qvc-20240630

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2024

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

For the transition period from to

Commission File Number 001-38654

QVC, Inc.

(Exact name of Registrant as specified in its charter)


State of Delaware						23-2414041
(State or other jurisdiction of						(I.R.S. Employer Identification
incorporation or organization)						Number)

1200 Wilson Drive						19380
West Chester, Pennsylvania						(Zip Code)
(Address of principal executive offices)

Registrant's telephone number, including area code: (484) 701-1000

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


Title of each class	Trading Symbol	Name of each exchange on which registered
6.375% Senior Secured Notes due 2067	QVCD	New York Stock Exchange
6.250% Senior Secured Notes due 2068	QVCC	New York Stock Exchange

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

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

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

Large accelerated filer o Accelerated filer o Non-accelerated filer ☒ Smaller reporting company Emerging growth

☐ company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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

None of the voting stock of the registrant is held by a non-affiliate of the registrant. There is no publicly traded market for any class of voting stock of the registrant. There is one holder of record of our equity, Qurate Retail Group, Inc., an indirect wholly-owned subsidiary of Qurate Retail, Inc.

QVC, Inc.

2024 QUARTERLY REPORT ON FORM 10-Q

Table of Contents


	Part I	Page

Item 1.	Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive Income	3
	Condensed Consolidated Statements of Cash Flows	4
	Condensed Consolidated Statement s of Equity	5
	Notes to the Condensed Consolidated Financial Statements (unaudited)	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	33
Item 4.	Controls and Procedures	34

	Part II
Item 5.	Other Information	34
Item 6.	Exhibits	35
	Signatures	36

Item 1. Financial Statements

QVC, Inc.

Condensed Consolidated Balance Sheets

(unaudited)


	June 30,		December 31,
(in millions, except share amounts)	2024		2023
Assets
Current assets:
Cash and cash equivalents	$	315	307
Restricted cash	15		15
Accounts receivable, less allowance for credit losses of $84 at June 30, 2024 and $101 at December 31, 2023	884		1,295
Inventories	950		860
Prepaid expenses and other current assets	152		162
Total current assets	2,316		2,639
Property and equipment, net of accumulated depreciation of $915 at June 30, 2024 and $908 at December 31, 2023	398		427
Operating lease right-of-use assets (note 5)	495		510
Television distribution rights, net (note 2)	61		83
Goodwill (note 3)	3,113		3,151
Other intangible assets, net (note 3)	3,070		3,111
Note receivable - related party (note 1)	1,740		1,740
Other noncurrent assets	48		54
Assets held for sale noncurrent (note 5)	—		5
Total assets	$	11,241	11,720
Liabilities and equity
Current liabilities:
Current portion of debt and finance lease obligations (note 4)	$	586	424
Accounts payable-trade	694		838
Accrued liabilities	739		938
Other current liabilities	49		51
Total current liabilities	2,068		2,251
Long-term portion of debt and finance lease obligations (note 4)	3,695		3,911
Deferred income taxes (note 6)	557		621
Long-term operating lease liabilities	483		488
Other long-term liabilities	106		112
Total liabilities	6,909		7,383
Commitments and contingencies (note 7)
Equity:
QVC, Inc. stockholder's equity:
Common stock, $0.01 par value, 1 authorized share	—		—
Additional paid-in capital	10,913		10,901
Accumulated deficit	(6,307)		(6,361)
Accumulated other comprehensive loss	(353)		(290)
Total QVC, Inc. stockholder's equity	4,253		4,250
Noncontrolling interest	79		87
Total equity	4,332		4,337
Total liabilities and equity	$	11,241	11,720

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QVC, Inc.

