|
State of Delaware
(State or other jurisdiction of
incorporation or organization)
|
23-2414041
(I.R.S. Employer Identification Number)
|
|
|
1200 Wilson Drive
West Chester, Pennsylvania
(Address of principal executive offices)
|
19380
(Zip Code)
|
Title of each class
|
Name of each exchange on which registered
|
6.375% Senior Secured Notes due 2067
|
New York Stock Exchange
|
Large accelerated filer
o
|
Accelerated filer
o
|
Non-accelerated filer
x
|
Smaller reporting company
o
|
Emerging growth company
o
|
|
||||
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.
o
|
|
|
Part I
|
Page
|
|
|
|
Item 1.
|
||
Item 1A.
|
||
Item 1B.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
|
|
|
|
Part II
|
|
Item 5.
|
||
Item 6.
|
||
Item 7.
|
||
Item 7A.
|
||
Item 8.
|
||
Item 9.
|
||
Item 9A.
|
||
Item 9B.
|
||
|
|
|
|
Financial Statements
|
|
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
|
|
|
Part III
|
|
Item 10.
|
||
Item 11.
|
||
Item 12.
|
||
Item 13.
|
||
Item 14.
|
||
|
|
|
|
Part IV
|
|
Item 15.
|
||
Item 16.
|
||
|
||
|
|
|
|
Years ended December 31,
|
|
|||||||
(in millions)
|
2018
|
|
2017
|
|
2016
|
|
|||
QVC.com net revenue
|
$
|
3,673
|
|
$
|
3,421
|
|
$
|
3,193
|
|
Total QVC-U.S. net revenue
|
6,349
|
|
6,140
|
|
6,120
|
|
|||
QVC.com % of total QVC-U.S. net revenue
|
57.9
|
%
|
55.7
|
%
|
52.2
|
%
|
|
Years ended December 31,
|
|
|||||||
(in millions)
|
2018
|
|
2017 (1)
|
|
2016 (1)
|
|
|||
HSN.com net revenue
|
$
|
1,075
|
|
$
|
1,099
|
|
$
|
1,119
|
|
Total HSN net revenue
|
2,202
|
|
2,343
|
|
2,479
|
|
|||
HSN.com % of total HSN net revenue
|
48.8
|
%
|
46.9
|
%
|
45.1
|
%
|
•
|
The Federal Trade Commission ("FTC") and the state attorneys general regulate the advertising of retail products and services offered for sale in the U.S., including the FTC's Guides Concerning the Use of Endorsements and Testimonials in Advertising and Guides for the Use of Environmental Marketing Claims.
|
•
|
The Food and Drug Administration has specific regulations regarding claims that can be made about food products and regulates marketing claims that can be made for cosmetic beauty products, medical devices and over-the-counter drugs.
|
•
|
The Environmental Protection Agency ("EPA") requires products that make certain types of claims, such as "anti-bacterial," to be registered with the EPA prior to making such claims.
|
•
|
Each of the FTC's Telemarketing Sales Rules, the Federal Communication Commission's ("FCC") rules implementing the Telephone Consumer Protection Act and similar state laws, establish procedures that must be followed when telemarketing or placing particular types of calls to consumers.
|
•
|
The Consumer Product Safety Commission has specific regulations regarding products that present unreasonable risks of injuries to consumers.
|
•
|
Import and export laws, including U.S. economic sanction and embargo regulations, U.S. homeland security laws and regulations and other laws such as the U.S. anti-boycott law and U.S. export controls regulations.
|
•
|
Comparable regulatory agencies and regulations in countries in which we have our non-U.S. operations.
|
•
|
customer demand for our products and services and our ability to anticipate customer demand and to adapt to changes in demand;
|
•
|
competitor responses to our products and services;
|
•
|
increased digital TV penetration and the impact on channel positioning of our programs;
|
•
|
the levels of online traffic on our websites and our ability to convert visitors into consumers or contributors;
|
•
|
uncertainties inherent in the development and integration of new business lines and business strategies;
|
•
|
our future financial performance, including availability, terms and deployment of capital;
|
•
|
our ability to successfully integrate and recognize anticipated efficiencies and benefits from the businesses we acquire;
|
•
|
the cost and ability of shipping companies, suppliers and vendors to deliver products, equipment, software and services;
|
•
|
the outcome of any pending or threatened litigation;
|
•
|
availability of qualified personnel;
|
•
|
changes in, or failure or inability to comply with, government regulations, including, without limitation, regulations of the FCC, and adverse outcomes from regulatory proceedings;
|
•
|
changes in the nature of key strategic relationships with partners, distributors, suppliers and vendors;
|
•
|
domestic and international economic and business conditions and industry trends;
|
•
|
changes in tariffs, trade policy and trade relations following the 2016 U.S. presidential election and the vote by the U.K. to exit from the European Union (“Brexit”);
|
•
|
consumer spending levels, including the availability and amount of individual consumer debt;
|
•
|
advertising spending levels;
|
•
|
changes in distribution and viewing of television programming, including the expanded deployment of personal video recorders, video on demand and IP television and their impact on home shopping programming;
|
•
|
rapid technological changes;
|
•
|
failure to protect the security of personal information, subjecting us to potentially costly government enforcement actions and/or private litigation and reputational damage;
|
•
|
the regulatory and competitive environment of the industries in which we operate;
|
•
|
threatened terrorist attacks, political unrest in international markets and ongoing military action around the world;
|
•
|
fluctuations in foreign currency exchange rates; and
|
•
|
Qurate Retail's dependence on our cash flow for servicing its debt and for other purposes.
|
•
|
a less favorable channel position for our programming, such as placement adjacent to programming that does not complement our programming, a position next to our televised home shopping competitors or isolation in a "shopping" tier;
|
•
|
more competitors entering the marketplace; or
|
•
|
more programming options being available to the viewing public in the form of new television networks and time-shifted viewing (e.g., personal video recorders, video-on-demand, interactive television and streaming video over Internet connections).
|
•
|
fluctuations in currency exchange rates;
|
•
|
longer payment cycles for sales in foreign countries that may increase the uncertainty associated with recoverable accounts;
|
•
|
recessionary conditions and economic instability, including fiscal policies that are implementing austerity measures in certain countries, which are affecting markets overseas;
|
•
|
our ability to repatriate funds held by our foreign subsidiaries to the U.S. at favorable tax rates;
|
•
|
potentially adverse tax consequences;
|
•
|
export and import restrictions, changes in tariffs, trade policies and trade relations;
|
•
|
increases in taxes and governmental royalties and fees;
|
•
|
our ability to obtain and maintain required licenses or certifications, such as for web services and electronic devices, that enable us to operate our business in foreign jurisdictions;
|
•
|
changes in foreign and U.S. laws, regulations and policies that govern operations of foreign-based companies;
|
•
|
changes to general consumer protection laws and regulations;
|
•
|
difficulties in staffing and managing international operations; and
|
•
|
threatened and actual terrorist attacks, political unrest in international markets and ongoing military action around the world that may result in disruptions of services that are critical to our international businesses.
|
•
|
reduced visibility of order status and package tracking;
|
•
|
delays in order processing and product delivery; and
|
•
|
reduced shipment quality, which may result in damaged products and customer dissatisfaction.
|
•
|
require a substantial portion of our cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness;
|
•
|
limit our ability to use cash flow or obtain additional financing for future working capital, capital expenditures or other general corporate purposes, which reduces the funds available to us for operations and any future business opportunities;
|
•
|
increase our vulnerability to general economic and industry conditions; or
|
•
|
expose us to the risk of increased interest rates because certain of our borrowings, including borrowings under our credit facility, are at variable interest rates.
|
•
|
make it difficult for us to satisfy our financial obligations, including making scheduled principal and interest payments on the notes and our other indebtedness;
|
•
|
restrict us from making strategic acquisitions or cause us to make non-strategic divestitures;
|
•
|
limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions or other general business purposes on satisfactory terms or at all;
|
•
|
limit our flexibility to plan for, or react to, changes in our business and industry;
|
•
|
place us at a competitive disadvantage compared to our less leveraged competitors; and
|
•
|
limit our ability to respond to business opportunities.
|
•
|
incur or assume liens or additional debt or provide guarantees in respect of obligations of other persons;
|
•
|
pay dividends or make distributions or redeem or repurchase capital stock;
|
•
|
prepay, redeem or repurchase debt;
|
•
|
make loans, investments and capital expenditures;
|
•
|
enter into agreements that restrict distributions from our subsidiaries;
|
•
|
sell assets and capital stock of our subsidiaries;
|
•
|
enter into sale and leaseback transactions;
|
•
|
enter into certain transactions with affiliates;
|
•
|
consolidate or merge with or into, or sell substantially all of our assets to, another person; and
|
•
|
designate our subsidiaries as unrestricted subsidiaries.
