Qurate Retail(QRTEA) - 2021 Q4 - Annual Report

PART I Item 1. Business. Qurate Retail, Inc. operates primarily in video and online commerce across North America, Europe, and Asia through its consolidated subsidiaries QVC, Zulily, and Cornerstone Brands, maintaining service agreements with Liberty Media Corporation General Development of Business This section details Qurate Retail's operational structure, shared services with Liberty Media, and the allocation of chairman compensation - Qurate Retail operates in North America, Europe, and Asia through consolidated subsidiaries QVC (QVC, HSN), Zulily, and Cornerstone, along with other cost and equity method investments[14] - Following the 2011 LMC Split-Off, Qurate Retail and LMC operate as separate public companies but share general and administrative services and office space, with Qurate Retail reimbursing LMC for allocable costs[15][16] Chairman Compensation Allocation (2021 vs. 2020) | Metric | 2021 Allocation (%) | 2020 Allocation (%) | | :----- | :------------------ | :------------------ | | Company's share of Chairman's compensation | 17 | 19 | Description of Business This section provides an overview of Qurate Retail's consolidated subsidiaries, including QVC, Zulily, and Cornerstone Brands, highlighting their core business models and market positions - Qurate Retail's consolidated subsidiaries include QVC, Inc. (QVC, HSN), Zulily, LLC, and Cornerstone Brands, Inc[23] - QVC is a global leader in video retailing, e-commerce, mobile commerce, and social commerce, reaching approximately 216 million worldwide households daily through broadcast networks and digital platforms[24] - Zulily is an online retailer offering daily flash sales events featuring unique products at discounted prices, leveraging proprietary technology for personalized shopping experiences and operating with minimal inventory[61][62][63][67] - Cornerstone consists of aspirational home and apparel brands (Ballard Designs, Frontgate, Grandin Road, Garnet Hill) operating through catalogs, websites, and 22 retail/outlet stores in the U.S[72][74][75] QVC QVC's operating strategies focus on product curation, video reach, digital discovery, community engagement, and customer service, supported by extensive global distribution and call centers - QVC's operating strategies include curating special products, extending video reach, reimagining daily digital discovery, expanding and engaging its passionate community, and delivering joyful customer service[25] - QVC operates thirteen distribution centers and seven call centers worldwide, handling approximately 114 million customer calls and shipping 236 million units globally in 2021[27] QVC Sales by Customer Type (2021) | Customer Type | % of Worldwide Shipped Sales | | :------------ | :--------------------------- | | Repeat & Reactivated Customers | ~94 | | New Customers | ~6 | Zulily Zulily offers a dynamic online shopping experience through daily flash sales, leveraging proprietary technology for personalized product curation and an efficient, minimal-inventory supply chain model - Zulily offers a fun and entertaining shopping experience with a fresh selection of new product styles daily through flash sales events, typically lasting 72 hours[61][62] - Zulily uses proprietary technology, data analytics, and machine learning for audience segmentation and personalized shopping experiences, offering curated products at significant discounts[63][65] - Zulily operates a minimal inventory, intermediary model, taking customer orders before purchasing inventory from vendors, which allows for a larger product selection and efficient supply chain[67][68] Cornerstone Cornerstone's portfolio includes distinct home and apparel brands, differentiated by proprietary products and marketed through catalogs, websites, and a network of retail stores - Cornerstone's portfolio includes home brands (Ballard Designs, Frontgate, Grandin Road) and an apparel brand (Garnet Hill), with 22 retail and outlet stores in the U.S[72] - Cornerstone differentiates its brands by offering innovative proprietary and branded apparel and home products, often securing exclusive distribution rights[76] - Marketing channels include full-color catalogs (163 million circulated in 2021) and brand-specific websites that offer additional content and product assortments[74][75] Regulatory Matters This section outlines the extensive domestic and foreign regulations governing the company's programming and online commerce activities - QVC's programming services are regulated by the FCC in the U.S. and similar foreign regulators, covering program licensing, carriage requirements, ownership limits, and closed captioning[79][80][82][83][86][87] - Online commerce businesses are subject to federal and state laws like COPPA, CAN-SPAM Act, and data privacy regulations (GDPR, CCPA, CPRA), with evolving interpretations and potential for significant penalties for non-compliance[88][89][91][92] - U.S. trade policy with China, including