italy. QVC-Japan distributes live programming 24 hours a day, QVC-Germany distributes its program 24 hours a day with 23 hours of live programming and QVC-U.K. distributes its program 24 hours a day with 17 hours of live programming. QVC-Italy distributes programming live for 17 hours a day on satellite and digital terrestrial television and an additional seven hours a day of recorded programming on satellite and seven hours a day of general interest programming on digital terrestrial television.

On July 4, 2012, QVC entered into a joint venture with China Broadcasting Corporation, a limited liability company, owned by China National Radio (''CNR'') for a 49% interest in a CNR subsidiary, CNR Home Shopping Co., Ltd. (''CNRS''). CNRS distributes live programming for 15 hours a day and recorded programming for 9 hours a day. This joint venture is being accounted for as an equity method investment recorded as equity in losses of investee in the condensed consolidated statements of operations.

The Company has a joint venture with Mitsui & Co. LTD ("Mitsui") for a television and multimedia retailing service in Japan. QVC-Japan is owned 60% by the Company and 40% by Mitsui. The Company and Mitsui share in all profits and losses based on their respective ownership interests.

We are an indirect wholly owned subsidiary of Liberty (Nasdaq: LINTA, LINTB, LVNTA and LVNTB), which owns interests in a broad range of digital commerce businesses. We are attributed to the Liberty Interactive tracking stock, which tracks the assets and liabilities of Liberty's Interactive Group (the "Interactive Group"). The Interactive Group does not represent a separate legal entity; rather, it represents those businesses, assets and liabilities that are attributed to that group. Liberty attributed to its Interactive Group those businesses primarily focused on digital commerce. Liberty also attributed to its Interactive Group its 38% ownership interest in HSN, Inc. ("HSN"), one of our two closest televised shopping competitors.

Liberty announced that its board has authorized management to pursue a plan to recapitalize (the "Recapitalization") its Liberty Interactive Group tracking stock into two new tracking stocks, one (currently the Liberty Interactive common stock) to be renamed the QVC Group common stock and the other to be designated as the Liberty Digital Commerce common stock. In the Recapitalization, record holders of Series A and Series B Liberty Interactive common stock would receive one share of the corresponding series of Liberty Digital Commerce common stock for each 10 shares of the renamed QVC Group common stock held by them as of the effective date. Liberty intends to attribute to the Liberty Digital Commerce Group its operating subsidiaries Provide Commerce, Inc.; Backcountry.com, Inc.; Bodybuilding.com, LLC; CommerceHub; Right Start and Evite along with cash and certain liabilities. The QVC Group, which is currently known as the Liberty Interactive Group, would have attributed to it our Company and Liberty’s approximate 38% interest in HSN, along with cash and certain liabilities.

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Strategies and challenges of business units

QVC's goal is to become the preeminent global multimedia shopping community for people who love to shop, and to offer a shopping experience that is as much about entertainment and enrichment as it is about buying. QVC's objective is to provide an integrated shopping experience that utilizes all forms of media including television, the internet and mobile devices. In 2013, QVC intends to employ several strategies to achieve these goals and objectives. Among these strategies are to (i) extend the breadth, relevance and exposure of the QVC brand; (ii) source products that represent unique quality and value; (iii) create engaging presentation content in televised programming, mobile and online; (iv) leverage customer loyalty and continue multi-platform expansion; and (v) create a compelling and differentiated customer experience. In addition, QVC expects to expand globally by leveraging its existing systems, infrastructure and skills in other countries around the world.

QVC's future net revenue growth will primarily depend on international expansion, sales growth from e-commerce and mobile platforms and additions of new customers from households already receiving QVC's television programming. QVC's future net revenue may also be affected by (i) the willingness of cable television and direct-to-home satellite system operators to continue carrying QVC's programming service; (ii) QVC's ability to maintain favorable channel positioning, which may become more difficult due to governmental action or from distributors converting analog customers to digital; (iii) changes in television viewing habits because of personal video recorders, video-on-demand and internet video services; and (iv) general economic conditions.

In March 2013, QVC-U.S. launched over-the-air broadcasting in designated U.S. markets that can be accessed by any television household in such markets, regardless of whether it subscribes to a paid television service. This will allow QVC-U.S. to reach new customers who previously did not have access to the program through other television platforms.

