Qurate Retail, Inc. ("Qurate Retail") (Nasdaq: QRTEA, QRTEB,
QRTEP) today reported first quarter 2022 results(1).
“We took important first steps in our turnaround, with a focus
on stabilizing our core US vCommerce business and setting the
foundation for accelerating growth in streaming. We restructured
the organization and leadership of the QVC US and HSN brands,
formed a new dedicated streaming business unit and attracted a
proven leader at Zulily,” said David Rawlinson, President and CEO
of Qurate Retail.
“Our first quarter results reflect the continued challenges of
operating amidst extreme supply chain disruptions. We don’t believe
this quarter’s results reflect the long-term underlying health of
our businesses. In addition, heightened inflationary pressure and
the situation in Ukraine led to depressed consumer sentiment, and
we experienced a larger-than-expected operational disruption
related to the December fire at our Rocky Mount, NC fulfillment
center. While our turnaround will take time, and progress may be
not be a straight line, we are starting from a position of strength
with scale in our television and streaming reach, a strong
financial profile, and core competencies in building consumer
engagement.”
First quarter 2022 operating results:
- Qurate Retail revenue decreased 14% to $2.9 billion
- In constant currency(2) revenue decreased 12%
- eCommerce revenue decreased 14% to $1.8 billion or 61% of total
revenue
- Qurate Retail reported diluted EPS of $0.00
- Adjusted diluted EPS(3) of $0.15
- QxH revenue decreased 13%
- QVC International revenue decreased 13%
- In constant currency, revenue decreased 7%
- Zulily revenue decreased 38%
- Cornerstone revenue increased 19%
Corporate headlines:
- Announced new executive leadership appointments on March 2nd
and efforts to differentiate brand experiences across QVC US and
HSN
- Mike Fitzharris named President, QVC US
- Rob Muller named President, HSN
- Mary Campbell named President of a new business unit created to
accelerate efforts in streaming and other live video commerce
(“vCommerce”) initiatives
- Named Terry Boyle, former Nordstrom executive and digital
retail veteran, as President & CEO of Zulily effective March
14th
Discussion of Results
Unless otherwise noted, the following discussion compares
financial information for the three months ended March 31, 2022 to
the same period in 2021.
FIRST QUARTER 2022
FINANCIAL RESULTS
(amounts in millions)
1Q21
1Q22
% Change
% Change
Constant
Currency(a)
Revenue
QxH
$
1,936
$
1,684
(13
)
%
QVC International
774
670
(13
)
%
(7
)
%
Zulily
377
232
(38
)
%
Cornerstone
250
297
19
%
Total Qurate Retail Revenue
$
3,337
$
2,883
(14
)
%
(12
)
%
Operating Income (Loss)
QxH(b)
$
257
$
42
NM
QVC International
124
88
(29
)
%
(24
)
%
Zulily(c)
(18
)
(38
)
(111
)
%
Cornerstone
21
24
14
%
Unallocated corporate cost
(11
)
(10
)
9
%
Total Qurate Retail Operating Income
(Loss)
$
373
$
106
NM
Adjusted OIBDA (Loss)
QxH
$
349
$
225
(36
)
%
QVC International
143
104
(27
)
%
(22
)
%
Zulily
6
(18
)
NM
Cornerstone
27
31
15
%
Unallocated corporate cost
(8
)
(7
)
13
%
Total Qurate Retail Adjusted OIBDA
(Loss)
$
517
$
335
(35
)
%
(34
)
%
a)
For a definition of constant currency
financial metrics, see the accompanying schedules.
b)
In the first quarter of 2022, QxH incurred
(i) an $80 million write-down related to inventory remaining at its
Rocky Mount, NC fulfillment center included in cost of goods sold
and (ii) $2 million of other costs related to the fire at its Rocky
Mount, NC fulfillment center included in restructuring and fire
related costs, net. These costs are included in operating income
and excluded from adjusted OIBDA.
c)
Zulily recorded $2 million of
restructuring charges during the first quarter of 2022 that are
included in operating income and excluded from adjusted OIBDA.