responses to forced labor and human rights abuses in Xinjiang, may adversely impact Qurate Retail's business, with new legislation like the Uyghur Forced Labor Prevention Act (UFLPA) posing risks of import bans and supply chain disruptions[96][186][188] Competition This section analyzes the competitive landscape, key factors, and challenges posed by diverse retailers - Qurate Retail's businesses compete with a wide range of traditional brick-and-mortar and online retailers, including large department stores, specialty shops, e-commerce giants (e.g., Amazon, Walmart), and direct marketing companies[97][127] - Principal competitive factors include high-quality products, brand recognition, selection, value, convenience, price, website performance, customer service, and accuracy of order shipment[97] - Many competitors have greater resources, longer histories, more customers, and stronger brand recognition, and may offer more aggressive pricing or shipping terms, increasing competitive pressure[127][131] Human Capital This section describes employee demographics, diversity initiatives, and COVID-19 response measures for personnel - As of December 31, 2021, Qurate Retail's consolidated subsidiaries had approximately 26,659 full and part-time employees, supplemented by independent contractors and temporary staffing[100] - The company is committed to Diversity, Equity, & Inclusion (DEI), focusing on representation, leadership accountability, culture, consumers & marketplace, community impact, and transparency, with ongoing training and resource groups[101] - In response to COVID-19, non-essential employees were mandated to work from home, and on-site staff followed strict health and safety precautions, while the company also provided support through flexible hours, additional paid time off, mental health resources, and special bonuses[103] Available Information This section specifies where SEC filings and corporate governance documents can be accessed by the public - All SEC filings (Form 10-Ks, 10-Qs, 8-Ks) are available free of charge on www.qurateretail.com within 24 hours of filing[104] - Corporate governance guidelines, code of business conduct and ethics, compensation committee charter, nominating and corporate governance committee charter, and audit committee charter are available on the company's website[105] Item 1A. Risk Factors Qurate Retail faces a broad range of material risks that could significantly impact its financial condition and operations, including dependence on television distribution, COVID-19 effects, extensive government regulation, technological changes, cybersecurity threats, and supply chain disruptions - The risks described are considered the most material and could materially adversely affect the company's businesses, prospects, financial condition, results of operations, and/or cash flows[108] - Past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods[108] Risks Related to Our Financial Condition and Business This section identifies risks related to television distribution, COVID-19 impacts, regulatory compliance, and market competition - QVC's ability to maintain and renew affiliation agreements with television distributors on favorable terms is critical, as failure could adversely affect growth, net revenue, and earnings[109][112] - The COVID-19 pandemic has negatively impacted the business through supply chain disruptions, labor shortages, increased costs, and shifts in customer demand, with ongoing uncertainty about future impacts[113][115][116][117][120][121] - The company's businesses are subject to a wide variety of domestic and foreign laws and regulations, including consumer protection, data privacy, and retail-specific rules, with non-compliance potentially leading to fines, proceedings, and increased costs[122][123][125][126] - Intense competition from diverse retailers, including e-commerce giants, poses risks to sales and profitability, particularly regarding pricing and shipping terms[127][128][131] - The company's success depends on attracting new customers, retaining existing ones, and predicting/responding to consumer preferences, with marketing initiatives facing increasing costs and uncertain effectiveness[132] - Zulily's flash sales model depends on sustained growth and customer interest; a decline in this market segment could adversely affect its financial condition[134] - QVC's ability to maintain suitable channel placement for its programming and adapt to changes in consumer behavior (e.g., shift to online video distribution) is crucial to retaining viewers and revenue[135][138][139][141] - The company's installment payment options (Easy-Pay, Flex-Pay, Smart-Pay) and revolving credit card programs carry risks of customer bad debts, especially during economic downturns, and potential increased regulation of 'Buy Now Pay Later' (BNPL) arrangements[145][146][147][148] - Failure to protect intellectual property rights or accusations of infringement by third parties could result