000125469912/3112021Q2FALSENon-accelerated Filer941241,4331,5440.010.01113.5004.3754.8504.4504.7504.3755.4505.9506.3756.25000012546992021-01-012021-06-300001254699qvc:A6.375SeniorSecuredNotesMember2021-01-012021-06-300001254699qvc:A625SeniorSecuredNotesMember2021-01-012021-06-30xbrli:shares00012546992021-06-30iso4217:USD00012546992020-12-31iso4217:USDxbrli:shares00012546992021-04-012021-06-3000012546992020-04-012020-06-3000012546992020-01-012020-06-300001254699qvc:QurateMember2021-01-012021-06-300001254699qvc:QurateMember2020-01-012020-06-3000012546992019-12-3100012546992020-06-300001254699us-gaap:CommonStockMember2019-12-310001254699us-gaap:AdditionalPaidInCapitalMember2019-12-310001254699us-gaap:RetainedEarningsMember2019-12-310001254699us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310001254699us-gaap:NoncontrollingInterestMember2019-12-310001254699us-gaap:RetainedEarningsMember2020-01-012020-06-300001254699us-gaap:NoncontrollingInterestMember2020-01-012020-06-300001254699us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-06-300001254699us-gaap:AdditionalPaidInCapitalMember2020-01-012020-06-300001254699us-gaap:CommonStockMember2020-06-300001254699us-gaap:AdditionalPaidInCapitalMember2020-06-300001254699us-gaap:RetainedEarningsMember2020-06-300001254699us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-300001254699us-gaap:NoncontrollingInterestMember2020-06-300001254699us-gaap:CommonStockMember2020-03-310001254699us-gaap:AdditionalPaidInCapitalMember2020-03-310001254699us-gaap:RetainedEarningsMember2020-03-310001254699us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-03-310001254699us-gaap:NoncontrollingInterestMember2020-03-3100012546992020-03-310001254699us-gaap:RetainedEarningsMember2020-04-012020-06-300001254699us-gaap:NoncontrollingInterestMember2020-04-012020-06-300001254699us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-04-012020-06-300001254699us-gaap:AdditionalPaidInCapitalMember2020-04-012020-06-300001254699us-gaap:CommonStockMember2020-12-310001254699us-gaap:AdditionalPaidInCapitalMember2020-12-310001254699us-gaap:RetainedEarningsMember2020-12-310001254699us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001254699us-gaap:NoncontrollingInterestMember2020-12-310001254699us-gaap:RetainedEarningsMember2021-01-012021-06-300001254699us-gaap:NoncontrollingInterestMember2021-01-012021-06-300001254699us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-06-300001254699us-gaap:AdditionalPaidInCapitalMember2021-01-012021-06-300001254699us-gaap:CommonStockMember2021-06-300001254699us-gaap:AdditionalPaidInCapitalMember2021-06-300001254699us-gaap:RetainedEarningsMember2021-06-300001254699us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-300001254699us-gaap:NoncontrollingInterestMember2021-06-300001254699us-gaap:CommonStockMember2021-03-310001254699us-gaap:AdditionalPaidInCapitalMember2021-03-310001254699us-gaap:RetainedEarningsMember2021-03-310001254699us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310001254699us-gaap:NoncontrollingInterestMember2021-03-3100012546992021-03-310001254699us-gaap:RetainedEarningsMember2021-04-012021-06-300001254699us-gaap:NoncontrollingInterestMember2021-04-012021-06-300001254699us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-012021-06-300001254699us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-30xbrli:pure0001254699qvc:QvcJapanMember2021-06-300001254699qvc:QvcJapanMemberqvc:MitsuiDomain2021-06-300001254699qvc:CnrHomeShoppingCoLtdMember2021-06-300001254699us-gaap:RevolvingCreditFacilityMember2018-12-310001254699us-gaap:RevolvingCreditFacilityMemberqvc:TrancheOneSharedwithRelatedPartyMember2018-12-310001254699qvc:ZulilyllcMember2021-06-300001254699qvc:QVCtoZulilyallocatedexpensesMemberqvc:ZulilyllcMember2021-01-012021-06-300001254699qvc:QVCtoZulilyallocatedexpensesMemberqvc:ZulilyllcMember2020-01-012020-06-300001254699qvc:ZulilytoQVCallocatedexpensesMemberqvc:ZulilyllcMember2021-01-012021-06-300001254699qvc:ZulilytoQVCallocatedexpensesMemberqvc:ZulilyllcMember2020-01-012020-06-300001254699qvc:QVCToZulilyLoanMemberqvc:ZulilyllcMember2021-06-300001254699qvc:QVCToZulilyLoanMemberqvc:ZulilyllcMember2021-01-012021-06-300001254699qvc:CornerstoneBrandsIncMemberqvc:QVCtoCBIAllocatedExpensesMember2021-01-012021-06-300001254699qvc:CornerstoneBrandsIncMemberqvc:QVCtoCBIAllocatedExpensesMember2020-01-012020-06-300001254699qvc:CornerstoneBrandsIncMemberqvc:CBItoQVCallocatedexpensesMember2021-01-012021-06-300001254699qvc:CornerstoneBrandsIncMemberqvc:CBItoQVCallocatedexpensesMember2020-01-012020-06-3000012546992020-12-300001254699qvc:TelevisionDistributionRightsMember2021-06-300001254699qvc:TelevisionDistributionRightsMember2020-12-310001254699qvc:TelevisionDistributionRightsMember2021-04-012021-06-300001254699qvc:TelevisionDistributionRightsMember2020-04-012020-06-300001254699qvc:TelevisionDistributionRightsMember2021-01-012021-06-300001254699qvc:TelevisionDistributionRightsMember2020-01-012020-06-300001254699qvc:QxHMember2020-12-310001254699qvc:QVCInternationalMember2020-12-310001254699qvc:QxHMember2021-01-012021-06-300001254699qvc:QVCInternationalMember2021-01-012021-06-300001254699qvc:QxHMember2021-06-300001254699qvc:QVCInternationalMember2021-06-300001254699us-gaap:OtherIntangibleAssetsMember2021-06-300001254699qvc:ExchangeableSeniorDebenturesDue2031Member2021-06-300001254699qvc:ExchangeableSeniorDebenturesDue2031Member2020-12-310001254699qvc:A4375SeniorSecuredNotesMember2021-06-300001254699qvc:A4375SeniorSecuredNotesMember2020-12-310001254699qvc:A4.85SeniorSecuredNotesMember2021-06-300001254699qvc:A4.85SeniorSecuredNotesMember2020-12-310001254699qvc:A4.45SeniorSecuredNotesMember2021-06-300001254699qvc:A4.45SeniorSecuredNotesMember2020-12-310001254699qvc:A475SeniorSecuredNotesMember2021-06-300001254699qvc:A475SeniorSecuredNotesMember2020-12-310001254699qvc:A4375SeniorSecuredNotesDue2028Member2021-06-300001254699qvc:A4375SeniorSecuredNotesDue2028Member2020-12-310001254699qvc:A5.45SeniorSecuredNotesMember2021-06-300001254699qvc:A5.45SeniorSecuredNotesMember2020-12-310001254699qvc:A5950SeniorSecuredNotesMember2021-06-300001254699qvc:A5950SeniorSecuredNotesMember2020-12-310001254699qvc:A6.375SeniorSecuredNotesMember2021-06-300001254699qvc:A6.375SeniorSecuredNotesMember2020-12-310001254699qvc:A625SeniorSecuredNotesMember2021-06-300001254699qvc:A625SeniorSecuredNotesMember2020-12-310001254699us-gaap:CapitalLeaseObligationsMember2021-06-300001254699us-gaap:CapitalLeaseObligationsMember2020-12-310001254699us-gaap:StandbyLettersOfCreditMemberqvc:TrancheOneSharedwithRelatedPartyMember2018-12-310001254699us-gaap:RevolvingCreditFacilityMemberqvc:QVCMember2018-12-310001254699us-gaap:LondonInterbankOfferedRateLIBORMember2021-06-300001254699us-gaap:RevolvingCreditFacilityMemberqvc:TrancheOneSharedwithRelatedPartyMember2021-06-3000012546992019-07-010001254699srt:MinimumMember2021-01-012021-06-300001254699srt:MaximumMember2021-01-012021-06-300001254699qvc:QxHMemberqvc:HomeMember2021-04-012021-06-300001254699qvc:HomeMemberqvc:QVCInternationalMember2021-04-012021-06-300001254699qvc:HomeMember2021-04-012021-06-300001254699qvc:QxHMemberqvc:HomeMember2021-01-012021-06-300001254699qvc:HomeMemberqvc:QVCInternationalMember2021-01-012021-06-300001254699qvc:HomeMember2021-01-012021-06-300001254699qvc:QxHMemberqvc:BeautyMember2021-04-012021-06-300001254699qvc:BeautyMemberqvc:QVCInternationalMember2021-04-012021-06-300001254699qvc:BeautyMember2021-04-012021-06-300001254699qvc:QxHMemberqvc:BeautyMember2021-01-012021-06-300001254699qvc:BeautyMemberqvc:QVCInternationalMember2021-01-012021-06-300001254699qvc:BeautyMember2021-01-012021-06-300001254699qvc:QxHMemberqvc:ApparelMember2021-04-012021-06-300001254699qvc:QVCInternationalMemberqvc:ApparelMember2021-04-012021-06-300001254699qvc:ApparelMember2021-04-012021-06-300001254699qvc:QxHMemberqvc:ApparelMember2021-01-012021-06-300001254699qvc:QVCInternationalMemberqvc:ApparelMember2021-01-012021-06-300001254699qvc:ApparelMember2021-01-012021-06-300001254699qvc:QxHMemberqvc:AccessoriesMember2021-04-012021-06-300001254699qvc:AccessoriesMemberqvc:QVCInternationalMember2021-04-012021-06-300001254699qvc:AccessoriesMember2021-04-012021-06-300001254699qvc:QxHMemberqvc:AccessoriesMember2021-01-012021-06-300001254699qvc:AccessoriesMemberqvc:QVCInternationalMember2021-01-012021-06-300001254699qvc:AccessoriesMember2021-01-012021-06-300001254699qvc:ElectronicsMemberqvc:QxHMember2021-04-012021-06-300001254699qvc:ElectronicsMemberqvc:QVCInternationalMember2021-04-012021-06-300001254699qvc:ElectronicsMember2021-04-012021-06-300001254699qvc:ElectronicsMemberqvc:QxHMember2021-01-012021-06-300001254699qvc:ElectronicsMemberqvc:QVCInternationalMember2021-01-012021-06-300001254699qvc:ElectronicsMember2021-01-012021-06-300001254699qvc:JewelryMemberqvc:QxHMember2021-04-012021-06-300001254699qvc:JewelryMemberqvc:QVCInternationalMember2021-04-012021-06-300001254699qvc:JewelryMember2021-04-012021-06-300001254699qvc:JewelryMemberqvc:QxHMember2021-01-012021-06-300001254699qvc:JewelryMemberqvc:QVCInternationalMember2021-01-012021-06-300001254699qvc:JewelryMember2021-01-012021-06-300001254699qvc:QxHMemberqvc:OtherrevenueMember2021-04-012021-06-300001254699qvc:OtherrevenueMemberqvc:QVCInternationalMember2021-04-012021-06-300001254699qvc:OtherrevenueMember2021-04-012021-06-300001254699qvc:QxHMemberqvc:OtherrevenueMember2021-01-012021-06-300001254699qvc:OtherrevenueMemberqvc:QVCInternationalMember2021-01-012021-06-300001254699qvc:OtherrevenueMember2021-01-012021-06-300001254699qvc:QxHMember2021-04-012021-06-300001254699qvc:QVCInternationalMember2021-04-012021-06-300001254699qvc:QxHMemberqvc:HomeMember2020-04-012020-06-300001254699qvc:HomeMemberqvc:QVCInternationalMember2020-04-012020-06-300001254699qvc:HomeMember2020-04-012020-06-300001254699qvc:QxHMemberqvc:HomeMember2020-01-012020-06-300001254699qvc:HomeMemberqvc:QVCInternationalMember2020-01-012020-06-300001254699qvc:HomeMember2020-01-012020-06-300001254699qvc:QxHMemberqvc:BeautyMember2020-04-012020-06-300001254699qvc:BeautyMemberqvc:QVCInternationalMember2020-04-012020-06-300001254699qvc:BeautyMember2020-04-012020-06-300001254699qvc:QxHMemberqvc:BeautyMember2020-01-012020-06-300001254699qvc:BeautyMemberqvc:QVCInternationalMember2020-01-012020-06-300001254699qvc:BeautyMember2020-01-012020-06-300001254699qvc:QxHMemberqvc:ApparelMember2020-04-012020-06-300001254699qvc:QVCInternationalMemberqvc:ApparelMember2020-04-012020-06-300001254699qvc:ApparelMember2020-04-012020-06-300001254699qvc:QxHMemberqvc:ApparelMember2020-01-012020-06-300001254699qvc:QVCInternationalMemberqvc:ApparelMember2020-01-012020-06-300001254699qvc:ApparelMember2020-01-012020-06-300001254699qvc:QxHMemberqvc:AccessoriesMember2020-04-012020-06-300001254699qvc:AccessoriesMemberqvc:QVCInternationalMember2020-04-012020-06-300001254699qvc:AccessoriesMember2020-04-012020-06-300001254699qvc:QxHMemberqvc:AccessoriesMember2020-01-012020-06-300001254699qvc:AccessoriesMemberqvc:QVCInternationalMember2020-01-012020-06-300001254699qvc:AccessoriesMember2020-01-012020-06-300001254699qvc:ElectronicsMemberqvc:QxHMember2020-04-012020-06-300001254699qvc:ElectronicsMemberqvc:QVCInternationalMember2020-04-012020-06-300001254699qvc:ElectronicsMember2020-04-012020-06-300001254699qvc:ElectronicsMemberqvc:QxHMember2020-01-012020-06-300001254699qvc:ElectronicsMemberqvc:QVCInternationalMember2020-01-012020-06-300001254699qvc:ElectronicsMember2020-01-012020-06-300001254699qvc:JewelryMemberqvc:QxHMember2020-04-012020-06-300001254699qvc:JewelryMemberqvc:QVCInternationalMember2020-04-012020-06-300001254699qvc:JewelryMember2020-04-012020-06-300001254699qvc:JewelryMemberqvc:QxHMember2020-01-012020-06-300001254699qvc:JewelryMemberqvc:QVCInternationalMember2020-01-012020-06-300001254699qvc:JewelryMember2020-01-012020-06-300001254699qvc:QxHMemberqvc:OtherrevenueMember2020-04-012020-06-300001254699qvc:OtherrevenueMemberqvc:QVCInternationalMember2020-04-012020-06-300001254699qvc:OtherrevenueMember2020-04-012020-06-300001254699qvc:QxHMemberqvc:OtherrevenueMember2020-01-012020-06-300001254699qvc:OtherrevenueMemberqvc:QVCInternationalMember2020-01-012020-06-300001254699qvc:OtherrevenueMember2020-01-012020-06-300001254699qvc:QxHMember2020-04-012020-06-300001254699qvc:QVCInternationalMember2020-04-012020-06-300001254699qvc:QxHMember2020-01-012020-06-300001254699qvc:QVCInternationalMember2020-01-012020-06-300001254699country:US2021-01-012021-06-300001254699qvc:LibertyMemberqvc:TaxAgreementMember2021-06-300001254699qvc:LibertyMemberqvc:TaxAgreementMember2020-12-310001254699us-gaap:FairValueMeasurementsRecurringMember2021-06-300001254699us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001254699us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001254699us-gaap:FairValueMeasurementsRecurringMember2020-12-310001254699us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-12-310001254699us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2020-12-310001254699qvc:AccumulatedOtherComprehensiveIncomeLossAttributableToDebtCreditRiskAdjustmentMemberMember2020-12-310001254699qvc:AccumulatedOtherComprehensiveIncomeLossAttributableToDebtCreditRiskAdjustmentMemberMember2021-01-012021-06-300001254699qvc:AccumulatedOtherComprehensiveIncomeLossAttributableToDebtCreditRiskAdjustmentMemberMember2021-06-300001254699qvc:QVCIncStockholderMember2020-01-012020-06-30
Table of Contents -- Click here to rapidly navigate through this document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 001-38654
QVC, Inc.
(Exact name of Registrant as specified in its charter)
State of Delaware 23-2414041
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
1200 Wilson Drive
West Chester, Pennsylvania 19380
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (484) 701-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
6.375% Senior Secured Notes due 2067QVCDNew York Stock Exchange
6.250% Senior Secured Notes due 2068QVCCNew York Stock Exchange
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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

