Board of Directors Announces Intent to
Declare Special Dividend of $1.50 Per Share and Preferred Stock
Dividend of $3.00 Per Share
Qurate Retail, Inc. ("Qurate Retail") (Nasdaq: QRTEA, QRTEB)
today reported second quarter 2020 results (1).
“We generated strong growth in revenue, OIBDA, and free cash
flow in the second quarter, with every business unit and geographic
market achieving meaningful sales gains and significant new
customer additions,” said Mike George, President and CEO of Qurate
Retail. “Our agile teams responded to the ongoing shifts in
consumer needs during this challenging time to deliver engaging and
relevant experiences across our eCommerce, video and social
platforms. While economic uncertainty remains, our recent results
give us confidence that we can generate sustained growth by
continued execution of our strategies to offer unique
differentiated products and immersive and trusted shopping
experiences across all the digital platforms relevant to today’s
consumer, while keeping the health and well-being of our team
members and communities our top priority.”
Second quarter operating results:
- Total Qurate Retail revenue increased 10% to $3.4 billion
- Revenue increased 10% in constant currency(2)
- eCommerce revenue grew 19% to $2.2 billion or 64% of total
revenue
- Qurate Retail reported diluted EPS of $0.53
- Adjusted diluted EPS(3) of $0.54
- QxH revenue increased 7% to $2.0 billion
- QVC International revenue increased 11% to $713 million
- Revenue increased 12% in constant currency
- Zulily revenue increased 16% to $422 million
- Cornerstone revenue increased 18% to $277 million
Corporate updates:
- Anticipate approximately $262 million pre-tax proceeds from
sale of green energy investment to be received in August
- Board of Directors announced their intent to return capital to
shareholders via a potential dividend, subject to official
declaration, consisting of:
- Special dividend of cash equal to $1.50 per share of common
stock
- Special dividend of preferred stock equivalent to $3.00 in
initial liquidation value per share with 8.0% dividend rate subject
to mandatory redemption in the first quarter of 2031
“Qurate posted tremendous results, utilizing the flexibility of
its operating model to meet customers’ changing demands,” said Greg
Maffei, Qurate Retail Chairman. “These solid operating results,
along with the pending sale of one of our green energy investments,
is driving a high level of free cash flow. With increased
confidence in the strength of the business, we are pleased to
announce our intended return of capital to shareholders in two
forms: a one-time cash dividend and a one-time preferred stock
dividend. We believe the preferred stock dividend will be an
efficient, ongoing instrument to return capital to our
shareholders. Qurate will continue to seek the most effective
solutions for delivering free cash flow to shareholders on an
ongoing basis while maintaining our stated leverage target.”
Key actions in the quarter:
- Focused on protecting the health and financial well-being of
team members. Team members who can work from home will continue
to do so, until at least early 2021, with some working from home
permanently. Social distancing, mandatory mask requirements and
stringent safety and sanitation protocols are in effect at all
sites. Qurate Retail provided special pay and work from home
allowances and continues to provide leave, medical and other
benefits.
- Committed over $40 million to community support and team
member relief. The company facilitated significant support for
those impacted by the pandemic, including contributions to Meals on
Wheels, No Kid Hungry, Cancer and Careers and a variety of other
organizations around the world; partnered with the National Retail
Federation to support and celebrate small businesses; established a
team member relief fund; elevated its commitment to racial and
economic justice within the company and around the world, including
support for the Equal Justice Initiative.
- Rapidly adapted product offerings, merchandising, marketing,
and on-air and online programming to be in tune with what
customers most cared about throughout the various stages of the
pandemic. Achieved meaningfully improved sales and new customer
growth trends across business segments in the second quarter.
- Executed a significant, strategic pull back on promotional
activity across all businesses, to provide a better foundation
for healthy, sustainable product margins while also managing
elevated demand.
- Took a variety of actions to simplify and streamline its
operating structure as it accelerated its strategic plan and
incorporated key operational learnings from its COVID response.
This necessitated separating with approximately 450 team members in
July, incurring $20 million of severance costs in the second
quarter. Qurate Retail also closed QVC customer contact centers in
San Antonio, Texas and Chesapeake, Virginia and the Zulily customer
contact center and digital studio in Gahanna, Ohio as the
businesses shifted to permanent work from home positions in those
locations.
