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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                             to                             

Commission File Number 001-33982

QURATE RETAIL, INC.

(Exact name of Registrant as specified in its charter)


incorporation or organization)


Identification No.)

State of Delaware

(State or other jurisdiction of
incorporation or organization)

84-1288730

(I.R.S. Employer
Identification No.)

12300 Liberty Boulevard
Englewood, Colorado

(Address of principal executive offices)

80112

(Zip Code)

Registrant's telephone number, including area code: (720875-5300

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Series A common stock

QRTEA

The Nasdaq Stock Market LLC

Series B common stock

QRTEB

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes    No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes     No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer 

Accelerated Filer 

Non-accelerated Filer 

Smaller Reporting Company 

Emerging Growth Company

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.

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes     No 

The number of outstanding shares of Qurate Retail, Inc.'s common stock as of July 31, 2020 was:

Series A common stock

387,477,851

Series B common stock

29,376,619

Table of Contents

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

QURATE RETAIL, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (unaudited)

    

I-3

QURATE RETAIL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (unaudited)

I-5

QURATE RETAIL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Comprehensive Earnings (Loss) (unaudited)

I-6

QURATE RETAIL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (unaudited)

I-7

QURATE RETAIL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Equity (unaudited)

I-8

QURATE RETAIL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (unaudited)

I-10

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

I-22

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

I-35

Item 4. Controls and Procedures.

I-35

PART II—OTHER INFORMATION

II-1

Item 1. Legal Proceedings

II-1

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

II-1

Item 6. Exhibits

II-2

SIGNATURES

II-3

I-2

Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(unaudited)

    

June 30,

    

December 31,

 

2020

2019

amounts in millions

Assets

Current assets:

Cash and cash equivalents

$

948

 

673

Trade and other receivables, net of allowance for doubtful accounts of $150 million and $129 million, respectively

 

1,324

 

1,854

Inventory, net

 

1,304

 

1,413

Other current assets

 

618

 

636

Total current assets

 

4,194

 

4,576

Investments in equity securities

 

71

 

76

Property and equipment, net

 

1,292

 

1,351

Intangible assets not subject to amortization (note 5):

Goodwill

 

6,574

 

6,576

Trademarks

 

3,168

 

3,168

 

9,742

 

9,744

Intangible assets subject to amortization, net (note 5)

 

830

 

955

Other assets, at cost, net of accumulated amortization

 

568

 

603

Total assets

$

16,697

 

17,305

(continued)

See accompanying notes to condensed consolidated financial statements.

I-3

Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Continued)

(unaudited)

June 30,

December 31,

 

2020

2019

 

amounts in millions,

 

except share amounts

 

Liabilities and Equity

    

    

    

    

Current liabilities:

Accounts payable

$

936

 

1,091

Accrued liabilities

 

1,146

 

1,173

Current portion of debt, including $1,452 million and $1,557 million measured at fair value (note 6)

 

1,452

 

1,557

Other current liabilities

 

216

 

180

Total current liabilities

 

3,750

 

4,001

Long-term debt (note 6)

 

5,189

 

5,855

Deferred income tax liabilities

 

1,746

 

1,716

Other liabilities

 

726

 

761

Total liabilities

 

11,411

 

12,333

Equity

Stockholders' equity:

Preferred stock, $.01 par value. Authorized 50,000,000 shares; no shares issued

 

 

Series A common stock, $.01 par value. Authorized 4,000,000,000 shares; issued and outstanding 387,467,859 shares at June 30, 2020 and 386,691,461 shares at December 31, 2019

 

4

 

4

Series B common stock, $.01 par value. Authorized 150,000,000 shares; issued and outstanding 29,381,251 shares at June 30, 2020 and 29,278,424 shares at December 31, 2019

 

 

Series C common stock, $.01 par value. Authorized 400,000,000 shares; no shares issued

Additional paid-in capital

 

25

 

Accumulated other comprehensive earnings (loss), net of taxes

 

37

 

(55)

Retained earnings

 

5,091

 

4,891

Total stockholders' equity

 

5,157

 

4,840

Noncontrolling interests in equity of subsidiaries

 

129

 

132

Total equity

 

5,286

 

4,972

Commitments and contingencies (note 7)

Total liabilities and equity

$

16,697

 

17,305

See accompanying notes to condensed consolidated financial statements.

