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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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)
September 30,December 31,
(in millions, except share amounts)20212020
Assets
Current assets:
Cash and cash equivalents$628 682 
Restricted cash9 8 
Accounts receivable, less allowance for credit losses of $93 at September 30, 2021 and $124 at December 31, 20201,142 1,602 
Inventories1,482 1,119 
Prepaid expenses and other current assets333 293 
Total current assets3,594 3,704 
Property and equipment, net of accumulated depreciation of $1,457 at September 30, 2021 and $1,544 at December 31, 20201,086 1,178 
Operating lease right-of-use assets (note 6)206 221 
Television distribution rights, net (note 2)169 63 
Goodwill (note 3)5,988 6,034 
Other intangible assets, net (note 3)3,409 3,454 
Note receivable - related party (note 1)1,825 1,825 
Other noncurrent assets63 79 
Total assets$16,340 16,558 
Liabilities and equity
Current liabilities:
Current portion of debt and finance lease obligations (note 5)$567 410 
Accounts payable-trade1,049 1,127 
Accrued liabilities (note 4)883 1,302 
Total current liabilities2,499 2,839 
Long-term portion of debt and finance lease obligations (note 5)4,548 4,549 
Deferred income taxes (note 8)716 711 
Other long-term liabilities309 324 
Total liabilities8,072 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 capital10,769 10,741 
Accumulated deficit(2,508)(2,722)
Accumulated other comprehensive loss(118)(17)
Total QVC, Inc. stockholder's equity8,143 8,002 
Noncontrolling interest125 133 
Total equity8,268 8,135 
Total liabilities and equity$16,340 16,558 
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)2021202020212020
Net revenue$2,512 2,703 8,002 7,853 
Operating costs and expenses:
Cost of goods sold (exclusive of depreciation and amortization shown separately below)1,617 1,722 5,130 5,041 
Operating183 184 565 548 
Selling, general and administrative, including stock-based compensation285 295 873 881 
Depreciation37 45 115 131 
Amortization74 69 200 213 
2,196 2,315 6,883 6,814 
Operating income316 388 1,119 1,039 
Other (expense) income:
Equity in (losses) earnings of investee(2)1 (2)(1)
(Losses) gains on financial instruments(5)1 (8)(3)
Interest expense, net(64)(65)(192)(194)
Foreign currency gain (loss)  1 (4)3 
Loss on extinguishment of debt (42) (42)
Other income  8  
(71)(104)(198)(237)
Income before income taxes245 284 921 802 
Income tax expense(85)(80)(266)(232)
Net income160 204 655 570 
Less net income attributable to the noncontrolling interest(15)(15)(48)(41)
Net income attributable to QVC, Inc. stockholder$145 189 607 529 
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)2021202020212020
Net income$160 204 655 570 
Foreign currency translation adjustments, net of tax(28)49 (92)45 
Comprehensive loss attributable to debt credit risk adjustments(7) (19) 
Total comprehensive income 125 253 544 615 
Comprehensive income attributable to noncontrolling interest(14)(17)(38)(45)
Comprehensive income attributable to QVC, Inc. stockholder$111 236 506 570 
3

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QVC, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
Nine months ended September 30,
(in millions)20212020
Operating activities:
Net income$655 570 
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in losses of investee2 1 
Deferred income taxes(1)8 
Foreign currency loss (gain)4 (3)
Depreciation115 131 
Amortization 200 213 
Change in fair value of financial instruments and noncash interest8 9 
Loss on extinguishment of debt 42 
Stock-based compensation33 26 
Change in other long-term liabilities5 9 
Other income(8) 
Other non-cash charges, net30 30 
Change in operating assets and liabilities
Decrease in accounts receivable443 718 
Increase in inventories(374)(49)
Decrease in prepaid expenses and other current assets47 30 
(Decrease) increase in accounts payable-trade(70)56 
Decrease in accrued liabilities and other(411)(111)
Net cash provided by operating activities678 1,680 
Investing activities:
Capital expenditures(145)(140)
Expenditures for television distribution rights(184)(41)
Changes in other noncurrent assets(3) 
Proceeds from sale of fixed assets40  
Other investing activities8  
Net cash used in investing activities(284)(181)
Financing activities:
Principal payments of debt and finance lease obligations(157)(1,230)
Principal borrowings of debt from senior secured credit facility135 112 
Principal repayment of senior secured notes (500)
Payment of premium on redemption of senior secured notes (41)
Proceeds from issuance of senior secured notes  1,075 
Payment of debt origination fees (15)
Dividends paid to Qurate Retail, Inc.(393)(845)
Dividends paid to noncontrolling interest(46)(46)
Withholding taxes on net share settlements of stock-based compensation(18)(1)
Derivative payments to counterparties(38) 
Derivative proceeds from counterparties88  
Other financing activities2  
Net cash used in financing activities(427)(1,491)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash(20)5 
Net (decrease) increase in cash, cash equivalents and restricted cash(53)13 
Cash, cash equivalents and restricted cash, beginning of period690 569 
Cash, cash equivalents and restricted cash, end of period$637 582 
4