FIRST
QUARTER 2022 NET INCOME AND ADJUSTED NET INCOME(3)
(amounts in millions)
1Q21
1Q22
Net income
$
206
$
1
Adjusted net income(a)
$
201
$
58
Basic weighted average shares outstanding
("WASO")
411
379
Potentially dilutive shares
11
5
Diluted WASO
422
384
GAAP EPS(b)
$
0.49
$
0.00
Adjusted EPS(a)
$
0.48
$
0.15
a)
See reconciling schedule 3.
b)
Represents diluted net income per share
attributable to Series A and Series B common stockholders as
presented in Qurate Retail’s financial statements.
QxH
QxH revenue declined primarily due to a 12% decrease in units
shipped, reflecting supply chain constraints and product scarcity
for home and electronics items, as well as weakened consumer
sentiment due to inflation and the invasion of Ukraine and a
decrease in shipping and handling revenue. Average selling price
was flat as price increases primarily in apparel were offset by mix
shift away from higher price point categories including home and
electronics. Although total customer count declined compared to the
first quarter of 2021’s solid gains, QxH experienced a 7% increase
in average spend per customer and a 6% increase in items purchased
per customer. QxH reported declines primarily in home, electronics,
accessories and beauty, partially offset by growth in apparel.
Operating income and adjusted OIBDA margin(3) decreased
primarily due to deleverage of fulfillment (freight and warehouse)
and operating expenses (customer service, commissions and credit
card fees) and higher fixed costs, inventory obsolescence and bad
debt expenses. These pressures were partially offset by higher
product margins due to favorable category mix shift into apparel.
Operating income was further negatively impacted by the $80 million
in write-down of inventory remaining at the Rocky Mount facility,
described below.
On December 18, 2021, QVC experienced a fire at its Rocky Mount,
NC fulfillment center. Rocky Mount was Qurate Retail’s
second-largest fulfillment center, processing approximately 25% to
30% of volume for QVC US and serving as QVC US’s primary returns
center for hard goods. QVC has made a decision not to rebuild the
facility; however, it is still in the process of determining future
plans for the property. Excluding Rocky Mount, QVC operates eight
fulfillment centers in the US. QVC has taken steps to mitigate
disruption to its operations including diverting inbound orders,
leveraging its existing fulfillment centers and supplementing these
facilities with short-term leased space as needed. While the
Company has taken steps to minimize the overall impact to its
business, it experienced elevated warehouse and logistics costs
during the three months ended March 31, 2022 and anticipates these
increased warehouse and logistics costs to continue during
2022.
During the year ended December 31, 2021, QVC recorded $229
million of fire related costs for which recovery was deemed
probable and received $100 million of insurance proceeds. During
the first quarter of 2022, QVC incurred an additional $2 million in
fire related costs, net, primarily related to personnel costs and
legal fees, that will not be reimbursed by QVC’s insurance policies
and are included in operating income, and $14 million of other fire
related costs for which recovery was deemed probable based on the
Company’s insurance policies. While there can be no assurance,
based on the provisions of QVC’s insurance policies and discussions
with insurance carriers, QVC determined that recovery of certain
fire related costs is probable, and has recorded an insurance
receivable with a balance of $143 million as of March 31, 2022, net
of $100 million of insurance proceeds received in advance (see
Schedule 4).
Qurate Retail is still in the process of assessing the extent of
damage to property and recoverability of inventory and submitting
relevant insurance claims. During the three months ended March 31,
2022, QVC recorded an $80 million write-down related to Rocky Mount
inventory which was included in cost of goods sold in the quarter.
Due to the circumstances surrounding the write-down of the
inventory, this write-down has been excluded from adjusted OIBDA.
These write-downs are expected to be submitted as part of QVC’s
business interruption insurance claim; however, there can be no
assurance they will be recovered. QVC expects to continue to record
additional costs and recoveries until the property damage and
inventory recoverability assessment is completed and the insurance
claim is fully settled.
QVC International
US Dollar denominated results were negatively impacted by
exchange rate fluctuations, primarily due to the Dollar
strengthening 9% versus the Japanese Yen, 7% versus the Euro and 3%
against the British Pound. 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 first quarter of 2021.
QVC International’s constant currency revenue declined primarily
due to a 6% decline in units shipped, also reflecting supply chain
constraints, product scarcity and weakened consumer sentiment
driven by the invasion of Ukraine, which particularly affected QVC
International’s European markets. Average selling price was flat,
primarily due to product scarcity for higher price home electronic
and beauty products. QVC International reported declines in all
categories except apparel in constant currency.
Operating income and adjusted OIBDA margin decreased primarily
due to lower product margins and deleverage of fulfillment and
administrative costs.