- Further strengthened its balance sheet with prudent
inventory reductions, more conservative credit practices and a new
trade payables program.
Corporate Updates
Qurate Retail today announced that 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, to be subject to mandatory
redemption in the first quarter of 2031 and to trade separate from
the common shares on the Nasdaq Global Select Market under the
ticker symbol QRTEP following the date of distribution. The
distribution of the Preferred Shares is intended to be tax-free to
shareholders. John Malone, a member of Qurate Retail’s board of
directors, and Greg Maffei have indicated their intention to be
long-term holders of the preferred, which will collectively
represent approximately 8% of the Preferred Shares outstanding on
the distribution date.
As of July 31, 2020, there are 387.5 million shares of QRTEA
common stock and 29.4 million shares of QRTEB common stock
outstanding. Additional detail regarding the aforementioned
potential dividend and its formal declarations are expected to be
announced by press release at a later date, including details on
when-issued trading.
Discussion of Results
Unless otherwise noted, the following discussion compares
financial information for the three months ended June 30, 2020 to
the same period in 2019.
SECOND
QUARTER 2020 FINANCIAL RESULTS
(amounts in millions)
2Q19
2Q20
% Change
% Change Constant Currency(a)
Revenue
QxH
$
1,874
$
2,010
7
%
QVC International(b)
640
713
11
%
12
%
Zulily
363
422
16
%
Cornerstone
234
277
18
%
Total Qurate Retail Revenue
$
3,111
$
3,422
10
%
10
%
Operating Income
QxH
$
292
$
280
(4
)%
QVC International(b)
73
101
38
%
39
%
Zulily(c)
(23
)
20
187
%
Cornerstone
6
13
117
%
Unallocated corporate cost(d)
(12
)
(9
)
25
%
Total Qurate Retail Operating
Income
$
336
$
405
21
%
Adjusted OIBDA
QxH
$
395
$
388
(2
)%
QVC International(b)
106
119
12
%
13
%
Zulily(c)
7
45
543
%
Cornerstone
14
21
50
%
Unallocated corporate cost(d)
(9
)
(8
)
11
%
Total Qurate Retail Adjusted
OIBDA
$
513
$
565
10
%
a)
For a definition of constant currency
financial metrics, see the accompanying schedules.
b)
Includes QVC Japan, QVC Germany, QVC UK
and QVC Italy. QVC France terminated its operations on March 13,
2019 and recorded an approximately $17 million operating loss and
$2 million adjusted OIBDA loss in the second quarter of 2019
primarily from the incurrence of closure costs.
c)
Zulily’s operating income and adjusted
OIBDA in the second quarter of 2020 benefited from a $10 million
reduction in a sales tax accrual, which was originally recorded at
the time of acquisition.
d)
Includes corporate costs incurred at
Qurate Retail, Inc. but not allocated to any business segment.
SECOND
QUARTER 2020 NET INCOME AND ADJUSTED NET INCOME(3)
(amounts in millions)
2Q19
2Q20
Net income (loss)(a)
$
118
$
220
Adjusted net income(b)
$
206
$
226
Basic weighted average shares outstanding
("WASO")
428
417
Potentially dilutive shares
—
1
Diluted WASO
428
418
GAAP EPS(a)
$
0.28
$
0.53
Adjusted EPS(b)
$
0.48
$
0.54
a)
Represents net income (loss) and diluted net income (loss) per
share attributable to Series A and Series B common stockholders as
presented in Qurate Retail’s financial statements.
b)
See reconciling schedule 3.
QxH
QxH reported revenue growth in the home, electronics and beauty
categories, which were partially offset by declines in apparel and
jewelry.
Product margins decreased primarily due to category mix shifts
and pricing and promotional offers early in the second quarter.
Gross margin decreased primarily due to higher fulfillment
(warehouse and freight) costs mainly associated with COVID-related
premium pay in our fulfillment centers, lower productivity due to
COVID-related protocols, reduced pack factor and general freight
rate increases. These factors were partially offset by favorable
customer returns. Operating income and adjusted OIBDA margin(3)
were also impacted by $9 million of incremental severance expense,
higher marketing expense and incentive compensation accruals,
partially offset by favorable TV commissions.