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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— — — 529 — 41 570 
Foreign currency translation adjustments, net of tax— — — — 41 4 45 
Dividends paid to Qurate Retail, Inc. and noncontrolling interest— — — (845)— (46)(891)
Impact of tax liability allocation and indemnification agreement with Qurate Retail, Inc.— — — (7)— — (7)
Stock-based compensation— — 26 — — — 26 
Balance, September 30, 20201$ 9,234 (2,713)(103)129 6,547 
Common stockAdditional paid-in capitalAccumulated deficitAccumulated other
comprehensive loss
Noncontrolling interestTotal equity
(in millions, except share data)SharesAmount
Balance, June 30, 20201 $ 9,224 (2,312)(150)128 6,890 
Net income— — — 189 — 15 204 
Foreign currency translation adjustments, net of tax— — — — 47 2 49 
Dividends paid to Qurate Retail, Inc. and noncontrolling interest— — — (583)— (16)(599)
Impact of tax liability allocation and indemnification agreement with Qurate Retail, Inc.— — — (7)— — (7)
Stock-based compensation— — 10 — — — 10 
Balance, September 30, 20201$ 9,234 (2,713)(103)129 6,547 




QVC, Inc.
Condensed Consolidated Statements of Equity
5

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(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— — — 607 — 48 655 
Foreign currency translation adjustments, net of tax— — — — (82)(10)(92)
Dividends paid to Qurate Retail, Inc. and noncontrolling interest— — — (393)— (46)(439)
Impact of tax liability allocation and indemnification agreement with Qurate Retail, Inc.— — 13 — — — 13 
Withholding taxes on net share settlements of stock-based compensation— — (18)— — — (18)
Stock-based compensation— — 33 — — — 33 
Debt credit risk adjustment— (19)— (19)
Balance, September 30, 20211 $ 10,769 (2,508)(118)125 8,268 
Common stockAdditional paid-in capitalAccumulated deficitAccumulated other
comprehensive loss
Noncontrolling interestTotal equity
(in millions, except share data)SharesAmount
Balance, June 30, 20211 $ 10,753 (2,561)(84)126 8,234 
Net income— — — 145 — 15 160 
Foreign currency translation adjustments, net of tax— — — — (27)(1)(28)
Dividends paid to Qurate Retail, Inc. and noncontrolling interest— — — (92)— (15)(107)
Impact of tax liability allocation and indemnification agreement with Qurate Retail, Inc.— — 4 — — — 4 
Withholding taxes on net share settlements of stock-based compensation— (1)— — — (1)
Stock-based compensation— — 13 — — — 13 
Debt credit risk adjustment— — — — (7)— (7)
Balance, September 30, 20211 $ 10,769 (2,508)(118)125 8,268 
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. QVC-Japan paid dividends to Mitsui of $46 million during each of the nine months ended September 30, 2021 and 2020.
Prior to September 2021, the Company had a joint venture with CNR Media Group, a limited liability company owned by China National Radio (''CNR''). The Company owned a 49% interest in a CNR subsidiary, CNR Home Shopping Co., Ltd. (''CNRS'') that was accounted for as an equity method investment. During the three months ended September 30, 2021, QVC sold its interest in CNRS which resulted in an immaterial loss for the three and nine months ended September 30, 2021 recorded in equity in (losses) earnings of investee in the condensed consolidated statements of operations.
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 September 30, 2021, there was $120 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.