In August 2013, QVC-U.S. launched an additional channel, "QVC Plus," which is being distributed through cable and satellite systems. The channel offers the same programming as the live channel, but on a three hour delay, which will allow viewers to have access to a broader range of QVC programming options, as well as more relevant programming for viewers in differing time zones.

The current economic uncertainty in various regions of the world in which our subsidiaries and affiliates operate could adversely affect demand for our products and services since a substantial portion of our revenue is derived from discretionary spending by individuals, which typically falls during times of economic instability. Global financial markets continue to experience disruptions, including increased volatility and diminished liquidity and credit availability. In particular, the European debt crisis, particularly most recently in Greece, Italy, Ireland, Portugal and Spain, and related European financial restricting efforts, may cause volatility in the European currencies and reduce the purchasing power of European customers. In the event that one or more countries were to replace the Euro with their legacy currency, then our revenue and operating results in such countries, or Europe generally, would likely be adversely affected until stable exchange rates were established and economic confidence restored. In addition, the European crisis is contributing to instability in global credit markets. The world has experienced a global macroeconomic downturn, and if economic and financial market conditions in the United States or other key markets, including Europe, remain uncertain, persist, or deteriorate further, our customers may respond by suspending, delaying, or reducing their discretionary spending. A suspension, delay or reduction in discretionary spending could adversely affect revenue. Accordingly, our ability to increase or maintain revenue and earnings could be adversely affected to the extent that relevant economic environments remain weak or decline further. Such weak economic conditions may also inhibit our expansion into new European and other markets. We currently are unable to predict the extent of any of these potential adverse effects.

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Results of Operations

QVC's operating results were as follows:

	Three months ended September 30,					Nine months ended September 30,
(in millions)	2013			2012		2013		2012
Net revenue	$	1,947		1,918		5,882		5,824
Costs of goods sold	1,222			1,216		3,701		3,680
Gross profit	725			702		2,181		2,144
Operating expenses:
Operating	176			171		520		522
SG&A expenses (excluding stock‑based compensation)	141			134		415		397
Adjusted OIBDA	408			397		1,246		1,225
Stock-based compensation	10			8		29		21
Depreciation	26			28		89		92
Amortization of intangible assets	113			101		324		293
Operating income	259			260		804		819
Other (expense) income:
Equity in losses of investee	(2		)	(3	)	(3	)	(3	)
Gains on financial instruments	—			12		15		36
Interest expense, net	(52		)	(61	)	(165	)	(172	)
Foreign currency (loss) gain	(1		)	1		(2	)	(1	)
Loss on extinguishment of debt	—			—		(57	)	—
	(55		)	(51	)	(212	)	(140	)
Income before income taxes	204			209		592		679
Income tax expense	(70		)	(73	)	(213	)	(247	)
Net income	134			136		379		432
Less net income attributable to the noncontrolling interest	(9		)	(15	)	(34	)	(44	)
Net income attributable to QVC, Inc. shareholder	$	125		121		345		388

Net revenue

Net revenue was generated in the following geographical areas:

	Three months ended September 30,					Nine months ended September 30,
(in millions)	2013			2012		2013		2012
QVC-U.S.	$	1,303		1,237		3,912		3,757
QVC-Japan	236			301		752		900
QVC-Germany	224			211		681		668
QVC-U.K.	156			149		449		445
QVC-Italy	28			20		88		54
Consolidated QVC	$	1,947		1,918		5,882		5,824

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QVC's consolidated net revenue increased 1.5% and 1.0% during the three and nine month periods ended September 30, 2013, respectively, as compared to the corresponding periods in the prior year. The three month increase in net revenue was primarily comprised of $58 million due to a 2.6% increase in average selling price per unit (“ASP”) and $49 million due to a 2.3% increase in units shipped. These amounts were partially offset by $50 million in unfavorable foreign currency rates primarily in Japan, and to a lesser extent, in the U.K., which were partially offset by favorable foreign currency rates in Germany and Italy. Additionally, net revenue was also negatively impacted by $27 million due to an increase in estimated product returns, primarily in the U.S., Japan and Germany. The increase in the U.S. was primarily due to sales volume and the increases in Japan and Germany were due, in part, to a greater mix of apparel products that return at higher rates than other categories and higher return rates within this category. The nine month increase in net revenue was primarily comprised of $189 million due to a 2.9% increase in ASP and $97 million due to a 1.5% increase in units shipped. These amounts were partially offset by $153 million in unfavorable foreign currency rates primarily in Japan, and to a lesser extent, in the U.K., which were partially offset by favorable foreign currency rates in Germany and Italy. Additionally, net revenue was also negatively impacted by $72 million due to an increase in estimated product returns, primarily in Japan and Germany, due in part to a greater mix of apparel products that return at higher rates than other categories as well as higher return rates within this category.