Zulily
Zulily revenue decreased primarily reflecting product scarcity
largely driven by supply chain constraints and marketing
inefficiencies due to cost inflation and privacy changes on certain
social media platforms, which caused Zulily to reduce marketing
spend, affecting its customer acquisition and retention.
Operating margin and adjusted OIBDA margin decreased primarily
due to deleverage of fixed costs and fulfillment expenses, which
was partially offset by lower marketing spend and higher product
margins. Zulily recorded $2 million of restructuring charges during
the first quarter of 2022, principally related to its regional
office space strategy and expenses associated with its Pennsylvania
facility closure. These restructuring charges are included in
operating income and excluded from adjusted OIBDA.
Cornerstone
Cornerstone generated record first quarter revenue at each of
its brands. This is primarily due to strong growth in its home
brands (Frontgate, Ballard Designs, and Grandin Road) and demand
for apparel and home products at Garnet Hill.
Operating income and adjusted OIBDA margin decreased primarily
from higher freight costs, which were partially offset by product
margin gains and leverage of fixed costs and marketing
expenses.
FIRST
QUARTER 2022 SUPPLEMENTAL METRICS
(amounts in millions unless otherwise
noted)
1Q21
1Q22
% Change
% Change
Constant
Currency(a)
QxH
Cost of Goods Sold % of Revenue(b)
66.0
%
67.4
%
140
bps
Operating Income Margin (%)
13.3
%
2.5
%
NM
Adjusted OIBDA Margin (%)
18.0
%
13.4
%
(460
)
bps
Average Selling Price
$
52.61
$
52.81
-
%
Units Sold
(12
)
%
Return Rate(c)
14.3
%
15.2
%
90
bps
eCommerce Revenue(d)
$
1,142
$
996
(13
)
%
eCommerce % of Total Revenue
59.0
%
59.1
%
10
bps
Mobile % of eCommerce Revenue(e)
66.2
%
66.3
%
10
bps
LTM Total Customers(f)
11.8
9.9
(16
)
%
QVC – International
Cost of Goods Sold % of Revenue
61.9
%
63.6
%
170
bps
Operating Income Margin (%)
16.0
%
13.1
%
(290
)
bps
Adjusted OIBDA Margin (%)
18.5
%
15.5
%
(300
)
bps
Average Selling Price
(7
)
%
-
%
Units Sold
(6
)
%
Return Rate(c)
18.0
%
18.5
%
50
bps
eCommerce Revenue(d)
$
353
$
318
(10
)
%
3
%
eCommerce % of Total Revenue
45.6
%
47.5
%
190
bps
Mobile % of eCommerce Revenue(e)
71.7
%
71.7
%
0
bps
LTM Total Customers(f)
5.1
4.7
(8
)
%
Zulily
Cost of Goods Sold % of Revenue
76.4
%
76.7
%
30
bps
Operating Income Margin (%)
(4.8
)
%
(16.4
)
%
(1,160
)
bps
Adjusted OIBDA Margin (%)
1.6
%
(7.8
)
%
NM
Mobile % of Total Orders
75.5
%
74.7
%
(80
)
bps
LTM Total Customers(f)
5.8
4.0
(31
)
%
Cornerstone
Cost of Goods Sold % of Revenue
59.8
%
61.7
%
190
bps
Operating Income Margin (%)
8.4
%
8.1
%
(30
)
bps
Adjusted OIBDA Margin (%)
10.8
%
10.4
%
(40
)
bps
eCommerce Revenue(d)
$
180
$
224
24
%
eCommerce % of Total Revenue
72.0
%
75.4
%
340
bps
a)
For a definition of constant currency
financial metrics, see the accompanying schedules.
b)
Excludes an $80 million write-down related
to inventory remaining at its Rocky Mount, NC fulfillment center
included in cost of goods sold.
c)
Measured as returned sales over gross
shipped sales in US dollars.
d)
Based on net revenue.
e)
Based on gross US dollar orders.
f)
LTM: Last twelve months.
Taxes
Qurate Retail estimates that its average annual effective tax
rate in 2022 will be in the range of 27-31% including federal,
state and foreign taxes. This is elevated relative to prior years
due to the expiration of certain of Qurate Retail’s green energy
investment credits at the end of 2021. This estimate excludes the
impact of one-time items and is subject to adjustment.