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

Large accelerated filer o Accelerated filer o Non-accelerated filer Smaller reporting company  Emerging growth
company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  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, Qurate Retail Group, Inc., an indirect wholly-owned subsidiary of Qurate Retail, Inc.



QVC, Inc.
2021 QUARTERLY REPORT ON FORM 10-Q


Table of Contents

Part IPage
Item 1.
Item 2.
Item 3.
Item 4.
Part II
Item 6.



Item 1. Financial Statements
QVC, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
June 30,December 31,
(in millions, except share amounts)20212020
Assets
Current assets:
Cash and cash equivalents$737 682 
Restricted cash8 8 
Accounts receivable, less allowance for credit losses of $94 at June 30, 2021 and $124 at December 31, 20201,157 1,602 
Inventories1,205 1,119 
Prepaid expenses and other current assets344 293 
Total current assets3,451 3,704 
Property and equipment, net of accumulated depreciation of $1,433 at June 30, 2021 and $1,544 at December 31, 20201,092 1,178 
Operating lease right-of-use assets (note 6)211 221 
Television distribution rights, net (note 2)187 63 
Goodwill (note 3)6,003 6,034 
Other intangible assets, net (note 3)3,429 3,454 
Note receivable - related party (note 1)1,825 1,825 
Other noncurrent assets75 79 
Total assets$16,273 16,558 
Liabilities and equity
Current liabilities:
Current portion of debt and finance lease obligations (note 5)$524 410 
Accounts payable-trade969 1,127 
Accrued liabilities (note 4)975 1,302 
Total current liabilities2,468 2,839 
Long-term portion of debt and finance lease obligations (note 5)4,543 4,549 
Deferred income taxes (note 8)715 711 
Other long-term liabilities313 324 
Total liabilities8,039 8,423 
Commitments and contingencies (note 9)
Equity:
QVC, Inc. stockholder's equity:
Common stock, $0.01 par value, 1 authorized share  
Additional paid-in capital10,753 10,741 
Accumulated deficit(2,561)(2,722)
Accumulated other comprehensive loss(84)(17)
Total QVC, Inc. stockholder's equity8,108 8,002 
Noncontrolling interest126 133 
Total equity8,234 8,135 
Total liabilities and equity$16,273 16,558 
1