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QVC, Inc.
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
During each of the nine months ended September 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 $6 million to Zulily for each of the nine months ended September 30, 2021 and 2020. Zulily allocated expenses of $6 million and $8 million to QVC for the nine months ended September 30, 2021 and 2020, respectively.
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 London Interbank Offered Rate ("LIBOR") rate plus an applicable margin rate. The Promissory Note matures in September 2030. There were no borrowings on the Promissory Note as of September 30, 2021 and December 31, 2020.
During each of the nine months ended September 30, 2021 and 2020, QVC and CBI engaged in multiple transactions relating to personnel and business advisory services. QVC allocated expenses of $16 million and $18 million to CBI for the nine months ended September 30, 2021 and 2020, respectively. CBI allocated expenses of $1 million to QVC for each of the nine months ended September 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 $6 million of related party interest income for the three and nine months ended September 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.

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QVC, Inc.
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(2) Television Distribution Rights, Net
Television distribution rights consisted of the following:
(in millions)September 30, 2021December 31, 2020
Television distribution rights$823 814 
Less accumulated amortization(654)(751)
Television distribution rights, net$169 63 
The Company recorded amortization expense of $32 million and $33 million for the three months ended September 30, 2021 and 2020, respectively, related to television distribution rights. For the nine months ended September 30, 2021 and 2020, amortization expense for television distribution rights was $80 million and $102 million, respectively.
As of September 30, 2021, related amortization expense for each of the next five years ended December 31 was as follows (in millions):
Remainder of 2021$30 
2022108 
202326 
20244 
20251 

(3) Goodwill and Other Intangible Assets, Net
The changes in the carrying amount of goodwill by operating segment for the nine months ended September 30, 2021 were as follows:
(in millions)QxHQVC-InternationalTotal
Balance as of December 31, 2020$5,112 922 6,034 
Exchange rate fluctuations (46)(46)
Balance as of September 30, 2021$5,112 876 5,988 
Other intangible assets consisted of the following:
September 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$1,002 (721)281 952 (663)289 
Affiliate and customer relationships2,836 (2,590)246 2,845 (2,564)281 
Debt origination fees10 (6)4 10 (4)6 
Trademarks (indefinite life)2,878 — 2,878 2,878 — 2,878 
$6,726 (3,317)3,409 6,685 (3,231)3,454 
The Company recorded amortization expense of $42 million and $36 million for the three months ended September 30, 2021 and 2020, respectively, related to other intangible assets. For the nine months ended September 30, 2021 and 2020, amortization expense for other intangible assets was $120 million and $111 million, respectively.

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Table of Contents
QVC, Inc.
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
As of September 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$47 
2022169 
2023135 
202486 
202547 

(4) Accrued Liabilities
Accrued liabilities consisted of the following:
(in millions)September 30, 2021December 31, 2020
Accounts payable non-trade$271 408 
Allowance for sales returns186 267 
Accrued compensation and benefits147 214 
Other279 413 
$883 1,302 


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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)September 30, 2021December 31, 2020
3.5% Exchangeable Senior Debentures due 2031$549 393 
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)163 168 
Less debt issuance costs, net(45)(50)
Total debt and finance lease obligations5,115 4,959 
Less current portion(567)(410)
Long-term portion of debt and finance lease obligations$4,548 4,549 
Exchangeable Senior Debentures
The Company has elected to account for its Motorola Solutions, Inc. 3.5% Exchangeable Senior Debentures Due 2031 (the “MSI Exchangeables”) using the fair value option. Accordingly, changes in the fair value of these instruments are recognized as (losses) gains 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) gains 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 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 $2.81 billion available under the terms of the Fourth Amended and Restated Credit Agreement as of September 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 September 30, 2021 and December 31, 2020, respectively. The swap arrangement was included in accrued liabilities and other long-term liabilities as of September 30, 2021 and December 31, 2020, respectively.
Changes in the fair value of the swaps are reflected in (losses) gains 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 September 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 September 30, 2021.