Condensed Consolidated Statements of Operations

(unaudited)


	Three months ended June 30,			Six months ended June 30,
(in millions)	2024		2023	2024	2023
Net revenue	$	2,134	2,224	4,245	4,417
Operating costs and expenses:
Cost of goods sold (exclusive of depreciation and amortization shown separately below)	1,374		1,456	2,747	2,944
Operating	167		177	337	355
Selling, general and administrative, including stock-based compensation	324		340	644	665
Depreciation	19		22	39	45
Amortization	69		72	141	138
Restructuring, penalties and fire related costs, net of (recoveries) (note 10)	18		(211)	18	(215)
Gains on sales of assets and sale leaseback transactions	—		(6)	(1)	(119)
	1,971		1,850	3,925	3,813
Operating income	163		374	320	604
Other (expense) income:
Losses on financial instruments	—		—	—	(1)
Interest expense, net	(67)		(67)	(129)	(104)
Foreign currency gain (loss)	1		(3)	—	(9)
Gain on extinguishment of debt	—		10	—	10
	(66)		(60)	(129)	(104)
Income before income taxes	97		314	191	500
Income tax expense	(31)		(88)	(63)	(139)
Net income	66		226	128	361
Less net income attributable to the noncontrolling interest	(13)		(13)	(24)	(26)
Net income attributable to QVC, Inc. stockholder	$	53	213	104	335

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QVC, Inc.

Condensed Consolidated Statements of Comprehensive Income

(unaudited)


	Three months ended June 30,			Six months ended June 30,
(in millions)	2024		2023	2024	2023
Net income	$	66	226	128	361
Foreign currency translation adjustments, net of tax	(29)		(24)	(73)	(4)
Total comprehensive income	37		202	55	357
Comprehensive income attributable to noncontrolling interest	(9)		(6)	(14)	(18)
Comprehensive income attributable to QVC, Inc. stockholder	$	28	196	41	339

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QVC, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)


	Six months ended June 30,
(in millions)	2024		2023
Operating activities:
Net income	$	128	361
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes	(2)		53
Foreign currency loss	—		9
Depreciation	39		45
Amortization	141		138
Change in fair value of financial instruments and noncash interest	(1)		1
Other charges, net	45		(7)
Gain on extinguishment of debt	—		(10)
Stock-based compensation	14		20
Gains on sales of assets and sale leaseback transactions	(1)		(119)
Gain on insurance proceeds, net of fire related costs	—		(228)
Insurance proceeds received for operating expenses and business interruption losses	—		226
Change in operating assets and liabilities
Decrease in accounts receivable	394		400
(Increase) decrease in inventories	(96)		108
Decrease in prepaid expenses and other current assets	13		13
Decrease in accounts payable-trade	(134)		(213)
Decrease in accrued liabilities and other	(292)		(206)
Net cash provided by operating activities	248		591
Investing activities:
Capital expenditures	(81)		(79)
Expenditures for television distribution rights	(13)		(107)
Insurance proceeds received for fixed asset loss	—		54
Proceeds from derivative instruments	—		167
Payments for derivative instruments	—		(179)
Changes in other noncurrent assets	(3)		(1)
Proceeds from sale of fixed assets	6		200
Net cash (used in) provided by investing activities	(91)		55
Financing activities:
Principal payments of debt and finance lease obligations	(1,292)		(515)
Principal borrowings of debt from senior secured credit facility	1,660		887
Principal repayment of senior secured notes	(423)		(396)
Dividends paid to Qurate Retail, Inc.	(50)		(300)
Dividends paid to noncontrolling interest	(22)		(24)
Withholding taxes on net share settlements of stock-based compensation	(1)		—
Net cash used in financing activities	(128)		(348)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash	(21)		(7)
Net increase in cash, cash equivalents and restricted cash	8		291
Cash, cash equivalents and restricted cash, beginning of period	322		367
Cash, cash equivalents and restricted cash, end of period	$	330	658

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QVC, Inc.