|
|
Years ended December 31,
|
|
|||||
(in millions)
|
2018
|
|
2017
|
|
2016
|
|
|
Net revenue
|
$
|
11,282
|
|
8,771
|
|
8,682
|
|
Operating costs and expenses:
|
|
|
|
||||
Cost of goods sold (exclusive of depreciation and amortization shown separately below)
|
7,248
|
|
5,598
|
|
5,540
|
|
|
Operating
|
881
|
|
601
|
|
606
|
|
|
Selling, general and administrative, excluding transaction related costs and stock-based compensation
|
1,094
|
|
666
|
|
696
|
|
|
Adjusted OIBDA
|
2,059
|
|
1,906
|
|
1,840
|
|
|
Impairment loss
|
30
|
|
—
|
|
—
|
|
|
Transaction related costs
|
60
|
|
39
|
|
—
|
|
|
Stock-based compensation
|
46
|
|
39
|
|
32
|
|
|
Depreciation
|
174
|
|
155
|
|
142
|
|
|
Amortization
|
237
|
|
364
|
|
463
|
|
|
Operating income
|
1,512
|
|
1,309
|
|
1,203
|
|
|
Other (expense) income:
|
|
|
|
||||
Equity in losses of investee
|
(3
|
)
|
(3
|
)
|
(6
|
)
|
|
(Losses) gains on financial instruments
|
(2
|
)
|
—
|
|
2
|
|
|
Interest expense, net
|
(243
|
)
|
(214
|
)
|
(210
|
)
|
|
Foreign currency (loss) gain
|
—
|
|
(6
|
)
|
38
|
|
|
Loss on extinguishment of debt
|
(2
|
)
|
—
|
|
—
|
|
|
|
(250
|
)
|
(223
|
)
|
(176
|
)
|
|
Income before income taxes
|
1,262
|
|
1,086
|
|
1,027
|
|
|
Income tax expense
|
(334
|
)
|
(139
|
)
|
(385
|
)
|
|
Net income
|
928
|
|
947
|
|
642
|
|
|
Less net income attributable to the noncontrolling interest
|
(46
|
)
|
(46
|
)
|
(38
|
)
|
|
Net income attributable to QVC, Inc. stockholder
|
$
|
882
|
|
901
|
|
604
|
|
|
Years ended December 31,
|
|
|||||
(in millions)
|
2018
|
|
2017
|
|
2016
|
|
|
Affiliate agreements
|
$
|
2
|
|
97
|
|
146
|
|
Customer relationships
|
50
|
|
113
|
|
169
|
|
|
Other technology
|
15
|
|
—
|
|
—
|
|
|
Acquisition related amortization
|
67
|
|
210
|
|
315
|
|
|
Property and equipment
|
174
|
|
155
|
|
142
|
|
|
Software amortization
|
95
|
|
93
|
|
100
|
|
|
Channel placement amortization and related expenses
|
75
|
|
61
|
|
48
|
|
|
Total depreciation and amortization
|
$
|
411
|
|
519
|
|
605
|
|
|
Payments due by period
|
|
|||||||||||||
(in millions)
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
Thereafter
|
|
Total
|
|
|
Long-term debt (1)
|
$
|
400
|
|
—
|
|
—
|
|
500
|
|
1,935
|
|
2,125
|
|
4,960
|
|
Interest payments (2)
|
221
|
|
221
|
|
221
|
|
221
|
|
179
|
|
1,270
|
|
2,333
|
|
|
Capital lease obligations (including imputed interest)
|
29
|
|
26
|
|
25
|
|
24
|
|
22
|
|
117
|
|
243
|
|
|
Operating lease obligations
|
30
|
|
22
|
|
13
|
|
10
|
|
8
|
|
63
|
|
146
|
|
|
Purchase obligations and other (3)
|
1,892
|
|
26
|
|
16
|
|
4
|
|
1
|
|
1
|
|
1,940
|
|
(in millions)
|
QVC-U.S.
|
|
QVC-International
|
|
HSN
|
|
Total
|
|
|
Balance as of December 31, 2016
|
$
|
4,190
|
|
805
|
|
—
|
|
4,995
|
|
Common control transaction (1)
|
—
|
|
—
|
|
904
|
|
904
|
|
|
Exchange rate fluctuations
|
—
|
|
80
|
|
—
|
|
80
|
|
|
Balance as of December 31, 2017
|
4,190
|
|
885
|
|
904
|
|
5,979
|
|
|
Purchase accounting adjustments (2)
|
—
|
|
—
|
|
18
|
|
18
|
|
|
Exchange rate fluctuations
|
—
|
|
(25
|
)
|
—
|
|
(25
|
)
|
|
Balance as of December 31, 2018
|
$
|
4,190
|
|
860
|
|
922
|
|
5,972
|
|
|
Years ended December 31,
|
|
|||||
(in millions)
|
2018
|
|
2017
|
|
2016
|
|
|
Net revenue
|
$
|
9,087
|
|
8,771
|
|
8,682
|
|
Operating costs and expenses:
|
|
|
|
|
|
||
Cost of goods sold (exclusive of depreciation and amortization shown separately below)
|
5,789
|
|
5,598
|
|
5,540
|
|
|
Operating
|
612
|
|
601
|
|
606
|
|
|
Selling, general and administrative, excluding transaction related costs and stock-based compensation
|
840
|
|
666
|
|
696
|
|
|
Adjusted OIBDA
|
1,846
|
|
1,906
|
|
1,840
|
|
|
Transaction related costs
|
41
|
|
9
|
|
—
|
|
|
Stock-based compensation
|
39
|
|
31
|
|
32
|
|
|
Depreciation
|
146
|
|
155
|
|
142
|
|
|
Amortization
|
157
|
|
364
|
|
463
|
|
|
Operating income
|
1,463
|
|
1,347
|
|
1,203
|
|
|
Years ended December 31,
|
|
|||||
(in millions)
|
2018
|
|
2017
|
|
2016
|
|
|
QVC-U.S.
|
$
|
6,349
|
|
6,140
|
|
6,120
|
|
QVC-International
|
2,738
|
|
2,631
|
|
2,562
|
|
|
QVC Global
|
$
|
9,087
|
|
8,771
|
|
8,682
|
|
|
Years ended December 31,
|
|
|||||
(in millions)
|
2018
|
|
2017
|
|
2016
|
|
|
Affiliate agreements
|
$
|
2
|
|
97
|
|
146
|
|
Customer relationships
|
3
|
|
113
|
|
169
|
|
|
Acquisition related amortization
|
5
|
|
210
|
|
315
|
|
|
Property and equipment
|
146
|
|
155
|
|
142
|
|
|
Software amortization
|
87
|
|
93
|
|
100
|
|
|
Channel placement amortization and related expenses
|
65
|
|
61
|
|
48
|
|
|
Total depreciation and amortization
|
$
|
303
|
|
519
|
|
605
|
|
|
Years ended December 31,
|
|
|||||
(in millions)
|
2018
|
|
2017
|
|
2016
|
|
|
Net revenue
|
$
|
2,202
|
|
2,343
|
|
2,479
|
|
Operating costs and expenses:
|
|
|
|
|
|
||
Cost of goods sold (exclusive of depreciation and amortization shown separately below)
|
1,466
|
|
1,560
|
|
1,663
|
|
|
Operating and selling, general and administrative, excluding transaction related costs and stock-based compensation
|
523
|
|
563
|
|
557
|
|
|
Adjusted OIBDA
|
213
|
|
220
|
|
259
|
|
|
Impairment loss
|
30
|
|
—
|
|
—
|
|
|
Transaction related costs
|
19
|
|
69
|
|
—
|
|
|
Stock-based compensation
|
7
|
|
17
|
|
15
|
|
|
Depreciation and amortization
|
108
|
|
31
|
|
29
|
|
|
Operating income
|
49
|
|
103
|
|
215
|
|
(in millions, except percentages)
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
Thereafter
|
|
Total
|
|
Fair Value
|
|
|
Fixed rate debt (1)
|
$
|
400
|
|
—
|
|
—
|
|
500
|
|
750
|
|
2,125
|
|
3,775
|
|
3,573
|
|
Weighted average interest rate on fixed rate debt
|
3.1
|
%
|
—
|
%
|
—
|
%
|
5.1
|
%
|
4.4
|
%
|
5.2
|
%
|
4.8
|
%
|
N/A
|
|
|
Variable rate debt (1)
|
$
|
—
|
|
—
|
|
—
|
|
—
|
|
1,185
|
|
—
|
|
1,185
|
|
1,185
|
|
Average interest rate on variable rate debt
|
—
|
%
|
—
|
%
|
—
|
%
|
—
|
%
|
3.9
|
%
|
—
|
%
|
3.9
|
%
|
N/A
|
|
•
|
Improvement of the design and operation of control activities and procedures associated with user and administrator access to the affected IT systems, including removing all inappropriate IT system access associated with the information technology general controls ("ITGCs") material weakness;
|
•
|
Improvement of change management and computer operation control activities that contributed to the ITGC material weakness;
|
•
|
Implement user activity monitoring for control activities contributing to the ITGC material weakness;
|
•
|
Deliver a training program to control owners addressing control operating protocols including ITGCs and policies; and
|
•
|
Enhancement of the design and operation of control activities meant to validate the completeness and accuracy of revenue recorded in the U.K.