12

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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 nine months ended September 30, 2021 and 2020, were as follows:
Three months ended September 30,Nine months ended September 30,
(in millions)2021202020212020
Finance lease cost
     Depreciation of leased assets$4 5 14 15 
     Interest on lease liabilities2 2 6 6 
Total finance lease cost6 7 20 21 
Operating lease cost 10 9 30 29 
     Total lease cost$16 16 50 50 
The remaining weighted-average lease term and the weighted-average discount rate were as follows:
September 30, 2021
Weighted-average remaining lease term (years):
     Finance leases7.9
     Operating leases10.7
Weighted-average discount rate:
     Finance leases5.1 %
     Operating leases6.0 %












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)September 30, 2021December 31, 2020
Operating Leases:
  Operating lease right-of-use assets$206 221 
  Accrued liabilities$24 25 
  Other long-term liabilities181 195 
      Total operating lease liabilities$205 220 
Finance Leases:
   Property and equipment$281 278 
   Accumulated depreciation(149)(141)
     Property and equipment, net$132 137 
   Current portion of debt and finance lease obligations$18 18 
   Long-term portion of debt and finance lease obligations145 150 
     Total finance lease liabilities$163 168 
Supplemental cash flow information related to leases was as follows:
Nine months ended September 30,
(in millions)20212020
Cash paid for amounts included in the measurement of lease liabilities:
     Operating cash flows from operating leases$29 33 
     Operating cash flows from finance leases6 6 
     Financing cash flows from finance leases13 14 
Right-of-use assets obtained in exchange for lease obligations:
      Operating leases6 22 
      Finance leases$11  
Future payments under noncancelable operating leases and finance leases with initial terms of one year or more as of September 30, 2021 consisted of the following:
(in millions)Finance leasesOperating leasesTotal leases
Remainder of 2021$6 9 15 
202228 35 63 
202327 28 55 
202426 25 51 
202524 21 45 
Thereafter90 167 257 
Total lease payments201 285 486 
Less: imputed interest(38)(80)(118)
Total lease liabilities$163 205 368 

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 September 30, 2021Nine months ended September 30, 2021
(in millions)QxHQVC-InternationalTotalQxHQVC-InternationalTotal
Home$679 272 951 2,229 905 3,134 
Beauty279 164 443 859 521 1,380 
Apparel336 119 455 985 372 1,357 
Accessories210 62 272 720 199 919 
Electronics171 24 195 539 89 628 
Jewelry95 55 150 269 169 438 
Other revenue43 3 46 137 9 146 
Total net revenue$1,813 699 2,512 5,738 2,264 8,002 
Three months ended September 30, 2020Nine months ended September 30, 2020
(in millions)QxHQVC-InternationalTotalQxHQVC-InternationalTotal
Home$819 286 1,105 2,303 829 3,132 
Beauty297 168 465 910 499 1,409 
Apparel312 115 427 913 316 1,229 
Accessories219 67 286 676 188 864 
Electronics197 25 222 588 78 666 
Jewelry93 59 152 273 155 428 
Other revenue43 3 46 119 6 125 
Total net revenue$1,980 723 2,703 5,782 2,071 7,853 

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 September 30, 2021 and 2020, the Company recorded a tax provision of $85 million and $80 million, respectively, which represented an effective tax rate of 34.7% and 28.2%, respectively. For the nine months ended September 30, 2021 and 2020, the Company recorded a tax provision of $266 million and $232 million, respectively, which represented an effective tax rate of 28.9% for both periods. The 2021 rate differs from the U.S. federal income tax rate of 21% due to state and foreign tax expenses and increases in valuation allowances. The 2021 effective tax rate has increased from the prior year for the three months ended September 30, 2021 primarily due to increases in permanent differences and increases in valuation allowances.

The Company participates in a consolidated federal return filing with Qurate Retail. As of September 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 September 30, 2021, the Company was under examination in 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 (receivable) payable (from) due to Qurate Retail as of September 30, 2021 and December 31, 2020 were $(9) 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.
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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 September 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$150 150 — — 
    Financial instrument asset (note 5)
92 — 92 — 
Current liabilities:
     Debt (note 5)549 — 549 — 
     Interest rate swap arrangements (note 5)2 — 2 — 
Long-term liabilities:
Debt (note 5)4,699