Condensed Consolidated Statements of Equity

(unaudited)


	Common stock			Additional paid-in capital	Accumulated deficit	Accumulated other comprehensive loss	Noncontrolling interest	Total equity
(in millions, except share data)	Shares	Amount
Balance, December 31, 2022	1	$	—	10,869	(6,080)	(312)	95	4,572
Net income	—	—		—	335	—	26	361
Foreign currency translation adjustments, net of tax	—	—		—	—	4	(8)	(4)
Dividends paid to Qurate Retail, Inc. and noncontrolling interest	—	—		—	(300)	—	(24)	(324)
Impact of tax liability allocation and indemnification agreement with Qurate Retail, Inc.	—	—		—	(5)	—	—	(5)
Stock-based compensation	—	—		17	—	—	—	17
Balance, June 30, 2023	1	$	—	10,886	(6,050)	(308)	89	4,617


	Common stock			Additional paid-in capital	Accumulated deficit	Accumulated other comprehensive loss	Noncontrolling interest	Total equity
(in millions, except share data)	Shares	Amount
Balance, March 31, 2023	1	$	—	10,821	(6,161)	(291)	95	4,464
Net income	—	—		—	213	—	13	226
Foreign currency translation adjustments, net of tax	—	—		—	—	(17)	(7)	(24)
Dividends paid to Qurate Retail, Inc. and noncontrolling interest	—	—		—	(101)	—	(12)	(113)
Impact of tax liability allocation and indemnification agreement with Qurate Retail, Inc.	—	—		—	(1)	—	—	(1)
Stock-based compensation	—	—		8	—	—	—	8
Common control transaction with Qurate Retail, Inc.	—	—		57	—	—	—	57
Balance, June 30, 2023	1	$	—	10,886	(6,050)	(308)	89	4,617

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QVC, Inc.

Condensed Consolidated Statements of Equity

(unaudited)


	Common stock			Additional paid-in capital	Accumulated deficit	Accumulated other comprehensive loss	Noncontrolling interest	Total equity
(in millions, except share data)	Shares	Amount
Balance, December 31, 2023	1	$	—	10,901	(6,361)	(290)	87	4,337
Net income	—	—		—	104	—	24	128
Foreign currency translation adjustments, net of tax	—	—		—	—	(63)	(10)	(73)
Dividends paid to Qurate Retail, Inc. and noncontrolling interest	—	—		—	(50)	—	(22)	(72)
Impact of tax liability allocation and indemnification agreement with Qurate Retail, Inc.	—	—		1	—	—	—	1
Withholding taxes on net share settlements of stock-based compensation	—	—		(1)	—	—	—	(1)
Stock-based compensation	—	—		12	—	—	—	12
Balance, June 30, 2024	1	$	—	10,913	(6,307)	(353)	79	4,332


	Common stock			Additional paid-in capital	Accumulated deficit	Accumulated other comprehensive loss	Noncontrolling interest	Total equity
(in millions, except share data)	Shares	Amount
Balance, March 31, 2024	1	$	—	10,908	(6,352)	(328)	81	4,309
Net income	—	—		—	53	—	13	66
Foreign currency translation adjustments, net of tax	—	—		—	—	(25)	(4)	(29)
Dividends paid to Qurate Retail, Inc. and noncontrolling interest	—	—		—	(8)	—	(11)	(19)
Stock-based compensation	—	—		5	—	—	—	5
Balance, June 30, 2024	1	$	—	10,913	(6,307)	(353)	79	4,332

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

(1) Basis of Presentation

QVC, Inc. and its consolidated subsidiaries (unless otherwise indicated or required by the context, the terms "we," "our," "us," the "Company" and "QVC" refer to QVC, Inc. and its consolidated subsidiaries) is a retailer of a wide range of consumer products, which are marketed and sold primarily by merchandise-focused televised shopping programs, the Internet and mobile applications. QVC is comprised of the reportable segments of QxH, which is comprised of QVC-U.S. and HSN, Inc. ("HSN"), and QVC-International. These segments reflect the way the Company evaluates its business performance and manages its operations.