Table of Contents








QVC, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
Three months ended June 30,Six months ended June 30,
(in millions)2021202020212020
Net revenue$2,780 2,723 5,490 5,150 
Operating costs and expenses:
Cost of goods sold (exclusive of depreciation and amortization shown separately below)1,755 1,735 3,513 3,319 
Operating196 187 382 364 
Selling, general and administrative, including stock-based compensation305 304 588 586 
Depreciation38 43 78 86 
Amortization64 73 126 144 
2,358 2,342 4,687 4,499 
Operating income422 381 803 651 
Other (expense) income:
Equity in losses of investee (1) (2)
Losses on financial instruments(4) (3)(4)
Interest expense, net(65)(64)(128)(129)
Foreign currency (loss) gain(2)1 (4)2 
Other income2  8  
(69)(64)(127)(133)
Income before income taxes353 317 676 518 
Income tax expense(96)(92)(181)(152)
Net income257 225 495 366 
Less net income attributable to the noncontrolling interest(17)(14)(33)(26)
Net income attributable to QVC, Inc. stockholder$240 211 462 340 
2

Table of Contents








QVC, Inc.
Condensed Consolidated Statements of Comprehensive Income
(unaudited)
Three months ended June 30,Six months ended June 30,
(in millions)2021202020212020
Net income$257 225 495 366 
Foreign currency translation adjustments, net of tax9 18 (64)(4)
Comprehensive income (loss) attributable to debt credit risk adjustments1  (12) 
Total comprehensive income 267 243 419 362 
Comprehensive income attributable to noncontrolling interest(16)(15)(24)(28)
Comprehensive income attributable to QVC, Inc. stockholder$251 228 395 334 
3

Table of Contents








QVC, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
Six months ended June 30,
(in millions)20212020
Operating activities:
Net income$495 366 
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in losses of investee 2 
Deferred income taxes(1) 
Foreign currency loss (gain)4 (2)
Depreciation78 86 
Amortization 126 144 
Change in fair value of financial instruments and noncash interest3 8 
Stock-based compensation20 16 
Change in other long-term liabilities3 3 
Other income(8) 
Other non-cash charges, net21 20 
Change in operating assets and liabilities
Decrease in accounts receivable432 525 
(Increase) decrease in inventories(93)96 
Decrease in prepaid expenses and other current assets40 9 
Decrease in accounts payable-trade(154)(124)
(Decrease) increase in accrued liabilities and other(321)30 
Net cash provided by operating activities645 1,179 
Investing activities:
Capital expenditures(94)(92)
Expenditures for television distribution rights(170)(10)
Changes in other noncurrent assets(2) 
Proceeds from sale of fixed assets40  
Net cash used in investing activities(226)(102)
Financing activities:
Principal payments of debt and finance lease obligations(149)(1,226)
Principal borrowings of debt from senior secured credit facility135 112 
Proceeds from issuance of senior secured notes  575 
Payment of debt origination fees (8)
Dividends paid to Qurate Retail, Inc.(301)(262)
Dividends paid to noncontrolling interest(31)(30)
Withholding taxes on net share settlements of stock-based compensation(17)(1)
Derivative payments to counterparties(12) 
Derivative proceeds from counterparties24  
Other financing activities2  
Net cash used in financing activities(349)(840)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash(15)(3)
Net increase in cash, cash equivalents and restricted cash55 234 
Cash, cash equivalents and restricted cash, beginning of period690 569 
Cash, cash equivalents and restricted cash, end of period$745 803 
4

Table of Contents








QVC, Inc.
Condensed Consolidated Statements of Equity
(unaudited)
Common stockAdditional paid-in capitalAccumulated deficitAccumulated other
comprehensive loss
Noncontrolling interestTotal equity
(in millions, except share data)SharesAmount
Balance, December 31, 20191 $ 9,208 (2,390)(144)130 6,804 
Net income— — — 340 — 26 366 
Foreign currency translation adjustments, net of tax— — — — (6)2 (4)
Dividends paid to Qurate Retail, Inc. and noncontrolling interest— — — (262)— (30)(292)
Impact of tax liability allocation and indemnification agreement with Qurate Retail, Inc.— — —  — —  
Withholding taxes on net share settlements of stock-based compensation— —  — — —  
Stock-based compensation— — 16 — — — 16 
Balance, June 30, 20201$ 9,224 (2,312)(150)128 6,890 
Common stockAdditional paid-in capitalAccumulated deficitAccumulated other
comprehensive loss
Noncontrolling interestTotal equity
(in millions, except share data)SharesAmount
Balance, March 31, 20201 $ 9,213 (2,381)(167)128 6,793 
Net income— — — 211 — 14 225 
Foreign currency translation adjustments, net of tax— — — — 17 1 18 
Dividends paid to Qurate Retail, Inc. and noncontrolling interest— — — (140)— (15)(155)
Impact of tax liability allocation and indemnification agreement with Qurate Retail, Inc.— — — (2)— — (2)
Withholding taxes on net share settlements of stock-based compensation— — 1 — — — 1 
Stock-based compensation— — 10 — — — 10 
Balance, June 30, 20201$ 9,224 (2,312)(150)128 6,890 