During the three and nine month periods ended September 30, 2013, the changes in revenue and expenses were affected by changes in the exchange rates for the Japanese Yen, the Euro and the U.K. Pound Sterling. In the event the U.S. Dollar strengthens against these foreign currencies in the future, QVC's revenue and operating cash flow will be negatively affected.

The percentage increase (decrease) in net revenue for each of QVC's geographic areas in U.S. Dollars and in local currency was as follows:

	Three months ended September 30,				Nine months ended September 30,
	2013				2013
	U.S. Dollars		Local currency		U.S. Dollars		Local currency
QVC-U.S.	5.3	%	5.3	%	4.1	%	4.1	%
QVC-Japan	(21.6	)%	(1.4	)%	(16.4	)%	1.7	%
QVC-Germany	6.2	%	0.2	%	1.9	%	(0.7	)%
QVC-U.K.	4.7	%	6.9	%	0.9	%	3.3	%
QVC-Italy	40.0	%	26.9	%	63.0	%	55.0	%

QVC-U.S.' growth in net revenue for the three months ended September 30, 2013 was primarily due to a 4.8% increase in ASP and a 0.7% increase in units shipped. QVC-U.S.' growth in net revenue for the nine months ended September 30, 2013 was primarily due to a 4.6% increase in ASP, partially offset by a 0.5% decrease in units shipped. For both periods, QVC-U.S.' shipped sales increased mainly due to growth in the beauty, home and accessories categories. For the three and nine month periods ended September 30, 2013, the decline at QVC-Japan was primarily due to a decrease in accessories shipped sales and an increase in estimated product returns, offset by shipped sales growth in the apparel category. For the three months ended September 30, 2013, QVC-Germany's shipped sales in local currency increased mainly due to greater apparel and home sales, offset by a decrease in jewelry and beauty as well as an increase in estimated product returns. For the nine months ended September 30, 2013, QVC-Germany's shipped sales in local currency increased mainly due to greater apparel and accessories sales, offset by a decrease in jewelry and an increase in estimated product returns. For the three and nine month periods ended September 30, 2013, QVC-U.K.'s shipped sales growth in local currency was primarily related to the home category, while the three month period also had greater accessories sales. For the three and nine month periods ended September 30, 2013, QVC-Italy's sales consisted primarily of home, beauty and apparel products.

Gross profit

QVC's gross profit percentage was 37.2% and 37.1% for the three and nine month periods ended September 30, 2013, respectively, compared to 36.6% and 36.8% for the three and nine month periods ended September 30, 2012, respectively. For the three months ended September 30, 2013, the increase in the gross profit percentage was primarily due to higher product margins in the U.S. and the U.K. The gross profit percentage remained relatively consistent for the nine month period presented compared to the prior year.

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Operating expenses

QVC's operating expenses are principally comprised of commissions, order processing and customer service expenses, credit card processing fees, telecommunications expenses and production costs. Operating expenses increased $5 million or 2.9% and decreased $2 million or 0.4% for the three and nine month periods ended September 30, 2013, respectively, as compared to the corresponding periods in the prior year. For the three months ended September 30, 2013, the increase was primarily due to an $8 million increase in commissions expense and a $2 million increase in credit card fees, offset by a $6 million benefit of exchange rates. For the nine months ended September 30, 2013, the decrease was primarily due to a $16 million benefit of exchange rates, offset by a $10 million increase in commissions expense and a $5 million increase in credit card fees. For both periods, the increase in commissions expense was primarily due to the sales increase in the U.S. and additional programming distribution expenses in Japan, while the increase in credit card fees was primarily the result of the sales increase in the U.S.

Selling, general and administrative expenses (excluding stock-based compensation)

QVC's SG&A expenses include personnel, information technology, provision for doubtful accounts, credit card income and marketing and advertising expenses. Such expenses increased from 7.0% to 7.2% and increased from 6.8% to 7.1% as a percentage of net revenue for the three and nine month periods ended September 30, 2013, respectively. SG&A expenses increased $7 million and $18 million for the three and nine month periods ended September 30, 2013, respectively, due to a variety of factors.

