Quarterly report pursuant to Section 13 or 15(d)

Guarantor/Non-Guarantor Subsidiary Financial Information

v3.3.0.814
Guarantor/Non-Guarantor Subsidiary Financial Information
9 Months Ended
Sep. 30, 2015
Guarantor Non-guarantor Subsidiary Financial Information [Abstract]  
Guarantor/Non-guarantor Subsidiary Financial Information
Guarantor/Non-guarantor Subsidiary Financial Information
The following information contains the condensed consolidating financial statements for the Company, the parent on a stand-alone basis (QVC, Inc.), the combined subsidiary guarantors (Affiliate Relations Holdings, Inc.; Affiliate Investment, Inc.; AMI 2, Inc.; ER Marks, Inc.; QVC International Ltd; QVC Rocky Mount, Inc.; QVC San Antonio, LLC; Global Holdings I, Inc.; and Global Holdings II, Inc.) and the combined non-guarantor subsidiaries pursuant to Rule 3-10 of Regulation S-X. Certain non-guarantor subsidiaries are majority-owned by QVC International Ltd, which is a guarantor subsidiary.
These condensed consolidating financial statements have been prepared from the Company's financial information on the same basis of accounting as the Company's condensed consolidated financial statements. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions, such as management fees, royalty revenue and expense, interest income and expense and gains on intercompany asset transfers. In the fourth quarter of 2014 the Company revised the presentation of intercompany management expense (income) and prior period amounts have been reclassified to conform with the current period presentation. 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.
During the nine months ended September 30, 2014, an intangible asset held by certain non-guarantor subsidiaries was sold to QVC, Inc. resulting in a gain of $20 million reflected in intercompany interest and other income for the non-guarantor subsidiaries and also included in equity in earnings of subsidiaries for the subsidiary guarantors. The gain is eliminated in the eliminations column. The impact of these earnings has been eliminated in the presentation of intangible assets and equity in earnings of subsidiaries of the parent company.
The subsidiary guarantors are 100% owned by the Company. All guarantees are full and unconditional and are joint and several. There are no significant restrictions on the ability of the Company to obtain funds from its U.S. subsidiaries, including the guarantors, by dividend or loan. The Company has not presented separate notes and other disclosures concerning the subsidiary guarantors as the Company has determined that such material information is available in the notes to the Company's condensed consolidated financial statements.

Condensed Consolidating Balance Sheets
September 30, 2015
 
(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
$
2

135

226


363

Restricted cash
9


3


12

Accounts receivable, net
660


214


874

Inventories
899


267


1,166

Deferred income taxes
175

26

11


212

Prepaid expenses
24


29


53

Total current assets
1,769

161

750


2,680

Property and equipment, net
277

67

653


997

Cable and satellite television distribution rights, net

315

49


364

Goodwill
4,191


860


5,051

Other intangible assets, net
899

2,050

48


2,997

Other noncurrent assets
6


52


58

Investments in subsidiaries
3,662

2,679


(6,341
)

Total assets
$
10,804

5,272

2,412

(6,341
)
12,147

Liabilities and equity
Current liabilities:





Current portion of debt and capital lease obligations
$
3


6


9

Accounts payable-trade
493


229


722

Accrued liabilities
136

160

418


714

Intercompany accounts payable (receivable)
500

1,303

(1,803
)


Total current liabilities
1,132

1,463

(1,150
)

1,445

Long-term portion of debt and capital lease obligations
4,480


54


4,534

Deferred compensation
14




14

Deferred income taxes
237

780

16


1,033

Other long-term liabilities
111


72


183

Total liabilities
5,974

2,243

(1,008
)

7,209

Equity:





QVC, Inc. stockholder's equity
4,830

3,029

3,312

(6,341
)
4,830

Noncontrolling interest


108


108

Total equity
4,830

3,029

3,420

(6,341
)
4,938

Total liabilities and equity
$
10,804

5,272

2,412

(6,341
)
12,147



Condensed Consolidating Balance Sheets
December 31, 2014
 
(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
$
2

123

222


347

Restricted cash
10


2


12

Accounts receivable, net
909


287


1,196

Inventories
680


202


882

Deferred income taxes
192


18


210

Prepaid expenses
25


25


50

Total current assets
1,818

123

756


2,697

Property and equipment, net
273

68

685


1,026

Cable and satellite television distribution rights, net

388

73


461

Goodwill
4,184


907


5,091

Other intangible assets, net
1,023

2,051

69


3,143

Other noncurrent assets
1


57


58

Investments in subsidiaries
4,681

1,386


(6,067
)

