Annual report pursuant to Section 13 and 15(d)

Guarantor/Non-Guarantor Subsidiary Financial Information

v3.19.3.a.u2
Guarantor/Non-Guarantor Subsidiary Financial Information
12 Months Ended
Dec. 31, 2019
Guarantor Non-guarantor Subsidiary Financial Information [Abstract]  
Guarantor/Non-guarantor Subsidiary Financial Information
Guarantor/Non-guarantor Subsidiary Financial Information
The following information contains the consolidating financial statements for the Company, the parent on a stand-alone basis (QVC, Inc.), the combined subsidiary guarantors (Affiliate Relations Holdings, Inc.; Affiliate Investment, Inc.; AMI 2, Inc.; ER Marks, Inc.; QVC Rocky Mount, Inc.; QVC San Antonio, LLC; QVC Global Holdings I, Inc.; and QVC Global Holdings II, Inc.) and the combined non-guarantor subsidiaries pursuant to Rule 3-10 of Regulation S-X.
In connection with the Fourth Amended and Restated Credit Agreement (refer to Note 8) on December 31, 2018, the following subsidiaries became part of the combined subsidiary guarantors: QVC Deutschland GP, Inc.; HSN, Inc; HSNi, LLC; HSN Holding LLC; AST Sub, Inc.; Home Shopping Network En Espanol, L.P.; Home Shopping Network En Espanol, L.L.C; H.O.T. Networks Holdings (Delaware) LLC; HSN of Nevada LLC; Ingenious Designs LLC; NLG Merger Corp.; Ventana Television, Inc.; and Ventana Television Holdings, Inc. The Company has shown all of the subsidiaries of our HSN segment as combined subsidiary guarantors as of December 29, 2017, the date on which HSN became a subsidiary of QVC through a common control transaction with Qurate Retail.
These consolidating financial statements have been prepared from the Company's financial information on the same basis of accounting as the Company's consolidated financial statements. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions, such as management fees, royalty revenue and expense, interest income and expense and gains on intercompany asset transfers. Goodwill and other intangible assets have been allocated to the subsidiaries based on management’s estimates. Certain costs have been partially allocated to all of the subsidiaries of the Company.
The subsidiary guarantors are 100% owned by the Company. All guarantees are full and unconditional and are joint and several. There are no significant restrictions on the ability of the Company to obtain funds from its U.S. subsidiaries, including the guarantors, by dividend or loan. The Company has not presented separate notes and other disclosures concerning the subsidiary guarantors as the Company has determined that such material information is available in the notes to the Company's consolidated financial statements.

Condensed Consolidating Balance Sheets
December 31, 2019
 
(in millions)
Parent
issuer-
QVC, Inc.

Combined
subsidiary
guarantors

Combined
non-guarantor
subsidiaries

Eliminations

Consolidated-
QVC, Inc. and
subsidiaries

Assets
Current assets:





Cash and cash equivalents
$
37

192

332


561

Restricted cash
5


3


8

Accounts receivable, net
1,169

300

344


1,813

Inventories
711

258

245


1,214

Prepaid expenses and other current assets
105

32

47


184

Total current assets
2,027

782

971


3,780

Property and equipment, net
264

245

706


1,215

Operating lease right-of-use assets
2

15

197


214

Television distribution rights, net

139

1


140

Goodwill
4,190

922

859


5,971

Other intangible assets, net
560

2,909

29


3,498

Other noncurrent assets
18

12

79


109

Investments in subsidiaries
5,747

932


(6,679
)

Total assets
$
12,808

5,956

2,842

(6,679
)
14,927

Liabilities and equity
Current liabilities:





Current portion of debt and finance lease obligations
$
2

1

15


18

Accounts payable-trade
477

181

255


913

Accrued liabilities
311

402

332


1,045

Intercompany accounts payable (receivable)
181

(1,356
)
1,175



Total current liabilities
971

(772
)
1,777


1,976

Long-term portion of debt and finance lease obligations
4,945

5

151


5,101

Deferred income taxes
98

653

(27
)

724

Other long-term liabilities
120

16

186


322

Total liabilities
6,134

(98
)
2,087


8,123

Equity:





QVC, Inc. stockholder's equity
6,674

6,054

625

(6,679
)
6,674

Noncontrolling interest


130


130

Total equity
6,674

6,054

755

(6,679
)
6,804

Total liabilities and equity
$
12,808

5,956

2,842

(6,679
)
14,927



Condensed Consolidating Balance Sheets
December 31, 2018
 
(in millions)
Parent
issuer-
QVC, Inc.