In the United States ("U.S."), QVC's televised shopping programs, including live and recorded content, are distributed across multiple channels nationally on a full-time basis, including QVC, QVC2, QVC3, HSN and HSN2. The Company's U.S. programming is also available on QVC.com and HSN.com, which we refer to as our "U.S. websites"; virtual multichannel video programming distributors (including Hulu + Live TV, DirecTV Stream and YouTube TV); applications via streaming video; Facebook Live, Roku, Apple TV, Amazon Fire, Xfinity Flex and Samsung TV Plus; mobile applications; social media pages and over-the-air broadcasters.

QVC's digital platforms enable consumers to purchase goods offered on our televised programming, along with a wide assortment of products that are available only on our U.S. websites and our other digital platforms (including our mobile applications, social media pages and others) are natural extensions of our business model, allowing customers to engage in our shopping experience wherever they are, with live or on-demand content customized to the device they are using. In addition to offering video content, our U.S. websites allow shoppers to browse, research, compare and perform targeted searches for products, read customer reviews, control the order-entry process and conveniently access their account.

Internationally, QVC's televised shopping programs, including live and recorded content, are distributed to households outside of the U.S., primarily in Germany, Austria, Japan, the United Kingdom ("U.K."), the Republic of Ireland, and Italy. In some of the countries where QVC operates, QVC's televised shopping programs are distributed across multiple QVC channels: QVC Style and QVC2 in Germany and QVC Beauty, QVC Extra and QVC Style in the U.K. Similar to the U.S., our international businesses also engage customers via websites, mobile applications and social media pages. QVC's international business employs product sourcing teams who select products tailored to the interests of each local market.

The Company's Japanese operations ("QVC-Japan") are conducted through a joint venture with Mitsui & Co. LTD ("Mitsui"). QVC-Japan is owned 60% by the Company and 40% by Mitsui. The Company and Mitsui share in all profits and losses based on their respective ownership interests. QVC-Japan paid dividends to Mitsui of $22 million and $24 million during the six months ended June 30, 2024 and 2023, respectively.

The Company is an indirect wholly-owned subsidiary of Qurate Retail, Inc. ("Qurate Retail") (Nasdaq: QRTEA, QRTEB and QRTEP), which owns Cornerstone Brands, Inc. ("CBI"), as well as other minority investments. QVC is part of the Qurate Retail Group, a portfolio of brands including QVC and CBI. Zulily, LLC (“Zulily”) was a wholly owned subsidiary of Qurate Retail until its divestiture on May 24, 2023.

During the six months ended June 30, 2023, QVC and Zulily engaged in multiple transactions relating to sales, sourcing of merchandise, marketing initiatives and business advisory services. Prior to Qurate Retail's divestiture of Zulily, QVC allocated expenses of $3 million to Zulily and Zulily allocated expenses of $2 million to QVC for the six months ended June 30, 2023.

During each of the six months ended June 30, 2024 and 2023, QVC and CBI engaged in multiple transactions relating to personnel and business advisory services. QVC allocated expenses of $14 million and $13 million to CBI for the six months ended June 30, 2024 and 2023, respectively. CBI allocated expenses of $1 million to QVC for each of the six months ended June 30, 2024 and 2023.

On December 30, 2020, the Company and Liberty Interactive LLC ("LIC") completed an internal realignment of the Company's global finance structure that resulted in a common control transaction with Qurate Retail. As part of the common control transaction, LIC issued a promissory note (“LIC Note”) to a subsidiary of the Company with an initial face amount of $1.8 billion, a stated interest rate of 0.48% and a maturity of December 29, 2029. Interest on the LIC Note is paid annually. QVC recorded $4 million of related party interest income for each of the six months ended June 30, 2024 and 2023, included in interest expense, net in the condensed consolidated statement of operations.

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

The condensed consolidated financial statements include the accounts of QVC, Inc. and its majority-owned subsidiaries. All significant intercompany accounts and transactions were eliminated in consolidation.

The accompanying (a) condensed consolidated balance sheet as of December 31, 2023, which has been derived from audited financial statements, and (b) the interim unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results for such periods have been included. The results of operations for any interim period are not necessarily indicative of results for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in QVC's Annual Report on Form 10-K for the year ended December 31, 2023.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Estimates include, but are not limited to, sales returns, uncollectible receivables, inventory obsolescence, depreciable lives of fixed assets and internally developed software, valuation of acquired intangible assets and goodwill and income taxes.