Capital Returns
There were no repurchases of Qurate Retail’s Series A common
stock (Nasdaq: QRTEA) from February 1, 2022 through April 30, 2022.
The remaining repurchase authorization for Qurate Retail is
approximately $492 million as of May 1, 2022.
FOOTNOTES
1)
Qurate Retail will discuss these headlines
and other matters on Qurate Retail’s earnings conference call that
will begin at 8:30 a.m. (E.D.T.) on May 6, 2022. 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 diluted EPS, see the accompanying
schedules.
NOTES
Cash and Debt
The following presentation is provided to separately identify
cash and debt information.
(amounts in millions)
12/31/2021
3/31/2022
Cash and cash equivalents
(GAAP)
$
587
$
608
Indemnification Asset(a)
$
324
$
239
Debt:
QVC senior secured notes(b)
$
4,450
$
4,450
QVC senior secured bank credit
facility
481
747
Total Qurate Retail Group Debt
$
4,931
$
5,197
Senior notes(b)
792
792
Senior exchangeable debentures(c)
1,160
1,159
Corporate Level Debentures
1,952
1,951
Total Qurate Retail, Inc. Debt
$
6,883
$
7,148
Unamortized discount, fair market value
adjustment and deferred loan costs
106
(56
)
Total Qurate Retail, Inc. Debt
(GAAP)
$
6,989
$
7,092
Other Financial Obligations:
Preferred stock(d)
$
1,261
$
1,265
QVC, Inc. leverage(e)
2.1x
2.5x
a)
Indemnity from Liberty Broadband, 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 adjustment for the fair market value
adjustment.
d)
Preferred Stock has an 8% coupon, $100 per
share initial liquidation preference plus accrued and unpaid
dividends and is non-voting. It is subject to a mandatory
redemption on March 15, 2031. The Preferred Stock is considered a
liability for GAAP purposes, and is recorded net of capitalized
costs.
e)
As defined in QVC, Inc.’s credit
agreement.
Cash at Qurate Retail increased $21 million in the first quarter
as additional borrowing under QVC’s bank credit facility more than
offset cash used by operations and capital expenditures.
Total debt at Qurate Retail increased $265 million in the first
quarter due to borrowing under QVC’s bank credit facility. QVC’s
bank credit facility has $747 million drawn as of March 31, 2022
with available capacity of approximately $2.48 billion, net of
letters of credit. Qurate Retail is in compliance with all debt
covenants as of March 31, 2022.
Qurate Retail benefits from an indemnification agreement with
Liberty Broadband 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
Liberty Broadband 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 March 31, 2022, a holder of
the Charter exchangeable debentures has the ability to exchange
and, accordingly, the indemnification asset is included as a
current asset in our condensed balance sheet as of that date.
Important Notice: Qurate Retail, Inc. (Nasdaq: QRTEA,
QRTEB, QRTEP) will discuss Qurate Retail’s earnings release on a
conference call which will begin at 8:30 a.m. (E.D.T.) on May 6,
2022. The call can be accessed by dialing (800) 458-4121 or (323)
794-2093, passcode 5519534, 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
https://www.qurateretail.com/investors/news-events/ir-calendar.
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, the impact of the fire at QVC’s Rocky
Mount fulfillment center, insurance recoveries, Qurate Retail’s
estimated ongoing annual tax rate, market conditions, the
indemnification by Liberty Broadband, future repayment of debt, the
continuation of our stock repurchase program 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), issues impacting the global supply chain and labor
market, 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, and where
applicable, separately identified impairments, litigation
settlements, restructuring, acquisition-related costs and fire
related costs, net (including Rocky Mount inventory losses).
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 March 31, 2021, June 30, 2021,
September 30, 2021, December 31, 2021 and March 31, 2022,
respectively.
CONSOLIDATED OPERATING INCOME AND ADJUSTED
OIBDA RECONCILIATION
(amounts in millions)
1Q21
2Q21
3Q21
4Q21
1Q22
Qurate Retail, Inc. Operating
Income
$
373
$
433
$
274
$
7
$
106
Depreciation and amortization
128
129
139
141
130
Stock compensation expense
16
19
19
18
15
Restructuring and fire related costs, net
(including Rocky Mount inventory losses)
—
—
—
21
84
Impairment of intangible assets
—
—
—
363
—
Qurate Retail, Inc. Adjusted
OIBDA
$
517
$
581
$
432
$
550
$
335
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 March 31, 2021, June 30, 2021, September 30,
2021, December 31, 2021 and March 31, 2022, respectively.
