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Table of Contents

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 March 31, 2022

OR

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

For the transition period from                             to                             

Commission File Number 001-33982

QURATE RETAIL, INC.

(Exact name of Registrant as specified in its charter)


incorporation or organization)


Identification No.)

State of Delaware

(State or other jurisdiction of
incorporation or organization)

84-1288730

(I.R.S. Employer
Identification No.)

12300 Liberty Boulevard
Englewood, Colorado

(Address of principal executive offices)

80112

(Zip Code)

Registrant's telephone number, including area code: (720875-5300

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Series A common stock

QRTEA

The Nasdaq Stock Market LLC

Series B common stock

QRTEB

The Nasdaq Stock Market LLC

8.0% Series A Cumulative Redeemable Preferred Stock

QRTEP

The Nasdaq Stock Market LLC

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

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

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

Large Accelerated Filer 

Accelerated Filer 

Non-accelerated Filer 

Smaller Reporting Company 

Emerging Growth Company

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

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

The number of outstanding shares of Qurate Retail, Inc.'s common stock as of April 30, 2022 was:

Series A common stock

373,636,068

Series B common stock

8,373,512

Table of Contents

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

QURATE RETAIL, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (unaudited)

    

I-3

QURATE RETAIL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (unaudited)

I-5

QURATE RETAIL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Comprehensive Earnings (Loss) (unaudited)

I-6

QURATE RETAIL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (unaudited)

I-7

QURATE RETAIL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Equity (unaudited)

I-8

QURATE RETAIL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (unaudited)

I-9

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

I-23

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

I-33

Item 4. Controls and Procedures.

I-35

PART II—OTHER INFORMATION

II-1

Item 1. Legal Proceedings

II-1

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

II-1

Item 6. Exhibits

II-2

SIGNATURES

II-3

I-2

Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(unaudited)

    

March 31,

    

December 31,

 

2022

2021

amounts in millions

Assets

Current assets:

Cash and cash equivalents

$

608

 

587

Trade and other receivables, net of allowance for credit losses of $102 million and $107 million, respectively

 

1,307

 

1,679

Inventory, net

 

1,772

 

1,623

Indemnification agreement receivable

239

324

Other current assets

 

243

 

235

Total current assets

 

4,169

 

4,448

Property and equipment, net

 

1,028

 

1,077

Intangible assets not subject to amortization (note 5):

Goodwill

 

6,312

 

6,339

Trademarks

 

3,038

 

3,038

 

9,350

 

9,377

Intangible assets subject to amortization, net (note 5)

 

698

 

745

Other assets, at cost, net of accumulated amortization

 

563

 

602

Total assets

$

15,808

 

16,249

(continued)

See accompanying notes to condensed consolidated financial statements.

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Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Continued)

(unaudited)

March 31,

December 31,

 

2022

2021

 

amounts in millions,

 

except share amounts

 

Liabilities and Equity

    

    

    

    

Current liabilities:

Accounts payable

$

1,212

 

1,429

Accrued liabilities

 

985

 

1,236

Current portion of debt, $1,151 million and $1,315 million measured at fair value (note 6)

 

1,901

 

1,315

Other current liabilities

 

212

 

244

Total current liabilities

 

4,310

 

4,224

Long-term debt (note 6)

 

5,191

 

5,674

Deferred income tax liabilities

 

1,390

 

1,353

Preferred stock (note 7)

1,265

1,261

Other liabilities

 

645

 

707

Total liabilities

 

12,801

 

13,219

Equity

Stockholders' equity:

Series A common stock, $.01 par value. Authorized 4,000,000,000 shares; issued and outstanding 373,490,863 shares at March 31, 2022 and 371,132,684 shares at December 31, 2021

 

4

 

4

Series B common stock, $.01 par value. Authorized 150,000,000 shares; issued and outstanding 8,392,212 shares at March 31, 2022 and 8,163,190 shares at December 31, 2021

 

 

Series C common stock, $.01 par value. Authorized 400,000,000 shares; no shares issued

Additional paid-in capital

 

7

 

Accumulated other comprehensive earnings (loss), net of taxes

 

(104)

 

(79)

Retained earnings

 

2,973

 

2,969

Total stockholders' equity

 

2,880

 

2,894

Noncontrolling interests in equity of subsidiaries

 

127

 

136

Total equity

 

3,007

 

3,030

Commitments and contingencies (note 8)

Total liabilities and equity

$

15,808

 

16,249

See accompanying notes to condensed consolidated financial statements.