QVC International
US Dollar denominated results were slightly negatively affected
by exchange rate fluctuations, primarily due to the Dollar
strengthening 3% versus the British Pound and 2% against the Euro,
offset by weakening 2% versus the Japanese Yen. The financial
metrics presented in this press release also provide a comparison
of the percentage change in QVC International’s results in constant
currency (where applicable) to the comparable figures calculated in
accordance with US GAAP for the second quarter of 2020.
QVC International constant currency revenue increased, driven by
increases in units shipped across all markets. Gross margin
decreased due to higher inventory obsolescence expense and lower
product margins from product mix shifts primarily to home.
Operating income and adjusted OIBDA margin increased primarily due
to lower administrative costs and leverage of operating expenses,
partially offset by higher incentive compensation accrual.
Operating income margin also benefited from comping approximately
$17 million of costs incurred in the second quarter of 2019 related
to the closure of QVC France, which terminated its operations on
March 13, 2019.
Zulily
Zulily revenue increased on higher unit volume and average
selling price. Gross margin increased primarily due to higher
product margins and sales leverage of warehouse expense, partially
offset by higher freight costs. Operating income and adjusted OIBDA
margin increased primarily due to lower marketing and
administrative expenses, partially offset by higher incentive
compensation accrual. Additionally, Zulily recognized a $10 million
reduction in a sales tax accrual during the second quarter of 2020,
which was originally recorded at the acquisition date and is
included in selling, general and administrative expense.
Cornerstone
Cornerstone revenue increased due to strong demand in its home
brands (Frontgate, Ballard Designs, and Grandin Road), partially
offset by weakness in apparel at Garnet Hill. Cornerstone re-opened
most of its retail stores by the end of the second quarter.
Operating income and adjusted OIBDA margin increased primarily
from the strength of the home brand’s revenue and gross margin
expansion as well as leverage in marketing expense, partially
offset by higher incentive compensation accrual and organizational
restructuring expense. Gross margin expansion was mainly driven by
higher product margins, which were partially offset by an inventory
obsolescence provision for Ryllace (marketing for this new business
has been paused due to the pandemic, while future plans are
reassessed) and higher fulfillment expense.
SECOND
QUARTER 2020 SUPPLEMENTAL METRICS
(amounts in millions unless otherwise
noted)
2Q19
2Q20
% Change
% Change Constant Currency(a)
QxH
Cost of Sales % of Revenue
63.2
%
64.1
%
90
bps
Operating Income Margin (%)
15.6
%
13.9
%
(170
)bps
Adjusted OIBDA Margin (%)
21.1
%
19.3
%
(180
)bps
Average Selling Price
$
53.00
$
53.38
1
%
Units Sold
5
%
Return Rate(b)
17.1
%
14.9
%
220
bps
eCommerce Revenue(c)
$
1,040
$
1,204
16
%
eCommerce % of Total Revenue
55.5
%
59.9
%
440
bps
Mobile % of eCommerce Revenue(d)
67.6
%
65.0
%
(260
)bps
LTM Total Customers(e)
10.7
11.1
4
%
QVC – International
Cost of Sales % of Revenue
61.2
%
62.6
%
140
bps
Operating Income Margin (%)
11.4
%
14.2
%
280
bps
Adjusted OIBDA Margin (%)
16.6
%
16.7
%
10
bps
Average Selling Price
(1
)%
-
%
Units Sold
11
%
eCommerce Revenue(c)
$
261
$
337
29
%
31
%
eCommerce % of Total Revenue
40.8
%
47.3
%
650
bps
Mobile % of eCommerce Revenue(d)
75.6
%
73.2
%
(240
)bps
LTM Total Customers(e)
4.7
4.8
2
%
Zulily
Cost of Sales % of Revenue
74.4
%
73.0
%
(140
)bps
Operating Income Margin (%)
(6.3
)%
4.7
%
1,100
bps
Adjusted OIBDA Margin (%)
1.9
%
10.7
%
880
bps
Mobile % of Total Orders
73.9
%
74.5
%
60
bps
LTM Total Customers(e)
6.2
5.3
(15
)%
Cornerstone
Operating Income Margin (%)
2.6
%
4.7
%
210
bps
Adjusted OIBDA Margin (%)
6.0
%
7.6
%
160
bps
eCommerce Revenue(c)
$
169
$
223
32
%
eCommerce % of Total Revenue
72.2
%
80.5
%
830
bps
a)
For a definition of constant currency
financial metrics, see the accompanying schedules.
b)
Measured as returned sales over gross
shipped sales.
c)
Based on net revenue.
d)
Based on gross US Dollar orders.
e)
LTM: Last twelve months.