5

Table of Contents








QVC, Inc.
Condensed Consolidated Statements of Equity
(unaudited)
Common stockAdditional paid-in capitalAccumulated deficit
Accumulated other
comprehensive loss
Noncontrolling interestTotal equity
(in millions, except share data)SharesAmount
Balance, December 31, 20201 $ 10,741 (2,722)(17)133 8,135 
Net income— — — 462 — 33 495 
Foreign currency translation adjustments, net of tax— — — — (55)(9)(64)
Dividends paid to Qurate Retail, Inc. and noncontrolling interest— — — (301)— (31)(332)
Impact of tax liability allocation and indemnification agreement with Qurate Retail, Inc.— — 9 — — — 9 
Withholding taxes on net share settlements of stock-based compensation— — (17)— — — (17)
Stock-based compensation— — 20 — — — 20 
Debt credit risk adjustment— (12)— (12)
Balance, June 30, 20211 $ 10,753 (2,561)(84)126 8,234 
Common stockAdditional paid-in capitalAccumulated deficitAccumulated other
comprehensive loss
Noncontrolling interestTotal equity
(in millions, except share data)SharesAmount
Balance, March 31, 20211 $ 10,740 (2,677)(95)125 8,093 
Net income— — — 240 — 17 257 
Foreign currency translation adjustments, net of tax— — — — 10 (1)9 
Dividends paid to Qurate Retail, Inc. and noncontrolling interest— — — (124)— (15)(139)
Impact of tax liability allocation and indemnification agreement with Qurate Retail, Inc.— — 4 — — — 4 
Withholding taxes on net share settlements of stock-based compensation— (2)— — — (2)
Stock-based compensation— — 11 — — — 11 
Debt credit risk adjustment— — — — 1 — 1 
Balance, June 30, 20211 $ 10,753 (2,561)(84)126 8,234 
6

Table of Contents
QVC, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

(1) Basis of Presentation
QVC, Inc. and its consolidated subsidiaries (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 ("U.S."), QVC's televised shopping programs, including live and recorded content, are distributed across multiple channels nationally on a full-time basis, including QVC, QVC2, QVC3, HSN and HSN2. The Company's U.S. programming is also available on QVC.com and HSN.com, which we refer to as our "U.S. websites"; virtual multichannel video programming distributors (including Hulu + Live TV, AT&T TV, and YouTube TV); applications via streaming video; Facebook Live, Roku, Apple TV, Amazon Fire and Xfinity Flex; mobile applications; social pages and over-the-air broadcasters.
QVC's digital platforms enable consumers to purchase goods offered on our televised programming, along with a wide assortment of products that are available only on our U.S. websites. QVC.com, HSN.com and our other digital platforms (including our mobile applications, social pages and others) are natural extensions of our business model, allowing customers to engage in our shopping experience wherever they are, with live or on-demand content customized to the device they are using. In addition to offering video content, our U.S. websites allow shoppers to browse, research, compare and perform targeted searches for products, read customer reviews, control the order-entry process and conveniently access their account.
Internationally, QVC's televised shopping programs, including live and recorded content, are distributed to households outside of the U.S., primarily in Germany, Austria, Japan, the United Kingdom ("U.K."), the Republic of Ireland and Italy. In some of the countries where QVC operates, QVC's televised shopping programs are distributed across multiple QVC channels: QVC Style and QVC2 in Germany and QVC Beauty, QVC Extra and QVC Style in the U.K. Similar to the U.S., our international businesses also engage customers via websites, mobile applications, and social pages. QVC's international business employs product sourcing teams who select products tailored to the interests of each local market.
The Company's Japanese operations ("QVC-Japan") are conducted through a joint venture with Mitsui & Co., LTD ("Mitsui"). 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 six months ended June 30, 2021 and 2020, QVC-Japan paid dividends to Mitsui of $31 million and $30 million, respectively.
The Company also has a joint venture with CNR Media Group, formerly known as China Broadcasting Corporation, a limited liability company owned by China National Radio (''CNR''). The Company owns a 49% interest in a CNR subsidiary, CNR Home Shopping Co., Ltd. (''CNRS''). CNRS operates a retail business in China through a shopping television channel with an associated website. This joint venture is accounted for as an equity method investment recorded as equity in income (losses) of investee in the condensed consolidated statements of operations. In June 2021, QVC entered into an agreement to sell its interest in CNRS. The transaction is expected to close in the third quarter of 2021.
The Company is an indirect wholly-owned subsidiary of Qurate Retail, Inc. ("Qurate Retail") (Nasdaq: QRTEA, QRTEB and QRTEP), which owns interests in a broad range of digital commerce businesses, including Qurate Retail's other wholly-owned subsidiary Zulily, LLC ("Zulily"), as well as other minority investments. QVC is part of the Qurate Retail Group, formerly QVC Group, a portfolio of brands including QVC, Zulily and Cornerstone Brands, Inc. ("CBI").
On December 31, 2018, QVC entered into the Fourth Amended and Restated Credit Agreement that provides for a $2.95 billion revolving credit facility as explained further in note 5. The Fourth Amended and Restated Credit Agreement includes a $400 million tranche that may be borrowed by QVC or Zulily. Under the terms of the Fourth Amended and Restated Credit Agreement, QVC and Zulily are jointly and severally liable for all amounts borrowed on the $400 million tranche. In accordance with the accounting guidance for obligations resulting from joint and several liability arrangements, QVC will record a liability for amounts it has borrowed under the credit facility plus any additional amount it expects to repay on behalf of Zulily. As of June 30, 2021, there was $77 million borrowed by Zulily on the $400 million tranche of the Fourth Amended and Restated Credit Agreement, none of which the Company expects to repay on behalf of Zulily.

7

Table of Contents
QVC, Inc.
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
During each of the six months ended June 30, 2021 and 2020, QVC and Zulily engaged in multiple transactions relating to sales, sourcing of merchandise, marketing initiatives and business advisory services. QVC allocated expenses of $4 million to Zulily for each of the six months ended June 30, 2021 and 2020. Zulily allocated expenses of $5 million to QVC for each of the six months ended June 30, 2021 and 2020.
In September 2020, QVC and Zulily executed a Master Promissory Note ("Promissory Note") whereby Zulily may borrow up to $100 million at a variable interest rate equal to the LIBOR rate plus an applicable margin rate. The Promissory Note matures in September 2030. There were no borrowings on the Promissory Note as of June 30, 2021 and December 31, 2020.
During each of the six months ended June 30, 2021 and 2020, QVC and CBI engaged in multiple transactions relating to personnel and business advisory services. QVC allocated expenses of $11 million to CBI for each of the six months ended June 30, 2021 and 2020. CBI allocated expenses of $1 million to QVC for each of the six months ended June 30, 2021 and 2020.
In December 2019, a new coronavirus disease ("COVID-19'") pandemic was reported to have surfaced in Wuhan, China and has subsequently spread across the globe, including all of the countries in which QVC operates. As a result of the spread of COVID-19, certain local governmental agencies have imposed travel restrictions, local quarantines or stay at home restrictions to contain the spread, which has caused a significant disruption to most sectors of the economy.
Management is not presently aware of any events or circumstances arising from COVID-19 that would require the Company to update the estimates, judgments or revise the carrying value of our assets or liabilities. Management's estimates may change, however, as new events occur and additional information is obtained, and any such changes will be recognized in the consolidated financial statements. Actual results could differ from estimates, and any such differences may be material to our financial statements.

