Quarterly report pursuant to Section 13 or 15(d)

Guarantor/Non-Guarantor Subsidiary Financial Information

v3.8.0.1
Guarantor/Non-Guarantor Subsidiary Financial Information
3 Months Ended
Mar. 31, 2018
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 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 in June 2016 (see notes 1 and 6), QVC International Ltd is no longer a guarantor subsidiary, and is reflected with the combined non-guarantor subsidiaries.
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. 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 condensed consolidated financial statements.

Condensed Consolidating Balance Sheets
March 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
$
10

97

241


348

Restricted cash
5


3


8

Accounts receivable, net
761


281


1,042

Inventories
769


304


1,073

Prepaid expenses and other current assets
84


50


134

Total current assets
1,629

97

879


2,605

Property and equipment, net
284

58

682


1,024

Television distribution rights, net

81

1


82

Goodwill
4,190


919


5,109

Other intangible assets, net
532

2,048

17


2,597

Other noncurrent assets
15


52


67

Investments in subsidiaries
3,694

1,772


(5,466
)

Total assets
$
10,344

4,056

2,550

(5,466
)
11,484

Liabilities and equity
Current liabilities:





Current portion of debt and capital lease obligations
$
4


14


18

Accounts payable-trade
381


283


664

Accrued liabilities
223

260

306


789

Intercompany accounts payable (receivable)
434

(1,499
)
1,065



Total current liabilities
1,042

(1,239
)
1,668


1,471

Long-term portion of debt and capital lease obligations
4,942


156


5,098

Deferred income taxes
58

470

(48
)

480

Other long-term liabilities
90


28


118

Total liabilities
6,132

(769
)
1,804


7,167

Equity:





QVC, Inc. stockholder's equity
4,212

4,825

641

(5,466
)
4,212

Noncontrolling interest


105


105

Total equity
4,212

4,825

746

(5,466
)
4,317

Total liabilities and equity
$
10,344

4,056

2,550

(5,466
)
11,484


Condensed 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



Condensed Consolidating Statements of Operations
Three months ended March 31, 2018
 
(in millions)
Parent
issuer-
QVC, Inc.

Combined
subsidiary
guarantors

Combined
non-guarantor
subsidiaries

Eliminations

Consolidated-
QVC, Inc. and
subsidiaries

Net revenue
$
1,455

223

728

(313
)
2,093

Operating costs and expenses
 
 
 
 
 
Cost of goods sold (exclusive of depreciation and amortization shown separately below)
878

35

447

(40
)
1,320

Operating
102

58

74

(89
)
145

Selling, general and administrative, including transaction related costs and stock-based compensation
279


113

(184
)
208

Depreciation
16

3

19


38

Amortization
20

16

3


39


1,295

112

656

(313
)
1,750

Operating income
160

111

72


343

Other (expense) income:





Equity in income of investee


1


1

Interest expense, net
(57
)



(57
)
Foreign currency loss
(4
)

3


(1
)
Intercompany interest (expense) income
(7
)
38

(31
)



(68
)
38

(27
)

(57
)
Income before income taxes
92

149

45


286

Income tax expense
(22
)
(34
)
(23
)

(79
)
Equity in earnings of subsidiaries, net of tax
137

25


(162
)

Net income
207

140

22

(162
)
207

Less net income attributable to the noncontrolling interest
(11
)

(11
)
11

(11
)
Net income attributable to QVC, Inc. stockholder
$
196

140

11

(151
)
196



Condensed Consolidating Statements of Operations
Three months ended March 31, 2017
 
(in millions)
Parent
issuer-
QVC, Inc.

Combined
subsidiary
guarantors

Combined
non-guarantor
subsidiaries

Eliminations

Consolidated-
QVC, Inc. and
subsidiaries

Net revenue
$
1,404

225

644

(308
)
1,965

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

37

391

(40
)
1,243

Operating
100

58

68

(89
)
137

Selling, general and administrative, including transaction related costs and stock-based compensation
242


94

(179
)
157

Depreciation
17

2

22


41

Amortization
60

45

11


116


1,274

142

586

(308
)
1,694

Operating income
130

83

58


271

Other (expense) income:
 
 
 
 
 
Equity in losses of investee


(2
)

(2
)
Interest expense, net
(55
)



(55
)
Foreign currency gain (loss)
(1
)

(1
)

(2
)
Intercompany interest (expense) income
(1
)
22

(21
)



(57
)
22

(24
)

(59
)
Income before income taxes
73

105

34


212

Income tax expense
(32
)
(30
)
(15
)

(77
)
Equity in earnings of subsidiaries, net of tax
94

17


(111
)

Net income
135

92

19

(111
)
135

Less net income attributable to the noncontrolling interest
(11
)

(11
)
11

(11
)
Net income attributable to QVC, Inc. stockholder
$
124

92

8

(100
)
124







Condensed Consolidating Statements of Comprehensive Income
Three months ended March 31, 2018
 
(in millions)
Parent
issuer-
QVC, Inc.