For the three months ended September 30, 2013, the change was primarily due to an $8 million increase in personnel expenses due to merit, benefits and bonus increases primarily in the U.S., Japan and the U.K. and $6 million primarily due to information technology and related expenses in Germany and the U.K. These amounts were offset by a $3 million benefit of exchange rates and a $2 million decrease in marketing expenses, primarily in Italy. For the nine months ended September 30, 2013, the change was primarily due to a $22 million increase in personnel expenses due to merit, benefits and bonus increases primarily in the U.S. and the U.K. and $10 million primarily due to information technology and related expenses in Germany and the U.K. These amounts were offset by a $10 million benefit of exchange rates and a $5 million decrease in U.S. franchise and sales tax expenses.

Stock-based compensation

Stock-based compensation includes compensation related to options and restricted stock granted to certain officers and employees. QVC recorded $10 million and $8 million of stock-based compensation expense for the three months ended September 30, 2013 and 2012, respectively, and $29 million and $21 million of stock-based compensation expense for the nine months ended September 30, 2013 and 2012, respectively. The increase in stock-based compensation expense was primarily the result of a greater number of shares being expensed on a higher measurement basis and the one-time option exchange for certain officers in December 2012.

Depreciation and amortization

Depreciation and amortization consisted of the following:

	Three months ended September 30,					Nine months ended September 30,
(in millions)	2013			2012		2013		2012
Affiliate agreements	$	38		37		113		113
Customer relationships	43			42		129		128
Acquisition related amortization	81			79		242		241
Property, plant and equipment	26			28		89		92
Software amortization	25			16		61		40
Channel placement amortization and related expenses	7			6		21		12
Total depreciation and amortization	$	139		129		413		385

In regards to software amortization, during the third quarter of 2013, the amortization of certain capitalized software in Germany, the UK and Italy was accelerated in the amount of $6 million.

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Equity in losses of investee

The losses were associated with our joint venture in China that is accounted for as an equity method investment.

Gains on financial instruments

In March 2013, QVC's notional interest rate swaps of $3.1 billion expired. These swap arrangements did not qualify as cash flow hedges under U.S. GAAP. Accordingly, changes in the fair value of the swaps were reflected in gain on financial instruments in the accompanying condensed consolidated statements of operations.

This financial statement line item also includes a gain that resulted from the reversal of a liability for contingent consideration associated with a previous acquisition.

Interest expense, net

For the three and nine month periods ended September 30, 2013, consolidated net interest expense decreased 14.8% and 4.1%, respectively, as compared to the corresponding periods in the prior year. For both periods, the decreases were primarily due to lower average interest rates.

Foreign currency loss

Certain loans between QVC and its subsidiaries are deemed to be short-term in nature, and accordingly, the translation of these loans is recorded on the statements of operations. The change in foreign currency loss was primarily due to variances in interest and operating payables balances between QVC and its international subsidiaries denominated in the currency of the subsidiary and the effects of currency exchange rate changes on those balances.

Loss on extinguishment of debt

During the first half of 2013, QVC redeemed $500 million of its 7.125% Senior Secured Notes due 2017 and $231 million of its 7.5% Senior Secured Notes due 2019. The loss was primarily due to premiums paid for the tenders and calls of these notes. Refer to note six to the accompanying condensed consolidated financial statements and the below section, "Financial Position, Liquidity and Capital Resources," for further details.

Income taxes

Our effective tax rate for the three and nine month periods ended September 30, 2013 was 34.3% and 36.0%, respectively, and our effective tax rate for the three and nine month periods ended September 30, 2012 was 34.9% and 36.4%, respectively. The three month rate differs from U.S. federal income tax rate of 35.0% primarily due to state tax expense and state law changes, whereas the nine month rate differs from the U.S. federal income tax rate of 35.0% primarily due to state tax expense.

