Annual report pursuant to Section 13 and 15(d)

Guarantor/Non-Guarantor Subsidiary Financial Information

v3.8.0.1
Guarantor/Non-Guarantor Subsidiary Financial Information
12 Months Ended
Dec. 31, 2017
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 Third Amended and Restated Credit Agreement (refer to note 8), QVC International Ltd is no longer a guarantor subsidiary, and is reflected with the combined non-guarantor subsidiaries as of and for the year ended December 31, 2016.
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.
With One Q, beginning in 2016, as mentioned in note 15, QVC began allocating certain additional corporate costs for management reporting purposes, which were historically included in its QVC-U.S segment, to the QVC-International segment.
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.

Consolidating Balance Sheets
December 31, 2017
 
(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

33

225


260

Restricted cash
5


3


8

Accounts receivable, net
1,076


312


1,388

Inventories
758


261


1,019

Prepaid expenses and other current assets
28


23


51

Total current assets
1,869

33

824


2,726

Property and equipment, net
295

60

650


1,005

Television distribution rights, net

78



78

Goodwill
4,190


885


5,075

Other intangible assets, net
539

2,048

18


2,605

Other noncurrent assets
14


47


61

Investments in subsidiaries
3,579

1,626


(5,205
)

Total assets
$
10,486

3,845

2,424

(5,205
)
11,550

Liabilities and equity
Current liabilities:





Current portion of debt and capital lease obligations
$
3


14


17

Accounts payable-trade
455


301


756

Accrued liabilities
366

227

279


872

Intercompany accounts payable (receivable)
453

(1,513
)
1,060



Total current liabilities
1,277

(1,286
)
1,654


1,645

Long-term portion of debt and capital lease obligations
5,033


140


5,173

Deferred income taxes
52

468

(47
)

473

Other long-term liabilities
92


25


117

Total liabilities
6,454

(818
)
1,772


7,408

Equity:





QVC, Inc. stockholder's equity
4,032

4,663

542

(5,205
)
4,032

Noncontrolling interest


110


110

Total equity
4,032

4,663

652

(5,205
)
4,142

Total liabilities and equity
$
10,486

3,845

2,424

(5,205
)
11,550



Consolidating Balance Sheets
December 31, 2016
 
(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

97

185


284

Restricted cash
8


2


10

Accounts receivable, net
958


288


1,246

Inventories
726


224


950

Prepaid expenses and other current assets
22


24


46

Total current assets
1,716

97

723


2,536

Property and equipment, net
317

63

651


1,031

Television distribution rights, net

167

16


183

Goodwill
4,190


805


4,995

Other intangible assets, net
666

2,049

23


2,738

Other noncurrent assets
15


47


62

Investments in subsidiaries
3,389

1,030


(4,419
)

Total assets
$
10,293

3,406

2,265

(4,419
)
11,545

Liabilities and equity
Current liabilities:





Current portion of debt and capital lease obligations
$
3


11


14

Accounts payable-trade
425


253


678

Accrued liabilities
74

234

461


769

Intercompany accounts payable (receivable)
623

(246
)
(377
)


Total current liabilities
1,125

(12
)
348


1,461

Long-term portion of debt and capital lease obligations
5,132


143


5,275

Deferred income taxes
145

707

(74
)

778

Other long-term liabilities
96


40


136

Total liabilities
6,498

695

457


7,650

Equity:





QVC, Inc. stockholder's equity
3,795

2,711

1,708

(4,419
)
3,795

Noncontrolling interest


100


100

Total equity
3,795

2,711

1,808

(4,419
)
3,895

Total liabilities and equity
$
10,293

3,406

2,265

(4,419
)
11,545



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 stock-based compensation
1,097

2

428

(821
)
706

Depreciation
67

7

81


155

Amortization
187

142

35


364

 
5,661

573

2,565

(1,375
)
7,424

Operating income
637

427

283


1,347

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

525

194


1,124

Income tax (expense) benefit
(129
)
80

(103
)

(152
)
Equity in earnings of subsidiaries, net of tax
696

47


(743
)

Net income
972

652

91

(743
)
972

Less net income attributable to the noncontrolling interest
(46
)

(46
)
46

(46
)
Net income attributable to QVC, Inc. stockholder
$
926

652

45

(697
)
926



Consolidating Statements of Operations
Year ended December 31, 2016
 
(in millions)
Parent
issuer-
QVC, Inc.