Taxes
Qurate Retail estimates that its average annual effective tax
rate over the next three years will be in the range of 15% - 18%
including federal, state and foreign taxes, net of tax credits
generated by Qurate Retail’s green energy investments. This
estimate excludes the impact of one-time items and is subject to
adjustment.
Share Repurchases
Qurate Retail did not repurchase shares from May 1, 2020 through
July 31, 2020. The remaining repurchase authorization for Qurate
Retail is approximately $497 million as of August 1, 2020.
FOOTNOTES
1)
Qurate Retail’s President and CEO, Mike
George, and Executive Chairman, Greg Maffei will discuss these
headlines and other matters on Qurate Retail’s earnings conference
call which will begin at 5:30 p.m. (E.D.T.) on August 10, 2020. For
information regarding how to access the call, please see “Important
Notice” later in this document.
2)
For a definition of constant currency
financial metrics, see the accompanying schedules. Applicable
reconciliations can be found in the financial tables at the
beginning of this press release.
3)
For definitions and applicable
reconciliations of Adjusted OIBDA, Adjusted OIBDA margin, adjusted
net income and adjusted EPS, see the accompanying schedules.
NOTES Cash and Debt
The following presentation is provided to
separately identify cash and debt information.
(amounts in millions)
3/31/2020
6/30/2020
Cash and cash equivalents
(GAAP)
$
555
$
948
Indemnification Asset(a)
$
180
$
215
Debt:
QVC senior notes(b)
$
4,450
$
4,450
QVC bank credit facility
525
—
Total Qurate Retail Group Debt
$
4,975
$
4,450
Senior notes(b)
791
791
Senior exchangeable debentures(c)
1,417
1,417
Corporate Level Debentures
2,208
2,208
Total Qurate Retail, Inc. Debt
$
7,183
$
6,658
Unamortized discount, fair market value
adjustment and deferred loan costs
(138
)
(17
)
Total Qurate Retail, Inc. Debt
(GAAP)
$
7,045
$
6,641
QVC, Inc. leverage(d)
2.4x
2.0x
a)
Indemnity from GCI Liberty, pursuant to an
indemnification agreement with respect to the 1.75% exchangeable
debentures due 2046 (the “Charter exchangeable debentures”) issued
by Liberty Interactive LLC (“LI LLC”), as described in this press
release.
b)
Face amount of Senior Notes and Debentures
with no reduction for the unamortized discount.
c)
Face amount of Senior Exchangeable
Debentures with no reduction for the fair market value
adjustment.
d)
As defined in QVC, Inc.’s credit
agreement. Includes QxH, QVC International and Zulily.
Cash at Qurate Retail increased $393 million in the second
quarter as cash from operations more than offset debt repayments
and capital expenditures. Total debt at Qurate Retail decreased by
$525 million in the second quarter driven by the repayment of QVC’s
bank credit facility.
QVC’s bank credit facility is undrawn as of June 30, 2020 with
available capacity of $2.9 billion, net of letters of credit. The
credit facility matures on December 31, 2023. Qurate Retail does
not have any maturity of senior secured notes until 2022 and
believes that it will be able to repay these notes with available
cash on hand, cash generated from operations, borrowings under its
revolving credit facility or through refinancing in the public debt
market. Qurate Retail is in compliance with all debt covenants, and
QVC, Inc.’s leverage ratio as defined in its credit agreement was
2.0x as of June 30, 2020.
Qurate Retail benefits from an indemnification agreement with
GCI Liberty with respect to its Charter exchangeable debentures.