I-4

Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(unaudited)

Three months ended

Six months ended

 

June 30,

June 30,

 

    

2020

    

2019

    

2020

    

2019

 

amounts in millions

 

Total revenue, net

$

3,422

 

3,111

 

6,342

 

6,196

Operating costs and expenses:

Cost of retail sales (exclusive of depreciation shown separately below)

 

2,217

 

1,996

 

4,150

 

4,019

Operating expense

 

209

 

197

 

402

 

393

Selling, general and administrative, including stock-based compensation (note 2)

 

447

 

424

 

868

 

849

Depreciation and amortization

 

144

 

158

 

286

 

311

 

3,017

 

2,775

 

5,706

 

5,572

Operating income (loss)

 

405

 

336

 

636

 

624

Other income (expense):

Interest expense

 

(95)

 

(93)

 

(192)

 

(189)

Share of earnings (losses) of affiliates, net

 

(28)

 

(23)

 

(64)

 

(68)

Realized and unrealized gains (losses) on financial instruments, net (note 4)

 

23

 

(113)

 

(115)

 

(194)

Other, net

 

(12)

 

(7)

 

1

 

(15)

 

(112)

 

(236)

 

(370)

 

(466)

Earnings (loss) before income taxes

 

293

 

100

 

266

 

158

Income tax (expense) benefit

 

(59)

 

30

 

(41)

 

38

Net earnings (loss)

234

130

225

196

Less net earnings (loss) attributable to the noncontrolling interests

 

14

 

12

 

25

 

23

Net earnings (loss) attributable to Qurate Retail, Inc. shareholders

$

220

 

118

200

 

173

Basic net earnings (loss) attributable to Series A and Series B Qurate Retail, Inc. shareholders per common share (note 3):

$

0.53

 

0.28

0.48

0.40

Diluted net earnings (loss) attributable to Series A and Series B Qurate Retail, Inc. shareholders per common share (note 3):

$

0.53

 

0.28

0.48

0.40

See accompanying notes to condensed consolidated financial statements.

I-5

Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Earnings (Loss)

(unaudited)

Three months ended

Six months ended

 

June 30,

June 30,

 

    

2020

    

2019

    

2020

    

2019

 

amounts in millions

 

Net earnings (loss)

$

234

 

130

 

225

 

196

Other comprehensive earnings (loss), net of taxes:

Foreign currency translation adjustments

 

18

 

15

 

(4)

 

8

Recognition of previously unrealized losses (gains) on debt, net

 

 

 

(1)

 

Comprehensive earnings (loss) attributable to debt credit risk adjustments

(68)

8

99

(14)

Other comprehensive earnings (loss)

 

(50)

 

23

 

94

 

(6)

Comprehensive earnings (loss)

 

184

 

153

 

319

 

190

Less comprehensive earnings (loss) attributable to the noncontrolling interests

 

15

 

15

 

27

 

26

Comprehensive earnings (loss) attributable to Qurate Retail, Inc. shareholders

$

169

 

138

 

292

 

164

See accompanying notes to condensed consolidated financial statements.