(2) Television Distribution Rights, Net

Television distribution rights consisted of the following:


(in millions)	June 30, 2024		December 31, 2023
Television distribution rights	$	547	592
Less accumulated amortization	(486)		(509)
Television distribution rights, net	$	61	83

The Company recorded amortization expense of $21 million and $26 million for the three months ended June 30, 2024 and 2023, respectively, related to television distribution rights. For the six months ended June 30, 2024 and 2023, amortization expense for television distribution rights was $41 million and $50 million, respectively.

As of June 30, 2024, related amortization expense for each of the next five years ended December 31 was as follows (in millions):


Remainder of 2024	$	37
2025	21
2026	3
2027	—
2028	—

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

(3) Goodwill and Other Intangible Assets, Net

The changes in the carrying amount of goodwill by operating segment for the six months ended June 30, 2024 were as follows:


(in millions)	QxH		QVC-International	Total
Balance as of December 31, 2023	$	2,366	785	3,151
Exchange rate fluctuations	—		(38)	(38)
Balance as of June 30, 2024	$	2,366	747	3,113

Other intangible assets consisted of the following:


	June 30, 2024				December 31, 2023
(in millions)	Gross cost		Accumulated amortization	Other intangible assets, net	Gross cost	Accumulated amortization	Other intangible assets, net
Purchased and internally developed software	$	1,087	(835)	252	1,052	(784)	268
Affiliate and customer relationships	2,819		(2,702)	117	2,825	(2,684)	141
Debt origination fees	9		(6)	3	9	(5)	4
Trademarks (indefinite life)	2,698		—	2,698	2,698	—	2,698
	$	6,613	(3,543)	3,070	6,584	(3,473)	3,111

The Company recorded amortization expense of $48 million and $46 million for the three months ended June 30, 2024 and 2023, respectively, related to other intangible assets. For the six months ended June 30, 2024 and 2023, amortization expense for other intangible assets was $100 million and $88 million, respectively.

As of June 30, 2024, the related amortization and interest expense for each of the next five years ended December 31 was as follows (in millions):


Remainder of 2024	$	99
2025	155
2026	105
2027	13
2028	—

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

(4) Long-Term Debt and Finance Lease Obligations

Long-term debt and finance lease obligations consisted of the following:


(in millions)	June 30, 2024		December 31, 2023
4.85% Senior Secured Notes due 2024, net of original issue discount	—		423
4.45% Senior Secured Notes due 2025, net of original issue discount	585		585
4.75% Senior Secured Notes due 2027	575		575
4.375% Senior Secured Notes due 2028	500		500
5.45% Senior Secured Notes due 2034, net of original issue discount	400		399
5.95% Senior Secured Notes due 2043, net of original issue discount	300		300
6.375% Senior Secured Notes due 2067	225		225
6.25% Senior Secured Notes due 2068	500		500
Senior secured credit facility	1,225		857
Finance lease obligations	1		2
Less debt issuance costs, net	(30)		(31)
Total debt and finance lease obligations	4,281		4,335
Less current portion	(586)		(424)
Long-term portion of debt and finance lease obligations	$	3,695	3,911

Senior Secured Notes

All of QVC's senior secured notes are secured by the capital stock of QVC and have equal priority to the senior secured credit facility. The interest on QVC's senior secured notes is payable semi-annually with the exception of the 6.375% Senior Secured Notes due 2067 (the "2067 Notes") and the 6.25% Senior Secured Notes due 2068 (the "2068 Notes"), which is payable quarterly.