Adjusted Operating Income before Depreciation and Amortization (Adjusted OIBDA)

QVC defines Adjusted OIBDA as net revenue less cost of goods sold, operating expenses and selling, general and administrative expenses (excluding stock-based compensation). QVC's chief operating decision maker and management team use this measure of performance in conjunction with other measures to evaluate the businesses and make decisions about allocating resources among the businesses. QVC believes that this is an important indicator of the operational strength and performance of the businesses, including the ability to service debt and fund capital expenditures. In addition, this measure allows QVC to view operating results, perform analytical comparisons and perform benchmarking among its businesses and identify strategies to improve performance. This measure of performance excludes such costs as depreciation, amortization and stock-based compensation that are included in the measurement of operating income pursuant to U.S. GAAP. Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with U.S. GAAP.

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The primary material limitations associated with the use of Adjusted OIBDA as compared to GAAP results are (i) it may not be comparable to similarly titled measures used by other companies in the industry, and (ii) it excludes financial information that some may consider important in evaluating QVC's performance. QVC compensates for these limitations by providing disclosure of the difference between Adjusted OIBDA and GAAP results, including providing a reconciliation of Adjusted OIBDA to GAAP results, to enable investors to perform their own analysis of QVC's operating results. Refer to note 11 to the accompanying condensed consolidated financial statements for a reconciliation of Adjusted OIBDA to Income before income taxes.

Seasonality

QVC's business is seasonal due to a higher volume of sales in the fourth calendar quarter related to year-end holiday shopping. In recent years, QVC has earned on average between 22% and 23% of its revenue in each of the first three quarters of the year and 32% of its revenue in the fourth quarter of the year.

Financial Position, Liquidity and Capital Resources

General

Historically, QVC's primary sources of cash have been cash provided by operating activities and borrowings. In general, QVC uses this cash to fund its operations, make capital purchases, make payments to Liberty, make interest payments and minimize QVC's outstanding senior secured credit facility balance.

As of September 30, 2013, substantially all of QVC's cash and cash equivalents were invested in AAA rated money market funds and time deposits with banks rated equal to or above A.

Master Promissory Note with Liberty

On September 16, 2013, QVC entered into a master promissory note with Liberty to borrow a principal amount of $300 million. Interest on the outstanding principal balance will accrue at a fixed rate of 0.5% per annum, payable quarterly. The proceeds from this loan were used to pay down a portion of the Company's outstanding senior secured credit facility balance. The master promissory note is payable in full on March 15, 2014. All or any portion of the outstanding balance of the master promissory note may be prepaid at any time without penalty or premium. The master promissory note is unsecured and not guaranteed by any QVC subsidiaries.

QVC repaid $150 million of the outstanding principal balance on the master promissory note with Liberty subsequent to September 30, 2013.

Senior Secured Credit Facility

On March 1, 2013, we amended and restated our senior secured credit facility, which provides for a $2.0 billion revolving credit facility with a $250 million sub-limit for standby letters of credit and $1.0 billion of uncommitted incremental revolving loan commitments or incremental term loans. QVC may elect that the loans extended under the senior secured credit facility bear interest at a rate per annum equal to the ABR Rate or LIBOR, as each is defined in the senior secured credit facility agreement, plus a margin of 0.25% to 2.00% depending on various factors. Each loan may be prepaid at any time and from time to time without penalty other than customary breakage costs. Any amounts prepaid on the revolving credit facility may be reborrowed. Payment of loans may be accelerated following certain customary events of default. The senior secured credit facility is a multi-currency facility. The senior secured credit facility is secured by the stock of QVC. We had $1.3 billion available under the terms of the senior secured credit facility at September 30, 2013.

The purpose of the amendment was to, among other things, extend the maturity of our senior secured credit facility to March 1, 2018 and lower the interest rate on borrowings.

The senior secured credit facility contains certain affirmative and negative covenants, including certain restrictions with respect to, among other things: incurring additional indebtedness; creating liens on property or assets; making certain loans or investments; selling or disposing of assets; paying certain dividends and other restricted payments; dissolving, consolidating or merging; entering into certain transactions with affiliates; entering into sale or leaseback transactions; restricting subsidiary distributions; and limiting QVC's ratio of consolidated total debt to consolidated Adjusted OIBDA.