Combined
subsidiary
guarantors

Combined
non-guarantor
subsidiaries

Eliminations

Consolidated-
QVC, Inc. and
subsidiaries

Assets
Current assets:





Cash and cash equivalents
$
73

192

278


543

Restricted cash
5


2


7

Accounts receivable, net
1,166

307

314


1,787

Inventories
725

310

245


1,280

Prepaid expenses and other current assets
95

73

48


216

Total current assets
2,064

882

887


3,833

Property and equipment, net
281

213

671


1,165

Television distribution rights, net

139

1


140

Goodwill
4,190

922

860


5,972

Other intangible assets, net
529

3,116

21


3,666

Other noncurrent assets
8

20

52


80

Investments in subsidiaries
5,523

885


(6,408
)

Total assets
$
12,595

6,177

2,492

(6,408
)
14,856

Liabilities and equity
Current liabilities:





Current portion of debt and capital lease obligations
$
403

1

17


421

Accounts payable-trade
494

201

313


1,008

Accrued liabilities
358

394

274


1,026

Intercompany accounts (receivable) payable
(95
)
(1,015
)
1,110



Total current liabilities
1,160

(419
)
1,714


2,455

Long-term portion of debt and capital lease obligations
4,540

6

153


4,699

Deferred income taxes
63

695

(58
)

700

Other long-term liabilities
122

34

17


173

Total liabilities
5,885

316

1,826


8,027

Equity:





QVC, Inc. stockholder's equity
6,710

5,861

547

(6,408
)
6,710

Noncontrolling interest


119


119

Total equity
6,710

5,861

666

(6,408
)
6,829

Total liabilities and equity
$
12,595

6,177

2,492

(6,408
)
14,856



Consolidating Statements of Operations
Year ended December 31, 2019
 
(in millions)
Parent
issuer-
QVC, Inc.

Combined
subsidiary
guarantors

Combined
non-guarantor
subsidiaries

Eliminations

Consolidated-
QVC, Inc. and
subsidiaries

Net revenue
$
6,236

3,094

2,938

(1,282
)
10,986

Operating costs and expenses:
 
 
 
 
 
Cost of goods sold (exclusive of depreciation and amortization shown separately below)
3,879

1,593

1,826

(150
)
7,148

Operating
441

416

279

(368
)
768

Selling, general and administrative, including transaction related costs and stock-based compensation
1,225

215

452

(764
)
1,128

Depreciation
63

35

88


186

Amortization
71

199

12


282

Impairment loss

147



147

 
5,679

2,605

2,657

(1,282
)
9,659

Operating income
557

489

281


1,327

Other (expense) income:





Losses on financial instruments
(5
)



(5
)
Interest (expense) income, net
(236
)
4

(8
)

(240
)
Foreign currency loss
(1
)

(2
)

(3
)
Intercompany interest income (expense)
28

40

(68
)


 
(214
)
44

(78
)

(248
)
Income before income taxes
343

533

203


1,079

Income tax expense
(102
)
(68
)
(92
)

(262
)
Equity in earnings of subsidiaries, net of tax
576

37


(613
)

Net income
817

502

111

(613
)
817

Less net income attributable to the noncontrolling interest
(50
)

(50
)
50

(50
)
Net income attributable to QVC, Inc. stockholder
$
767

502

61

(563
)
767



Consolidating Statements of Operations
Year ended December 31, 2018
 
(in millions)
Parent
issuer-
QVC, Inc.

Combined
subsidiary
guarantors

Combined
non-guarantor
subsidiaries

Eliminations

Consolidated-
QVC, Inc. and
subsidiaries

Net revenue
$
6,502

3,185

2,964

(1,369
)
11,282

Operating costs and expenses:
 
 
 
 
 
Cost of goods sold (exclusive of depreciation and amortization shown separately below)
3,979

1,617

1,832

(180
)
7,248

Operating
442

533

288

(382
)
881

Selling, general and administrative, including transaction related costs and stock-based compensation
1,252

282

473

(807
)
1,200

Depreciation
65

37

72


174

Amortization
79

147

11


237

Impairment loss

30



30

 
5,817

2,646

2,676

(1,369
)
9,770

Operating income
685

539

288


1,512

Other (expense) income:





Equity in losses of investee


(3
)

(3
)
Losses on financial instruments
(1
)
(1
)


(2
)
Interest expense, net
(223
)
(15
)
(5
)

(243
)
Foreign currency gain (loss)
2


(2
)


Loss on extinguishment of debt

(2
)


(2
)
Intercompany interest (expense) income
(34
)
151

(117
)


 
(256
)
133

(127
)

(250
)
Income before income taxes
429

672

161


1,262

Income tax expense
(127
)
(121
)
(86
)

(334
)
Equity in earnings of subsidiaries, net of tax
626

50


(676
)

Net income
928

601

75

(676
)
928

Less net income attributable to the noncontrolling interest
(46
)

(46
)
46

(46
)
Net income attributable to QVC, Inc. stockholder
$
882

601

29

(630
)
882



Consolidating Statements of Operations
Year ended December 31, 2017
 
(in millions)
Parent
issuer-
QVC, Inc.