During the second quarter of 2023, QVC purchased $177 million of the outstanding 4.85% Senior Secured Notes due 2024 (the "2024 Notes") and $15 million of the outstanding 4.45% Senior Secured Notes due 2025 (the "2025 Notes"). As a result of the repurchases, QVC recorded a gain on extinguishment of debt in the condensed consolidated statements of operations of $10 million for the three and six months ended June 30, 2023. On February 27, 2024, QVC delivered a notice of redemption to the trustee and holders of the 2024 Notes. Pursuant to the notice of redemption, QVC redeemed the remaining outstanding 2024 Notes in full on March 28, 2024. As of June 30, 2024, the remaining outstanding 2025 Notes are classified within the current portion of long term debt as they mature in less than one year.

The senior secured notes contain certain covenants, including certain restrictions on QVC and its restricted subsidiaries (subject to certain exceptions), with respect to, among other things: incurring additional indebtedness; creating liens on property or assets; making certain loans or investments; selling or disposing of assets; paying certain dividends and other restricted payments; consolidating or merging; entering into certain transactions with affiliates; entering into sale or leaseback transactions; and restricting subsidiary distributions.

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

Senior Secured Credit Facility

On October 27, 2021, QVC entered into the Fifth Amended and Restated Credit Agreement (the "Fifth Amended and Restated Credit Agreement") with Zulily, CBI, and QVC Global Corporate Holdings, LLC (“QVC Global”), each a direct or indirect (or former, in the case of Zulily) wholly owned subsidiary of Qurate Retail, as borrowers (collectively, the “Borrowers”). The Fifth Amended and Restated Credit Agreement is a multi-currency facility providing for a $3.25 billion revolving credit facility, with a $450 million sub-limit for letters of credit and an alternative currency revolving sub-limit equal to 50% of the revolving commitments thereunder. The Fifth Amended and Restated Credit Agreement may be borrowed by any Borrower, with each Borrower jointly and severally liable for the outstanding borrowings. Borrowings bear interest at either the alternate base rate (“ABR Rate”) or a London Inter-bank Offered Rate ("LIBOR")-based rate (or the applicable non-U.S. Dollar equivalent rate) (“Term Benchmark/RFR Rate”) at the applicable Borrower’s election in each case plus a margin. Borrowings that are ABR Rate loans will bear interest at a per annum rate equal to the base rate plus a margin that varies between 0.25% and 0.625% depending on the Borrowers’ combined ratio of consolidated total debt to consolidated EBITDA (the “consolidated leverage ratio”). Borrowings that are Term Benchmark/RFR Rate loans will bear interest at a per annum rate equal to the applicable rate plus a margin that varies between 1.25% and 1.625% depending on the Borrowers’ consolidated leverage ratio. Each loan may be prepaid at any time and from time to time without penalty other than customary breakage costs. No mandatory prepayments will be required other than when borrowings and letter of credit usage exceed availability; provided that, if CBI, QVC Global or any other borrower (other than QVC) is removed, at the election of QVC, as a borrower thereunder, all of its loans must be repaid and its letters of credit are terminated or cash collateralized. Any amounts prepaid may be reborrowed. The facility matures on October 27, 2026. Payment of loans may be accelerated following certain customary events of default. In connection with Qurate Retail's divestiture of Zulily (see note 1), Zulily is no longer a co-borrower in the senior secured credit facility, and Zulily repaid its outstanding borrowings under the Fifth Amended and Restated Credit Agreement using cash contributed from Qurate Retail.

On June 20, 2023, QVC, QVC Global and CBI, as borrowers, JPMorgan Chase Bank, N.A., as administrative agent, and the other parties thereto entered into an agreement whereby, in accordance with the Fifth Amended and Restated Credit Agreement, LIBOR-based rate loans denominated in U.S. dollars made on or after June 30, 2023 would be replaced with Secured Overnight Financing Rate ("SOFR")-based rate loans. Borrowings that are SOFR-based loans will bear interest at a per annum rate equal to the applicable SOFR rate, plus a credit spread adjustment, plus a margin that varies between 1.25% and 1.625% depending on the Borrowers’ consolidated leverage ratio.