|
•
|
Failure to select and apply appropriate ITGCs and U.K revenue related controls with accountability enforced through formal policies and procedures.
|
•
|
Insufficient training of IT personnel on the importance of ITGCs.
|
•
|
Insufficient staffing in the U.K.
|
•
|
Inadequate risk assessment to fully understand the nature and extent of risk introduced into the production environment and other control areas.
|
|
/s/ KPMG LLP
|
(in millions, except share amounts)
|
2018
|
|
2017
|
|
|
Assets
|
|
|
|||
Current assets:
|
|
|
|||
Cash and cash equivalents
|
$
|
543
|
|
282
|
|
Restricted cash
|
7
|
|
8
|
|
|
Accounts receivable, less allowance for doubtful accounts of $112 at December 31, 2018 and $91 at December 31, 2017
|
1,787
|
|
1,680
|
|
|
Inventories
|
1,280
|
|
1,204
|
|
|
Prepaid expenses and other current assets
|
216
|
|
71
|
|
|
Total current assets
|
3,833
|
|
3,245
|
|
|
Property and equipment, net of accumulated depreciation of $1,281 at December 31, 2018 and $1,174 at December 31, 2017
|
1,165
|
|
1,170
|
|
|
Television distribution rights, net
|
140
|
|
78
|
|
|
Goodwill
|
5,972
|
|
5,979
|
|
|
Other intangible assets, net
|
3,666
|
|
3,770
|
|
|
Other noncurrent assets
|
80
|
|
77
|
|
|
Total assets
|
$
|
14,856
|
|
14,319
|
|
Liabilities and equity
|
|
|
|||
Current liabilities:
|
|
|
|||
Current portion of debt and capital lease obligations
|
$
|
421
|
|
17
|
|
Accounts payable-trade
|
1,008
|
|
958
|
|
|
Accrued liabilities
|
1,026
|
|
1,057
|
|
|
Total current liabilities
|
2,455
|
|
2,032
|
|
|
Long-term portion of debt and capital lease obligations
|
4,699
|
|
5,633
|
|
|
Deferred income taxes
|
700
|
|
730
|
|
|
Other long-term liabilities
|
173
|
|
128
|
|
|
Total liabilities
|
8,027
|
|
8,523
|
|
|
Equity:
|
|
|
|||
QVC, Inc. stockholder's equity:
|
|
|
|||
Common stock, $0.01 par value, 1 authorized share
|
—
|
|
—
|
|
|
Additional paid-in capital
|
9,123
|
|
8,576
|
|
|
Accumulated deficit
|
(2,269
|
)
|
(2,797
|
)
|
|
Accumulated other comprehensive loss
|
(144
|
)
|
(93
|
)
|
|
Total QVC, Inc. stockholder's equity
|
6,710
|
|
5,686
|
|
|
Noncontrolling interest
|
119
|
|
110
|
|
|
Total equity
|
6,829
|
|
5,796
|
|
|
Total liabilities and equity
|
$
|
14,856
|
|
14,319
|
|
(in millions)
|
2018
|
|
2017
|
|
2016
|
|
|
Net revenue
|
$
|
11,282
|
|
8,771
|
|
8,682
|
|
Operating costs and expenses:
|
|
|
|
||||
Cost of goods sold (exclusive of depreciation and amortization shown separately below)
|
7,248
|
|
5,598
|
|
5,540
|
|
|
Operating
|
881
|
|
601
|
|
606
|
|
|
Selling, general and administrative, including transaction related costs and stock-based compensation
|
1,200
|
|
744
|
|
728
|
|
|
Depreciation
|
174
|
|
155
|
|
142
|
|
|
Amortization
|
237
|
|
364
|
|
463
|
|
|
Impairment loss
|
30
|
|
—
|
|
—
|
|
|
|
9,770
|
|
7,462
|
|
7,479
|
|
|
Operating income
|
1,512
|
|
1,309
|
|
1,203
|
|
|
Other (expense) income:
|
|
|
|
||||
Equity in losses of investee
|
(3
|
)
|
(3
|
)
|
(6
|
)
|
|
(Losses) gains on financial instruments
|
(2
|
)
|
—
|
|
2
|
|
|
Interest expense, net
|
(243
|
)
|
(214
|
)
|
(210
|
)
|
|
Foreign currency (loss) gain
|
—
|
|
(6
|
)
|
38
|
|
|
Loss on extinguishment of debt
|
(2
|
)
|
—
|
|
—
|
|
|
|
(250
|
)
|
(223
|
)
|
(176
|
)
|
|
Income before income taxes
|
1,262
|
|
1,086
|
|
1,027
|
|
|
Income tax expense
|
(334
|
)
|
(139
|
)
|
(385
|
)
|
|
Net income
|
928
|
|
947
|
|
642
|
|
|
Less net income attributable to the noncontrolling interest
|
(46
|
)
|
(46
|
)
|
(38
|
)
|
|
Net income attributable to QVC, Inc. stockholder
|
$
|
882
|
|
901
|
|
604
|
|
(in millions)
|
2018
|
|
2017
|
|
2016
|
|
|
Net income
|
$
|
928
|
|
947
|
|
642
|
|
Foreign currency translation adjustments, net of tax
|
(48
|
)
|
135
|
|
(83
|
)
|
|
Total comprehensive income
|
880
|
|
1,082
|
|
559
|
|
|
Comprehensive income attributable to noncontrolling interest
|
(49
|
)
|
(50
|
)
|
(39
|
)
|
|
Comprehensive income attributable to QVC, Inc. stockholder
|
$
|
831
|
|
1,032
|
|
520
|
|
(in millions)
|
2018
|
|
2017
|
|
2016
|
|
|
Operating activities:
|
|
|
|
||||
Net income
|
$
|
928
|
|
947
|
|
642
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||
Equity in losses of investee
|
3
|
|
3
|
|
6
|
|
|
Deferred income taxes
|
(30
|
)
|
(329
|
)
|
(43
|
)
|
|
Foreign currency loss (gain)
|
—
|
|
6
|
|
(38
|
)
|
|
Depreciation
|
174
|
|
155
|
|
142
|
|
|
Amortization
|
237
|
|
364
|
|
463
|
|
|
Change in fair value of financial instruments and noncash interest
|
8
|
|
4
|
|
5
|
|
|
Impairment loss
|
30
|
|
—
|
|
—
|
|
|
Loss on extinguishment of debt
|
2
|
|
—
|
|
—
|
|
|
Stock-based compensation
|
46
|
|
39
|
|
32
|
|
|
Change in other long-term liabilities
|
42
|
|
(19
|
)
|
(8
|
)
|
|
Effects of changes in working capital items
|
(284
|
)
|
32
|
|
(23
|
)
|
|
Net cash provided by operating activities
|
1,156
|
|
1,202
|
|
1,178
|
|
|
Investing activities:
|
|
|
|
||||
Capital expenditures
|
(228
|
)
|
(152
|
)
|
(179
|
)
|
|
Expenditures for television distribution rights
|
(140
|
)
|
(50
|
)
|
(38
|
)
|
|
Changes in other noncurrent assets
|
(16
|
)
|
(1
|
)
|
(1
|
)
|
|
Other investing activities
|
(29
|
)
|
—
|
|
(3
|
)
|
|
Common control transaction with Qurate Retail, Inc., net of cash received
|
—
|
|
22
|
|
—
|
|
|
Net cash used in investing activities
|
(413
|
)
|
(181
|
)
|
(221
|
)
|
|
Financing activities:
|
|
|
|
||||
Principal payments of debt and capital lease obligations
|
(3,541
|
)
|
(2,278
|
)
|
(1,733
|
)
|
|
Principal borrowings of debt from senior secured credit facilities
|
2,750
|
|
2,162
|
|
1,505
|
|
|
Proceeds from issuance of senior secured notes
|
225
|
|
—
|
|
—
|
|
|
Payment of debt origination fees
|
(14
|
)
|
—
|
|
(2
|
)
|
|
Capital contributions received from Qurate Retail, Inc.
|
520
|
|
—
|
|
—
|
|
|
Dividends paid to Qurate Retail, Inc.