The indemnification agreement compensates Qurate Retail for any
payments made in excess of the adjusted principal amount of the
debentures to any holder that exercises its exchange right on or
before the put/call date of October 5, 2023. This indemnity is
supported by a negative pledge in favor of Qurate Retail on the 1.0
million reference shares of Class A common stock of Charter held at
GCI Liberty that underlie the Charter exchangeable debentures. The
indemnification asset on Qurate Retail’s balance sheet is valued
based on the estimated exchange feature in the Charter exchangeable
debentures. As of June 30, 2020, a holder of the Charter
exchangeable debentures has the ability to exchange, and
accordingly, the exchangeable debentures and indemnification asset
were both classified as current as of June 30, 2020. There is $332
million principal amount of the Charter exchangeable debentures
outstanding as of June 30, 2020.
Important Notice: Qurate Retail, Inc. (Nasdaq: QRTEA,
QRTEB) President and CEO, Mike George, and Executive Chairman, Greg
Maffei, will discuss Qurate Retail’s earnings release on a
conference call which will begin at 5:30 p.m. (E.D.T.) on August
10, 2020. The call can be accessed by dialing (800) 458-4121 or
(323) 794-2093, passcode 2681043, at least 10 minutes prior to the
start time. The call will also be broadcast live across the
Internet and archived on our website. To access the webcast go to
http://ir.qurateretail.com/events-and-presentations. Links to this
press release and replays of the call will also be available on
Qurate Retail’s website.
This press release includes certain forward-looking statements,
including statements about business strategies and initiatives and
their expected benefits, market potential, future financial
performance and prospects (including results for current and future
periods stemming from COVID-19 impacts), Qurate Retail’s estimated
ongoing annual tax rate, the impact of COVID-19, market conditions,
the indemnification by GCI Liberty, future repayment of debt, the
continuation of our stock repurchase program, the anticipated cash
and preferred stock dividend, including the declaration and timing
thereof and the issuance and timing thereof, the amount of cash
portion of the dividend, the amount of preferred stock portion of
the dividend, the terms of the preferred stock and other matters
that are not historical facts. These forward-looking statements
involve many risks and uncertainties that could cause actual
results to differ materially from those expressed or implied by
such statements, including, without limitation, possible changes in
market acceptance of new products or services, competitive issues,
regulatory matters affecting our businesses, continued access to
capital on terms acceptable to Qurate Retail, changes in law and
government regulations, the availability of investment
opportunities, general market conditions (including as a result of
COVID-19) and market conditions conducive to stock repurchases.
These forward-looking statements speak only as of the date of this
press release, and Qurate Retail expressly disclaims any obligation
or undertaking to disseminate any updates or revisions to any
forward-looking statement contained herein to reflect any change in
Qurate Retail's expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is
based. Please refer to the publicly filed documents of Qurate
Retail, including the most recent Forms 10-K and 10-Q, for
additional information about Qurate Retail and about the risks and
uncertainties related to Qurate Retail's business which may affect
the statements made in this press release.
NON-GAAP FINANCIAL MEASURES
To provide investors with additional information regarding our
financial results, this press release includes a presentation of
Adjusted OIBDA, which is a non-GAAP financial measure, for Qurate
Retail, QVC (and certain of its subsidiaries), Zulily and
Cornerstone together with a reconciliation to that entity or such
businesses’ operating income, as determined under GAAP. Qurate
Retail defines Adjusted OIBDA as operating income (loss) plus
depreciation and amortization, stock-based compensation, separately
reported litigation settlements, restructuring, acquisition and
other related costs and impairments. Further, this press release
includes Adjusted OIBDA margin which is also a non-GAAP financial
measure. Qurate Retail defines Adjusted OIBDA margin as Adjusted
OIBDA divided by revenue.
Qurate Retail believes Adjusted OIBDA is an important indicator
of the operational strength and performance of its businesses by
identifying those items that are not directly a reflection of each
business’ performance or indicative of ongoing business trends. In
addition, this measure allows management to view operating results
and perform analytical comparisons and benchmarking between
businesses and identify strategies to improve performance. Because
Adjusted OIBDA is used as a measure of operating performance,
Qurate Retail views operating income as the most directly
comparable GAAP measure. Adjusted OIBDA is not meant to replace or
supersede operating income or any other GAAP measure, but rather to
supplement such GAAP measures in order to present investors with
the same information that Qurate Retail's management considers in
assessing the results of operations and performance of its assets.
Please see the attached schedules for applicable
reconciliations.