I-4

Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(unaudited)

Three months ended

 

March 31,

 

    

2022

    

2021

 

amounts in millions, except per share amounts

 

Total revenue, net

$

2,883

 

3,337

Operating costs and expenses:

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

 

2,002

 

2,195

Operating expense

 

196

 

206

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

 

445

 

435

Restructuring and fire related costs, net

4

Depreciation and amortization

 

130

 

128

 

2,777

 

2,964

Operating income (loss)

 

106

 

373

Other income (expense):

Interest expense

 

(117)

 

(117)

Share of earnings (losses) of affiliates, net

 

(1)

 

(32)

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

 

30

 

41

Other, net

 

53

 

13

 

(35)

 

(95)

Earnings (loss) before income taxes

 

71

 

278

Income tax (expense) benefit

 

(58)

 

(54)

Net earnings (loss)

13

224

Less net earnings (loss) attributable to the noncontrolling interests

 

12

 

18

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

$

1

 

206

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

$

0.00

 

0.50

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

$

0.00

 

0.49

See accompanying notes to condensed consolidated financial statements.

I-5

Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Earnings (Loss)

(unaudited)

Three months ended

 

March 31,

 

    

2022

    

2021

 

amounts in millions

 

Net earnings (loss)

$

13

 

224

Other comprehensive earnings (loss), net of taxes:

Foreign currency translation adjustments

 

(60)

 

(73)

Comprehensive earnings (loss) attributable to debt credit risk adjustments

29

(56)

Other comprehensive earnings (loss)

 

(31)

 

(129)

Comprehensive earnings (loss)

 

(18)

 

95

Less comprehensive earnings (loss) attributable to the noncontrolling interests

 

6

 

9

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

$

(24)

 

86

See accompanying notes to condensed consolidated financial statements.

I-6

Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(unaudited)

Three months ended

 

March 31,

 

    

2022

    

2021

 

amounts in millions

 

Cash flows from operating activities:

Net earnings (loss)

$

13

 

224

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

Depreciation and amortization

 

130

 

128

Stock-based compensation

 

15

 

16

Share of (earnings) losses of affiliates, net

 

1

 

32

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

 

(30)

 

(41)

Deferred income tax expense (benefit)

 

29

 

2

Other, net

 

(25)

 

6

Changes in operating assets and liabilities

Decrease (increase) in accounts receivable

 

365

 

382

Decrease (increase) in inventory

(155)

(81)

Decrease (increase) in prepaid expenses and other assets

8

32

(Decrease) increase in trade accounts payable

(211)

(165)

(Decrease) increase in accrued and other liabilities

(319)

(382)

Net cash provided (used) by operating activities

 

(179)

 

153

Cash flows from investing activities:

Investments in and loans to cost and equity investees

 

(7)

 

(118)

Capital expenditures

 

(43)

 

(47)

Expenditures for television distribution rights

(2)

(56)

Cash proceeds from dispositions of investments

12

2

Proceeds from sale of fixed assets

40

Other investing activities, net

24

(1)

Net cash provided (used) by investing activities

 

(16)

 

(180)

Cash flows from financing activities:

Borrowings of debt

 

460

 

265

Repayments of debt

 

(195)

 

(194)

Repurchases of Qurate Retail common stock

 

 

(41)

Withholding taxes on net settlements of stock-based compensation

 

(7)

 

(21)

Dividends paid to noncontrolling interest

(14)

(16)

Dividends paid to common shareholders

(10)

(13)

Other financing activities, net

 

(5)

 

(3)

Net cash provided (used) by financing activities

 

229

 

(23)

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

 

(13)

 

(17)

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

 

21

 

(67)

Cash, cash equivalents and restricted cash at beginning of period

 

596

 

814

Cash, cash equivalents and restricted cash at end of period

$

617

 

747

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

March 31,

December 31,

2022

2021

in millions

Cash and cash equivalents

$

608

587

Restricted cash included in other current assets

9

9

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

$

617

596

See accompanying notes to condensed consolidated financial statements.