I-6

Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(unaudited)

Six months ended

 

June 30,

 

    

2020

    

2019

 

amounts in millions

 

Cash flows from operating activities:

Net earnings (loss)

$

225

 

196

Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation and amortization

 

286

 

311

Stock-based compensation

 

27

 

37

Share of (earnings) losses of affiliates, net

 

64

 

68

Realized and unrealized (gains) losses on financial instruments, net

 

115

 

194

Deferred income tax expense (benefit)

 

1

 

(21)

Other, net

 

4

 

9

Changes in operating assets and liabilities

Decrease (increase) in accounts receivable

 

531

 

544

Decrease (increase) in inventory

108

(38)

Decrease (increase) in prepaid expenses and other assets

37

62

(Decrease) increase in trade accounts payable

(152)

(352)

(Decrease) increase in accrued and other liabilities

(48)

(417)

Net cash provided (used) by operating activities

 

1,198

 

593

Cash flows from investing activities:

Investments in and loans to cost and equity investees

 

(55)

 

(76)

Capital expenditures

 

(108)

 

(167)

Expenditures for television distribution rights

(10)

(124)

Other investing activities, net

 

7

 

Net cash provided (used) by investing activities

 

(166)

 

(367)

Cash flows from financing activities:

Borrowings of debt

 

753

 

1,909

Repayments of debt

 

(1,477)

 

(1,912)

Repurchases of Qurate Retail common stock

 

 

(296)

Withholding taxes on net settlements of stock-based compensation

 

(2)

 

(8)

Dividends paid to noncontrolling interest

(30)

(28)

Other financing activities, net

 

2

 

(25)

Net cash provided (used) by financing activities

 

(754)

 

(360)

Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash

 

(3)

 

1

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

 

275

 

(133)

Cash, cash equivalents and restricted cash at beginning of period

 

681

 

660

Cash, cash equivalents and restricted cash at end of period

$

956

 

527

The following table reconciles cash, cash equivalents and restricted cash reported in our condensed consolidated balance sheets to the total amount presented in our condensed consolidated statements of cash flows:

June 30,

December 31,

2020

2019

in millions

Cash and cash equivalents

$

948

673

Restricted cash included in other current assets

8

8

Total cash, cash equivalents and restricted cash in the condensed consolidated statement of cash flows

$

956

681

See accompanying notes to condensed consolidated financial statements.

I-7

Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Equity

(unaudited)

Stockholders' Equity

Accumulated

Additional

other

Noncontrolling

 

Preferred

Common stock

paid-in

comprehensive

Retained

interest in equity

Total

 

  

stock

  

Series A

  

Series B

  

capital

  

earnings (loss)

  

earnings

  

of subsidiaries

  

equity

 

amounts in millions

 

Balance at January 1, 2020

$

4

(55)

4,891

132

4,972

Net earnings (loss)

 

200

25

225

Other comprehensive earnings (loss)

 

92

2

94

Stock compensation

27

27

Distribution to noncontrolling interest

(30)

(30)

Other

(2)

(2)

Balance at June 30, 2020

$

4

25

37

5,091

129

5,286

Stockholders' Equity

Accumulated

Additional

other

Noncontrolling

Preferred

Common stock

paid-in

comprehensive

Retained

interest in equity

Total

  

stock

  

Series A

  

Series B

  

capital

  

earnings (loss)

  

earnings

  

of subsidiaries

  

equity

amounts in millions

Balance at March 31, 2020

$

4

9

88

4,871

129

5,101

Net earnings (loss)

 

220

14

234

Other comprehensive earnings (loss)

 

(51)

1

(50)

Stock compensation

16

16

Distribution to noncontrolling interest

(15)

(15)

Balance at June 30, 2020

$

4

25

37

5,091

129

5,286

I-8

Table of Contents

Stockholders' Equity

Accumulated

Additional

other

Noncontrolling

Preferred

Common stock

paid-in

comprehensive

Retained

interest in equity

Total

  

stock

  

Series A

  

Series B

  

capital

  

earnings (loss)

  

earnings

  

of subsidiaries

  

equity

amounts in millions

Balance at January 1, 2019

$

4

(55)

5,675

120

5,744

Net earnings (loss)

 

173

23

196

Other comprehensive earnings (loss)

 

(9)

3

(6)