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Senior Secured Notes

On March 4, 2013, QVC announced the commencement of the Offers for any and all of its outstanding $500 million in aggregate principal amount of 7.125% Senior Secured Notes due 2017 and up to $250 million in aggregate principal amount of its 7.5% Senior Secured Notes due 2019. On March 18, 2013, $124 million of the 7.125% Senior Secured Notes due 2017 were tendered pursuant to the Offers, whereby holders of the 7.125% Senior Secured Notes due 2017 received consideration of $1,039.40 for each $1,000 principal amount of tendered 7.125% Senior Secured Notes due 2017. On March 18, 2013, $231 million of the 7.5% Senior Secured Notes due 2019 were tendered pursuant to the Offers, whereby holders of the 7.5% Senior Secured Notes due 2019 received consideration of $1,120 for each $1,000 principal amount of tendered 7.5% Senior Secured Notes due 2019. On April 17, 2013, QVC completed the redemption of the remaining $376 million principal amount of its 7.125% Senior Secured Notes due 2017, whereby holders received consideration of $1,035.63 for each $1,000 principal amount of tendered 7.125% Senior Secured Notes due 2017.

On March 18, 2013, QVC issued $750 million principal amount of 4.375% Senior Secured Notes due 2023 at an issue price of 99.968% and issued $300 million principal amount of 5.95% Senior Secured Notes due 2043 at an issue price of 99.973%. These notes are secured by the stock of QVC, pari passu with the senior secured credit facility and QVC's existing notes. Interest is payable semi-annually.

The net proceeds from the issuance of these instruments were used to reduce the outstanding principal under QVC's existing 7.125% Senior Secured Notes due 2017, the 7.5% Senior Secured Notes due 2019 and the senior secured credit facility, as well as for general corporate purposes.

Additionally, as a result of these refinancing transactions, we incurred an extinguishment loss of $57 million for the nine months ended September 30, 2013, recorded as loss on extinguishment of debt in the condensed consolidated statements of operations.

Interest Rate Swap Arrangements

In March 2013, QVC's notional interest rate swaps of $3.1 billion expired. These swap arrangements did not qualify as cash flow hedges under U.S. GAAP. Accordingly, changes in the fair value of the swaps were reflected in gain on financial instruments in the accompanying condensed consolidated statements of operations.

Other Debt Related Information

QVC was in compliance with all of its debt covenants at September 30, 2013.

During the quarter, there were no significant changes to QVC's debt credit ratings.

There are no restrictions under the debt agreements on QVC's ability to pay dividends or make other restricted payments if QVC is not in default on its senior secured notes or credit facility, and QVC's consolidated leverage ratio would be no greater than 3.25 to 1.0. As a result, Liberty will, in many instances, be permitted to rely on QVC's cash flow for servicing Liberty's debt and for other purposes, including repurchases of Liberty's common stock, or to fund acquisitions or other operational requirements of Liberty and its subsidiaries. These events may deplete QVC's equity or require QVC to borrow under the senior secured credit facility, increasing QVC's leverage and decreasing liquidity. QVC has made significant distributions to Liberty in the past.

Additional Cash Flow Information

During the nine months ended September 30, 2013, QVC's primary uses of cash were $2,161 million of principal payments on debt and capital lease obligations, $900 million of dividends to Liberty, $162 million of capital and cable and satellite television distribution rights expenditures, $46 million in premiums paid for the redemption of QVC's existing 7.125% Senior Secured Notes due 2017 and partial redemption of QVC's 7.5% Senior Secured Notes due 2019 and a $25 million dividend payment from QVC-Japan to Mitsui. These uses of cash were funded primarily with $1,198 million of principal borrowings on the senior secured credit facility, $1,050 million in proceeds from the issuance of the 4.375% Senior Secured Notes due 2023 and the 5.95% Senior Secured Notes due 2043, $603 million of cash provided by operating activities and a $300 million master promissory note with Liberty. As of September 30, 2013, QVC's cash balance (excluding restricted cash) was $369 million.

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During the nine months ended September 30, 2012, QVC's primary uses of cash were $1,682 million of dividends to Liberty, $1,080 million of principal payments on debt and capital lease obligations,$165 million of capital expenditures, $71 million paid related to investments in joint ventures and acquisitions, net of cash received, and a $29 million dividend payment from QVC-Japan to Mitsui. These uses of cash were funded primarily with $1,493 million of principal borrowings on the senior secured credit facility, $875 million of cash provided by operating activities and $500 million in proceeds from the issuance of the 5.125% Senior Secured Notes due 2022. As of September 30, 2012, QVC's cash balance (excluding restricted cash) was $386 million.