|
(367
|
)
|
(866
|
)
|
(703
|
)
|
|
Dividends paid to noncontrolling interest
|
(40
|
)
|
(40
|
)
|
(39
|
)
|
|
Other financing activities
|
(18
|
)
|
(16
|
)
|
(9
|
)
|
|
Net cash used in financing activities
|
(485
|
)
|
(1,038
|
)
|
(981
|
)
|
|
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash
|
2
|
|
13
|
|
(20
|
)
|
|
Net increase (decrease) in cash, cash equivalents and restricted cash
|
260
|
|
(4
|
)
|
(44
|
)
|
|
Cash, cash equivalents and restricted cash, beginning of year
|
290
|
|
294
|
|
338
|
|
|
Cash, cash equivalents and restricted cash, end of year
|
$
|
550
|
|
290
|
|
294
|
|
Effects of changes in working capital items:
|
|
|
|
||||
(Increase) decrease in accounts receivable
|
$
|
(110
|
)
|
(127
|
)
|
117
|
|
Increase in inventories
|
(113
|
)
|
(43
|
)
|
(38
|
)
|
|
(Increase) decrease in prepaid expenses and other current assets
|
(97
|
)
|
—
|
|
29
|
|
|
Increase in accounts payable-trade
|
11
|
|
50
|
|
22
|
|
|
Increase (decrease) in accrued liabilities and other
|
25
|
|
152
|
|
(153
|
)
|
|
Effects of changes in working capital items
|
$
|
(284
|
)
|
32
|
|
(23
|
)
|
Supplemental cash flow information:
|
|
|
|
||||
Cash paid for taxes-to Qurate Retail Inc.
|
$
|
273
|
|
363
|
|
395
|
|
Cash paid for taxes-other
|
134
|
|
81
|
|
105
|
|
|
Cash paid for interest
|
241
|
|
211
|
|
210
|
|
|
Common stock
|
|
Additional paid-in capital
|
|
Accumulated deficit
|
|
Accumulated other
comprehensive loss |
|
Noncontrolling interest
|
|
Total equity
|
|
|||
(in millions, except share data)
|
Shares
|
|
Amount
|
|
|||||||||||
Balance, December 31, 2015
|
1
|
|
$
|
—
|
|
6,827
|
|
(2,669
|
)
|
(140
|
)
|
100
|
|
4,118
|
|
Net income
|
—
|
|
—
|
|
—
|
|
604
|
|
—
|
|
38
|
|
642
|
|
|
Foreign currency translation adjustments, net of tax
|
—
|
|
—
|
|
—
|
|
—
|
|
(84
|
)
|
1
|
|
(83
|
)
|
|
Dividends paid to Qurate Retail, Inc. and noncontrolling interest and other
|
—
|
|
—
|
|
—
|
|
(703
|
)
|
—
|
|
(39
|
)
|
(742
|
)
|
|
Impact of tax liability allocation and indemnification agreement with Qurate Retail, Inc.
|
—
|
|
—
|
|
—
|
|
(64
|
)
|
—
|
|
—
|
|
(64
|
)
|
|
Withholding taxes on net share settlements of stock-based compensation
|
—
|
|
—
|
|
(8
|
)
|
—
|
|
—
|
|
—
|
|
(8
|
)
|
|
Stock-based compensation
|
—
|
|
—
|
|
32
|
|
—
|
|
—
|
|
—
|
|
32
|
|
|
Balance, December 31, 2016
|
1
|
|
—
|
|
6,851
|
|
(2,832
|
)
|
(224
|
)
|
100
|
|
3,895
|
|
|
Net income
|
—
|
|
—
|
|
—
|
|
901
|
|
—
|
|
46
|
|
947
|
|
|
Foreign currency translation adjustments, net of tax
|
—
|
|
—
|
|
—
|
|
—
|
|
131
|
|
4
|
|
135
|
|
|
Dividends paid to Qurate Retail, Inc. and noncontrolling interest and other
|
—
|
|
—
|
|
—
|
|
(866
|
)
|
—
|
|
(40
|
)
|
(906
|
)
|
|
Impact of tax liability allocation and indemnification agreement with Qurate Retail, Inc.
|
—
|
|
—
|
|
31
|
|
—
|
|
—
|
|
—
|
|
31
|
|
|
Withholding taxes on net share settlements of stock-based compensation
|
—
|
|
—
|
|
(16
|
)
|
—
|
|
—
|
|
—
|
|
(16
|
)
|
|
Impact of transfer of HSN, Inc. through common control transaction with Qurate Retail, Inc.
|
—
|
|
—
|
|
1,671
|
|
—
|
|
—
|
|
—
|
|
1,671
|
|
|
Stock-based compensation
|
—
|
|
—
|
|
39
|
|
—
|
|
—
|
|
—
|
|
39
|
|
|
Balance, December 31, 2017
|
1
|
|
—
|
|
8,576
|
|
(2,797
|
)
|
(93
|
)
|
110
|
|
5,796
|
|
|
Adjustments due to adoption of new accounting pronouncements
|
—
|
|
—
|
|
—
|
|
13
|
|
—
|
|
—
|
|
13
|
|
|
Net income
|
—
|
|
—
|
|
—
|
|
882
|
|
—
|
|
46
|
|
928
|
|
|
Foreign currency translation adjustments, net of tax
|
—
|
|
—
|
|
—
|
|
—
|
|
(51
|
)
|
3
|
|
(48
|
)
|
|
Capital contributions received from Qurate Retail, Inc.
|
—
|
|
—
|
|
520
|
|
—
|
|
—
|
|
—
|
|
520
|
|
|
Dividends paid to Qurate Retail, Inc. and noncontrolling interest and other
|
—
|
|
—
|
|
—
|
|
(367
|
)
|
—
|
|
(40
|
)
|
(407
|
)
|
|
Withholding taxes on net share settlements of stock-based compensation
|
—
|
|
—
|
|
(19
|
)
|
—
|
|
—
|
|
—
|
|
(19
|
)
|
|
Stock-based compensation
|
—
|
|
—
|
|
46
|
|
—
|
|
—
|
|
—
|
|
46
|
|
|
Balance, December 31, 2018
|
1
|
|
$
|
—
|
|
9,123
|
|
(2,269
|
)
|
(144
|
)
|
119
|
|
6,829
|
|
(in millions)
|
QVC-U.S.
|
|
QVC-International
|
|
HSN
|
|
Total
|
|
|
Balance as of December 31, 2016
|
$
|
4,190
|
|
805
|
|
—
|
|
4,995
|
|
Common control transaction (1)
|
—
|
|
—
|
|
904
|
|
904
|
|
|
Exchange rate fluctuations
|
—
|
|
80
|
|
—
|
|
80
|
|
|
Balance as of December 31, 2017
|
4,190
|
|
885
|
|
904
|
|
5,979
|
|
|
Purchase accounting adjustments (2)
|
—
|
|
—
|
|
18
|
|
18
|
|
|
Exchange rate fluctuations
|
—
|
|
(25
|
)
|
—
|
|
(25
|
)
|
|
Balance as of December 31, 2018
|
$
|
4,190
|
|
860
|
|
922
|
|
5,972
|
|
Cash and cash equivalents
|
$
|
22
|
|
Accounts receivable
|
292
|
|
|
Inventory
|
185
|
|
|
Property and equipment
|
165
|
|
|
Goodwill
|
904
|
|
|
Other intangible assets
|
1,165
|
|
|
Other assets
|
37
|
|
|
Accounts payable-trade and accrued liabilities
|
(366
|
)
|
|
Long-term portion of debt
|
(460
|
)
|
|
Deferred income taxes
|
(263
|
)
|
|
Other long-term liabilities
|
(10
|
)
|
|
Capital contribution from Qurate Retail, Inc.