Stock compensation

37

37

Series A Qurate Retail stock repurchases

 

(296)

(296)

Distribution to noncontrolling interest

(28)

(28)

Withholding taxes on net share settlements of stock-based compensation

(6)

(6)

Reclassification

265

(265)

Balance at June 30, 2019

$

 

4

 

 

 

(64)

 

5,583

 

118

 

5,641

Stockholders' Equity

Common stock

Accumulated

Qurate

Additional

other

Noncontrolling

Preferred

Retail

paid-in

comprehensive

Retained

interest in equity

Total

  

stock

  

Series A

  

Series B

  

capital

  

earnings (loss)

  

earnings

  

of subsidiaries

  

equity

amounts in millions

Balance at March 31, 2019

$

4

(84)

5,533

109

5,562

Net earnings (loss)

 

118

12

130

Other comprehensive income (loss)

 

20

3

23

Stock compensation

18

18

Series A Qurate Retail stock repurchases

 

(86)

(86)

Distribution to noncontrolling interest

(6)

(6)

Reclassification

68

(68)

Balance at June 30, 2019

$

4

(64)

5,583

118

5,641

See accompanying notes to condensed consolidated financial statements.

I-9

Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(unaudited)

(1)   Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of Qurate Retail, Inc. (formerly named Liberty Interactive Corporation, prior to the GCI Liberty Split-Off defined and described below) and its controlled subsidiaries (collectively, "Qurate Retail," the "Company," “Consolidated Qurate Retail,” “us,” “we,” or “our” unless the context otherwise requires). All significant intercompany accounts and transactions have been eliminated in consolidation. Qurate Retail is made up of wholly-owned subsidiaries QVC, Inc. (“QVC”), which includes HSN, Inc. (“HSN”), Cornerstone Brands, Inc. (“Cornerstone”), Zulily, LLC (“Zulily”), and other cost and equity method investments.

Qurate Retail is primarily engaged in the video and online commerce industries in North America, Europe and Asia. The businesses of the Company’s wholly-owned subsidiaries, QVC, Cornerstone and Zulily, are seasonal due to a higher volume of sales in the fourth calendar quarter related to year-end holiday shopping.  

The accompanying (a) condensed consolidated balance sheet as of December 31, 2019, which has been derived from audited financial statements, and (b) the interim unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results for such periods have been included. Additionally, certain prior period amounts have been reclassified for comparability with current period presentation. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in Qurate Retail's Annual Report on Form 10-K for the year ended December 31, 2019.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Qurate Retail considers (i) fair value measurements, (ii) accounting for income taxes, and (iii) estimates of retail-related adjustments and allowances to be its most significant estimates.    

In December 2019, a new coronavirus (“COVID-19”) was reported to have surfaced in Wuhan, China and has subsequently spread across the globe causing a global pandemic, impacting all countries where Qurate Retail operates. As a result of the spread of the virus, most local governmental agencies have imposed travel restrictions, local quarantines or stay at home restrictions to contain the spread, which has caused a significant disruption to most sectors of the economy.

As a result of COVID-19, management has increased the amounts of certain estimated reserves, including but not limited to, uncollectible receivables, inventory obsolescence and sales returns for the three and six months ended June 30, 2020. Other than these changes, management is not presently aware of any events or circumstances arising from the COVID-19 pandemic that would require the Company to update our estimates or judgments or revise the carrying value of our assets or liabilities.  Management’s estimates may change, however, as new events occur and additional information is obtained, and any such changes will be recognized in the financial statements. Actual results could differ from estimates, and any such differences may be material to our financial statements.