On December 30, 2020, the Company and Liberty Interactive LLC ("LIC") completed an internal realignment of the Company's global finance structure that resulted in a common control transaction with Qurate Retail. As part of the common control transaction, LIC issued a promissory note (“LIC Note”) to the Company with an initial face amount of $1.8 billion, a stated interest rate of 0.48% and a maturity of December 29, 2029. Interest on the LIC Note is to be paid annually beginning on December 29, 2021. QVC recorded $2 million and $4 million of related party interest income for the three and six months ended June 30, 2021, respectively, included in interest expense, net in the consolidated statement of operations.

The condensed consolidated financial statements include the accounts of QVC, Inc. and its majority-owned subsidiaries. All significant intercompany accounts and transactions were eliminated in consolidation.

The accompanying (a) condensed consolidated balance sheet as of December 31, 2020, which has been derived from audited financial statements, and (b) the interim unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("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 consolidated financial statements and notes thereto contained in QVC's Annual Report on Form 10-K for the year ended December 31, 2020.
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 and the disclosure of contingent 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, internally-developed software, valuation of acquired intangible assets and goodwill and income taxes.



8

Table of Contents
QVC, Inc.
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(2) Television Distribution Rights, Net
Television distribution rights consisted of the following:
(in millions)June 30, 2021December 31, 2020
Television distribution rights$823 814 
Less accumulated amortization(636)(751)
Television distribution rights, net$187 63 
The Company recorded amortization expense of $23 million and $35 million for the three months ended June 30, 2021 and 2020, respectively, related to television distribution rights. For the six months ended June 30, 2021 and 2020, amortization expense for television distribution rights was $48 million and $69 million, respectively.
As of June 30, 2021, related amortization expense for each of the next five years ended December 31 was as follows (in millions):
Remainder of 2021$59 
2022103 
202322 
20243 
2025 

(3) Goodwill and Other Intangible Assets, Net
The changes in the carrying amount of goodwill by operating segment for the six months ended June 30, 2021 were as follows:
(in millions)QxHQVC-InternationalTotal
Balance as of December 31, 2020$5,112 922 6,034 
Exchange rate fluctuations (31)(31)
Balance as of June 30, 2021$5,112 891 6,003 
Other intangible assets consisted of the following:
June 30, 2021December 31, 2020
(in millions)Gross
cost
Accumulated
amortization
Other intangible assets, net Gross
cost
Accumulated
amortization
Other intangible assets, net
Purchased and internally developed software$983 (694)289 952 (663)289 
Affiliate and customer relationships2,839 (2,582)257 2,845 (2,564)281 
Debt origination fees10 (5)5 10 (4)6 
Trademarks (indefinite life)2,878 — 2,878 2,878 — 2,878 
$6,710 (3,281)3,429 6,685 (3,231)3,454 
The Company recorded amortization expense of $41 million and $38 million for the three months ended June 30, 2021 and 2020, respectively, related to other intangible assets. For the six months ended June 30, 2021 and 2020, amortization expense for other intangible assets was $78 million and $75 million, respectively.

9

Table of Contents
QVC, Inc.
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
As of June 30, 2021, the related amortization and interest expense for each of the next five years ended December 31 was as follows (in millions):
Remainder of 2021$100 
2022161 
2023120 
202476 
202547 

(4) Accrued Liabilities
Accrued liabilities consisted of the following:
(in millions)June 30, 2021December 31, 2020
Accounts payable non-trade$295 408 
Allowance for sales returns186 267 
Accrued compensation and benefits155 214 
Other339 413 
$975 1,302 


10

Table of Contents
QVC, Inc.
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(5) Long-Term Debt and Finance Lease Obligations
Long-term debt and finance lease obligations consisted of the following:
(in millions)June 30, 2021December 31, 2020
3.5% Exchangeable Senior Debentures due 2031$507 393 
4.375% Senior Secured Notes due 2023, net of original issue discount 750 750 
4.85% Senior Secured Notes due 2024, net of original issue discount 600 600 
4.45% Senior Secured Notes due 2025, net of original issue discount 599 599 
4.75% Senior Secured Notes due 2027575 575 
4.375% Senior Secured Notes due 2028500 500 
5.45% Senior Secured Notes due 2034, net of original issue discount 399 399 
5.95% Senior Secured Notes due 2043, net of original issue discount 300 300 
6.375% Senior Secured Notes due 2067225 225 
6.25% Senior Secured Notes due 2068 500 500 
Finance lease obligations (note 6)158 168 
Less debt issuance costs, net(46)(50)
Total debt and finance lease obligations5,067 4,959 
Less current portion(524)(410)
Long-term portion of debt and finance lease obligations$4,543 4,549 
Exchangeable Senior Debentures
The Company has elected to account for its Motorola Solutions, Inc. 3.5% Senior Exchangeable Debentures Due 2031 (the “MSI Exchangeables”) using the fair value option. Accordingly, changes in the fair value of these instruments are recognized as losses on financial instruments in the statements of operations and in other comprehensive income as it relates to instrument specific credit risk on the consolidated statements of comprehensive income. The Company has classified for financial reporting purposes the MSI Exchangeables as a current liability as the MSI Exchangeables are exchangeable at the option of the holder at any time. Although we do not own underlying shares, the Company has entered into certain derivative transactions in order to hedge against upward price fluctuations on certain shares. Such derivative instruments are recognized in the other current assets line item in the condensed consolidated balance sheets, and are marked to fair value each reporting period. The changes in fair value are recognized in losses on financial instruments in the condensed statement of operations.