|
$
|
1,671
|
|
|
Years Ended December 31,
|
|
|||
(in millions) (unaudited)
|
2017
|
2016
|
|||
Net revenue
|
$
|
11,114
|
|
11,161
|
|
Income before income taxes
|
1,163
|
|
1,222
|
|
(in millions)
|
Balance at December 31, 2017
|
Adjustments Due to ASC 606
|
Adjustments Due to ASU 2016-16
|
Balance at January 1, 2018
|
|||||
Assets:
|
|
|
|
|
|||||
Inventories
|
$
|
1,204
|
|
(22
|
)
|
—
|
|
1,182
|
|
Prepaid expenses and other current assets
|
71
|
|
—
|
|
(1
|
)
|
70
|
|
|
|
|
|
|
|
|||||
Liabilities:
|
|
|
|
|
|||||
Accrued liabilities
|
1,057
|
|
(36
|
)
|
—
|
|
1,021
|
|
|
|
|
|
|
|
|||||
Equity:
|
|
|
|
|
|||||
Accumulated deficit
|
$
|
(2,797
|
)
|
14
|
|
(1
|
)
|
(2,784
|
)
|
Statements of Operations
|
Year ended December 31, 2018
|
|
|||||
(in millions)
|
As Reported
|
Balances Without Adoption of ASC 606
|
Effect of Change Increase/(Decrease)
|
||||
Net revenue
|
$
|
11,282
|
|
11,143
|
|
139
|
|
|
|
|
|
||||
Costs and expenses:
|
|
|
|
||||
Cost of goods sold (exclusive of depreciation and amortization)
|
7,248
|
|
7,238
|
|
10
|
|
|
Operating
|
881
|
|
879
|
|
2
|
|
|
Selling, general and administrative, including transaction related costs and stock-based compensation
|
1,200
|
|
1,082
|
|
118
|
|
|
|
|
|
|
||||
Income tax expense
|
334
|
|
332
|
|
2
|
|
|
|
|
|
|
||||
Net income
|
$
|
928
|
|
921
|
|
7
|
|
|
December 31,
|
|
|||
(in millions)
|
2018
|
|
2017
|
|
|
Installment sales plan
|
$
|
1,533
|
|
1,396
|
|
Major credit cards and customers
|
269
|
|
295
|
|
|
Other receivables
|
97
|
|
80
|
|
|
|
1,899
|
|
1,771
|
|
|
Less allowance for doubtful accounts
|
(112
|
)
|
(91
|
)
|
|
Accounts receivable, net
|
$
|
1,787
|
|
1,680
|
|
(in millions)
|
Balance
beginning of year |
|
Additions-
charged to expense |
|
Deductions-
write-offs |
|
Balance
end of year |
|
|
2018
|
$
|
91
|
|
112
|
|
(91
|
)
|
112
|
|
2017
|
97
|
|
72
|
|
(78
|
)
|
91
|
|
|
2016
|
86
|
|
107
|
|
(96
|
)
|
97
|
|
|
December 31,
|
|
Estimated
useful |
|||
(in millions)
|
2018
|
|
2017
|
|
life
|
|
Land
|
$
|
128
|
|
108
|
|
N/A
|
Buildings and improvements
|
1,174
|
|
1,166
|
|
8 - 20 years
|
|
Furniture and other equipment
|
543
|
|
546
|
|
2 -10 years
|
|
Broadcast equipment
|
179
|
|
138
|
|
2 - 6 years
|
|
Computer equipment
|
186
|
|
174
|
|
2 - 5 years
|
|
Transponders and terrestrial transmitter (note 9)
|
178
|
|
170
|
|
8 - 15 years
|
|
Projects in progress
|
58
|
|
42
|
|
N/A
|
|
|
2,446
|
|
2,344
|
|
|
|
Less: accumulated depreciation
|
(1,281
|
)
|
(1,174
|
)
|
|
|
Property and equipment, net
|
$
|
1,165
|
|
1,170
|
|
|
|
|
December 31,
|
|
||
(in millions)
|
2018
|
|
2017
|
|
|
Television distribution rights
|
$
|
723
|
|
730
|
|
Less accumulated amortization
|
(583
|
)
|
(652
|
)
|
|
Television distribution rights, net
|
$
|
140
|
|
78
|
|
2019
|
$
|
74
|
|
2020
|
55
|
|
|
2021
|
9
|
|
|
2022
|
2
|
|
|
2023
|
—
|
|
December 31,
|
|
|
||||||||||||
|
2018
|
|
2017
|
|
Weighted average remaining life (years)
|
|||||||||
(in millions)
|
Gross
cost |
|
Accumulated
amortization |
|
Other intangible assets, net
|
|
Gross
cost |
|
Accumulated
amortization |
|
Other intangible assets, net
|
|
||
Purchased and internally developed software
|
$
|
890
|
|
(640
|
)
|
250
|
|
822
|
|
(548
|
)
|
274
|
|
4.0
|
Affiliate and customer relationships
|
2,831
|
|
(2,450
|
)
|
381
|
|
2,845
|
|
(2,409
|
)
|
436
|
|
7.9
|
|
Debt origination fees
|
10
|
|
—
|
|
10
|
|
8
|
|
(3
|
)
|
5
|
|
5.0
|
|
Trademarks (indefinite life)
|
3,025
|
|
—
|
|
3,025
|
|
3,055
|
|
—
|
|
3,055
|
|
N/A
|
|
|
$
|
6,756
|
|
(3,090
|
)
|
3,666
|
|
6,730
|
|
(2,960
|
)
|
3,770
|
|
6.3
|
|
December 31,
|
|
|||
(in millions)
|
2018
|
|
2017
|
|
|
Accounts payable non-trade
|
$
|
314
|
|
324
|
|
Allowance for sales returns
|
242
|
|
119
|
|
|
Accrued compensation and benefits
|
146
|
|
195
|
|
|
Sales and other taxes
|
101
|
|
82
|
|
|
Accrued interest
|
58
|
|
58
|
|
|
Accrued cable distribution fees
|
39
|
|
63
|
|
|
Income taxes
|
37
|
|
77
|
|
|
Deferred revenue
|
24
|
|
70
|
|
|
Other
|
65
|
|
69
|
|
|
|
$
|
1,026
|
|
1,057
|
|
|
December 31,
|
|
|||
(in millions)
|
2018
|
|
2017
|
|
|
3.125% Senior Secured Notes due 2019, net of original issue discount
|
$
|
399
|
|
399
|
|
5.125% Senior Secured Notes due 2022
|
500
|
|
500
|
|
|
4.375% Senior Secured Notes due 2023, net of original issue discount
|
750
|
|
750
|
|
|
4.85% Senior Secured Notes due 2024, net of original issue discount
|
600
|
|
600
|
|
|
4.45% Senior Secured Notes due 2025, net of original issue discount
|
599
|
|
599
|
|
|
5.45% Senior Secured Notes due 2034, net of original issue discount
|
399
|
|
399
|
|
|
5.95% Senior Secured Notes due 2043, net of original issue discount
|
300
|
|
300
|
|
|
6.375% Senior Secured Notes due 2067
|
225
|
|
—
|
|
|
Senior secured credit facilities
|
1,185
|
|
1,956
|
|
|
Capital lease obligations
|
188
|
|
68
|
|
|
Build to suit lease obligation
|
—
|
|
101
|
|
|
Less debt issuance costs, net
|
(25
|
)
|
(22
|
)
|
|
Total debt and capital lease obligations
|
5,120
|
|
5,650
|
|
|
Less current portion
|
(421
|
)
|
(17
|
)
|
|
Long-term portion of debt and capital lease obligations
|
$
|
4,699
|
|
5,633
|
|
(in millions)
|
Capital leases
|
|
Operating leases
|
|
|
2019
|
$
|
29
|
|
30
|
|
2020
|
26
|
|
22
|
|
|
2021
|
25
|
|
13
|
|
|
2022
|
24
|
|
10
|
|
|
2023
|
22
|
|
8
|
|
|
Thereafter
|
117
|
|
63
|
|
|
Total
|
$
|
243
|
|
146
|
|
|
Year ended December 31, 2018
|
|
|||||||||
(in millions)
|
QVC-U.S.
|
|
QVC-International
|
|
HSN
|
|
Intersegment eliminations
|
|
Total
|
|
|
Home
|
$
|
2,265
|
|
1,023
|
|
910
|
|
—
|
|
4,198
|
|
Beauty
|
1,040
|
|
640
|
|
286
|
|
—
|
|
1,966
|
|
|
Apparel
|
1,140
|
|
453
|
|
183
|
|
—
|
|
1,776
|
|
|
Accessories
|
772
|
|
273
|
|
161
|
|
—
|
|
1,206
|
|
|
Electronics
|
674
|
|
119
|
|
455
|
|
—
|
|
1,248
|
|
|
Jewelry
|
324
|
|
213
|
|
149
|
|
—
|
|
686
|
|
|
Other revenue
|
134
|
|
17
|
|
58
|
|
(7
|
)
|
202
|
|
|
Total net revenue
|
$
|
6,349
|
|
2,738
|
|
2,202
|
|
(7
|
)
|
11,282
|
|
(in millions)
|
Balance
beginning of year |
|
Additions-
charged to earnings |
|
Deductions
|
|
Transfer of HSN reserve
|
|
Balance
end of year |
|
|
2018
|
$
|
243
|
|
2,213
|
|
(2,214
|
)
|
—
|
|
242
|
|
2017
|
93
|
|
982
|
|
(979
|
)
|
23
|
|
119
|
|
|
2016
|
103
|
|
1,010
|
|
(1,020
|
)
|
—
|
|
93
|
|
i.
|
A holder of a Liberty Ventures Award who was a member of the board of directors or an officer of Qurate Retail holding the position of Vice President or above received (i) an adjustment to the exercise price and the number of shares subject to the Liberty Ventures Award (as so adjusted, an “Adjusted Liberty Ventures Award”) and (ii) a corresponding equity award relating to shares of the corresponding series of CommerceHub common stock, as well as Series C CommerceHub common stock (in each case, a “CommerceHub Award”); and
|
ii.
|
Each other holder of a Liberty Ventures Award received only an adjustment to the exercise price and the number of shares subject to the Liberty Ventures Award (also referred to as an “Adjusted Liberty Ventures Award”).
|
i.
|
An adjustment to the exercise price and the number of shares subject to the Liberty Ventures Award and
|
ii.