Total assets
$
11,980

4,016

2,547

(6,067
)
12,476

Liabilities and equity
Current liabilities:





Current portion of debt and capital lease obligations
$
2


7


9

Accounts payable-trade
420


209


629

Accrued liabilities
282

143

460


885

Intercompany accounts payable (receivable)
1,384

(921
)
(463
)


Total current liabilities
2,088

(778
)
213


1,523

Long-term portion of debt and capital lease obligations
4,565


55


4,620

Deferred compensation
16


1


17

Deferred income taxes
269

877

(25
)

1,121

Other long-term liabilities
99


50


149

Total liabilities
7,037

99

294


7,430

Equity:





QVC, Inc. stockholder's equity
4,943

3,917

2,150

(6,067
)
4,943

Noncontrolling interest


103


103

Total equity
4,943

3,917

2,253

(6,067
)
5,046

Total liabilities and equity
$
11,980

4,016

2,547

(6,067
)
12,476



Condensed Consolidating Statements of Operations
Three months ended September 30, 2015
 
(in millions)
Parent
issuer-
QVC, Inc.

Combined
subsidiary
guarantors

Combined
non-guarantor
subsidiaries

Eliminations

Consolidated-
QVC, Inc. and
subsidiaries

Net revenue
$
1,458

223

641

(315
)
2,007

Cost of goods sold
905

27

385

(51
)
1,266

Gross profit
553

196

256

(264
)
741

Operating expenses:





Operating
95

63

88

(72
)
174

Selling, general and administrative, including stock-based compensation
255


83

(192
)
146

Depreciation
11

2

20


33

Amortization
56

40

12


108


417

105

203

(264
)
461

Operating income
136

91

53


280

Other (expense) income:





Equity in losses of investee


(3
)

(3
)
Interest expense, net
(50
)

1


(49
)
Foreign currency gain
2

7

3


12

Intercompany interest (expense) income
(1
)
(21
)
22




(49
)
(14
)
23


(40
)
Income before income taxes
87

77

76


240

Income tax expense
(23
)
(25
)
(38
)

(86
)
Equity in earnings of subsidiaries, net of tax
90

37


(127
)

Net income
154

89

38

(127
)
154

Less net income attributable to the noncontrolling interest
(8
)

(8
)
8

(8
)
Net income attributable to QVC, Inc. stockholder
$
146

89

30

(119
)
146



Condensed Consolidating Statements of Operations
Three months ended September 30, 2014
 
(in millions)
Parent
issuer-
QVC, Inc.

Combined
subsidiary
guarantors

Combined
non-guarantor
subsidiaries

Eliminations

Consolidated-
QVC, Inc. and
subsidiaries

Net revenue
$
1,404

210

745

(339
)
2,020

Cost of goods sold
873

27

430

(64
)
1,266

Gross profit
531

183

315

(275
)
754

Operating expenses:
 
 
 
 
 
Operating
115

61

95

(93
)
178

Selling, general and administrative, including stock-based compensation
250


85

(182
)
153

Depreciation
10

1

23


34

Amortization
56

39

18


113


431

101

221

(275
)
478

Operating income
100

82

94


276

Other (expense) income:
 
 
 
 
 
Equity in losses of investee


(2
)

(2
)
Interest expense, net
(60
)



(60
)
Foreign currency gain (loss)
6

(2
)
(2
)

2

Loss on extinguishment of debt
(48
)



(48
)
Intercompany interest (expense) income
(6
)
13

(7
)



(108
)
11

(11
)

(108
)
(Loss) income before income taxes
(8
)
93

83


168

Income tax expense
(15
)
(29
)
(21
)

(65
)
Equity in earnings of subsidiaries, net of tax
126

13


(139
)

Net income
103

77

62

(139
)
103

Less net income attributable to the noncontrolling interest
(8
)

(8
)
8

(8
)
Net income attributable to QVC, Inc. stockholder
$
95

77

54

(131
)
95




Condensed Consolidating Statements of Operations
Nine months ended September 30, 2015
 
(in millions)
Parent
issuer-
QVC, Inc.