Senior Secured Notes
All of QVC's senior secured notes are secured by the capital stock of QVC and certain of its subsidiaries and have equal priority to the senior secured credit facility. The interest on QVC's senior secured notes is payable semi-annually with the exception of the 6.375% Senior Secured Notes due 2067 (the "2067 Notes") and the 6.25% Senior Secured Notes due 2068 (the "2068 Notes"), which is payable quarterly.

11

Table of Contents
QVC, Inc.
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
Senior Secured Credit Facility
On December 31, 2018, QVC entered into the Fourth Amended and Restated Credit Agreement with Zulily as borrowers (collectively, the “Borrowers”) which is a multi-currency facility that provides for a $2.95 billion revolving credit facility with a $450 million sub-limit for standby letters of credit and $1.5 billion of uncommitted incremental revolving loan commitments or incremental term loans. The Fourth Amended and Restated Credit Agreement includes a $400 million tranche that may be borrowed by the Company or Zulily with a $50 million sub-limit for standby letters of credit. The remaining $2.55 billion and any incremental loans may be borrowed only by the Company. Borrowings that are alternate base rate loans will bear interest at a per annum rate equal to the base rate plus a margin that varies between 0.25% and 0.75% depending on the Borrowers’ combined ratio of Consolidated Total Debt to Consolidated EBITDA (the “Combined Consolidated Leverage Ratio”). Borrowings that are London Interbank Offered Rate ("LIBOR") loans will bear interest at a per annum rate equal to the applicable LIBOR rate plus a margin that varies between 1.25% and 1.75% depending on the Borrowers’ Combined Consolidated Leverage Ratio. Each loan may be prepaid at any time and from time to time without penalty other than customary breakage costs. No mandatory prepayments will be required other than when borrowings and letter of credit usage exceed availability; provided that, if Zulily ceases to be controlled by Qurate Retail, all of its loans must be repaid and its letters of credit cash collateralized. The facility matures on December 31, 2023. Payment of loans may be accelerated following certain customary events of default.
QVC had $2.85 billion available under the terms of the Fourth Amended and Restated Credit Agreement as of June 30, 2021, including the portion available under the $400 million tranche that Zulily may also borrow on.
The payment and performance of the Borrowers’ obligations under the Fourth Amended and Restated Credit Agreement are guaranteed by each of QVC’s Material Domestic Subsidiaries (as defined in the Fourth Amended and Restated Credit Agreement). Further, the borrowings under the Fourth Amended and Restated Credit Agreement are secured, pari passu with QVC’s existing notes, by a pledge of all of QVC’s equity interests. In addition, the payment and performance of the Borrowers’ obligations with respect to the $400 million tranche available to both QVC and Zulily are also guaranteed by Zulily and secured by a pledge of all of Zulily’s equity interests.
The Fourth Amended and Restated Credit Agreement contains certain affirmative and negative covenants, including certain restrictions on the Company and Zulily and each of their respective restricted subsidiaries (subject to certain exceptions) 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 the Company’s consolidated leverage ratio and the Borrowers’ Combined Consolidated Leverage Ratio.
Interest Rate Swap Arrangements
In July 2019, the Company entered into a three-year interest swap arrangement with a notional amount of $125 million. The swap arrangement did not qualify as a cash flow hedge under U.S. GAAP and the fair value of the swap instrument was in a net liability position of $2 million and $3 million as of June 30, 2021 and December 31, 2020, respectively, which was included in other long-term liabilities.
Changes in the fair value of the swaps are reflected in losses on financial instruments in the condensed consolidated statements of operations.

Other Debt Related Information
QVC was in compliance with all of its debt covenants as of June 30, 2021.
The weighted average interest rate applicable to all of the outstanding debt (excluding finance leases) prior to amortization of bond discounts and related debt issuance costs was 4.9% as of June 30, 2021.


12

Table of Contents
QVC, Inc.
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(6) Leases
The Company has finance lease agreements with transponder and transmitter network suppliers for the right to transmit its signals in the U.S. and Germany. The Company is also party to a finance lease agreement for a warehouse.
QVC also leases data processing equipment, facilities, office space and land. These leases are classified as operating leases. Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future lease payments using our incremental borrowing rate. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Our leases have remaining lease terms of less than 1 year to 13 years, some of which may include the option to extend or terminate the leases.
The components of lease cost for the three and six months ended June 30, 2021 and 2020, were as follows:
Three months ended June 30,Six months ended June 30,
(in millions)2021202020212020
Finance lease cost
     Depreciation of leased assets$5 5 10 10 
     Interest on lease liabilities2 2 4 4 
Total finance lease cost7 7 14 14 
Operating lease cost 10 10 20 20 
     Total lease cost$17 17 34 34 
The remaining weighted-average lease term and the weighted-average discount rate were as follows:
June 30, 2021
Weighted-average remaining lease term (years):
     Finance leases8.2
     Operating leases10.8
Weighted-average discount rate:
     Finance leases5.2 %
     Operating leases5.9 %












13

Table of Contents
QVC, Inc.
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
Supplemental balance sheet information related to leases was as follows:
(in millions)June 30, 2021December 31, 2020
Operating Leases:
  Operating lease right-of-use assets$211 221 
  Accrued liabilities$24 25 
  Other long-term liabilities187 195 
      Total operating lease liabilities$211 220 
Finance Leases:
   Property and equipment$274 278 
   Accumulated depreciation(147)(141)
     Property and equipment, net$127 137 
   Current portion of debt and finance lease obligations$17 18 
   Long-term portion of debt and finance lease obligations141 150 
     Total finance lease liabilities$158 168 
Supplemental cash flow information related to leases was as follows:
Six months ended June 30,
(in millions)20212020
Cash paid for amounts included in the measurement of lease liabilities:
     Operating cash flows from operating leases$20 25 
     Operating cash flows from finance leases4 4 
     Financing cash flows from finance leases9 9 
Right-of-use assets obtained in exchange for lease obligations:
      Operating leases$4 19 
Future payments under noncancelable operating leases and finance leases with initial terms of one year or more as of June 30, 2021 consisted of the following:
(in millions)Finance leasesOperating leasesTotal leases
Remainder of 2021$12 19 31 
202226 34 60 
202325 28 53 
202424 25 49 
202521 21 42 
Thereafter89 168 257 
Total lease payments197 295 492 
Less: imputed interest(39)(84)(123)
Total lease liabilities$158 211 369 