I-7

Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Equity

(unaudited)

Stockholders' Equity

Accumulated

Additional

other

Noncontrolling

 

Preferred

Common stock

paid-in

comprehensive

Retained

interest in equity

Total

 

  

stock

  

Series A

  

Series B

  

capital

  

earnings (loss)

  

earnings

  

of subsidiaries

  

equity

 

amounts in millions

 

Balance at January 1, 2022

$

4

(79)

2,969

136

3,030

Net earnings (loss)

 

1

12

13

Other comprehensive earnings (loss)

 

(25)

(6)

(31)

Stock-based compensation

14

14

Distribution to noncontrolling interest

(15)

(15)

Withholding taxes on net share settlements of stock-based compensation

(7)

(7)

Other

3

3

Balance at March 31, 2022

$

4

7

(104)

2,973

127

3,007

Stockholders' Equity

Accumulated

Additional

other

Noncontrolling

Preferred

Common stock

paid-in

comprehensive

Retained

interest in equity

Total

  

stock

  

Series A

  

Series B

  

capital

  

earnings (loss)

  

earnings

  

of subsidiaries

  

equity

amounts in millions

Balance at January 1, 2021

$

4

72

3,522

135

3,733

Net earnings (loss)

 

206

18

224

Other comprehensive income (loss)

 

(120)

(9)

(129)

Stock-based compensation

15

15

Series A Qurate Retail stock repurchases

(41)

(41)

Distribution to noncontrolling interest

(16)

(16)

Withholding taxes on net share settlements of stock-based compensation

(21)

(21)

Other

(2)

1

(1)

Reclassification

49

(49)

Balance at March 31, 2021

$

 

4

 

 

 

(48)

 

3,680

 

128

 

3,764

See accompanying notes to condensed consolidated financial statements.

I-8

Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(unaudited)

(1)   Basis of Presentation

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

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

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

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

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

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

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

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Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

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

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

The reorganization agreement with LMC provides for, among other things, provisions governing the relationship between Qurate Retail and LMC, including certain cross-indemnities. Pursuant to the services agreement, LMC provides Qurate Retail with certain general and administrative services including legal, tax, accounting, treasury and investor relations support. Qurate Retail reimburses LMC for direct, out-of-pocket expenses incurred by LMC in providing these services and for Qurate Retail's allocable portion of costs associated with any shared services or personnel based on an estimated percentage of time spent providing services to Qurate Retail. Under the facilities sharing agreement, LMC shares office space and related amenities at its corporate headquarters with Qurate Retail. Under these various agreements, approximately $3 million and $2 million was reimbursable to LMC for the three months ended March 31, 2022 and 2021, respectively. Qurate Retail had a tax sharing payable to LMC and Liberty Broadband in the amount of approximately $74 million and $96 million as of March 31, 2022 and December 31, 2021, respectively, included in Other liabilities in the condensed consolidated balance sheets. 

(2)   Stock-Based Compensation

The Company has granted to certain of its directors, employees and employees of its subsidiaries, restricted stock (“RSAs”), restricted stock units (“RSUs”) and options to purchase shares of the Company’s common stock (collectively, "Awards"). The Company measures the cost of employee services received in exchange for an equity classified Award (such as stock options and restricted stock) based on the grant-date fair value (“GDFV”) of the Award, and recognizes that cost over the period during which the employee is required to provide service (usually the vesting period of the Award). The Company measures the cost of employee services received in exchange for a liability classified Award based on the current fair value of the Award, and remeasures the fair value of the Award at each reporting date.

Included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations are $15 million and $16 millon of stock-based compensation during the three months ended March 31, 2022 and 2021, respectively.

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Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

Qurate Retail – RSUs

The following table presents the number and weighted average GDFV of RSUs granted by the Company during the three months ended March 31, 2022:

Three months ended

March 31, 2022

RSUs Granted (000's)

Weighted Average GDFV

Series A Qurate Retail common stock, subsidiary employees (1)

10,486

$

4.91

Series A Qurate Retail common stock, Qurate Retail employees and directors (2)

217

$

4.91

Series A Qurate Retail common stock, Qurate Retail President and CEO (3)

596

$

4.91

Series B Qurate Retail common stock, Qurate Retail Chairman of the Board (4)

327

$

4.95

(1)Grants mainly vest equally over three years.
(2)Grants mainly vest one year from the month of grant, subject to the satisfaction of certain performance objectives.
(3)Grant vests one year from the month of grant, subject to the satisfaction of certain performance objectives. Grant was made in connection with the employment agreement of our President and Chief Executive Officer.
(4)Grant vests one year from the month of grant, subject to the satisfaction of certain performance objectives. Grant was made in connection with our Chairman’s employment agreement.  

For awards that are performance-based, performance objectives, which are subjective, are considered in determining the timing and amount of compensation expense recognized. When the satisfaction of the performance objectives becomes probable, the Company records compensation expense. The probability of satisfying the performance objectives is assessed at the end of each reporting period.