|
A corresponding equity award relating to shares of the corresponding series of Expedia Holdings common stock (an “Expedia Holdings Award”)
|
|
Options
|
|
Weighted
average exercise price |
|
Aggregate
intrinsic value (000s) |
|
Weighted average remaining
life (years) |
||
Outstanding at January 1, 2018
|
14,872,849
|
|
$
|
24.53
|
|
$
|
25,290
|
|
5.1
|
Granted
|
4,016,618
|
|
26.77
|
|
|
|
|||
Transferred from zulily (1)
|
2,785,968
|
|
16.16
|
|
|
|
|||
Exercised
|
(3,045,271
|
)
|
16.60
|
|
|
|
|||
Forfeited
|
(3,976,575
|
)
|
27.25
|
|
|
|
|||
Outstanding at December 31, 2018
|
14,653,589
|
|
24.46
|
|
8,353
|
|
4.4
|
||
Exercisable at December 31, 2018
|
6,970,577
|
|
23.85
|
|
6,214
|
|
3.4
|
|
2018
|
|
2017
|
|
2016
|
|
Expected volatility
|
29.7
|
%
|
30.3
|
%
|
27.4
|
%
|
Expected term (years)
|
5.2
|
|
5.9
|
|
6.1
|
|
Risk free interest rate
|
2.7
|
%
|
2.1
|
%
|
1.6
|
%
|
Expected dividend yield
|
—
|
|
—
|
|
—
|
|
|
Restricted shares
|
|
Weighted average
grant date fair value |
|
|
Outstanding at January 1, 2018
|
2,393,700
|
|
$
|
24.49
|
|
Granted
|
910,559
|
|
26.23
|
|
|
Transferred from zulily (1)
|
110,550
|
|
24.02
|
|
|
Transferred from CBI (2)
|
1,818
|
|
24.42
|
|
|
Vested
|
(1,516,428
|
)
|
24.21
|
|
|
Forfeited
|
(300,906
|
)
|
26.06
|
|
|
Outstanding at December 31, 2018
|
1,599,293
|
|
25.42
|
|
|
Restricted shares
|
|
Weighted
average grant date fair value |
|
|
Outstanding at January 1, 2018
|
4,061
|
|
$
|
51.47
|
|
Granted
|
—
|
|
—
|
|
|
Vested
|
(3,839
|
)
|
51.54
|
|
|
Forfeited
|
(222
|
)
|
50.52
|
|
|
Outstanding at December 31, 2018
|
—
|
|
—
|
|
|
Years ended December 31,
|
|
|||||
(in millions)
|
2018
|
|
2017
|
|
2016
|
|
|
Current:
|
|
|
|
||||
U.S. federal
|
$
|
239
|
|
352
|
|
326
|
|
State and local
|
37
|
|
27
|
|
29
|
|
|
Foreign jurisdictions
|
84
|
|
87
|
|
73
|
|
|
Total
|
360
|
|
466
|
|
428
|
|
|
Deferred:
|
|
|
|
||||
U.S. federal
|
(27
|
)
|
(320
|
)
|
(31
|
)
|
|
State and local
|
(2
|
)
|
(7
|
)
|
(8
|
)
|
|
Foreign jurisdictions
|
3
|
|
—
|
|
(4
|
)
|
|
Total
|
(26
|
)
|
(327
|
)
|
(43
|
)
|
|
Total income tax expense
|
$
|
334
|
|
139
|
|
385
|
|
|
Years ended December 31,
|
|
|||||
(in millions)
|
2018
|
|
2017
|
|
2016
|
|
|
QVC-U.S.
|
$
|
1,033
|
|
915
|
|
859
|
|
QVC-International
|
200
|
|
209
|
|
168
|
|
|
HSN
|
29
|
|
(38
|
)
|
—
|
|
|
Consolidated QVC
|
$
|
1,262
|
|
1,086
|
|
1,027
|
|
|
Years ended December 31,
|
|
||||
|
2018
|
|
2017
|
|
2016
|
|
Provision at statutory rate
|
21.0
|
%
|
35.0
|
%
|
35.0
|
%
|
State income taxes, net of federal benefit
|
2.2
|
%
|
1.0
|
%
|
1.3
|
%
|
Foreign taxes
|
0.8
|
%
|
—
|
%
|
(0.3
|
)%
|
Foreign earnings repatriation
|
—
|
%
|
—
|
%
|
0.2
|
%
|
Valuation allowance
|
2.6
|
%
|
1.0
|
%
|
1.0
|
%
|
Permanent differences
|
(0.2
|
)%
|
(2.2
|
)%
|
(0.6
|
)%
|
Impact of Tax Cuts and Jobs Act
|
—
|
%
|
(26.0
|
)%
|
—
|
%
|
Investment in subsidiary
|
0.6
|
%
|
4.0
|
%
|
—
|
%
|
Impact of foreign currency tax regulation
|
(0.6
|
)%
|
0.4
|
%
|
1
|
%
|
Other, net
|
0.1
|
%
|
(0.4
|
)%
|
(0.1
|
)%
|
Total income tax expense
|
26.5
|
%
|
12.8
|
%
|
37.5
|
%
|
|
December 31,
|
|
|||
(in millions)
|
2018
|
|
2017
|
|
|
Deferred tax assets:
|
|
|
|||
Accounts receivable, principally due to the allowance for doubtful accounts and related reserves for the uncollectible accounts
|
$
|
29
|
|
28
|
|
Inventories, principally due to obsolescence reserves and additional costs of inventories for tax purposes pursuant to the Tax Reform Act of 1986
|
33
|
|
30
|
|
|
Allowance for sales returns
|
31
|
|
30
|
|
|
Deferred revenue
|
15
|
|
29
|
|
|
Deferred compensation
|
39
|
|
33
|
|
|
Unrecognized federal and state tax benefits
|
10
|
|
11
|
|
|
Net operating loss carryforwards
|
49
|
|
34
|
|
|
Foreign tax credits carryforward
|
17
|
|
—
|
|
|
Accrued liabilities
|
33
|
|
30
|
|
|
Other
|
5
|
|
1
|
|
|
Subtotal
|
261
|
|
226
|
|
|
Valuation allowance
|
(64
|
)
|
(33
|
)
|
|
Total deferred tax assets
|
197
|
|
193
|
|
|
Deferred tax liabilities:
|
|
|
|||
Depreciation and amortization
|
(840
|
)
|
(876
|
)
|
|
Cumulative translation of foreign currencies
|
(16
|
)
|
(18
|
)
|
|
Investment in subsidiary
|
(41
|
)
|
(29
|
)
|
|
Total deferred tax liabilities
|
(897
|
)
|
(923
|
)
|
|
Net deferred tax liability
|
$
|
(700
|
)
|
(730
|
)
|
|
|
Fair value measurements at December 31, 2018 using
|
|
||||||
(in millions)
|
Total
|
|
Quoted prices
in active markets for identical assets (Level 1) |
|
Significant
other observable inputs (Level 2) |
|
Significant
unobservable inputs (Level 3) |
|
|
Current assets:
|
|
|
|
|
|||||
Cash equivalents
|
$
|
233
|
|
233
|
|
—
|
|
—
|
|
Interest rate swap arrangements (note 8)
|
5
|
|
—
|
|
5
|
|
—
|
|
|
Debt (note 8)
|
4,758
|
|
189
|
|
4,569
|
|
—
|
|
|
|
Fair value measurements at December 31, 2017 using
|
|
||||||
(in millions)
|
Total
|
|
Quoted prices
in active markets for identical assets (Level 1) |
|
Significant
other observable inputs (Level 2) |
|
Significant
unobservable inputs (Level 3) |
|
|
Current assets:
|
|
|
|
|
|||||
Cash equivalents
|
$
|
42
|
|
42
|
|
—
|
|
—
|
|
Non-current assets:
|
|
|
|
|
|
||||
Interest rate swap arrangements (note 8)
|
7
|
|
—
|
|
7
|
|
—
|
|
|
Long-term liabilities:
|
|
|
|
|
|||||
Debt (note 8)
|
5,592
|
|
—
|
|
5,592
|
|
—
|
|
|
Years ended December 31,
|
|
|||||||||||
|
2018
|
|
2017
|
|
2016
|
|
|||||||
(in millions)
|
Net
revenue |
|
Adjusted
OIBDA |
|
Net
revenue |
|
Adjusted
OIBDA |
|
Net
revenue |
|
Adjusted
OIBDA |
|
|
QVC-U.S.
|
$
|
6,349
|
|
1,417
|
|
6,140
|
|
1,455
|
|
6,120
|
|
1,435
|
|
QVC-International
|
2,738
|
|
429
|
|
2,631
|
|
451
|
|
2,562
|
|
405
|
|
|
HSN
|
2,202
|
|
213
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Intersegment eliminations
|
(7
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Consolidated QVC
|
$
|
11,282
|
|
2,059
|
|
8,771
|
|
1,906
|
|
8,682
|
|
1,840
|
|
|
Years ended December 31,
|
|
|||||||||||
|
2018
|
|
2017
|
|
2016
|
|
|||||||
(in millions)
|
Depreciation
|
|
Amortization
|
|
Depreciation
|
|
Amortization
|
|
Depreciation
|
|
Amortization
|
|
|
QVC-U.S.