Combined
subsidiary
guarantors

Combined
non-guarantor
subsidiaries

Eliminations

Consolidated-
QVC, Inc. and
subsidiaries

Net revenue
$
6,179

1,001

2,787

(1,285
)
8,682

Operating costs and expenses:
 
 
 
 
 
Cost of goods sold (exclusive of depreciation and amortization shown separately below)
3,855

169

1,726

(210
)
5,540

Operating
414

258

274

(340
)
606

Selling, general and administrative, including stock-based compensation
1,116

1

346

(735
)
728

Depreciation
57

7

78


142

Amortization
245

168

50


463

 
5,687

603

2,474

(1,285
)
7,479

Operating income
492

398

313


1,203

Other (expense) income:
 
 
 
 
 
Equity in losses of investee


(6
)

(6
)
Gain on financial instruments
2




2

Interest (expense) income, net
(211
)

1


(210
)
Foreign currency gain
17


21


38

Intercompany interest (expense) income
(2
)
1

1



 
(194
)
1

17


(176
)
Income before income taxes
298

399

330


1,027

Income tax expense
(114
)
(156
)
(115
)

(385
)
Equity in earnings of subsidiaries, net of tax
458

189


(647
)

Net income
642

432

215

(647
)
642

Less net income attributable to the noncontrolling interest
(38
)

(38
)
38

(38
)
Net income attributable to QVC, Inc. stockholder
$
604

432

177

(609
)
604



Consolidating Statements of Operations
Year ended December 31, 2015
 
(in millions)
Parent
issuer-
QVC, Inc.

Combined
subsidiary
guarantors

Combined
non-guarantor
subsidiaries

Eliminations

Consolidated-
QVC, Inc. and
subsidiaries

Net revenue
$
6,416

962

2,717

(1,352
)
8,743

Operating costs and expenses:
 
 
 
 
 
Cost of goods sold (exclusive of depreciation and amortization shown separately below)
4,018

109

1,624

(223
)
5,528

Operating
338

265

293

(289
)
607

Selling, general and administrative, including stock-based compensation
1,180

1

404

(840
)
745

Depreciation
43

8

83


134

Amortization
233

163

58


454

 
5,812

546

2,462

(1,352
)
7,468

Operating income
604

416

255


1,275

Other (expense) income:





Equity in losses of investee


(9
)

(9
)
Interest expense, net
(205
)

(3
)

(208
)
Foreign currency gain (loss)
15

(1
)


14

Loss on extinguishment of debt
(21
)



(21
)
Intercompany interest (expense) income
(7
)
(51
)
58



 
(218
)
(52
)
46


(224
)
Income before income taxes
386

364

301


1,051

Income tax expense
(136
)
(153
)
(100
)

(389
)
Equity in earnings of subsidiaries, net of tax
412

262


(674
)

Net income
662

473

201

(674
)
662

Less net income attributable to the noncontrolling interest
(34
)

(34
)
34

(34
)
Net income attributable to QVC, Inc. stockholder
$
628

473

167

(640
)
628



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
$
972

652

91

(743
)
972

Foreign currency translation adjustments, net of tax
135


135

(135
)
135

Total comprehensive income
1,107

652

226

(878
)
1,107

Comprehensive income attributable to noncontrolling interest
(50
)

(50
)
50

(50
)
Comprehensive income attributable to QVC, Inc. stockholder
$
1,057

652

176

(828
)
1,057



Consolidating Statements of Comprehensive Income
Year ended December 31, 2016
 
(in millions)
Parent
issuer-
QVC, Inc.

Combined
subsidiary
guarantors

Combined
non-guarantor
subsidiaries

Eliminations

Consolidated-
QVC, Inc. and
subsidiaries

Net income
$
642

432

215

(647
)
642

Foreign currency translation adjustments, net of tax
(83
)

(83
)
83

(83
)
Total comprehensive income
559

432

132

(564
)
559

Comprehensive income attributable to noncontrolling interest
(39
)

(39
)
39

(39
)
Comprehensive income attributable to QVC, Inc. stockholder
$
520

432

93

(525
)
520



Consolidating Statements of Comprehensive Income
Year ended December 31, 2015
 
(in millions)
Parent
issuer-
QVC, Inc.