Pursuant to the terms of the Stock Exchange Agreement, dated as of June 3, 2021, by and between Mr. Maffei and the Company, on March 25, 2022, Mr. Maffei transferred to the Company an aggregate of 229,022 shares of Series A common stock of Qurate Retail (“QRTEA”) received by Mr. Maffei upon vesting of the performance-based restricted stock unit award granted to Mr. Maffei on March 10, 2021 and in exchange, the Company issued to Mr. Maffei an equivalent number of shares of Series B common stock of Qurate Retail (“QRTEB”). Each share of Qurate Retail’s Series B common stock is convertible, at the option of the holder, into one share of Qurate Retail’s Series A common stock.

Qurate Retail—Outstanding Awards

The following tables present the number and weighted average exercise price ("WAEP") of the options to purchase Qurate Retail common stock granted to certain officers, employees and directors of the Company, as well as the weighted average remaining life and aggregate intrinsic value of the options.

    

    

    

Weighted

    

Aggregate

 

average

intrinsic

Series A

remaining

value

(000's)

WAEP

life

(millions)

Options outstanding at January 1, 2022

 

42,110

$

9.23

Granted

 

$

Exercised

 

(56)

$

2.80

Forfeited/Cancelled

 

(2,936)

$

11.16

Options outstanding at March 31, 2022

 

39,118

$

9.10

 

3.3

years

$

18

Options exercisable at March 31, 2022

 

25,183

$

11.19

 

2.3

years

$

6

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Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

    

    

    

Weighted

    

Aggregate

 

average

intrinsic

Series B

remaining

value

(000's)

WAEP

life

(millions)

Options outstanding at January 1, 2022

 

2,221

$

12.25

Granted

 

$

Exercised

 

$

Forfeited/Cancelled

$

Options outstanding at March 31, 2022

 

2,221

$

12.25

 

1.5

years

$

Options exercisable at March 31, 2022

 

2,221

$

12.25

 

1.5

years

$

The following table presents the number and weighted average GDFV of RSUs granted to certain officers, employees and directors of the Company.

Weighted

Weighted

Series A

Average

Series B

Average

(000's)

GDFV

(000's)

GDFV

RSUs outstanding at January 1, 2022

 

12,905

$

9.38

$

Granted

 

11,299

$

4.91

327

$

4.95

Vested

 

(3,593)

$

9.86

$

Forfeited/Cancelled

 

(1,154)

$

8.82

$

RSUs outstanding at March 31, 2022

 

19,457

$

6.73

327

$

4.95

 

As of March 31, 2022, Qurate Retail also had 1.1 million QRTEB RSAs and 116 thousand Qurate Retail 8.0% Series A Cumulative Redeemable Preferred Stock RSAs and RSUs outstanding. The QRTEB unvested RSAs had a weighted average GDFV of $13.65 per share, and 95 thousand of the Qurate Retail 8.0% Series A Cumulative Redeemable Preferred Stock unvested RSUs had an incremental cost of $48.17 per share.

As of March 31, 2022, the total unrecognized compensation cost related to unvested Awards was approximately $152 million. Such amount will be recognized in the Company's consolidated statements of operations over a weighted average period of approximately 1.8 years.

As of March 31, 2022, Qurate Retail reserved for issuance upon exercise of outstanding stock options approximately 39.1 million shares of QRTEA and 2.2 million shares of QRTEB common stock.

(3)   Earnings (Loss) Per Common Share

Basic earnings (loss) per common share ("EPS") is computed by dividing net earnings (loss) by the weighted average number of common shares outstanding ("WASO") for the period. Diluted EPS presents the dilutive effect on a per share basis of potential common shares as if they had been converted at the beginning of the periods presented. Potentially dilutive shares are excluded from the computation of diluted EPS during periods in which losses are reported since the result would be antidilutive.

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Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

Excluded from diluted EPS for the three months ended March 31, 2022 and 2021 are 26 million and 25 million potential common shares, respectively, because their inclusion would have been antidilutive.