|
$
|
90
|
|
147
|
|
93
|
|
330
|
|
78
|
|
414
|
|
QVC-International
|
56
|
|
10
|
|
62
|
|
34
|
|
64
|
|
49
|
|
|
HSN
|
28
|
|
80
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Consolidated QVC
|
$
|
174
|
|
237
|
|
155
|
|
364
|
|
142
|
|
463
|
|
|
Years ended December 31,
|
|
|||||||
|
2018
|
|
2017
|
|
|||||
(in millions)
|
Total
assets |
|
Capital
expenditures |
|
Total
assets |
|
Capital
expenditures |
|
|
QVC-U.S.
|
$
|
9,785
|
|
143
|
|
9,429
|
|
116
|
|
QVC-International
|
2,154
|
|
67
|
|
2,121
|
|
36
|
|
|
HSN
|
2,917
|
|
18
|
|
2,769
|
|
—
|
|
|
Consolidated QVC
|
$
|
14,856
|
|
228
|
|
14,319
|
|
152
|
|
|
Years ended December 31,
|
|
|||||
(in millions)
|
2018
|
|
2017
|
|
2016
|
|
|
Adjusted OIBDA
|
$
|
2,059
|
|
1,906
|
|
1,840
|
|
Impairment loss
|
(30
|
)
|
—
|
|
—
|
|
|
Transaction related costs
|
(60
|
)
|
(39
|
)
|
—
|
|
|
Stock-based compensation
|
(46
|
)
|
(39
|
)
|
(32
|
)
|
|
Depreciation and amortization
|
(411
|
)
|
(519
|
)
|
(605
|
)
|
|
Equity in losses of investee
|
(3
|
)
|
(3
|
)
|
(6
|
)
|
|
(Losses) gains on financial instruments
|
(2
|
)
|
—
|
|
2
|
|
|
Interest expense, net
|
(243
|
)
|
(214
|
)
|
(210
|
)
|
|
Foreign currency (loss) gain
|
—
|
|
(6
|
)
|
38
|
|
|
Loss on extinguishment of debt
|
(2
|
)
|
—
|
|
—
|
|
|
Income before income taxes
|
$
|
1,262
|
|
1,086
|
|
1,027
|
|
|
Years ended December 31,
|
|
|||||
(in millions)
|
2018
|
|
2017
|
|
2016
|
|
|
United States
|
$
|
8,544
|
|
6,140
|
|
6,120
|
|
Japan
|
947
|
|
934
|
|
897
|
|
|
Germany
|
943
|
|
899
|
|
865
|
|
|
United Kingdom
|
679
|
|
640
|
|
654
|
|
|
Other countries
|
169
|
|
158
|
|
146
|
|
|
Consolidated QVC
|
$
|
11,282
|
|
8,771
|
|
8,682
|
|
(in millions)
|
Foreign currency translation adjustments
|
|
AOCL
|
|
|
Balance at January 1, 2016
|
$
|
(140
|
)
|
(140
|
)
|
Other comprehensive loss attributable to QVC, Inc. stockholder
|
(84
|
)
|
(84
|
)
|
|
Balance at December 31, 2016
|
(224
|
)
|
(224
|
)
|
|
Other comprehensive loss attributable to QVC, Inc. stockholder
|
131
|
|
131
|
|
|
Balance at December 31, 2017
|
(93
|
)
|
(93
|
)
|
|
Other comprehensive income attributable to QVC, Inc. stockholder
|
(51
|
)
|
(51
|
)
|
|
Balance at December 31, 2018
|
$
|
(144
|
)
|
(144
|
)
|
(in millions)
|
Before-tax amount
|
|
Tax benefit (expense)
|
|
Net-of-tax amount
|
|
|
Year ended December 31, 2018:
|
|
|
|
||||
Foreign currency translation adjustments
|
$
|
(49
|
)
|
1
|
|
(48
|
)
|
Other comprehensive loss
|
(49
|
)
|
1
|
|
(48
|
)
|
|
|
|
|
|
||||
Year ended December 31, 2017:
|
|
|
|
||||
Foreign currency translation adjustments
|
$
|
156
|
|
(21
|
)
|
135
|
|
Other comprehensive income
|
156
|
|
(21
|
)
|
135
|
|
|
|
|
|
|
||||
Year ended December 31, 2016:
|
|
|
|
||||
Foreign currency translation adjustments
|
$
|
(96
|
)
|
13
|
|
(83
|
)
|
Other comprehensive loss
|
(96
|
)
|
13
|
|
(83
|
)
|
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
|
|
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
|
|
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
|
|
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
|
)
|
|
Gains 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
|
|
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
|
|
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
|
|
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
|
|
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
|
|
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
|
|
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
|
)
|
|
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
|
297
|
|
91
|
|
(26
|
)
|
(583
|
)
|
(221
|
)
|
|
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 Qurate Retail, Inc.
|
(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, cash equivalents and restricted cash
|
—
|
|
—
|
|
(20
|
)
|
—
|
|
(20
|
)
|
|
Net increase (decrease) in cash, cash equivalents and restricted cash
|
1
|
|
(15
|
)
|
(30
|
)
|
—
|
|
(44
|
)
|
|
Cash, cash equivalents and restricted cash, beginning of period
|
9
|
|
112
|
|
217
|
|
—
|
|
338
|
|
|
Cash, cash equivalents and restricted cash, end of period
|
$
|
10
|
|
97
|
|
187
|
|
—
|
|
294
|
|
|
Year ended December 31, 2018
|
|
|||||||
(in millions)
|
1st Quarter (a)
|
2nd Quarter (a)
|
3rd Quarter (a)
|
4th Quarter
|
|||||
Net revenue
|
$
|
2,602
|
|
2,556
|
|
2,569
|
|
3,555
|
|
Operating income
|
$
|
356
|
|
390
|
|
305
|
|
461
|
|
Net income
|
$
|
212
|
|
244
|
|
181
|
|
291
|
|
Net income attributable to QVC, Inc. stockholder
|
$
|
201
|
|
233
|
|
170
|
|
278
|
|
|
Year ended December 31, 2017
|
|
|||||||
(in millions)
|
1st Quarter
|
2nd Quarter
|
3rd Quarter
|
4th Quarter (a)
|
|||||
Net revenue
|
$
|
1,965
|
|
1,979
|
|
2,010
|
|
2,817
|
|
Operating income
|
$
|
271
|
|
306
|
|
274
|
|
458
|
|
Net income
|
$
|
135
|
|
151
|
|
166
|
|
495
|
|
Net income attributable to QVC, Inc. stockholder
|
$
|
124
|
|
141
|
|
154
|
|
482
|
|
|
Year ended December 31,
|
|
||||
|
2018
|
|
2017
|
|
||
Audit fees (1)
|
$
|
6,628,079
|
|
$
|
4,534,252
|
|
Audit related fees (2)
|
—
|
|
6,589
|
|
||
Audit and audit related fees
|
6,628,079
|
|
4,540,841
|
|
||
Tax fees (3)
|
41,998
|
|
51,128
|
|
||
Total fees
|
$
|
6,670,077
|
|
$
|
4,591,969
|
|
•
|
Audit services as specified in the policy, including (i) financial audits of QVC and its subsidiaries, (ii) services associated with QVC's registration statements, periodic reports and other documents filed or issued in connection with securities offerings (including comfort letters and consents), (iii) attestations of management reports on QVC's internal controls and (iv) consultations with management as to accounting or disclosure treatment of transactions;
|
•
|
Audit related services as specified in the policy, including (i) due diligence services, (ii) financial statement audits of employee benefit plans, (iii) consultations with management as to the accounting or disclosure treatment of transactions, (iv) attest services not required by statute or regulation, (v) certain audits incremental to the audit of QVC's consolidated financial statements, (vi) closing balance sheet audits related to dispositions, and (vii) general assistance with implementation of the requirements of certain SEC rules or listing standards; and
|
•
|
Tax services as specified in the policy, including federal, state, local and international tax planning, compliance and review services, and tax due diligence and advice regarding mergers and acquisitions.
|
|
Page
|
QVC, Inc.:
|
|
Report of Independent Registered Public Accounting Firm
|
|
Consolidated Balance Sheets, December 31, 2018 and 2017
|
|
Consolidated Statements of Operations, Years ended December 31, 2018, 2017 and 2016
|
|
Consolidated Statements of Comprehensive Income, Years ended December 31, 2018, 2017 and 2016
|
|
Consolidated Statements of Cash Flows, Years ended December 31, 2018, 2017 and 2016
|
|
Consolidated Statement of Equity, Years ended December 31, 2018, 2017 and 2016
|
|
Notes to Consolidated Financial Statements, December 31, 2018, 2017 and 2016
|
(i)
|
All schedules have been omitted because they are not applicable, not material or the required information is set forth in the financial statements or notes thereto.