In addition, this press release includes references to adjusted
net income and adjusted earnings per share, which are non-GAAP
financial measures, for Qurate Retail. Qurate Retail defines
adjusted net income as net income, excluding the impact of
acquisition accounting amortization (net of deferred tax benefit),
mark to market adjustments on certain public debt and equity
securities and other one-time adjustments. Qurate Retail defines
adjusted earnings per share as diluted earnings per share plus the
diluted per share effects of certain adjustments, net of tax.
Qurate Retail believes adjusted net income and adjusted earnings
per share are important indicators of financial performance due to
the impact of purchase accounting amortization, mark to market
adjustments and other one-time items identified in Schedule 3
below. Because adjusted net income and adjusted earnings per share
are used as measures of overall financial performance, Qurate
Retail views net income and diluted earnings per share,
respectively, as the most directly comparable GAAP measures.
Adjusted net income and adjusted earnings per share are not meant
to replace or supersede net income, diluted earnings per share or
any other GAAP measure, but rather to supplement such GAAP measures
in order to present investors with a supplemental metric of
financial performance. Please see the attached schedules for a
reconciliation of adjusted net income to net income (loss) and
adjusted earnings per share to diluted earnings per share, in each
case, calculated in accordance with GAAP for Qurate Retail
(Schedule 3).
This press release also references certain financial metrics on
a constant currency basis, which is a non-GAAP measure, for Qurate
Retail. Constant currency financial metrics, as presented herein,
are calculated by translating the current-year and prior-year
reported amounts into comparable amounts using a single foreign
exchange rate for each currency.
Qurate Retail believes constant currency financial metrics are
an important indicator of financial performance, in particular for
QVC, due to the translational impact of foreign currency
fluctuations relating to its subsidiaries in the UK, Germany, Italy
and Japan. We use constant currency financial metrics to provide a
framework to assess how our businesses performed excluding the
effects of foreign currency exchange fluctuations. Please see the
financial tables at the beginning of this press release for a
reconciliation of the impact of foreign currency fluctuations on
revenue, operating income, Adjusted OIBDA and average selling
price.
SCHEDULE 1
The following table provides a reconciliation of Qurate Retail’s
Adjusted OIBDA to its operating income calculated in accordance
with GAAP for the three months ended June 30, 2019, September 30,
2019, December 31, 2019, March 31, 2020 and June 30, 2020,
respectively.
CONSOLIDATED OPERATING INCOME AND ADJUSTED OIBDA
RECONCILIATION
(amounts in millions)
2Q19
3Q19
4Q19
1Q20
2Q20
Qurate Retail, Inc. Operating Income
(Loss)
$
336
$
(727
)
$
287
$
231
$
405
Depreciation and amortization
158
146
149
142
144
Stock compensation expense
18
17
17
11
16
Impairment of intangible assets
—
1,020
147
—
—
Operating company level transaction
related costs
1
—
—
—
—
Qurate Retail, Inc. Adjusted
OIBDA
$
513
$
456
$
600
$
384
$
565
SCHEDULE 2
The following table provides a reconciliation of Adjusted OIBDA
for QVC, Zulily and Cornerstone to that entity or such businesses'
operating income (loss) calculated in accordance with GAAP for the
three months ended June 30, 2019, September 30, 2019, December 31,
2019, March 31, 2020 and June 30, 2020, respectively.
SUBSIDIARY ADJUSTED
OIBDA RECONCILIATION
(amounts in millions)
2Q19
3Q19
4Q19
1Q20
2Q20
QVC
Operating income
$
365
$
330
$
306
$
270
$
381
Depreciation and amortization
124
112
114
114
116
Stock compensation
11
10
9
6
10
Impairment of intangible assets
—
—
147
—
—
Transaction related costs
1
—
—
—
—
Adjusted OIBDA
$
501
$
452
$
576
$
390
$
507
QxH Adjusted OIBDA
$
395
$
346
$
443
$
293
$
388
QVC International Adjusted
OIBDA
106
106
133
97
119
Zulily
Operating income (loss)
$
(23
)
$
(1,042
)
$
(13
)
$
(20
)
$
20
Depreciation and amortization
26
26
26
20
20
Stock compensation
4
4
3
2
5
Impairment of intangible assets
—
1,020
—
—
—
Adjusted OIBDA
$
7
$
8
$
16
$
2
$
45
Cornerstone
Operating income (loss)
$
6
$
(5
)
$
3
$
(11
)
$
13
Depreciation and amortization
8
8
9
8
8
Stock compensation
—
1
—
1
—
Adjusted OIBDA
$
14
$
4
$
12
$
(2
)
$
21
SCHEDULE 3
The following table provides a reconciliation of Qurate Retail’s
net income (loss) to its adjusted net income and diluted earnings
(loss) per share to adjusted earnings per share, in each case,
calculated in accordance with GAAP for the three months ended June
30, 2019, September 30, 2019, December 31, 2019, March 31, 2020 and
June 30, 2020, respectively.