14

Table of Contents
QVC, Inc.
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(7) Revenue

Disaggregated revenue by segment and product category consisted of the following:
Three months ended June 30, 2021Six months ended June 30, 2021
(in millions)QxHQVC-InternationalTotalQxHQVC-InternationalTotal
Home$775 309 1,084 1,550 633 2,183 
Beauty294 193 487 580 357 937 
Apparel359 127 486 649 253 902 
Accessories272 71 343 510 137 647 
Electronics167 32 199 368 65 433 
Jewelry76 54 130 174 114 288 
Other revenue46 5 51 94 6 100 
Total net revenue$1,989 791 2,780 3,925 1,565 5,490 
Three months ended June 30, 2020Six months ended June 30, 2020
(in millions)QxHQVC-InternationalTotalQxHQVC-InternationalTotal
Home$803 286 1,089 1,484 543 2,027 
Beauty325 186 511 613 331 944 
Apparel302 100 402 601 201 802 
Accessories245 63 308 457 121 578 
Electronics217 31 248 391 53 444 
Jewelry82 47 129 180 96 276 
Other revenue36  36 76 3 79 
Total net revenue$2,010 713 2,723 3,802 1,348 5,150 

Consumer Product Revenue and Other Revenue

QVC's revenue includes sales of consumer products in the following categories; home, beauty, apparel, accessories, electronics and jewelry, which are primarily sold through live merchandise-focused televised shopping programs and via our websites and other interactive media.

Other revenue consists primarily of income generated from our U.S. Private Label Credit Card ("PLCC") in which a large consumer financial services company provides revolving credit directly to QVC's customers for the sole purpose of purchasing merchandise or services with a PLCC. In return, the Company receives a portion of the net economics of the credit card program.

Revenue Recognition

Revenue is recognized when obligations with our customers are satisfied; generally this occurs at the time of shipment to our customers consistent with when control of the shipped product passes. The recognized revenue reflects the consideration we expect to receive in exchange for transferring goods, net of allowances for returns.

The Company generally recognizes revenue related to the PLCC program over time as the PLCC is used by QVC's customers.

Sales, value add, use and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue.

15

Table of Contents
QVC, Inc.
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
The Company elected to treat shipping and handling activities that occur after the customer obtains control of the goods as a fulfillment cost and not as a promised good or service. Accordingly, the Company accrues the related shipping costs and recognizes revenue upon delivery of the goods to the shipping carrier. In electing this accounting policy, all shipping and handling activities will be treated as fulfillment costs.

The Company generally extends payment terms with its customers of one year or less and does not consider the time value of money when recognizing revenue.

Significant Judgments

Our products are generally sold with a right of return and we may provide other credits or incentives, which are accounted for as variable consideration when estimating the amount of revenue to recognize. Returns and credits are estimated at contract inception and updated at the end of each reporting period as additional information becomes available. The Company has determined that it is generally the principal in vendor arrangements as the Company can establish control over the goods prior to shipment. Accordingly, the Company records revenue for these arrangements on a gross basis.

16

Table of Contents
QVC, Inc.
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(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.
For the three months ended June 30, 2021 and 2020, the Company recorded a tax provision of $96 million and $92 million, respectively, which represented an effective tax rate of 27.2% and 29.0%, respectively. For the six months ended June 30, 2021 and 2020, the Company recorded a tax provision of $181 million and $152 million, respectively, which represented an effective tax rate of 26.8% and 29.3%, respectively. The 2021 rate differs from the U.S. federal income tax rate of 21% due primarily to state and foreign tax expenses. The 2021 effective tax rate has decreased from the prior year for both the three months and six months ended June 30, 2021 primarily due to decreases in state tax expense and a valuation allowance established in the prior year for excess U.S. foreign tax credits.

The Company participates in a consolidated federal return filing with Qurate Retail. As of June 30, 2021, the Company's tax years through 2016 are closed for federal income tax purposes, and the Internal Revenue Service ("IRS") has completed its examination of the Company's 2017, 2018 and 2019 tax years. The Company's 2020 and 2021 tax years are being examined currently as part of the Qurate Retail consolidated return under the IRS's Compliance Assurance Process program. The Company, or one of its subsidiaries, files income tax returns in various states and foreign jurisdictions. As of June 30, 2021, the Company was under examination in the state of Pennsylvania, New York City, the U.K. and Japan.

The Company is a party to a Tax Liability Allocation and Indemnification Agreement (the “Tax Agreement”) with Qurate Retail. The Tax Agreement establishes the methodology for the calculation and payment of income taxes in connection with the consolidation of the Company with Qurate Retail for income tax purposes. Generally, the Tax Agreement provides that the Company will pay Qurate Retail 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 Qurate Retail, 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.
The amounts of the tax-related payable due to Qurate Retail as of June 30, 2021 and December 31, 2020 were $1 million and $47 million, respectively, and were included in accrued liabilities in the accompanying condensed consolidated balance sheets.

(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.
17

Table of Contents
QVC, Inc.
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
Network and information systems, including the Internet and telecommunication systems, third party delivery services and other technologies are critical to QVC's business activities. Substantially all of QVC's 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, the Company could face a significant disruption in fulfilling QVC's customer orders and shipment of QVC's products. The Company has active disaster recovery programs in place to help mitigate risks associated with these critical business activities.

(10) Financial Instruments and Fair Value Measurements
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, other than quoted market prices included within Level 1, are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability.
The Company's assets and liabilities measured or disclosed at fair value were as follows:
Fair value measurements at June 30, 2021 using
(in millions)TotalQuoted prices
in active
markets for
identical
assets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Current assets:
    Cash equivalents$255 255 — — 
    Financial instrument asset (note 5)
107 — 107 — 
Current liabilities:
     Debt (note 5)507 — 507 — 
Long-term liabilities:
Debt (note 5)4,707 769 3,938 — 
     Interest rate swap arrangements (note 5)2 — 2 — 
18

Table of Contents
QVC, Inc.
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
Fair value measurements at December 31, 2020 using
(in millions)TotalQuoted prices
in active
markets for
identical
assets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Current assets:
Cash equivalents$240 240 — — 
Financial instrument asset (note 5)
23 23 — 
Current liabilities:
Debt (note 5)