SUBSIDIARY ADJUSTED OIBDA
RECONCILIATION
(amounts in millions)
1Q21
2Q21
3Q21
4Q21
1Q22
QVC
Operating income
$
381
$
422
$
316
$
388
$
130
Depreciation and amortization
102
102
111
114
109
Stock compensation
9
11
13
11
8
Fire related costs, net (including Rocky
Mount inventory losses)
—
—
—
21
82
Adjusted OIBDA
$
492
$
535
$
440
$
534
$
329
QxH Adjusted OIBDA
$
349
$
391
$
325
$
374
$
225
QVC International Adjusted
OIBDA
$
143
$
144
$
115
$
160
$
104
Zulily
Operating income (loss)
$
(18
)
$
(15
)
$
(40
)
$
(396
)
$
(38
)
Depreciation and amortization
20
20
20
21
15
Stock compensation
4
4
3
2
3
Restructuring charges
—
—
—
—
2
Impairment of intangible assets
—
—
—
363
—
Adjusted OIBDA (Loss)
$
6
$
9
$
(17
)
$
(10
)
$
(18
)
Cornerstone
Operating income
$
21
$
44
$
16
$
27
$
24
Depreciation and amortization
6
7
8
6
6
Stock compensation
—
1
—
1
1
Adjusted OIBDA
$
27
$
52
$
24
$
34
$
31
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 March
31, 2021, June 30, 2021, September 30, 2021, December 31, 2021 and
March 31, 2022, respectively.
ADJUSTED NET INCOME AND ADJUSTED EPS
RECONCILIATION
(amounts in millions)
1Q21
2Q21
3Q21
4Q21
1Q22
Qurate Retail, Inc. Net Income
(GAAP)
$
206
222
$
127
$
(215
)
$
1
Purchase accounting amort., net of
deferred tax benefit(a)
26
25
27
28
17
Impairment of intangible assets, net of
tax impact
—
—
—
331
—
Restructuring and fire related costs, net
of recoveries and tax impact (including Rocky Mount inventory
losses)
—
—
—
16
63
Mark-to-market adjustments, net(b)
(31
)
(15
)
(31
)
—
(23
)
Adjusted Net Income
$
201
$
232
$
123
$
160
$
58
Diluted earnings (loss) per share
(GAAP)
$
0.49
$
0.52
$
0.31
$
(0.54
)
$
—
Total adjustments per share, net of
tax
(0.01
)
0.02
(0.01
)
0.94
0.15
Adjusted earnings per share
$
0.48
$
0.54
$
0.30
$
0.40
$
0.15
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)
Add-back includes realized and unrealized
gains/losses on financial instruments, net of tax.
SCHEDULE 4
The following table provides certain incremental costs incurred
and the insurance receivable balance related to the Rocky Mount,
Inc. fulfillment center fire for the year ended December 31, 2021
and three months ended March 31, 2022.
DIRECT COSTS RELATED TO ROCKY MOUNT FIRE
AND INSURANCE RECEIVABLE BALANCE
(amounts in millions)
Year ended December 31, 2021:
Loss on inventory
$
134
Loss on fixed assets
87
Other fire related costs
29
Total
250
Less: Fire related costs not deemed
probable to be covered by insurance policies(a)
(21
)
Less: Insurance recoveries received
(100
)
Insurance receivable balance as of
December 31, 2021
$
129
Three months ended March 31, 2022:
Other fire related costs(b)
16
Less: Fire related costs not deemed
probable to be covered by insurance policies(c)
(2
)
Insurance receivable balance as of March
31, 2022
$
143
a)
Costs included in QxH’s operating income
and excluded from adjusted OIBDA primarily related to personnel
costs.
b)
Excludes an $80 million write-down related
to inventory remaining at the Rocky Mount facility, for which no
insurance receivable was recorded as of March 31, 2022. This
expense will be submitted as part of QVC's insurance claim;
however, there can be no assurance that it will be recovered. The
$80 million inventory write-down is included in QxH's operating
income and excluded from adjusted OIBDA.
c)
Costs included in QxH's operating income
and excluded from adjusted OIBDA primarily related to personnel
costs and legal fees.