ADJUSTED NET INCOME
AND ADJUSTED EPS RECONCILIATION
(amounts in millions)
2Q19
3Q19
4Q19
1Q20
2Q20
Qurate Retail, Inc. Net Income (Loss)
(GAAP)
$
118
(770
)
141
$
(20
)
$
220
Purchase accounting amort., net of
deferred tax benefit (a)
34
32
33
29
24
Operating company level transaction
related costs, net of tax benefit
1
—
—
—
—
Impairment of intangible assets, net of
tax impact
—
881
113
—
—
Non-recurring tax items(b)
(34
)
—
(11
)
—
—
Mark-to-market adjustments, net(c)
87
34
8
105
(18
)
Adjusted Net Income
$
206
$
177
$
284
$
114
$
226
Diluted earnings (loss) per share
(GAAP)
$
0.28
$
(1.85
)
$
0.34
$
(0.05
)
$
0.53
Total adjustments per share, net of
tax
0.20
2.27
0.34
0.32
0.01
Adjusted earnings per share
$
0.48
$
0.42
$
0.68
$
0.27
$
0.54
a)
Add-back relates to non-cash, non-tax deductible purchase
accounting amortization from Qurate Retail’s acquisitions of QVC,
HSN, Zulily and Cornerstone, net of book deferred tax benefit.
b)
Includes impact of US tax reform and other one-time tax
items.
c)
Add-back includes realized and unrealized gains/losses on
financial instruments, net of tax.
QURATE RETAIL, INC.
BALANCE SHEET
INFORMATION
(unaudited)
June 30,
December 31,
2020
2019
amounts in millions
Assets
Current assets:
Cash and cash equivalents
$
948
673
Trade and other receivables, net
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
9,742
9,744
Intangible assets subject to amortization,
net
830
955
Other assets, at cost, net of accumulated
amortization
568
603
Total assets
$
16,697
17,305
Liabilities and Equity
Current liabilities:
Accounts payable
936
1,091
Accrued liabilities
1,146
1,173
Current portion of debt
1,452
1,557
Other current liabilities
216
180
Total current liabilities
3,750
4,001
Long-term debt
5,189
5,855
Deferred income tax liabilities
1,746
1,716
Other liabilities
726
761
Total liabilities
11,411
12,333
Equity
5,157
4,840
Non-controlling interests in equity of
subsidiaries
129
132
Total liabilities and equity
$
16,697
17,305
QURATE RETAIL, INC.
STATEMENT OF OPERATIONS
INFORMATION
(unaudited)
Three months ended
June 30,
2020
2019
Revenue:
Total revenue, net
$
3,422
3,111
Operating costs and expenses:
Cost of retail sales (exclusive of
depreciation shown separately below)
2,217
1,996
Operating expense
209
197
Selling, general and administrative,
including stock-based compensation
447
424
Depreciation and amortization
144
158
3,017
2,775
Operating income (loss)
405
336
Other income (expense):
Interest expense
(95
)
(93
)
Share of earnings (losses) of affiliates,
net
(28
)
(23
)
Realized and unrealized gains (losses) on
financial instruments, net
23
(113
)
Other, net
(12
)
(7
)
(112
)
(236
)
Earnings (loss) before income taxes
293
100
Income tax benefit (expense)
(59
)
30
Net earnings (loss)
234
130
Less net earnings (loss) attributable to
noncontrolling interests
14
12
Net earnings (loss) attributable to Qurate
Retail, Inc. shareholders
$
220
118
QURATE RETAIL, INC.
STATEMENT OF CASH FLOWS
INFORMATION
(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 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 period
$
956
527
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version on businesswire.com: https://www.businesswire.com/news/home/20200810005656/en/
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