Qurate Retail has entered into certain agreements with Liberty Media Corporation ("LMC") (for accounting purposes, a related party of the Company), a separate publicly traded company. These agreements include a reorganization agreement, services agreement and facilities sharing agreement.  As a result of certain corporate transactions, LMC and Qurate Retail may have obligations to each other for certain tax related matters. Neither Qurate Retail nor LMC has any stock ownership, beneficial or otherwise, in the other. In connection with a split-off transaction that occurred in the first quarter of 2018 (the “GCI Liberty Split-Off”), Qurate Retail and GCI Liberty, Inc. (“GCI Liberty”) (for accounting purposes, a related party of the Company) entered into a tax sharing agreement.  Pursuant to the tax sharing agreement, GCI Liberty has agreed to indemnify Qurate Retail for taxes and tax-related losses resulting from the GCI Liberty Split-Off to the extent such taxes or tax-related losses (i) result primarily from, individually or in the aggregate, the breach of certain restrictive covenants

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Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

made by GCI Liberty (applicable to actions or failures to act by GCI Liberty and its subsidiaries following the completion of the GCI Liberty Split-Off), or (ii) result from Section 355(e) of the Internal Revenue Code applying to the GCI Liberty Split-Off as a result of the GCI Liberty Split-Off being part of a plan (or series of related transactions) pursuant to which one or more persons acquire, directly or indirectly, a 50-percent or greater interest (measured by vote or value) in the stock of GCI Liberty (or any successor corporation).

In December 2019, the Company entered into an amendment to the services agreement in connection with LMC’s entry into a new employment arrangement with Gregory B. Maffei, the Company’s Chairman of the Board (the “Chairman”). Under the amended services agreement, components of his compensation will either be paid directly to him by each of the Company, Liberty TripAdvisor Holdings, Inc., GCI Liberty, and Liberty Broadband Corporation. (collectively, the “Service Companies”) or reimbursed to LMC, in each case, based on allocations among LMC and the Service Companies set forth in the amended services agreement, currently set at 19% for the Company. 

The reorganization agreement with LMC provides for, among other things, provisions governing the relationship between Qurate Retail and LMC, including certain cross-indemnities. Pursuant to the services agreement, LMC provides Qurate Retail with certain general and administrative services including legal, tax, accounting, treasury and investor relations support. Qurate Retail reimburses LMC for direct, out-of-pocket expenses incurred by LMC in providing these services and for Qurate Retail's allocable portion of costs associated with any shared services or personnel based on an estimated percentage of time spent providing services to Qurate Retail. Under the facilities sharing agreement, LMC shares office space and related amenities at its corporate headquarters with Qurate Retail. Under these various agreements, approximately $2 million and $1 million was reimbursable to LMC for the three months ended June 30, 2020 and 2019, respectively, and $5 million and $3 million was reimbursable to LMC for the six months ended June 30, 2020 and 2019, respectively.  Qurate Retail had a tax sharing payable with LMC and GCI Liberty in the amount of approximately $99 million and $95 million as of June 30, 2020 and December 31, 2019, respectively, included in Other liabilities in the condensed consolidated balance sheets. 

On August 10, 2020, Qurate Retail announced its Board of Directors intends to distribute a special dividend consisting of (i) cash in the amount of $1.50 per common share for an aggregate cash dividend of approximately $633 million and (ii) newly issued 8.0% fixed rate cumulative redeemable preferred shares (the “Preferred Shares”) equivalent to $3.00 in initial liquidation value per common share, for an aggregate issuance of approximately $1.3 billion aggregate liquidation preference. The dividend has not yet been declared and is subject to formal approval by a committee of the board, but is currently expected to be payable on September 14th to holders of record of Qurate Retail’s Series A and Series B common stock as of the close of business on August 31st. Holders of the Preferred Shares are expected to receive quarterly cash dividends at a fixed rate of 8.0% per year. The Preferred Shares are expected to be non-voting, subject to a mandatory redemption right in the first quarter of 2031.