QURATE RETAIL, INC.
BALANCE SHEET
INFORMATION
(unaudited)
March 31,
December 31,
2022
2021
amounts in millions
Assets
Current assets:
Cash and cash equivalents
$
608
587
Trade and other receivables, net
1,307
1,679
Inventory, net
1,772
1,623
Indemnification agreement receivable
239
324
Other current assets
243
235
Total current assets
4,169
4,448
Property and equipment, net
1,028
1,077
Intangible assets not subject to
amortization
9,350
9,377
Intangible assets subject to amortization,
net
698
745
Other assets, at cost, net of accumulated
amortization
563
602
Total assets
$
15,808
16,249
Liabilities and Equity
Current liabilities:
Accounts payable
1,212
1,429
Accrued liabilities
985
1,236
Current portion of debt
1,901
1,315
Other current liabilities
212
244
Total current liabilities
4,310
4,224
Long-term debt
5,191
5,674
Deferred income tax liabilities
1,390
1,353
Preferred stock
1,265
1,261
Other liabilities
645
707
Total liabilities
12,801
13,219
Equity
2,880
2,894
Non-controlling interests in equity of
subsidiaries
127
136
Total liabilities and equity
$
15,808
16,249
QURATE RETAIL, INC.
STATEMENT OF OPERATIONS
INFORMATION
(unaudited)
Three months ended
March 31,
2022
2021
Revenue:
Total revenue, net
$
2,883
3,337
Operating costs and expenses:
Cost of goods sold (exclusive of
depreciation shown separately below)
2,002
2,195
Operating expense
196
206
Selling, general and administrative,
including stock-based compensation
445
435
Restructuring and fire related costs,
net
4
—
Depreciation and amortization
130
128
2,777
2,964
Operating income (loss)
106
373
Other income (expense):
Interest expense
(117
)
(117
)
Share of earnings (losses) of affiliates,
net
(1
)
(32
)
Realized and unrealized gains (losses) on
financial instruments, net
30
41
Other, net
53
13
(35
)
(95
)
Earnings (loss) before income taxes
71
278
Income tax (expense) benefit
(58
)
(54
)
Net earnings (loss)
13
224
Less net earnings (loss) attributable to
noncontrolling interests
12
18
Net earnings (loss) attributable to Qurate
Retail, Inc. shareholders
$
1
206
QURATE RETAIL, INC.
STATEMENT OF CASH FLOWS
INFORMATION
(unaudited)
Three months ended
March 31,
2022
2021
amounts in millions
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)
$
13
224
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization
130
128
Stock-based compensation
15
16
Share of (earnings) losses of affiliates,
net
1
32
Realized and unrealized (gains) losses on
financial instruments, net
(30
)
(41
)
Deferred income tax expense (benefit)
29
2
Other, net
(25
)
6
Changes in operating assets and
liabilities
Decrease (increase) in accounts
receivable
365
382
Decrease (increase) in inventory
(155
)
(81
)
Decrease (increase) in prepaid expenses
and other assets
8
32
(Decrease) increase in trade accounts
payable
(211
)
(165
)
(Decrease) increase in accrued and other
liabilities
(319
)
(382
)
Net cash provided (used) by operating
activities
(179
)
153
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in and loans to cost and
equity investees
(7
)
(118
)
Capital expenditures
(43
)
(47
)
Expenditures for television distribution
rights
(2
)
(56
)
Cash proceeds from dispositions of
investments
12
2
Proceeds from sale of fixed assets
—
40
Other investing activities, net
24
(1
)
Net cash provided (used) by investing
activities
(16
)
(180
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of debt
460
265
Repayments of debt
(195
)
(194
)
Repurchases of Qurate Retail common
stock
—
(41
)
Withholding taxes on net settlements of
stock-based compensation
(7
)
(21
)
Dividends paid to noncontrolling
interest
(14
)
(16
)
Dividends paid to common shareholders
(10
)
(13
)
Other financing activities, net
(5
)
(3
)
Net cash provided (used) by financing
activities
229
(23
)
Effect of foreign currency rates on cash,
cash equivalents and restricted cash
(13
)
(17
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
21
(67
)
Cash, cash equivalents and restricted cash
at beginning of period
596
814
Cash, cash equivalents and restricted cash
at end period
$
617
747
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220505006263/en/
Courtnee Chun, (720) 875-5420
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