The change in cash provided by operating activities for the nine months ended September 30, 2013 compared to the prior period was primarily due to variances in accrued liabilities balances. The change in accrued liabilities was primarily due to variances in taxes payable balances as a result of timing of payments.

As of September 30, 2013, $183 million of the $369 million in cash was held by foreign subsidiaries. Cash in foreign subsidiaries is generally accessible, but certain tax consequences may reduce the net amount of cash we are able to utilize for U.S. purposes. QVC accrues taxes on the unremitted earnings of its international subsidiaries. Approximately one-half of this foreign cash balance was that of QVC-Japan. QVC owns 60% of QVC-Japan and shares all profits and losses with the 40% minority interest holder, Mitsui. We believe that we currently have appropriate legal structures in place to repatriate foreign cash as tax efficiently as possible and meet the business needs of QVC.

Other

Capital expenditures spending in 2013 is expected to be approximately $205 million, including $121 million already expended.

Refer to the chart under the "Off-balance Sheet Arrangements and Aggregate Contractual Obligations" section below for additional information concerning the amount and timing of expected future payments under QVC's contractual obligations at September 30, 2013.

QVC has contingent liabilities related to legal and tax proceedings and other matters arising in the ordinary course of business. Although it is reasonably possible QVC may incur losses upon the conclusion of such matters, an estimate of any loss or range of loss cannot be made. In the opinion of management, it is expected that amounts, if any, that may be required to satisfy such contingencies will not be material in relation to the accompanying condensed consolidated financial statements.

Off-balance Sheet Arrangements and Aggregate Contractual Obligations

Information concerning the amount and timing of required payments, both accrued and off-balance sheet, under our contractual obligations at September 30, 2013 is summarized below:

	Payments due by period
(in millions)	Total			Remainder of 2013		2014-2015		2016-2017		Thereafter
Debt (1)	$	3,792		—		300		—		3,492
Interest payments (2)	1,804			52		381		377		994
Capital lease obligations (including imputed interest)	89			4		23		22		40
Operating lease obligations	170			10		32		21		107

(1) Amounts exclude capital lease obligations and the issue discounts on the 7.5%, 4.375% and 5.95% Senior Secured Notes.

(2) Amounts (i) are based on the terms of QVC's senior secured credit facility and senior secured notes, (ii) assumes the interest rates on the floating rate debt remain constant at the rates in effect as of September 30, 2013, (iii) assumes that our existing debt is repaid at maturity and (iv) excludes capital lease obligations.

Our purchase obligations did not materially change as of September 30, 2013.

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Recent Accounting Pronouncements

In February 2013, the FASB issued ASU No. 2013-02, which amends ASC Topic 220, Comprehensive Income and requires that companies present information about reclassification adjustments from accumulated other comprehensive income in their interim and annual financial statements. The standard requires that companies present either in a single note, or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source and the income statement line items affected by the reclassification. If a component is not required to be reclassified to net income in its entirety, companies will instead cross reference to the related footnote for additional information. QVC adopted this guidance as of January 1, 2013, and adoption did not have an impact on QVC's condensed consolidated financial position, results of operations or cash flows.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

QVC is exposed to market risk in the normal course of business due to ongoing investing and financial activities and the conduct of operations by subsidiaries in different foreign countries. Market risk refers to the risk of loss arising from adverse changes in stock prices, interest rates and foreign currency exchange rates. The risk of loss can be assessed from the perspective of adverse changes in fair values, cash flows and future earnings. QVC has established procedures and internal processes governing the management of market risks and the use of financial instruments to manage exposure to such risks.

Interest rate risk

QVC is exposed to changes in interest rates primarily as a result of borrowing activities. QVC manages the exposure to interest rates by maintaining what QVC believes is an appropriate mix of fixed and variable rate debt. QVC believes this best protects itself from interest rate risk. As of September 30, 2013, QVC's debt, excluding capital leases and unamortized discounts, was comprised of $3.1 billion of fixed rate debt and $673 million of variable rate debt. The weighted average rate of all of QVC's variable rate debt was 2.0% and the weighted average rate of all of QVC's fixed rate debt (including capital leases) was 5.5% as of September 30, 2013.

In March 2013, QVC's notional interest rate swaps of $3.1 billion expired. These swap arrangements did not qualify as cash flow hedges under U.S. GAAP. Accordingly, changes in the fair value of the swaps were reflected in gain on financial instruments in the accompanying condensed consolidated statements of operations.