Combined
subsidiary
guarantors

Combined
non-guarantor
subsidiaries

Eliminations

Consolidated-
QVC, Inc. and
subsidiaries

Net revenue
$
4,282

645

1,938

(922
)
5,943

Cost of goods sold
2,632

75

1,153

(139
)
3,721

Gross profit
1,650

570

785

(783
)
2,222

Operating expenses:





Operating
294

181

266

(224
)
517

Selling, general and administrative, including stock-based compensation
757


245

(559
)
443

Depreciation
32

6

63


101

Amortization
175

121

45


341


1,258

308

619

(783
)
1,402

Operating income
392

262

166


820

Other (expense) income:





Equity in losses of investee


(7
)

(7
)
Interest expense, net
(157
)

(1
)

(158
)
Foreign currency gain (loss)
7

(6
)
10


11

Loss on extinguishment of debt
(21
)



(21
)
Intercompany interest (expense) income
(7
)
(30
)
37




(178
)
(36
)
39


(175
)
Income before income taxes
214

226

205


645

Income tax expense
(63
)
(101
)
(79
)

(243
)
Equity in earnings of subsidiaries, net of tax
251

145


(396
)

Net income
402

270

126

(396
)
402

Less net income attributable to the noncontrolling interest
(25
)

(25
)
25

(25
)
Net income attributable to QVC, Inc. stockholder
$
377

270

101

(371
)
377



Condensed Consolidating Statements of Operations
Nine months ended September 30, 2014
 
(in millions)
Parent
issuer-
QVC, Inc.

Combined
subsidiary
guarantors

Combined
non-guarantor
subsidiaries

Eliminations

Consolidated-
QVC, Inc. and
subsidiaries

Net revenue
$
4,133

601

2,196

(910
)
6,020

Cost of goods sold
2,565

75

1,308

(176
)
3,772

Gross profit
1,568

526

888

(734
)
2,248

Operating expenses:





Operating
276

174

295

(209
)
536

Selling, general and administrative, including stock-based compensation
713


268

(525
)
456

Depreciation
29

4

67


100

Amortization
166

115

55


336


1,184

293

685

(734
)
1,428

Operating income
384

233

203


820

Other (expense) income:





Equity in losses of investee


(5
)

(5
)
Interest expense, net
(173
)

(9
)

(182
)
Foreign currency gain (loss)
3

(2
)
1


2

Loss on extinguishment of debt
(48
)



(48
)
Intercompany interest and other (expense) income
(16
)
39

(3
)
(20
)


(234
)
37

(16
)
(20
)
(233
)
Income before income taxes
150

270

187

(20
)
587

Income tax expense
(22
)
(81
)
(119
)

(222
)
Equity in earnings (losses) of subsidiaries, net of tax
237

(6
)

(231
)

Net income
365

183

68

(251
)
365

Less net income attributable to the noncontrolling interest
(27
)

(27
)
27

(27
)
Net income attributable to QVC, Inc. stockholder
$
338

183

41

(224
)
338




Condensed Consolidating Statements of Comprehensive Income
Three months ended September 30, 2015
 
(in millions)
Parent
issuer-
QVC, Inc.

Combined
subsidiary
guarantors

Combined
non-guarantor
subsidiaries

Eliminations

Consolidated-
QVC, Inc. and
subsidiaries

Net income
$
154

89

38

(127
)
154

Foreign currency translation adjustments
3


3

(3
)
3

Total comprehensive income
157

89

41

(130
)
157

Comprehensive income attributable to noncontrolling interest
(11
)

(11
)
11

(11
)
Comprehensive income attributable to QVC, Inc. stockholder
$
146

89

30

(119
)
146


Condensed Consolidating Statements of Comprehensive Income
Three months ended September 30, 2014
 
(in millions)
Parent
issuer-
QVC, Inc.

Combined
subsidiary
guarantors

Combined
non-guarantor
subsidiaries

Eliminations

Consolidated-
QVC, Inc. and
subsidiaries

Net income
$
103

77

62

(139
)
103

Foreign currency translation adjustments
(116
)

(116
)
116

(116
)
Total comprehensive (loss) income
(13
)
77

(54
)
(23
)
(13
)
Comprehensive income attributable to noncontrolling interest
(1
)

(1
)
1

(1
)
Comprehensive (loss) income attributable to QVC, Inc. stockholder
$
(14
)
77

(55
)
(22
)
(14
)


Condensed Consolidating Statements of Comprehensive Income
Nine months ended September 30, 2015
 
(in millions)
Parent
issuer-
QVC, Inc.