in substantial costs, diversion of resources, and damage to brand reputation[149][150] - Natural disasters, political crises, and other catastrophic events, such as the fire at the Rocky Mount fulfillment center, can damage facilities, disrupt operations, and have broader economic impacts[151] Risks Related to Technology and Information Security This section addresses risks from technological obsolescence, digital platform reliance, system failures, and data security threats - Rapid technological advances and the emergence of alternative platforms (mobile, cloud computing) could render products/services obsolete or non-competitive, requiring continuous investment and adaptation[152] - Dependence on third-party digital platform algorithms (e.g., Google, Facebook) for web traffic means changes could negatively affect paid advertisement distribution or unpaid search rankings, increasing marketing costs[153] - System interruptions, lack of integration/redundancy, and failures in new system implementation could impair operations, order fulfillment, and customer service[155] - The processing, storage, and protection of personal data are subject to evolving governmental regulations (e.g., GDPR, CCPA, CPRA) and security risks, including breaches and identity theft, which could lead to liabilities, fines, reputational damage, and lost sales[157][161] - Difficulty in developing and gaining customer acceptance for applications on personal electronic devices could harm business by impacting traffic and advertising revenue on these platforms[158][160] Risks Related to Our Businesses' Facilities and Third Party Suppliers and Vendors This section covers risks associated with facility damage, shipping disruptions, and reliance on external suppliers - Damage or inoperability of distribution facilities, such as the Rocky Mount fire in December 2021, can cause substantial inventory loss, disruptions in deliveries, increased costs, and harm to reputation[151][163][164] - Reliance on independent shipping companies exposes the company to carrier disruptions (strikes, weather, customs actions) and significant increases in shipping rates, which can negatively impact profits and customer satisfaction[166][168] - Dependence on third-party suppliers and vendors means adverse changes in these relationships, including financial difficulties or consolidation, could lead to lost sales, failure to meet customer expectations, and reduced profitability[169][170] - Staffing issues and labor shortages at distribution facilities, exacerbated by COVID-19, can hinder full operational capacity and lead to shipping delays[165] Risks Related to the Seasonality of Our Business This section explains the operational and inventory challenges posed by the seasonal nature of the company's sales - The seasonality of businesses, particularly higher sales in the fourth quarter (30-32% of QVC's global revenue), creates significant inventory risks due to rapid changes in product cycles, consumer demand, and tastes[60][171][174] - Inability to accurately predict trends, establish vendor relationships for new products, or forecast demand can lead to overstocking or understocking[171] - Seasonal peaks place increased strain on operations, including ensuring sufficient product supply from vendors (especially with COVID-19 impacts), managing website traffic, and adequately staffing fulfillment networks and customer service centers[174] Risks Related to Management and Key Personnel This section highlights risks concerning talent retention and potential conflicts of interest with affiliated companies - The company's unique business models require recruiting and retaining key employees with specialized skills in retail, television production, direct-to-consumer marketing, and e-commerce, a competitive and limited market[175] - Overlapping directors and officers with Liberty Media Corporation (LMC), Liberty TripAdvisor Holdings, Inc., Liberty Broadband Corporation, and Liberty Media Acquisition Corporation may create conflicts of interest regarding corporate opportunities and transactions[176][178] Risks Related to Economic Conditions This section examines risks from international economic instability, currency fluctuations, and U.S. trade policies - International operations are subject to risks such as currency exchange rate fluctuations, recessionary conditions, economic instability, inflationary pressures, and limited ability to repatriate funds[179][180] - Significant developments from U.S. trade policy (e.g., with China) or Brexit create political and economic uncertainty, potentially leading to trade barriers, tariffs, shipping delays, increased product costs, and reduced consumer demand[183][184][185][187] - Weak economic conditions worldwide, including inflation and recession, can reduce discretionary consumer spending, adversely affecting revenue and earnings[185] Risks Related to Our Indebtedness and Common Stock This section details financial risks from significant debt, refinancing