Qurate Retail Common Stock

    

Three months ended

March 31,

2022

2021

number of shares in millions

Basic WASO

 

379

411

Potentially dilutive shares

 

5

11

Diluted WASO

 

384

422

(4)   Assets and Liabilities Measured at Fair Value

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

The Company's assets and liabilities measured at fair value are as follows:

Fair Value Measurements at

Fair Value Measurements at

 

March 31, 2022

December 31, 2021

 

    

    

Quoted

    

    

    

Quoted

    

 

prices

prices

 

in active

Significant

in active

Significant

 

markets for

other

markets for

other

 

identical

observable

identical

observable

 

assets

inputs

assets

inputs

 

Description

Total

(Level 1)

(Level 2)

Total

(Level 1)

(Level 2)

 

amounts in millions

 

Cash equivalents

$

213

 

213

 

 

149

 

149

 

Indemnification asset

$

239

239

324

324

Debt

$

1,151

 

 

1,151

 

1,315

 

 

1,315

The majority of the Company's Level 2 financial assets and liabilities are primarily debt instruments and derivative instruments with quoted market prices that are not considered to be traded on "active markets," as defined in GAAP. The fair values for such instruments are derived from a typical model using observable market data as the significant inputs.

The indemnification asset relates to Liberty Broadband’s agreement to indemnify Liberty Interactive LLC (“LI LLC”) and pertains to the ability of holders of LI LLC’s 1.75% exchangeable debentures due 2046 (the “1.75% Exchangeable Debentures”) to exercise their exchange right according to the terms of the debentures on or before October 5, 2023. Such amount will equal the difference between the exchange value and par value of the 1.75% Exchangeable Debentures at the time the exchange occurs.  The indemnification asset recorded in the condensed consolidated balance sheets as of March 31, 2022 represents the fair value of the estimated exchange feature included in the 1.75% Exchangeable Debentures primarily based on market observable inputs (Level 2).  As of March 31, 2022, a holder of the 1.75% Exchangeable Debentures has the ability to exchange and, accordingly, such indemnification asset is included as a current asset in our condensed consolidated balance sheet as of that date.

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Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

Realized and Unrealized Gains (Losses) on Financial Instruments

Realized and unrealized gains (losses) on financial instruments are comprised of changes in the fair value of the following:

Three months ended

 

March 31,

 

    

2022

    

2021

 

amounts in millions

 

Equity securities

(10)

7

Exchangeable senior debentures

 

124

 

46

Indemnification asset

(85)

(52)

Other financial instruments

1

40

$

30

 

41

The Company has elected to account for its exchangeable debt using the fair value option. Changes in the fair value of the exchangeable senior debentures recognized in the condensed consolidated statement of operations are primarily due to market factors primarily driven by changes in the fair value of the underlying shares into which the debt is exchangeable. The Company isolates the portion of the unrealized gain (loss) attributable to the change in the instrument specific credit risk and recognizes such amount in other comprehensive earnings (loss).  The change in the fair value of the exchangeable senior debentures attributable to changes in the instrument specific credit risk was a gain of $34 million and a loss of $68 million for the three months ended March 31, 2022 and 2021, respectively.  The cumulative change was a gain of $182 million as of March 31, 2022, net of the recognition of previously unrecognized gains and losses.  

(5)   Intangible Assets

Goodwill

Changes in the carrying amount of goodwill are as follows:

Corporate and

    

QxH

QVC Int'l

Zulily

    

Other

    

Total

 

amounts in millions

 

Balance at January 1, 2022

$

5,228

855

244

 

12

 

6,339

Foreign currency translation adjustments

 

(27)

 

 

(27)

Balance at March 31, 2022

$

5,228

828

244

 

12

 

6,312

Intangible Assets Subject to Amortization

Amortization expense for intangible assets with finite useful lives was $82 million for both of the three months ended March 31, 2022 and 2021, respectively. Based on its amortizable intangible assets as of March 31, 2022, Qurate Retail expects that amortization expense will be as follows for the next five years (amounts in millions):

Remainder of 2022

    

$

242

2023

$

208

2024

$

130

2025

$

58

2026

$

52

I-14

Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

(6)   Long-Term Debt

Debt is summarized as follows:

Outstanding

 

principal at

Carrying value

 

    

March 31, 2022

    

March 31, 2022

    

December 31, 2021

 

amounts in millions

 

Corporate level debentures

8.5% Senior Debentures due 2029

$

287

 

286

 

286

8.25% Senior Debentures due 2030

 

505

 

503

 

503

4% Exchangeable Senior Debentures due 2029

396

294

328

3.75% Exchangeable Senior Debentures due 2030

431

312

347

1.75% Exchangeable Senior Debentures due 2046

332

545

640

Subsidiary level notes and facilities

QVC 4.375% Senior Secured Notes due 2023

 

750

 

750

 

750

QVC 4.85% Senior Secured Notes due 2024