In accordance with the accounting guidance for obligations resulting from joint and several liability arrangements, QVC will record a liability for amounts it has borrowed under the senior secured credit facility plus any additional amount it expects to repay on behalf of CBI. There were no borrowings by CBI outstanding on the Fifth Amended and Restated Credit Agreement as of June 30, 2024 and December 31, 2023.

Prior to the removal of Zulily as a co-borrower, QVC recorded a liability for amounts it expected to repay on behalf of Zulily as part of a common control transaction with Qurate Retail. Upon repayment of Zulily's outstanding borrowings, QVC removed a $57 million liability for Zulily's borrowings during the three months ended June 30, 2023, which was treated as additional paid in capital in the condensed consolidated statement of equity.

Availability under the Fifth Amended and Restated Credit Agreement at June 30, 2024 was $1.86 billion. The interest rate on the senior secured credit facility was 6.9% and 6.6% at June 30, 2024 and 2023, respectively.

The payment and performance of the Borrowers’ obligations under the Fifth Amended and Restated Credit Agreement are guaranteed by each of QVC’s, QVC Global’s and CBI’s Material Domestic Subsidiaries (as defined in the Fifth Amended and Restated Credit Agreement), if any, and certain other subsidiaries of any Borrower that such Borrower has chosen to provide guarantees. Further, the borrowings under the Fifth Amended and Restated Credit Agreement are secured, pari passu with QVC’s existing notes, by a pledge of all of QVC’s equity interests. The borrowings under the Fifth Amended and Restated Credit Agreement are also secured by a pledge of all of CBI’s equity interests.

The Fifth Amended and Restated Credit Agreement contains certain affirmative and negative covenants, including certain restrictions on the Borrowers and each of their respective restricted subsidiaries (subject to certain exceptions) with respect to, among other things: incurring additional indebtedness; creating liens on property or assets; making certain loans or investments; selling or disposing of assets; paying certain dividends and other restricted payments; dissolving, consolidating or merging; entering into certain transactions with affiliates; entering into sale or leaseback transactions; restricting subsidiary distributions; and limiting the Borrowers’ consolidated leverage ratio.

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

Other Debt Related Information

There are no restrictions under the debt agreements on QVC's ability to pay dividends or make other restricted payments if QVC is not in default on its senior secured notes or the Fifth Amended and Restated Credit Agreement and (i) with respect to QVC’s senior secured notes, QVC's consolidated leverage ratio would be no greater than 3.5 to 1.0 (“senior secured notes leverage basket”) and (ii) with respect to the Fifth Amended and Restated Credit Agreement, the consolidated net leverage ratio for QVC, QVC Global and CBI, would be no greater than 4.0 to 1.0. As of June 30, 2024, QVC’s consolidated leverage ratio (as calculated under QVC’s senior secured notes) was greater than 3.5 to 1.0 and as a result QVC is restricted in its ability to make dividends or other restricted payments under the senior secured notes. Although QVC will not be able to make unlimited dividends or other restricted payments under the senior secured notes leverage basket, QVC will continue to be permitted to make unlimited dividends under the senior secured notes to parent entities of QVC to service the principal and interest when due in respect of indebtedness of such parent entities (so long as there is no default under the indentures governing QVC’s senior secured notes) and permitted to make certain restricted payments to Qurate Retail under an intercompany tax sharing agreement (the “Tax Agreement”) in respect of certain tax obligations of QVC and its subsidiaries.

The weighted average interest rate applicable to all of the outstanding debt (excluding finance leases) prior to amortization of bond discounts and related debt issuance costs was 5.7% and 5.6% as of June 30, 2024 and 2023, respectively.

(5) Leases

Sale-Leaseback Transactions

In November 2022, QVC-International entered into agreements to sell two properties located in Germany and the U.K. to an independent third party. Under the terms of the agreements, QVC received net cash proceeds of $102 million related to its German facility and $80 million related to its U.K. facility when the sale closed in January 2023. Concurrent with the sale, the Company entered into agreements to lease each of the properties back from the purchaser over an initial term of 20 years with the option to extend the terms of the property leases for up to four consecutive terms of five years. QVC recognized a $69 million and $44 million gain related to the successful sale leaseback of the German and U.K. properties, respectively, during the first quarter of 2023 calculated as the difference between the aggregate consideration received and the carrying value of the properties. The Company accounted for the leases as operating leases and recorded a $42 million and $32 million right-of-use asset and operating lease liability for the German and U.K. properties, respectively.