challenges, and restrictive covenants - QVC's significant indebtedness ($4,448 million secured notes, $481 million secured credit facility as of Dec 31, 2021) increases vulnerability to adverse economic conditions, requires substantial cash flow for debt service, and limits financial flexibility[189][190][192] - The company may face challenges refinancing indebtedness on favorable terms, and restrictive covenants in debt agreements limit its ability to incur additional debt, pay dividends, or make investments[193][194][196] - A substantial portion of consolidated debt is held at the LI LLC level, and the ability to service this debt depends on cash access from available balances, operating activities, and dividends from subsidiaries, which can be restricted by debt covenants[200][282] - The discontinuance of LIBOR and transition to alternative reference rates (like SOFR) could increase the cost of QVC's variable-rate borrowings[199] - Disposal of reference shares underlying exchangeable debentures exposes the company to liquidity risk, as it must fund required payments from its own resources[201][204] - Insider transactions in common stock could depress the market price due to perceived adverse events or trends[205] - Certain provisions in the company's charter and bylaws, such as a multi-series common stock structure with differential voting rights and staggered board terms, may discourage or delay a change in control[206] Item 1B. Unresolved Staff Comments There are no unresolved staff comments to report for Qurate Retail, Inc - No unresolved staff comments were reported[207] Item 2. Properties Qurate Retail leases its corporate headquarters from LMC, while its subsidiaries own or lease various properties worldwide, including headquarters, call centers, distribution centers (with the Rocky Mount facility damaged by fire), and 22 retail stores - Qurate Retail leases its corporate headquarters in Englewood, Colorado, from LMC[209] - QxH owns its corporate headquarters in West Chester, PA, a call center in Chesapeake, VA, and distribution centers in Piney Flats, TN; Suffolk, VA; Rocky Mount, NC (damaged by fire); Florence, SC; and Ontario, CA, and leases one in Bethlehem, PA[210][211] - QVC International owns call centers in Bochum and Kassel, Germany; and Chiba-Shi, Japan, also owning distribution centers in Chiba, Japan; and Hückelhoven, Germany, and multi-functional buildings in Knowsley, United Kingdom; Chiba, Japan; Brugherio, Italy; and Dusseldorf, Germany, leasing one in London, U.K[212] - Zulily leases its corporate headquarters in Seattle, Washington, fulfillment centers in Lockbourne, Ohio, McCarran, Nevada, Bethlehem, Pennsylvania, and corporate offices in Gahanna, Ohio and Shenzhen, China[213] - Cornerstone owns an office in Franconia, New Hampshire, and leases its fulfillment centers in Butler and Warren Counties in Ohio and Phoenix, Arizona, along with 22 retail stores and outlets in various locations throughout the United States[214] Item 3. Legal Proceedings Qurate Retail, Inc. has no material legal proceedings to report - No legal proceedings were reported[216] Item 4. Mine Safety Disclosures Mine Safety Disclosures are not applicable to Qurate Retail, Inc - Mine Safety Disclosures are not applicable to the company[217] Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Qurate Retail's Series A (QRTEA) and Series B (QRTEB) common stock are traded on the Nasdaq Global Select Market, with significant special dividends declared in 2020 and 2021, and ongoing share repurchase programs - Series A (QRTEA) and Series B (QRTEB) common stock trade on the Nasdaq Global Select Market, but QRTEB is not actively traded[219] - On August 21, 2020, a special dividend was declared, consisting of $1.50 cash per common share (total $626 million) and 0.03 shares of 8.0% Series A Cumulative Redeemable Preferred Stock (total $1.3 billion liquidation preference)[222] - On November 4, 2021, a special cash dividend of $1.25 per common share (total $488 million) was declared[226] - The board authorized $500 million share repurchase programs in May 2019 and August 2021 for Series A or Series B common stock[228] Record Holders of Common Stock (Jan 31, 2022) | Class of Stock | Number of Record Holders | | :------------- | :----------------------- | | Series A common stock | 2,244 | | Series B common stock | 60 | Series B Common Stock High and Low Sales Prices (2020-2021) | Period | High ($) | Low ($) | | :----- | :------- | :------ | | 2020 | | | | First quarter | 6.04 | 2.39 | | Second quarter | 5.96 | 3.32 | | Third quarter | 28.46 | 5.60 | | Fourth quarter | 12.00 | 6.78 | | 2021 | | | | First quarter | 15.77 | 10.40 | | Second quarter | 17.39 | 11.25 | | Third quarter | 13.74 | 10.18 | | Fourth quarter | 12.16 | 7.07 | Series A Common Stock Repurchases (Q4 2021) | Period | Total Number of Shares Purchased | Average Price Paid per Share ($) | Maximum Value Remaining ($ millions) | | :----- | :------------------------------- | :------------------------------- | :----------------------------------- | | Oct 1 - 31, 2021 | 2,745,588 | 10.33 | 660 | | Nov 1 - 30, 2021 | 11,479,893 | 9.87 | 546 | | Dec 1 - 31, 2021 | 6,685,685 | 8.11 | 492 | | Total | 20,911,166 | 9.37 | | Item 6. [Reserved] This item is reserved and contains no information - Item 6 is reserved[231] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Qurate Retail's financial performance in 2021 was significantly impacted by a 0.9% decrease in consolidated revenue to $14,044 million, primarily due to declines in QxH and Zulily, despite growth in QVC International and Cornerstone, with operating income decreasing by $485 million to $1,087 million due to a $457 million intangible asset impairment at Zulily - Qurate Retail's largest businesses and reportable segments are QxH (QVC U.S. and HSN), QVC International, and Zulily[234] - The COVID-19 pandemic significantly disrupted the global economy, impacting Qurate Retail's operations, supply chain, customer demand, and costs, with ongoing uncertainty[235][236][239][241] - A fire at the Rocky Mount fulfillment center in December 2021 caused significant damage, leading to inventory and fixed asset losses, increased costs, and operational disruptions, with expected insurance recoveries[243][244] Consolidated Operating Results (2019-2021) | Metric (Millions USD) | 2021 | 2020 | 2019 | | :-------------------- | :----- | :----- | :----- | | Revenue | $14,044 | $14,177 | $13,458 | | Operating Income (Loss) | $1,087 | $1,572 | $184 | | Adjusted OIBDA | $2,080 | $2,198 | $2,029 | Overview This section provides an overview of Qurate Retail's segments, the impact of COVID-19, and the consequences of the Rocky Mount fulfillment center fire - Qurate Retail's main segments are QxH (QVC U.S. and HSN), QVC International, and Zulily, engaged in video and online commerce[234] - COVID-19 led to work-from-home mandates, reduced on-site staff, increased cleaning protocols, and staffing/labor shortages, resulting in higher wages and operational costs[236] - COVID-19 caused supply chain disruptions, factory closures, shipping delays, and product shortages, impacting QVC's ability to offer and ship products timely[238][242] - A fire at the Rocky Mount fulfillment center on December 18, 2021, significantly damaged the facility, which processed 25-30% of QVC-U.S. volume and was its primary returns center for hard goods[243] Fire-Related Costs and Recoveries (2021) | Item | Amount (Millions USD) | | :-------------------------- | :-------------------- | | Loss on inventory | $134 | | Loss on fixed assets | $87 | | Other fire-related costs | $29 | | Total Costs | $250 | | Insurance recoveries received | ($100) | | Expected insurance recoveries | ($129) | | Fire related costs, net | $21 | Strategies and Challenges This section outlines QVC's and Zulily's strategic initiatives and the economic and supply chain challenges they face - QVC's strategies include curating special products, extending video reach, reimagining digital discovery, expanding community, and delivering joyful customer service, with future growth dependent on e-commerce, mobile, and streaming platforms[245][246][247] - Zulily's strategies focus on acquiring new customers, increasing loyalty, strengthening vendor relationships, and investing in mobile platforms and low-cost supply chain systems[252] - Economic uncertainty and U.S. trade policy with China (e.g., tariffs, human rights concerns) pose risks to demand, sales, and merchandise costs for both QVC and Zulily[250][251] - Zulily faces challenges in continually identifying new emerging brands and boutique vendors, and ensuring consistent quality and timely delivery from its diverse vendor base[253][254] Results of Operations—Consolidated This section presents a consolidated financial overview, including revenue, operating income, and Adjusted OIBDA trends - Consolidated revenue decreased 0.9% in 2021, driven by QxH and Zulily declines, but increased 5.3% in 2020[256] - Consolidated operating income decreased $485 million in 2021, primarily due to a $457 million increase in Zulily's operating losses from intangible asset impairment[259][260] - Consolidated Adjusted OIBDA decreased $118 million in 2021, with declines in QxH and Zulily, partially offset by QVC International and Cornerstone[264][265] Consolidated Operating Results (2019-2021) | Metric (Millions USD) | 2021 | 2020 | 2019 | | :-------------------- | :----- | :----- | :----- | | Revenue | $14,044 | $14,177 | $13,458 | | Operating Income (Loss) | $1,087 | $1,572 | $184 | | Adjusted OIBDA | $2,080 | $2,198 | $2,029 | Reconciliation of Operating Income to Adjusted OIBDA (Millions USD) | Metric | 2021 | 2020 | 2019 | | :------------------------------------------ | :----- | :----- | :----- | | Operating income (loss) | $1,087 | $1,572 | $184 | | Depreciation and amortization | $537 | $562 | $606 | | Stock-based compensation | $72 | $64 | $71 | | Fire related costs, net | $21 | — | — | | Impairment of intangible