Combined
subsidiary
guarantors

Combined
non-guarantor
subsidiaries

Eliminations

Consolidated-
QVC, Inc. and
subsidiaries

Net revenue
$
6,298

1,000

2,848

(1,375
)
8,771

Operating costs and expenses:





Cost of goods sold (exclusive of depreciation and amortization shown separately below)
3,877

157

1,744

(180
)
5,598

Operating
433

265

277

(374
)
601

Selling, general and administrative, including transaction related costs and stock-based compensation
1,097

40

428

(821
)
744

Depreciation
67

7

81


155

Amortization
187

142

35


364


5,661

611

2,565

(1,375
)
7,462

Operating income
637

389

283


1,309

Other (expense) income:




 
Equity in losses of investee


(3
)

(3
)
Interest (expense) income, net
(215
)
1



(214
)
Foreign currency (loss) gain
(5
)
1

(2
)

(6
)
Intercompany interest (expense) income
(12
)
96

(84
)



(232
)
98

(89
)

(223
)
Income before income taxes
405

487

194


1,086

Income tax (expense) benefit
(129
)
93

(103
)

(139
)
Equity in earnings of subsidiaries, net of tax
671

47


(718
)

Net income
947

627

91

(718
)
947

Less net income attributable to the noncontrolling interest
(46
)

(46
)
46

(46
)
Net income attributable to QVC, Inc. stockholder
$
901

627

45

(672
)
901



Consolidating Statements of Comprehensive Income
Year ended December 31, 2019
 
(in millions)
Parent
issuer-
QVC, Inc.

Combined
subsidiary
guarantors

Combined
non-guarantor
subsidiaries

Eliminations

Consolidated-
QVC, Inc. and
subsidiaries

Net income
$
817

502

111

(613
)
817

Foreign currency translation adjustments, net of tax
1


2

(2
)
1

Total comprehensive income
818

502

113

(615
)
818

Comprehensive income attributable to noncontrolling interest
(51
)

(51
)
51

(51
)
Comprehensive income attributable to QVC, Inc. stockholder
$
767

502

62

(564
)
767



Consolidating Statements of Comprehensive Income
Year ended December 31, 2018
 
(in millions)
Parent
issuer-
QVC, Inc.

Combined
subsidiary
guarantors

Combined
non-guarantor
subsidiaries

Eliminations

Consolidated-
QVC, Inc. and
subsidiaries

Net income
$
928

601

75

(676
)
928

Foreign currency translation adjustments, net of tax
(48
)

(48
)
48

(48
)
Total comprehensive income
880

601

27

(628
)
880

Comprehensive income attributable to noncontrolling interest
(49
)

(49
)
49

(49
)
Comprehensive income attributable to QVC, Inc. stockholder
$
831

601

(22
)
(579
)
831



Consolidating Statements of Comprehensive Income
Year ended December 31, 2017
 
(in millions)
Parent
issuer-
QVC, Inc.

Combined
subsidiary
guarantors

Combined
non-guarantor
subsidiaries

Eliminations

Consolidated-
QVC, Inc. and
subsidiaries

Net income
$
947

627

91

(718
)
947

Foreign currency translation adjustments, net of tax
135


135

(135
)
135

Total comprehensive income
1,082

627

226

(853
)
1,082

Comprehensive income attributable to noncontrolling interest
(50
)

(50
)
50

(50
)
Comprehensive income attributable to QVC, Inc. stockholder
$
1,032

627

176

(803
)
1,032




Condensed Consolidating Statements of Cash Flows
Year ended December 31, 2019
 
(in millions)
Parent
issuer-
QVC, Inc.

