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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 March 31, 2021

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

8.0% Series A Cumulative Redeemable Preferred Stock

QRTEP

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 April 30, 2021 was:

Series A common stock

379,563,326

Series B common stock

29,353,492

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-9

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

I-20

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

I-31

Item 4. Controls and Procedures.

I-31

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)

    

March 31,

    

December 31,

 

2021

2020

amounts in millions

Assets

Current assets:

Cash and cash equivalents

$

739

 

806

Trade and other receivables, net of allowance for doubtful accounts of $111 million and $132 million, respectively

 

1,245

 

1,640

Inventory, net

 

1,374

 

1,301

Indemnification agreement receivable

293

345

Other current assets

 

484

 

473

Total current assets

 

4,135

 

4,565

Property and equipment, net

 

1,222

 

1,300

Intangible assets not subject to amortization (note 5):

Goodwill

 

6,601

 

6,638

Trademarks

 

3,168

 

3,168

 

9,769

 

9,806

Intangible assets subject to amortization, net (note 5)

 

831

 

779

Other assets, at cost, net of accumulated amortization

 

614

 

549

Total assets

$

16,571

 

16,999

(continued)

See accompanying notes to condensed consolidated financial statements.

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Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Continued)

(unaudited)

March 31,

December 31,

 

2021

2020

 

amounts in millions,

 

except share amounts

 

Liabilities and Equity

    

    

    

    

Current liabilities:

Accounts payable

$

1,129

 

1,305

Accrued liabilities

 

1,088

 

1,418

Current portion of debt, including $1,767 million and $1,750 million measured at fair value (note 6)

 

1,767

 

1,750

Other current liabilities

 

236

 

231

Total current liabilities

 

4,220

 

4,704

Long-term debt (note 6)

 

5,263

 

5,186

Deferred income tax liabilities

 

1,349

 

1,359

Preferred stock (note 7)

1,259

1,249

Other liabilities

 

716

 

768

Total liabilities

 

12,807

 

13,266

Equity

Stockholders' equity:

Series A common stock, $.01 par value. Authorized 4,000,000,000 shares; issued and outstanding 382,235,148 shares at March 31, 2021 and 382,165,550 shares at December 31, 2020

 

4

 

4

Series B common stock, $.01 par value. Authorized 150,000,000 shares; issued and outstanding 29,353,492 shares at March 31, 2021 and 29,366,492 shares at December 31, 2020

 

 

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

Additional paid-in capital

 

 

Accumulated other comprehensive earnings (loss), net of taxes

 

(48)

 

72

Retained earnings

 

3,680

 

3,522

Total stockholders' equity

 

3,636

 

3,598

Noncontrolling interests in equity of subsidiaries

 

128

 

135

Total equity

 

3,764

 

3,733

Commitments and contingencies (note 8)

Total liabilities and equity

$

16,571

 

16,999

See accompanying notes to condensed consolidated financial statements.

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Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(unaudited)

Three months ended

 

March 31,

 

    

2021

    

2020

 

amounts in millions, except per share amounts

 

Total revenue, net

$

3,337

 

2,920

Operating costs and expenses:

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

 

2,195

 

1,933

Operating expense

 

206

 

193

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

 

435

 

421

Depreciation and amortization

 

128

 

142

 

2,964

 

2,689

Operating income (loss)

 

373

 

231

Other income (expense):

Interest expense

 

(117)

 

(97)

Share of earnings (losses) of affiliates, net

 

(32)

 

(36)

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

 

41

 

(138)

Other, net

 

13

 

13

 

(95)

 

(258)

Earnings (loss) before income taxes

 

278

 

(27)

Income tax (expense) benefit

 

(54)

 

18

Net earnings (loss)

224

(9)

Less net earnings (loss) attributable to the noncontrolling interests

 

18

 

11

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

$

206

 

(20)

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

$

0.50

 

(0.05)

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

$

0.49

 

(0.05)

See accompanying notes to condensed consolidated financial statements.

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Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Earnings (Loss)

(unaudited)

Three months ended

 

March 31,

 

    

2021

    

2020

 

amounts in millions

 

Net earnings (loss)

$

224

 

(9)

Other comprehensive earnings (loss), net of taxes:

Foreign currency translation adjustments

 

(73)

 

(22)

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

 

 

(1)

Comprehensive earnings (loss) attributable to debt credit risk adjustments

(56)

167

Other comprehensive earnings (loss)

 

(129)

 

144

Comprehensive earnings (loss)

 

95

 

135

Less comprehensive earnings (loss) attributable to the noncontrolling interests

 

9

 

12

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

$

86

 

123

See accompanying notes to condensed consolidated financial statements.