assets | $363 | — | $1,167 | | Transaction related costs | — | — | $1 | | Adjusted OIBDA | $2,080 | $2,198 | $2,029 | Other Income and Expense This section details the components of other income and expense, including interest, affiliate earnings, and financial instrument gains/losses - Interest expense increased by $60 million in 2021 due to dividends declared and paid on Preferred Stock, and in 2020 due to QVC's debt refinancing with higher interest rates[270] - Share of losses of affiliates decreased $62 million in 2021, primarily due to a decrease in losses from alternative energy entities[271] - Realized and unrealized gains (losses) on financial instruments shifted from a net loss of $110 million in 2020 to a net gain of $99 million in 2021, driven by decreased unrealized losses on exchangeable senior debentures and increased unrealized gains on derivative instruments and equity securities[272] - Net gains on transactions decreased $214 million in 2021, compared to a $224 million gain in 2020 from the sale of an alternative energy investment[272] Components of Other Income (Expense) (Millions USD) | Item | 2021 | 2020 | 2019 | | :------------------------------------------ | :----- | :----- | :----- | | Interest expense | ($468) | ($408) | ($374) | | Share of earnings (losses) of affiliate, net | ($94) | ($156) | ($160) | | Realized and unrealized gains (losses) on financial instruments, net | $99 | ($110) | ($251) | | Gains (losses) on transactions, net | $10 | $224 | ($1) | | Tax sharing income (expense) with Liberty Broadband | $10 | ($39) | ($26) | | Other, net | ($6) | ($32) | $6 | | Total Other income (expense) | ($449) | ($521) | ($806) | Income taxes This section explains the company's income tax expense/benefit and effective tax rates over recent periods - The 2021 effective tax rate (34.0%) was higher than the 21% U.S. federal rate due to foreign tax expense, state income tax, non-deductible goodwill impairment, and non-deductible interest on preferred stock, partially offset by alternative energy tax credits[276][513] - The 2020 tax benefit was primarily due to a corporate realignment and tax credits generated by alternative energy investments[278][515] - A corporate realignment in Q4 2020, transferring foreign business units to a foreign subsidiary, resulted in a reduction of deferred income tax liability for Motorola Exchangeables and a corresponding income tax benefit[517] Income Tax (Expense) Benefit (Millions USD) | Metric | 2021 | 2020 | 2019 | | :----- | :----- | :----- | :----- | | Income tax (expense) benefit | ($217) | $211 | $217 | | Effective tax rate | 34.0% | 20.1% | 34.9% | Net earnings (loss) This section summarizes the company's net earnings and net earnings attributable to shareholders - The change in net earnings (loss) was the result of fluctuations in revenue, expenses, and other gains and losses[280] Net Earnings (Loss) (Millions USD) | Metric | 2021 | 2020 | 2019 | | :----- | :----- | :----- | :----- | | Net earnings (loss) | $421 | $1,262 | ($405) | | Net earnings (loss) attributable to Qurate Retail, Inc. shareholders | $340 | $1,204 | ($456) | Liquidity and Capital Resources This section assesses the company's cash position, potential liquidity sources, and primary uses of cash - As of December 31, 2021, cash and cash equivalents totaled $587 million, primarily invested in U.S. Treasury securities and other highly rated debt instruments[281][284] - Potential liquidity sources include available cash, equity issuances, dividends, asset sales, and debt, including $2.75 billion available under QVC's bank credit facility[282][284] - QVC's bond indentures and bank credit facility allow dividends/restricted payments if not in default and consolidated leverage ratio is below 3.5:1.0 and 4.0:1.0, respectively, with the company's leverage ratio at 2.1 as of December 31, 2021[282][283] - Primary uses of cash in 2021 included payments for financial instruments ($694 million), cash dividends ($563 million), common stock repurchases ($365 million), and capital expenditures ($244 million)[287] - Projected uses of cash for the next year include debt service (approx. $320 million interest), capital improvement spending (approx. $290 million), debt repayment, stock buybacks, preferred stock dividends, and new investments[288] Off-Balance Sheet Arrangements and Aggregate Material Cash Requirements This section discloses contingent liabilities and a breakdown of future cash obligations - The company has contingent liabilities from legal and tax proceedings and indemnification obligations for asset sales, with maximum potential liability unestimable but not expected to be material[289][290][597] Aggregate Material Cash Requirements (Millions USD) | Item | Total | Less than 1 year | 2 - 3 years | 4 - 5 years | After 5 years | | :-------------------------- | :------ | :--------------- | :---------- | :---------- | :------------ | | Long-term debt | $6,883 | $3 | $1,356 | $1,087 | $4,437 | | Interest payments | $4,329 | $321 | $627 | $513 | $2,868 | | Finance and operating lease obligations | $651 | $107 | $181 | $133 | $230 | | Preferred Stock | $2,197 | $101 | $202 | $202 | $1,692 | | Purchase orders and other obligations | $3,594 | $3,524 | $54 | $12 | $4 | | Total | $17,654 | $4,056 | $2,420 | $1,947 | $9,231 | Critical Accounting Estimates This section discusses key accounting judgments, including fair value measurements, retail allowances, and income taxes - Critical accounting estimates include fair value measurements of non-financial instruments, retail-related adjustments and allowances, and income taxes[293][449] - These estimates require a high degree of judgment and assumptions, and actual results could differ significantly from estimates[294][298][300][449] - In 2021, Zulily recorded impairments of $233 million to goodwill and $130 million to its tradename due to business deterioration and management turnover[297][462] QVC Sales Returns (as % of gross product revenue) | Year | Percentage | | :--- | :--------- | | 2021 | 15.3% | | 2020 | 15.6% | | 2019 | 17.3% | Intangible Assets Not Subject to Amortization (Millions USD, Dec 31, 2021) | Segment | Goodwill | Tradenames | Total | | :------ | :------- | :--------- | :---- | | QxH | $5,228 | $2,878 | $8,106 | | QVC International | $855 | — | $855 | | Zulily | $244 | $160 | $404 | | Corporate and other | $12 | — | $12 | | Total | $6,339 | $3,038 | $9,377 | Results of Operations—Businesses This section provides detailed operating results for QVC and Zulily, including revenue, costs, and profitability drivers - QVC's consolidated net revenue decreased 1.0% in 2021 to $11,354 million, driven by a 1.3% decrease in units sold and a 0.8% decline in ASP, mainly from QxH, partially offset by lower product returns and favorable foreign exchange rates[307] - QVC's cost of goods sold as a percentage of net revenue increased to 64.9% in 2021, primarily due to higher warehouse expenses (labor shortages, increased wages) and increased freight costs at QxH[314] - QVC's SG&A expenses decreased by $17 million in 2021, mainly due to lower personnel costs and estimated credit losses, despite an $80 million increase in marketing[316][317] - Zulily's net revenue decreased 11.2% in 2021 to $1,453 million, driven by a 15.3% decrease in units shipped and an 18.1% decrease in active customers, attributed to product scarcity, higher online ad costs, and reduced marketing spend[329] - Zulily's operating losses significantly increased to $469 million in 2021, primarily due to a $363 million impairment of intangible assets[326][335] QVC Operating Results (Millions USD) | Metric | 2021 | 2020 | 2019 | | :------------------------------------------ | :----- | :----- | :----- | | Net revenue | $11,354 | $11,472 | $10,986 | | Cost of goods sold | ($7,368) | ($7,418) | ($7,148) | | Operating expenses | ($791) | ($786) | ($768) | | SG&A expenses (excluding stock-based comp. and transaction costs) | ($1,194) | ($1,211) | ($1,088) | | Adjusted OIBDA | $2,001 | $2,057 | $1,982 | | Operating income | $1,507 | $1,567 | $1,327 | Zulily Operating Results (Millions USD) | Metric | 2021 | 2020 | 2019 | | :------------------------------------------ | :----- | :----- | :----- | | Net revenue | $1,453 | $1,636 | $1,571 | | Cost of goods sold | ($1,128) | ($1,228) | ($1,179) | | Operating expenses | ($39) | ($44) | ($42) | | SG&A expenses (excluding stock-based comp. and transaction costs) | ($298) | ($281) | ($302) | | Adjusted OIBDA | ($12) | $83 | $48 | | Operating income (loss) | ($469) | ($12) | ($1,091) | Item 7A. Quantitative and Qualitative Disclosures about Market Risk. Qurate Retail is exposed to market risks from stock prices, interest rates, and foreign currency exchange rates, managing interest rate risk through a mix of fixed and variable rate debt and interest rate swaps, with QVC's Adjusted OIBDA sensitive to exchange rate changes (approximately $6 million impact for every 1% change in 2021) - Qurate Retail is exposed to market risk from changes in stock prices, interest rates, and foreign currency exchange rates[337][339] - Interest rate risk is managed through a mix of fixed and variable rate debt and interest rate swap arrangements[339] - Foreign currency exchange rate fluctuations can negatively impact earnings and equity, with QVC's Adjusted OIBDA sensitive to a 1% change in foreign currency exchange rates (approximately $6 million impact in 2021)[339] Debt Composition (Millions USD, Dec 31, 2021) | Segment | Variable Rate Debt (Principal) | Weighted Avg Interest Rate (%) | Fixed Rate Debt (Principal) | Weighted Avg Interest Rate (%) | | :-------------------- | :----------------------------- | :----------------------------- | :-------------------------- | :----------------------------- | | QxH and QVC International | $356 | 1.5 | $4,575 | 5.0 | | Corporate and other | — | — | $1,952 | 5.3 | Item 8. Financial Statements and Supplementary Data. This item indicates that the consolidated financial statements