Combined
subsidiary
guarantors

Combined
non-guarantor
subsidiaries

Eliminations

Consolidated-
QVC, Inc. and
subsidiaries

Net income
$
662

473

201

(674
)
662

Foreign currency translation adjustments, net of tax
(102
)

(102
)
102

(102
)
Total comprehensive income
560

473

99

(572
)
560

Comprehensive income attributable to noncontrolling interest
(33
)

(33
)
33

(33
)
Comprehensive income attributable to QVC, Inc. stockholder
$
527

473

66

(539
)
527




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
)
Decrease (increase) in restricted cash
3


(1
)

2

Changes in other noncurrent assets
(1
)



(1
)
Intercompany investing activities
545

(1,507
)

962


Net cash provided by (used in) investing activities
444

(1,561
)
(46
)
962

(201
)
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 Liberty Interactive Corporation
(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 and cash equivalents


13


13

Net (decrease) increase in cash and cash equivalents

(64
)
40


(24
)
Cash and cash equivalents, beginning of period
2

97

185


284

Cash and cash equivalents, end of period
$
2

33

225


260



Consolidating Statements of Cash Flows
Year ended December 31, 2016
 
(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
$
555

408

215


1,178

Investing activities:





Capital expenditures
(141
)
(2
)
(36
)

(179
)
Expenditures for television distribution rights

(38
)


(38
)
Decrease in restricted cash
1




1

Other investing activities
(12
)

9


(3
)
Changes in other noncurrent assets
(2
)

1


(1
)
Intercompany investing activities
452

131


(583
)

Net cash provided by (used in) investing activities
298

91

(26
)
(583
)
(220
)
Financing activities:





Principal payments of debt and capital lease obligations
(1,727
)

(6
)

(1,733
)
Principal borrowings of debt from senior secured credit facility
1,505




1,505

Payment of debt origination fees
(2
)



(2
)
Dividends paid to Liberty
(703
)



(703
)
Dividends paid to noncontrolling interest


(39
)

(39
)
Other financing activities
(9
)



(9
)
Net short-term intercompany debt borrowings (repayments)
61

(1,517
)
1,456



Other intercompany financing activities
24

1,003

(1,610
)
583


Net cash used in financing activities
(851
)
(514
)
(199
)
583

(981
)
Effect of foreign exchange rate changes on cash and cash equivalents


(20
)

(20
)
Net increase (decrease) in cash and cash equivalents
2

(15
)
(30
)

(43
)
Cash and cash equivalents, beginning of period

112

215


327

Cash and cash equivalents, end of period
$
2

97

185


284







Consolidating Statements of Cash Flows
Year ended December 31, 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
$
274

314

440


1,028

Investing activities:





Capital expenditures
(154
)
(9
)
(52
)

(215
)
Expenditures for television distribution rights

(68
)
(4
)

(72
)
Decrease (increase) in restricted cash
1


(1
)


Other investing activities
2




2

Changes in other noncurrent assets
12


(12
)


Intercompany investing activities
525

413


(938
)

Net cash provided by (used in) investing activities
386

336

(69
)
(938
)
(285
)
Financing activities:





Principal payments of debt and capital lease obligations
(2,170
)

(7
)

(2,177
)
Principal borrowings of debt from senior secured credit facility
2,974




2,974

Payment of debt origination fees
(3
)



(3
)
Payment of bond premium fees
(18
)



(18
)
Dividends paid to Liberty
(1,485
)



(1,485
)
Dividends paid to noncontrolling interest


(36
)

(36
)
Other financing activities
(15
)



(15
)
Net short-term intercompany debt (repayments) borrowings
(822
)
2,192

(1,370
)


Other intercompany financing activities
877

(2,853
)
1,038

938


Net cash used in financing activities
(662
)
(661
)
(375
)
938

(760
)
Effect of foreign exchange rate changes on cash and cash equivalents


(3
)

(3
)
Net decrease in cash and cash equivalents
(2
)
(11
)
(7
)

(20
)
Cash and cash equivalents, beginning of period
2

123

222


347

Cash and cash equivalents, end of period
$

112

215


327