Combined
subsidiary
guarantors

Combined
non-guarantor
subsidiaries

Eliminations

Consolidated-
QVC, Inc. and
subsidiaries

Operating activities:










Net cash provided by operating activities
$
368

836

118


1,322

Investing activities:
 
 
 
 
 
Capital expenditures
(127
)
(65
)
(99
)

(291
)
Expenditures for television distribution rights

(134
)


(134
)
Changes in other noncurrent assets
(11
)
(2
)
2


(11
)
Other investing activities

29



29

Intercompany investing activities
319

(999
)

680


Net cash provided by (used in) investing activities
181

(1,171
)
(97
)
680

(407
)
Financing activities:
 
 
 
 
 
Principal payments of debt and finance lease obligations
(2,586
)

(13
)

(2,599
)
Principal borrowings of debt from senior secured credit facility
2,496




2,496

Principal repayment of senior secured notes
(400
)



(400
)
Proceeds from issuance of senior secured notes
500




500

Payment of debt origination fees
(18
)



(18
)
Capital contributions received from Qurate Retail, Inc.
50




50

Dividends paid to Qurate Retail Inc.
(877
)
(2
)


(879
)
Dividends paid to noncontrolling interest


(40
)

(40
)
Other financing activities
(4
)



(4
)
Net short-term intercompany debt borrowings (repayments)
276

(341
)
65



Other intercompany financing activities
(22
)
678

24

(680
)

Net cash (used in) provided by financing activities
(585
)
335

36

(680
)
(894
)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash


(2
)

(2
)
Net (decrease) increase in cash, cash equivalents and restricted cash
(36
)

55


19

Cash, cash equivalents and restricted cash, beginning of period
78

192

280


550

Cash, cash equivalents and restricted cash, end of period
$
42

192

335


569



Condensed Consolidating Statements of Cash Flows
Year ended December 31, 2018
 
(in millions)
Parent
issuer-
QVC, Inc.

Combined
subsidiary
guarantors

Combined
non-guarantor
subsidiaries

Eliminations

Consolidated-
QVC, Inc. and
subsidiaries

Operating activities:
 
 
 
 
 
Net cash provided by operating activities
$
461

592

103


1,156

Investing activities:





Capital expenditures
(121
)
(19
)
(88
)

(228
)
Expenditures for television distribution rights

(139
)
(1
)

(140
)
Changes in other noncurrent assets
1

(4
)
(13
)

(16
)
Other investing activities

(29
)


(29
)
Intercompany investing activities
433

(688
)

255


Net cash provided by (used in) investing activities
313

(879
)
(102
)
255

(413
)
Financing activities:





Principal payments of debt and capital lease obligations
(2,680
)
(851
)
(10
)

(3,541
)
Principal borrowings of debt from senior secured credit facility
2,362

388



2,750

Proceeds from issuance of senior secured notes
225




225

Payment of debt origination fees
(14
)



(14
)
Capital contributions received from Qurate Retail, Inc.
340

180



520

Dividends paid to Qurate Retail, Inc.
(367
)



(367
)
Dividends paid to noncontrolling interest


(40
)

(40
)
Other financing activities
(10
)
(8
)


(18
)
Net short-term intercompany debt (repayments) borrowings
(548
)
498

50



Other intercompany financing activities
(11
)
217

49

(255
)

Net cash (used in) provided by financing activities
(703
)
424

49

(255
)
(485
)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash


2


2

Net increase in cash, cash equivalents and restricted cash
71

137

52


260

Cash, cash equivalents and restricted cash, beginning of period
7

55

228


290

Cash, cash equivalents and restricted cash, end of period
$
78

192

280


550







Condensed Consolidating Statements of Cash Flows
Year ended December 31, 2017
 
(in millions)
Parent
issuer-
QVC, Inc.

Combined
subsidiary
guarantors

Combined
non-guarantor
subsidiaries

Eliminations

Consolidated-
QVC, Inc. and
subsidiaries

Operating activities:





Net cash provided by operating activities
$
641

507

54


1,202

Investing activities:





Capital expenditures
(103
)
(4
)
(45
)

(152
)
Expenditures for television distribution rights

(50
)


(50
)
Changes in other noncurrent assets
(1
)



(1
)
Intercompany investing activities
545

(1,507
)

962


Common control transaction with Qurate Retail, Inc., net of cash received

22



22

Net cash provided by (used in) investing activities
441

(1,539
)
(45
)
962

(181
)
Financing activities:





Principal payments of debt and capital lease obligations
(2,268
)

(10
)

(2,278
)
Principal borrowings of debt from senior secured credit facility
2,162




2,162

Dividends paid to Qurate Retail, Inc.
(866
)



(866
)
Dividends paid to noncontrolling interest


(40
)

(40
)
Other financing activities
(16
)



(16
)
Net short-term intercompany debt (repayments) borrowings
(170
)
(1,267
)
1,437



Other intercompany financing activities
73

2,257

(1,368
)
(962
)

Net cash (used in) provided by financing activities
(1,085
)
990

19

(962
)
(1,038
)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash


13


13

Net (decrease) increase in cash, cash equivalents and restricted cash
(3
)
(42
)
41


(4
)
Cash, cash equivalents and restricted cash, beginning of period
10

97

187


294

Cash, cash equivalents and restricted cash, end of period
$
7

55

228


290