Combined
subsidiary
guarantors

Combined
non-guarantor
subsidiaries

Eliminations

Consolidated-
QVC, Inc. and
subsidiaries

Net income
$
207

140

22

(162
)
207

Foreign currency translation adjustments
70


70

(70
)
70

Total comprehensive income
277

140

92

(232
)
277

Comprehensive income attributable to noncontrolling interest
(18
)

(18
)
18

(18
)
Comprehensive income attributable to QVC, Inc. stockholder
$
259

140

74

(214
)
259


Condensed Consolidating Statements of Comprehensive Income
Three months ended March 31, 2017
 
(in millions)
Parent
issuer-
QVC, Inc.

Combined
subsidiary
guarantors

Combined
non-guarantor
subsidiaries

Eliminations

Consolidated-
QVC, Inc. and
subsidiaries

Net income
$
135

92

19

(111
)
135

Foreign currency translation adjustments
27


27

(27
)
27

Total comprehensive income
162

92

46

(138
)
162

Comprehensive income attributable to noncontrolling interest
(17
)

(17
)
17

(17
)
Comprehensive income attributable to QVC, Inc. stockholder
$
145

92

29

(121
)
145




Condensed Consolidating Statements of Cash Flows
Three months ended March 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
$
166

169

14


349

Investing activities:
 
 
 
 
 
Capital expenditures
(18
)
(1
)
(17
)

(36
)
Expenditures for television distribution rights

(19
)
(1
)

(20
)
Changes in other noncurrent assets
2


(2
)


Intercompany investing activities
82

(105
)

23


Net cash provided by (used in) investing activities
66

(125
)
(20
)
23

(56
)
Financing activities:
 
 
 
 
 
Principal payments of debt and capital lease obligations
(964
)

(3
)

(967
)
Principal borrowings of debt from senior secured credit facility
872




872

Capital contribution received from Qurate Retail, Inc.
140




140

Dividends paid to Qurate Retail, Inc.
(233
)



(233
)
Dividends paid to noncontrolling interest


(23
)

(23
)
Other financing activities
(7
)



(7
)
Net short-term intercompany debt (repayments) borrowings
(19
)
14

5



Other intercompany financing activities
(13
)
6

30

(23
)

Net cash (used in) provided by financing activities
(224
)
20

9

(23
)
(218
)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash


13


13

Net increase in cash, cash equivalents and restricted cash
8

64

16


88

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

33

228


268

Cash, cash equivalents and restricted cash, end of period
$
15

97

244


356



Condensed Consolidating Statements of Cash Flows
Three months ended March 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
$
220

155

82


457

Investing activities:





Capital expenditures
(13
)
(1
)
(3
)

(17
)
Expenditures for television distribution rights

(1
)


(1
)
Other investing activities





Changes in other noncurrent assets
(2
)

(1
)

(3
)
Intercompany investing activities
201

(522
)

321


Net cash provided by (used in) investing activities
186

(524
)
(4
)
321

(21
)
Financing activities:





Principal payments of debt and capital lease obligations
(648
)

(2
)

(650
)
Principal borrowings of debt from senior secured credit facility
454




454

Dividends paid to Qurate Retail, Inc.
(183
)



(183
)
Dividends paid to noncontrolling interest


(22
)

(22
)
Other financing activities
(4
)



(4
)
Net short-term intercompany debt (repayments) borrowings
(20
)
(1,030
)
1,050



Other intercompany financing activities
(6
)
1,453

(1,126
)
(321
)

Net cash (used in) provided by financing activities
(407
)
423

(100
)
(321
)
(405
)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash


9


9

Net (decrease) increase in cash, cash equivalents and restricted cash
(1
)
54

(13
)

40

Cash, cash equivalents and restricted cash, beginning of period
10

97

187


294

Cash, cash equivalents and restricted cash, end of period
$
9

151

174


334