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Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(unaudited)

Three months ended

 

March 31,

 

    

2021

    

2020

 

amounts in millions

 

Cash flows from operating activities:

Net earnings (loss)

$

224

 

(9)

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

Depreciation and amortization

 

128

 

142

Stock-based compensation

 

16

 

11

Share of (earnings) losses of affiliates, net

 

32

 

36

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

 

(41)

 

138

Deferred income tax expense (benefit)

 

2

 

(43)

Other, net

 

6

 

4

Changes in operating assets and liabilities

Decrease (increase) in accounts receivable

 

382

 

411

Decrease (increase) in inventory

(81)

(23)

Decrease (increase) in prepaid expenses and other assets

32

62

(Decrease) increase in trade accounts payable

(165)

(240)

(Decrease) increase in accrued and other liabilities

(382)

(317)

Net cash provided (used) by operating activities

 

153

 

172

Cash flows from investing activities:

Investments in and loans to cost and equity investees

 

(118)

 

(36)

Capital expenditures

 

(47)

 

(45)

Expenditures for television distribution rights

(56)

(1)

Cash proceeds from dispositions of investments

2

Proceeds from sale of fixed assets

 

40

 

Other investing activities, net

(1)

8

Net cash provided (used) by investing activities

 

(180)

 

(74)

Cash flows from financing activities:

Borrowings of debt

 

265

 

743

Repayments of debt

 

(194)

 

(942)

Repurchases of Qurate Retail common stock

 

(41)

 

Withholding taxes on net settlements of stock-based compensation

 

(21)

 

(2)

Dividends paid to noncontrolling interest

(16)

(15)

Dividends paid to common shareholders

(13)

Other financing activities, net

 

(3)

 

6

Net cash provided (used) by financing activities

 

(23)

 

(210)

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

 

(17)

 

(6)

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

 

(67)

 

(118)

Cash, cash equivalents and restricted cash at beginning of period

 

814

 

681

Cash, cash equivalents and restricted cash at end of period

$

747

 

563

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:

March 31,

December 31,

2021

2020

in millions

Cash and cash equivalents

$

739

806

Restricted cash included in other current assets

8

8

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

$

747

814

See accompanying notes to condensed consolidated financial statements.

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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, 2021

$

4

72

3,522

135

3,733

Net earnings (loss)

 

206

18

224

Other comprehensive earnings (loss)

 

(120)

(9)

(129)

Stock compensation

15

15

Series A Qurate Retail stock repurchases

 

(41)

(41)

Distribution to noncontrolling interest

(16)

(16)

Withholding taxes on net share settlements of stock-based compensation

(21)

(21)

Other

(2)

1

(1)

Reclassification

49

(49)

Balance at March 31, 2021

$

4

(48)

3,680

128

3,764

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)

 

(20)

11

(9)

Other comprehensive earnings (loss)

 

143

1

144

Stock compensation

11

11

Distribution to noncontrolling interest

(15)

(15)

Other

(2)

(2)

Balance at March 31, 2020

$

 

4

 

 

9

 

88

 

4,871

 

129

 

5,101

See accompanying notes to condensed consolidated financial statements.

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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. 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, 2020, 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, 2020 (the “2020 10-K”).

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, certain 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.

Management is not presently aware of any events or circumstances arising from the COVID-19 pandemic that would require the Company to update the estimates, 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 consolidated financial statements. Actual results could differ from estimates, and any such differences may be material to our financial statements.

As a result of repurchases of Series A Qurate Retail common stock, the Company’s additional paid-in capital balance was in a deficit position as of March 31, 2021.  In order to ensure that the additional paid-in capital account is not negative, we reclassified the amount of the deficit ($49 million) at March 31, 2021 to retained earnings.

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”) entered into a tax sharing agreement. Pursuant to the tax sharing agreement, GCI Liberty 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

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Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

or in the aggregate, the breach of certain restrictive covenants 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). Following a merger between Liberty Broadband Corporation (“Liberty Broadband”) and GCI Liberty, Liberty Broadband (for accounting purposes, a related party of the Company) has assumed the tax sharing agreement.

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., and Liberty Broadband (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 17% 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 $3 million was reimbursable to LMC for the three months ended March 31, 2021 and 2020, respectively. Qurate Retail had a tax sharing payable to LMC and Liberty Broadband in the amount of approximately $121 million and $129 million as of March 31, 2021 and December 31, 2020, respectively, included in Other liabilities in the condensed consolidated balance sheets. 