(2)   Stock-Based Compensation

The Company has granted to certain of its directors, employees and employees of its subsidiaries, restricted stock, restricted stock units (“RSUs”) and options to purchase shares of the Company’s common stock (collectively, "Awards"). The Company measures the cost of employee services received in exchange for an equity classified Award (such as stock options and restricted stock) based on the grant-date fair value (“GDFV”) of the Award, and recognizes that cost over the period during which the employee is required to provide service (usually the vesting period of the Award). The Company measures the cost of employee services received in exchange for a liability classified Award based on the current fair value of the Award, and remeasures the fair value of the Award at each reporting date.

Included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations are $16 million and $18 million of stock-based compensation during the three months ended June 30, 2020 and 2019, respectively, and $27 million and $37 million of stock-based compensation during the six months ended June 30, 2020 and 2019, respectively.

The following table presents the number and weighted average GDFV of options granted by the Company during the six months ended June 30, 2020:

I-11

Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

Six months ended

June 30, 2020

Options Granted (000's)

Weighted Average GDFV

Series A Qurate Retail common stock, QVC and HSN employees (1)

4,166

$

1.94

Series A Qurate Retail common stock, Zulily employees (1)

618

$

1.94

Series A Qurate Retail common stock, Qurate Retail employees (2)

26

$

3.71

(1)Grants vest semi-annually over four years.
(2)Grants vest between three and four years.

During the six months ended June 30, 2020, Qurate Retail granted to its employees 9.6 million RSUs of Series A Qurate Retail common stock. The Series A RSUs had a GDFV of $4.54 per share and generally vest annually over four years. In connection with our Chairman’s employment agreement, during the six months ended June 30, 2020, Qurate Retail granted 584 thousand performance-based RSUs of Series A Qurate Retail common stock to the Chairman. The Series A RSUs had a GDFV of $4.44 per share at the time they were granted and will cliff vest one year from the month of grant, subject to the satisfaction of certain performance objectives.  During the six months ended June 30, 2020, Qurate Retail also granted approximately 725 thousand performance-based RSUs of Series A Qurate Retail common stock to its CEO.  The Series A RSUs had a GDFV of $4.44 per share at the time they were granted and will cliff vest one year from the month of grant, subject to the satisfaction of certain performance objectives. Performance objectives, which are subjective, are considered in determining the timing and amount of compensation expense recognized. When the satisfaction of the performance objectives becomes probable, the Company records compensation expense. The probability of satisfying the performance objectives is assessed at the end of each reporting period.

Also during the six months ended June 30, 2020, Qurate Retail granted 38 thousand time-based RSUs of Series A Qurate Retail common stock to our Chairman. The RSUs had a GDFV of $7.44 per share and cliff vest on December 10, 2020.  This RSU grant was issued in lieu of our Chairman receiving 50% of his remaining base salary for the last three quarters of calendar year 2020, and he has waived his right to receive the other 50%, in each case, in light of the ongoing financial impact of COVID-19.

The Company has calculated the GDFV for all of its equity classified Awards and any subsequent remeasurement of its liability classified Awards using the Black-Scholes-Merton Model. The Company estimates the expected term of the Awards based on historical exercise and forfeiture data. The volatility used in the calculation for Awards is based on the historical volatility of Qurate Retail's stock and the implied volatility of publicly traded Qurate Retail options. The Company uses a zero dividend rate and the risk-free rate for Treasury Bonds with a term similar to that of the subject options.

Qurate Retail—Outstanding Awards

The following tables present the number and weighted average exercise price ("WAEP") of the Awards to purchase Qurate Retail common stock granted to certain officers, employees and directors of the Company, as well as the weighted average remaining life and aggregate intrinsic value of the Awards.

I-12

Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

    

    

    

Weighted

    

Aggregate

 

average

intrinsic

Series A

remaining

value

(000's)

WAEP

life

(millions)

Outstanding at January 1, 2020

 

23,248

$

21.28

Granted

 

4,810

$

4.46

Exercised

 

$

Forfeited/Cancelled

 

(3,256)

$

19.37

Outstanding at June 30, 2020

 

24,802

$

18.27