Foreign currency exchange rate risk

QVC is exposed to foreign exchange rate fluctuations related to the monetary assets and liabilities and the financial results of its foreign subsidiaries. Assets and liabilities of foreign subsidiaries for which the functional currency is the local currency are translated into U.S. Dollars at period-end exchange rates, and the statements of operations are translated at the average exchange rate for the period. Exchange rate fluctuations on translating foreign currency financial statements into U.S. Dollars that result in unrealized gains or losses are referred to as translation adjustments. Cumulative translation adjustments are recorded in other comprehensive income as a separate component of shareholder's equity. Transactions denominated in currencies other than the functional currency are recorded based on exchange rates at the time such transactions arise. Subsequent changes in exchange rates result in transaction gains and losses, which are reflected in income as unrealized (based on period-end transactions) or realized upon settlement of the transactions. Cash flows from operations in foreign countries are translated at the average rate for the period. Accordingly, QVC may experience economic loss and a negative impact on earnings and equity with respect to its holdings solely as a result of foreign currency exchange rate fluctuations. QVC's reported Adjusted OIBDA for the three and nine month periods ended September 30, 2013 would have been impacted by approximately $1 million and $3 million, respectively, for every 1% change in foreign currency exchange rates relative to the U.S. Dollar.

The credit facility provides QVC the ability to borrow in multiple currencies. This allows QVC to somewhat mitigate foreign currency exchange rate risks. As of September 30, 2013, QVC had borrowings of 5.5 billion Japanese Yen, equivalent to $56 million based on an exchange rate of 98.23 Japanese Yen per U.S. Dollar, outstanding under the credit facility. As of September 30, 2013, the foreign currency exchange exposure to these borrowings approximated $1 million for every 1% change in the Japanese Yen exchange rate per U.S. Dollar.

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Item 4. Controls and Procedures

In accordance with Exchange Act Rules 13a-15 and 15d-15 ("the Exchange Act"), the Company carried out an evaluation, under the supervision and with the participation of management, including its chief executive officer and its principal accounting and financial officer (the "Executives"), of the effectiveness of its disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Executives concluded that the Company's disclosure controls and procedures were effective as of September 30, 2013 to provide reasonable assurance that information required to be disclosed in its reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.

There has been no change in the Company's internal control over financial reporting that occurred during the three months ended September 30, 2013 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 6. Exhibits

(a) Exhibits

Listed below are the exhibits which are filed as a part of this Report (according to the number assigned to them in Item 601 of Regulation S-K):

31.1		Rule 13a-14(a)/15d-14(a) Certification*
31.2		Rule 13a-14(a)/15d-14(a) Certification*
32.1		Section 1350 Certification*
101.INS		XBRL Instance Document**
101.SCH		XBRL Taxonomy Extension Schema Document**
101.CAL		XBRL Taxonomy Calculation Linkbase Document**
101.LAB		XBRL Taxonomy Label Linkbase Document**
101.PRE		XBRL Taxonomy Presentation Linkbase Document**
101.DEF		XBRL Taxonomy Definition Document**

*Filed herewith.

**Furnished herewith.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

QVC, Inc.

Date: November 7, 2013	By:/s/ MICHAEL A. GEORGE
	Michael A. George
	President and Chief Executive Officer (Principal Executive Officer)
Date: November 7, 2013	By:/s/ THADDEUS J. JASTRZEBSKI
	Thaddeus J. Jastrzebski
	Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

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EXHIBIT INDEX

Listed below are the exhibits which are filed as a part of this Report (according to the number assigned to them in Item 601 of Regulation S-K):

31.1		Rule 13a-14(a)/15d-14(a) Certification*
31.2		Rule 13a-14(a)/15d-14(a) Certification*
32.1		Section 1350 Certification*
101.INS		XBRL Instance Document**
101.SCH		XBRL Taxonomy Extension Schema Document**
101.CAL		XBRL Taxonomy Calculation Linkbase Document**
101.LAB		XBRL Taxonomy Label Linkbase Document**
101.PRE		XBRL Taxonomy Presentation Linkbase Document**
101.DEF		XBRL Taxonomy Definition Document**

*Filed herewith.

**Furnished herewith.

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