(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 $11 million of stock-based compensation during the three months ended March 31, 2021 and 2020, respectively.

The following table presents the number and weighted average GDFV of options granted by the Company during the three months ended March 31, 2021:

Three months ended

March 31, 2021

Options Granted (000's)

Weighted Average GDFV

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

853

$

6.74

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

79

$

6.74

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

63

$

6.18

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Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

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

During the three months ended March 31, 2021, Qurate Retail granted to employees and directors 4.5 million RSUs of Series A Qurate Retail common stock (“QRTEA”), which RSUs have a GDFV of $12.90 per share and generally vest annually over four years. In connection with our Chairman’s employment agreement, during the three months ended March 31, 2021, Qurate Retail granted 229 thousand performance-based RSUs of QRTEA to the Chairman. The Series A RSUs had a GDFV of $12.90 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 three months ended March 31, 2021, Qurate Retail also granted 423 thousand performance-based RSUs and 423 thousand time-based RSUs of QRTEA to its CEO.  Both the performance-based and time-based Series A RSUs had a GDFV of $12.90 per share at the time they were granted. The time-based RSUs vest on December 10, 2021, and the performance-based RSUs 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.

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.

    

    

    

Weighted

    

Aggregate

 

average

intrinsic

Series A

remaining

value

(000's)

WAEP

life

(millions)

Outstanding at January 1, 2021

 

40,553

$

10.61

Granted

 

995

$

12.90

Exercised

 

(1,053)

$

5.47

Forfeited/Cancelled

 

(1,447)

$

14.13

Outstanding at March 31, 2021

 

39,048

$

10.68

 

4.1

years

$

115

Exercisable at March 31, 2021

 

22,876

$

13.86

 

2.9

years

$

19

    

    

    

Weighted

    

Aggregate

 

average

intrinsic

Series B

remaining

value

(000's)

WAEP

life

(millions)

Outstanding at January 1, 2021

 

3,243

$

15.39

Granted

 

$

Exercised

 

$

Forfeited/Cancelled

$

Outstanding at March 31, 2021

 

3,243

$

15.39

 

1.8

years

$

Exercisable at March 31, 2021

 

3,243

$

15.39

 

1.8

years

$

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Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

As of March 31, 2021, Qurate Retail had 14 million QRTEA RSUs outstanding with a weighted average GDFV of $9.76 per share.

As of March 31, 2021, the total unrecognized compensation cost related to unvested Awards was approximately $159 million. Such amount will be recognized in the Company's consolidated statements of operations over a weighted average period of approximately 2.2 years.

As of March 31, 2021, Qurate Retail reserved for issuance upon exercise of outstanding stock options approximately 39.0 million shares of QRTEA and 3.2 million shares of Series B Qurate Retail common stock.

(3)   Earnings (Loss) Per Common Share

Basic earnings (loss) per common share ("EPS") is computed by dividing net earnings (loss) by the weighted average number of common shares outstanding ("WASO") for the period. Diluted EPS presents the dilutive effect on a per share basis of potential common shares as if they had been converted at the beginning of the periods presented. Potentially dilutive shares are excluded from the computation of diluted EPS during periods in which losses are reported since the result would be antidilutive.

Excluded from diluted EPS for the three months ended March 31, 2021 and 2020 are 25 million and 22 million potential common shares, respectively, because their inclusion would have been antidilutive.

Qurate Retail Common Stock

    

Three months ended

March 31,

2021

2020

number of shares in millions

Basic WASO

 

411

416

Potentially dilutive shares

 

11

1

Diluted WASO

 

422

417

(4)   Assets and Liabilities Measured at Fair Value

For assets and liabilities required to be reported at fair value, GAAP provides a hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs, other than quoted market prices included within Level 1, that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability.

The Company's assets and liabilities measured at fair value are as follows:

Fair Value Measurements at

Fair Value Measurements at

 

March 31, 2021

December 31, 2020

 

    

    

Quoted

    

    

    

Quoted

    

 

prices

prices

 

in active

Significant

in active

Significant

 

markets for

other

markets for

other

 

identical

observable

identical

observable

 

assets

inputs

assets

inputs

 

Description

Total

(Level 1)

(Level 2)

Total

(Level 1)

(Level 2)

 

amounts in millions

 

Cash equivalents

$

249

 

249

 

 

290

 

290

 

Indemnification asset

$

293

293

345

345

Debt

$

1,767

 

 

1,767

 

1,750

 

 

1,750

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Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

The majority of the Company's Level 2 financial assets and liabilities are primarily debt instruments with quoted market prices that are not considered to be traded on "active markets," as defined in GAAP. The fair values for such instruments are derived from a typical model using observable market data as the significant inputs.