|
3.1
|
|
|
3.2
|
|
4.1
|
|
|
4.2
|
|
|
4.3
|
|
|
4.4
|
|
|
4.5
|
|
|
4.6
|
|
|
4.7
|
|
|
4.8
|
|
|
4.9
|
|
23.1
|
|
101.INS
|
XBRL Instance Document*
|
101.SCH
|
XBRL Taxonomy Extension Schema Document*
|
101.CAL
|
XBRL Taxonomy Calculation Linkbase Document*
|
101.LAB
|
XBRL Taxonomy Label Linkbase Document*
|
101.PRE
|
XBRL Taxonomy Presentation Linkbase Document*
|
101.DEF
|
XBRL Taxonomy Definition Document*
|
Date: February 28, 2019
|
By:/s/ MICHAEL A. GEORGE
|
|
Michael A. George
|
|
President and Chief Executive Officer (Principal Executive Officer)
|
|
|
Date: February 28, 2019
|
By:/s/ JEFFREY A. DAVIS
|
|
Jeffrey A. Davis
|
|
Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
|
Date: February 28, 2019
|
By:/s/ JEFFREY A. DAVIS
|
|
Jeffrey A. Davis
|
|
Chief Financial Officer of Qurate Retail Group, Inc., as Stockholder-Director of QVC, Inc.
|
|
|
Date: February 28, 2019
|
By:/s/ MICHAEL A. GEORGE
|
|
Michael A. George
|
|
President and Chief Executive Officer (Principal Executive Officer)
|
|
|
Date: February 28, 2019
|
By:/s/ JEFFREY A. DAVIS
|
|
Jeffrey A. Davis
|
|
Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
|
QVC, Inc. and Subsidiaries
|
Exhibit 21.1
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
Entity Name
|
|
|
|
|
|
|
|
Domicile
|
||
QVC, Inc.
|
DE
|
|||||||||
|
California Voices, LLC
|
DE
|
||||||||
|
DMS DE, Inc.
|
DE
|
||||||||
|
|
NSTBC, Inc.
|
DE
|
|||||||
|
|
|
Diamonique Canada Holdings, Inc.
|
DE
|
||||||
|
|
|
|
RQ Holdings Corp.
|
Nova Scotia
|
|||||
|
ER Development International, Inc.
|
PA
|
||||||||
|
HSN, Inc.
|
DE
|
||||||||
|
|
Home Shopping Espanol (Mexico) S. DE. R.D.DE C.V.
|
Mexico
|
|||||||
|
|
Home Shopping Espanol Services (Mexico) S. DE. R.D.DE C.V.
|
DE
|
|||||||
|
|
Home Shopping Network En Espanol, L.L.C.
|
DE
|
|||||||
|
|
|
Home Shopping Network En Espanol, L.P.
|
DE
|
||||||
|
|
|
Home Shopping Espanol (Mexico) S. DE. R.D.DE C.V.
|
Mexico
|
||||||
|
|
|
Home Shopping Espanol Services (Mexico) S. DE. R.D.DE C.V.
|
Mexico
|
||||||
|
|
Home Shopping Network En Espanol, L.P.
|
DE
|
|||||||
|
|
H.O.T. Networks Holdings (Delaware) LLC
|
DE
|
|||||||
|
|
|
H.O.T. Home Order Television Belgium S.A.
|
Belgium
|
||||||
|
|
HSN Holding LLC
|
DE
|
|||||||
|
|
HSNi, LLC
|
DE
|
|||||||
|
|
|
AST Sub, Inc.
|
DE
|
||||||
|
|
HSN of Nevada LLC
|
DE
|
|||||||
|
|
|
H.O.T. Home Order Television Belgium S.A.
|
Belgium
|
||||||
|
|
|
H.O.T. Networks Holdings (Delaware) LLC
|
DE
|
||||||
|
|
Ingenious Designs LLC
|
DE
|
|||||||
|
|
NLG Merger Corp.
|
DE
|
|||||||
|
|
Ventana Television Holdings, Inc.
|
DE
|
|||||||
|
|
|
Ventana Television Inc.
|
DE
|
||||||
|
Innovative Retailing, Inc.
|
DE
|
||||||||
|
|
QVC Information and Technologies (Shenzhen) Co., Ltd
|
China
|
|||||||
|
QDirect Ventures, Inc.
|
DE
|
||||||||
|
QExhibits, Inc.
|
DE
|
||||||||
|
QHealth, Inc.
|
DE
|
||||||||
|
QLocal, Inc.
|
DE
|
||||||||
|
QVC Britain
|
UK
|
||||||||
|
QVC Chesapeake, LLC
|
VA
|
||||||||
|
QVC China Licensing, Inc.
|
DE
|
||||||||
|
QVC Global DDGS, Inc.
|
DE
|
||||||||
|
|
QVC India, Ltd.
|
DE
|
|||||||
|
QVC Global Holdings II, Inc.
|
DE
|
||||||||
|
|
QVC Cayman Holdings LLC
|
DE
|
|
|
|
|
|
QVC Germany II SARL
|
Luxembourg
|
||||
|
|
|
|
|
|
QVC Handel S.à.r.l. & Co. KG
|
Germany
|
|||
|
|
|
|
|
QVC International Management GP S.à.r.l.
|
Luxembourg
|
||||
|
|
|
|
|
QVC Suisse Holdings GmbH
|
Switzerland
|
||||
|
|
|
|
|
|
QVC (Barbados) International Finance SRL
|
Barbados
|
|||
|
|
|
|
|
|
QVC France Holdings, S.a.r.l.
|
Luxembourg
|
|||
|
|
|
|
|
|
|
QVC France SAS
|
France
|
||
|
|
|
|
|
|
|
QVC Poland Global Services Sp. z.o.o.
|
Poland
|
||
|
|
|
|
|
|
QVC Suisse Finance GmbH
|
Switzerland
|
|||
|
|
|
|
QVC Italy Holdings, LLC
|
DE
|
|||||
|
|
|
|
|
QVC Italia S.r.l.
|
Italy
|
||||
|
|
|
QVC Mexico, Inc.
|
DE
|
||||||
|
|
|
QVC Mexico II, Inc.
|
DE
|
||||||
|
|
|
QVC Mexico III, Inc.
|
DE
|
||||||
|
|
|
QVC of Thailand, Inc.
|
DE
|
||||||
|
|
|
QVC San Antonio, LLC
|
TX
|
||||||
|
|
|
QVC Vendor Development, Inc.
|
DE
|
||||||
|
QVC Grundstücksverwaltungs GmbH
|
Germany
|
||||||||
|
QVC HK Holdings, LLC
|
DE
|
||||||||
|
|
QVC China Holdings Limited
|
Hong Kong
|
|||||||
|
|
|
CNR Home Shopping Co., Ltd.
|
China
|
||||||
|
|
|
QVC (Shanghai) Management Co., Ltd.
|
China
|
||||||
|
|
|
QVC Trading (Shanghai) Co., Ltd.
|
China
|
||||||
|
|
|
QVC Trading (Shenzhen) Co., Ltd.
|
China
|
||||||
|
QVC Northeast, LLC
|
DE
|
||||||||
|
QVC Ontario Holdings, LLC
|
DE
|
||||||||
|
|
QVC Ontario, LLC
|
DE
|
|||||||
|
QVC-QRT, Inc.
|
DE
|
||||||||
|
QVC Rocky Mount, Inc.
|
NC
|
||||||||
|
QVC RS Naples, Inc.
|
FL
|
||||||||
|
QVC Shop International, Inc.
|
DE
|
||||||||
|
QVC STT Holdings, LLC
|
DE
|
||||||||
|
|
Send the Trend, Inc.
|
DE
|
|||||||
|
QVC St. Lucie, Inc.
|
FL
|
||||||||
|
QVC Suffolk, LLC
|
MN
|
||||||||
|
RS Mebane, Inc.
|
NC
|
||||||||
|
RS Myrtle Beach, Inc.
|
SC
|
||||||||
|
TOBH, Inc.
|
DE
|
|
/s/ KPMG LLP
|
By:/s/ MICHAEL A. GEORGE
|
|
Michael A. George
|
|
President and Chief Executive Officer (Principal Executive Officer)
|
|
By:/s/ JEFFREY A. DAVIS
|
|
Jeffrey A. Davis
|
|
Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
|
|
Date: February 28, 2019
|
By:/s/ MICHAEL A. GEORGE
|
|
Michael A. George
|
|
President and Chief Executive Officer (Principal Executive Officer)
|
|
|
Date: February 28, 2019
|
By:/s/ JEFFREY A. DAVIS
|
|
Jeffrey A. Davis
|
|
Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
|