of Qurate Retail, Inc. are filed under this item, beginning on page II-25, and that financial statement schedules required by Regulation S-X are filed under Item 15 of this Annual Report on Form 10-K - Consolidated financial statements of Qurate Retail are filed under this Item, beginning on page II-25[341] - The financial statement schedules required by Regulation S-X are filed under Item 15 of this Annual Report on Form 10‑K[341] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. There are no changes in or disagreements with accountants on accounting and financial disclosure to report for Qurate Retail, Inc - No changes in or disagreements with accountants on accounting and financial disclosure were reported[342] Item 9A. Controls and Procedures. Qurate Retail's management evaluated the effectiveness of its disclosure controls and procedures as of December 31, 2021, concluding they were effective, with no material changes in internal control over financial reporting during Q4 2021, and KPMG LLP affirming the effectiveness of internal control over financial reporting - Management concluded that disclosure controls and procedures were effective as of December 31, 2021[343] - No material changes in internal control over financial reporting occurred during the quarter ended December 31, 2021[344] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2021, based on COSO criteria[350] - KPMG LLP issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting[352][353] Item 9B. Other Information. No other information is reported under this item for Qurate Retail, Inc - No other information was reported[346] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This disclosure item is not applicable to Qurate Retail, Inc - This disclosure item is not applicable[347] PART III Item 10. Directors, Executive Officers and Corporate Governance Information regarding Qurate Retail's directors, executive officers, and corporate governance is incorporated by reference from the company's definitive proxy statement for its 2022 Annual Meeting of Stockholders - Information for this item is incorporated by reference to the company's definitive proxy statement for its 2022 Annual Meeting of Stockholders[174][616] Item 11. Executive Compensation Information regarding Qurate Retail's executive compensation is incorporated by reference from the company's definitive proxy statement for its 2022 Annual Meeting of Stockholders - Information for this item is incorporated by reference to the company's definitive proxy statement for its 2022 Annual Meeting of Stockholders[174][616] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership of certain beneficial owners and management, and related stockholder matters, is incorporated by reference from Qurate Retail's definitive proxy statement for its 2022 Annual Meeting of Stockholders - Information for this item is incorporated by reference to the company's definitive proxy statement for its 2022 Annual Meeting of Stockholders[174][616] Item 13. Certain Relationships and Related Transactions, and Director Independence Information regarding certain relationships and related transactions, and director independence, is incorporated by reference from Qurate Retail's definitive proxy statement for its 2022 Annual Meeting of Stockholders - Information for this item is incorporated by reference to the company's definitive proxy statement for its 2022 Annual Meeting of Stockholders[174][616] Item 14. Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from Qurate Retail's definitive proxy statement for its 2022 Annual Meeting of Stockholders - Information for this item is incorporated by reference to the company's definitive proxy statement for its 2022 Annual Meeting of Stockholders[174][616] PART IV. Item 15. Exhibits and Financial Statement Schedules. This item lists the financial statements included in Part II of the report, such as consolidated balance sheets, statements of operations, comprehensive earnings (loss), cash flows, and equity, along with their respective page numbers, noting that all financial statement schedules are omitted as they are not applicable or material, and provides a comprehensive list of exhibits filed as part of the report, including articles of incorporation, debt instruments, material contracts, and certifications - Financial statements included in Part II are listed, such as Consolidated Balance Sheets, Statements of Operations, Comprehensive Earnings (loss), Cash Flows, and Equity[619] - All financial statement schedules are omitted because they are not applicable, not material, or the required information is set forth in the financial statements or notes thereto[619] - A comprehensive list of exhibits, including articles of incorporation, debt instruments, material contracts, and certifications, is provided[620][622][624][628][633] Item 16. Form 10-K Summary. This item states that a Form 10-K Summary is not applicable to Qurate Retail, Inc - A Form 10-K Summary is not applicable[637]