The indemnification asset relates to Liberty Broadband’s agreement to indemnify Liberty Interactive LLC (“LI LLC”) and pertains to the ability of holders of LI LLC’s 1.75% exchangeable debentures due 2046 (the “1.75% Exchangeable Debentures”) to exercise their exchange right according to the terms of the debentures on or before October 5, 2023. Such amount will equal the difference between the exchange value and par value of the 1.75% Exchangeable Debentures at the time the exchange occurs.  The indemnification asset recorded in the condensed consolidated balance sheets as of March 31, 2021 represents the fair value of the estimated exchange feature included in the 1.75% Exchangeable Debentures primarily based on market observable inputs (Level 2).  As of March 31, 2021, a holder of the 1.75% Exchangeable Debentures has the ability to exchange and, accordingly, such indemnification asset is included as a current asset in our condensed consolidated balance sheet as of that date.

Realized and Unrealized Gains (Losses) on Financial Instruments

Realized and unrealized gains (losses) on financial instruments are comprised of changes in the fair value of the following:

Three months ended

 

March 31,

 

    

2021

    

2020

 

amounts in millions

 

Exchangeable senior debentures

 

46

 

(50)

Indemnification asset

(52)

(22)

Other financial instruments

47

(66)

$

41

 

(138)

The Company has elected to account for its exchangeable debt using the fair value option. Changes in the fair value of the exchangeable senior debentures recognized in the condensed consolidated statement of operations are primarily due to market factors primarily driven by changes in the fair value of the underlying shares into which the debt is exchangeable. The Company isolates the portion of the unrealized gain (loss) attributable to the change in the instrument specific credit risk and recognizes such amount in other comprehensive earnings (loss).  The change in the fair value of the exchangeable senior debentures attributable to changes in the instrument specific credit risk was a loss of $68 million and a gain of $220 million for the three months ended March 31, 2021 and 2020, respectively.  The cumulative change was a gain of $125 million as of March 31, 2021.  

(5)   Intangible Assets

Goodwill

Changes in the carrying amount of goodwill are as follows:

Corporate and

    

QxH

QVC Int'l

Zulily

    

Other

    

Total

 

amounts in millions

 

Balance at January 1, 2021

$

5,228

921

477

 

12

 

6,638

Foreign currency translation adjustments

 

(37)

 

 

(37)

Balance at March 31, 2021

$

5,228

884

477

 

12

 

6,601

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Table of Contents

QURATE RETAIL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

Intangible Assets Subject to Amortization

Amortization expense for intangible assets with finite useful lives was $82 million and $91 million for the three months ended March 31, 2021 and 2020, respectively. Based on its amortizable intangible assets as of March 31, 2021, Qurate Retail expects that amortization expense will be as follows for the next five years (amounts in millions):

Remainder of 2021

    

$

259

2022

$

247

2023

$

135

2024

$

82

2025

$

50

(6)   Long-Term Debt

Debt is summarized as follows:

Outstanding

 

principal at

Carrying value

 

    

March 31, 2021

    

March 31, 2021

    

December 31, 2020

 

amounts in millions

 

Corporate level debentures

8.5% Senior Debentures due 2029

$

287

 

285

 

285

8.25% Senior Debentures due 2030

 

505

 

502

 

502

4% Exchangeable Senior Debentures due 2029

430

361

362

3.75% Exchangeable Senior Debentures due 2030

432

353

346

1.75% Exchangeable Senior Debentures due 2046

332

612

649

Subsidiary level notes and facilities

QVC 4.375% Senior Secured Notes due 2023

 

750

 

750

 

750

QVC 4.85% Senior Secured Notes due 2024

 

600

 

600

 

600

QVC 4.45% Senior Secured Notes due 2025

600

599

599

QVC 4.75% Senior Secured Notes due 2027

575

575

575

QVC 4.375% Senior Secured Notes due 2028

500

500

500

QVC 5.45% Senior Secured Notes due 2034

400

399

399

QVC 5.95% Senior Secured Notes due 2043

 

300

 

300

 

300

QVC 6.375% Senior Secured Notes due 2067

225

225

225

QVC 6.25% Senior Secured Notes due 2068

500

500

500

3.5% Exchangeable Senior Debentures due 2031

 

214

 

441

 

393

QVC Bank Credit Facilities

75

75

Deferred loan costs

(