Combined
subsidiary
guarantors

Combined
non-guarantor
subsidiaries

Eliminations

Consolidated-
QVC, Inc. and
subsidiaries

Net income
$
402

270

126

(396
)
402

Foreign currency translation adjustments
(77
)

(77
)
77

(77
)
Total comprehensive income
325

270

49

(319
)
325

Comprehensive income attributable to noncontrolling interest
(25
)

(25
)
25

(25
)
Comprehensive income attributable to QVC, Inc. stockholder
$
300

270

24

(294
)
300


Condensed Consolidating Statements of Comprehensive Income
Nine months ended September 30, 2014
 
(in millions)
Parent
issuer-
QVC, Inc.

Combined
subsidiary
guarantors

Combined
non-guarantor
subsidiaries

Eliminations

Consolidated-
QVC, Inc. and
subsidiaries

Net income
$
365

183

68

(251
)
365

Foreign currency translation adjustments
(98
)

(98
)
98

(98
)
Total comprehensive income (loss)
267

183

(30
)
(153
)
267

Comprehensive income attributable to noncontrolling interest
(23
)

(23
)
23

(23
)
Comprehensive income (loss) attributable to QVC, Inc. stockholder
$
244

183

(53
)
(130
)
244




Condensed Consolidating Statements of Cash Flows
Nine months ended September 30, 2015
 
(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
$
351

152

277


780

Investing activities:
 
 
 
 
 
Capital expenditures
(90
)
(6
)
(36
)

(132
)
Expenditures for cable and satellite television distribution rights, net

(45
)
(3
)

(48
)
Decrease (increase) in restricted cash
1


(1
)


Changes in other noncurrent assets


(1
)

(1
)
Other investing activities
2




2

Intercompany investing activities
339

382


(721
)

Net cash provided by (used in) investing activities
252

331

(41
)
(721
)
(179
)
Financing activities:
 
 
 
 
 
Principal payments of debt and capital lease obligations
(1,560
)

(5
)

(1,565
)
Principal borrowings of debt from senior secured credit facility
1,470




1,470

Payment of debt origination fees
(3
)



(3
)
Payment of bond premium fees
(18
)



(18
)
Other financing activities
(1
)



(1
)
Dividends paid to Liberty
(444
)



(444
)
Dividends paid to noncontrolling interest


(20
)

(20
)
Net short-term intercompany debt (repayments) borrowings
(884
)
2,224

(1,340
)


Other intercompany financing activities
837

(2,695
)
1,137

721


Net cash (used in) provided by financing activities
(603
)
(471
)
(228
)
721

(581
)
Effect of foreign exchange rate changes on cash and cash equivalents


(4
)

(4
)
Net increase in cash and cash equivalents

12

4


16

Cash and cash equivalents, beginning of period
2

123

222


347

Cash and cash equivalents, end of period
$
2

135

226


363



Condensed Consolidating Statements of Cash Flows
Nine months ended September 30, 2014
 
(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
$
311

273

228


812

Investing activities:





Capital expenditures
(103
)
(3
)
27

(20
)
(99
)
Expenditures for cable and satellite television distribution rights, net

(30
)


(30
)
Decrease in restricted cash
1


1


2

Changes in other noncurrent assets
(1
)



(1
)
Other investing activities
1




1

Intercompany investing activities
258

78


(336
)

Net cash provided by (used in) investing activities
156

45

28

(356
)
(127
)
Financing activities:





Principal payments of debt and capital lease obligations
(2,388
)

(8
)

(2,396
)
Principal borrowings of debt from senior secured credit facility
726




726

Proceeds from issuance of senior secured notes, net of original issue discount
1,997




1,997

Payment of debt origination fees
(25
)



(25
)
Payment of bond premium fees
(32
)



(32
)
Other financing activities
(5
)



(5
)
Dividends paid to Liberty
(764
)



(764
)
Dividends paid to noncontrolling interest


(25
)

(25
)
Net short-term intercompany debt borrowings (repayments)
90

76

(166
)


Other intercompany financing activities
(143
)
(302
)
89

356


Net cash used in financing activities
(544
)
(226
)
(110
)
356

(524
)
Effect of foreign exchange rate changes on cash and cash equivalents


(32
)

(32
)
Net (decrease) increase in cash and cash equivalents
(77
)
92

114


129

Cash and cash equivalents, beginning of period
78

133

246


457

Cash and cash equivalents, end of period
$
1

225

360


586