In December 2023, QVC entered into an agreement to sell an owned and operated property in Germany to an independent third party. This property was owned as of December 31, 2023, and is included in assets held for sale noncurrent in the condensed consolidated balance sheet. Under the terms of the agreement, QVC received net cash proceeds of $6 million related to its German facility when the sale closed in February 2024. QVC recognized a $1 million gain related to the sale during the first quarter of 2024, calculated as the difference between the aggregate consideration received and the carrying value of the property. Concurrent with the sale, the Company entered into an agreement to lease a portion of the property back over 2 years and recorded an operating lease right-of-use asset and operating lease liability of $1 million.

(6) Income Taxes

The Company calculates its interim income tax provision by applying its best estimate of the annual expected effective tax rate to its ordinary year-to-date income or loss. The tax or benefit related to significant, unusual or extraordinary items that will be separately reported or reported net of their related tax effect are individually computed and recognized in the interim period in which those items occur.

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QVC, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgments including, but not limited to, the expected operating income for the year, projections of the proportion of income earned and taxed in foreign jurisdictions, permanent and temporary differences as a result of differences between amounts measured and recognized in accordance with tax laws and financial accounting standards, and the likelihood of recovering deferred tax assets. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or as the tax environment changes. To the extent that the estimated annual effective tax rate changes during a quarter, the effect of the change on the prior quarters is included in the tax expense for the current quarter.

For the three months ended June 30, 2024 and 2023, the Company recorded a tax provision of $31 million and $88 million, respectively, which represented an effective tax rate of 32.0% and 28.0%, respectively. For the six months ended June 30, 2024 and 2023, the Company recorded a tax provision of $63 million and $139 million, respectively, which represented an effective tax rate of 33.0% and 27.8%, respectively. The 2024 effective tax rate differs from the U.S. federal income tax rate of 21% primarily due to state and foreign tax expense and permanent items. The 2023 effective tax rate differs from the U.S. federal income tax rate of 21% primarily due to state and foreign tax expense and permanent items and includes a reversal of tax expense accrued in prior periods related to the settlement of state income tax reserves, resulting in a reduction to the rate.

The Company participates in a consolidated federal return filing with Qurate Retail. As of June 30, 2024, the Internal Revenue Service ("IRS") has completed its examination of the Company's tax years through 2021. The Company's 2022, 2023 and 2024 tax years are being examined currently as part of the Qurate Retail consolidated return under the IRS's Compliance Assurance Process program. The Company, or one of its subsidiaries, files income tax returns in various states and foreign jurisdictions. As of June 30, 2024, the Company was under examination in Colorado, Idaho, Massachusetts, Minnesota, Pennsylvania, South Carolina, Texas, Wisconsin, Utah, New York City and Germany.

The Company is a party to the Tax Agreement with Qurate Retail. The Tax Agreement establishes the methodology for the calculation and payment of income taxes in connection with the consolidation of the Company with Qurate Retail for income tax purposes. Generally, the Tax Agreement provides that the Company will pay Qurate Retail an amount equal to the tax liability, if any, that it would have if it were to file as a consolidated group separate and apart from Qurate Retail, with exceptions for the treatment and timing of certain items, including but not limited to deferred intercompany transactions, credits, and net operating and capital losses. To the extent that the separate company tax expense is different from the payment terms of the Tax Agreement, the difference is recorded as either a dividend or capital contribution.

The amounts of the tax-related payable due to Qurate Retail as of June 30, 2024 and December 31, 2023 were $55 million and $59 million, respectively, and were included in accrued liabilities in the accompanying condensed consolidated balance sheets.

SEC Form 10-Q filed by QVC, Inc.