QVC INC

Previous wording

Certain statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our business, product and marketing strategies; capital expenditures; revenue growth; the recoverability of our goodwill and other long-lived assets; our projected sources and uses of cash; repayment of debt; and the anticipated impact of certain contingent liabilities related to legal and tax proceedings and other matters arising in the ordinary course of business. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. The following include some but not all of the factors that could cause actual results or events to differ materially from those anticipated:

Current wording

Certain statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our business, product and marketing strategies; capital expenditures; revenue growth; the recoverability of our goodwill and other long-lived assets; our projected sources and uses of cash; repayment of debt; economic and macroeconomic trends; and the anticipated impact of certain contingent liabilities related to legal and tax proceedings and other matters arising in the ordinary course of business. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. The following include some but not all of the factors that could cause actual results or events to differ materially from those anticipated:

Previous wording

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.

Current wording

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 includes 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.

Previous wording

During 2022, QVC commenced the first phase of Project Athens, including actions to reduce inventory and a planned workforce reduction that was completed in February 2023. QVC recorded restructuring charges of $13 million during the six months ended June 30, 2023 in restructuring, penalties and fire related costs, net of (recoveries) in the condensed consolidated statement of operations. These initiatives are consistent with QVC’s strategy to operate more efficiently as it implements its turnaround plan.

Current wording

During 2022, QVC commenced the first phase of Project Athens, including actions to reduce inventory and a planned workforce reduction that was completed in February 2023. QVC recorded restructuring charges of $13 million during the nine months ended September 30, 2023 in restructuring, penalties and fire related costs, net of (recoveries) in the condensed consolidated statement of operations. These initiatives are consistent with QVC’s strategy to operate more efficiently as it implements its turnaround plan.

Previous wording

During the second quarter of 2024, QVC entered into an agreement and announced a plan to shift its global operating model for IT services to a managed services model. As a result, during the three and six months ended June 30, 2024 QVC recorded restructuring charges of $18 million in restructuring, penalties and fire related costs, net of (recoveries) in the condensed consolidated statement of operations.

Current wording

During the second quarter of 2024, QVC entered into an agreement and announced a plan to shift its global operating model for IT services to a managed services model. As a result, during the nine months ended September 30, 2024 QVC recorded restructuring charges of $18 million in restructuring, penalties and fire related costs, net of (recoveries) in the condensed consolidated statement of operations.

Previous wording

The current economic uncertainty in various regions of the world in which our subsidiaries and affiliates operate could adversely affect demand for our products and services since a substantial portion of our revenue is derived from discretionary spending by individuals, which typically falls during times of economic instability. Global financial markets may experience disruptions, including increased volatility and diminished liquidity and credit availability. If economic and financial market conditions in the U.S. or other key markets, including Japan and Europe, continue to be uncertain or deteriorate, our customers may respond by suspending, delaying or reducing their discretionary spending. A suspension, delay or reduction in discretionary spending could adversely affect revenue. Accordingly, our ability to increase or maintain revenue and earnings could be adversely affected to the extent that relevant economic environments decline. Such weak economic conditions may also inhibit our expansion into new European and other markets. We currently are unable to predict the extent of any of these potential adverse effects.

Current wording

The current economic uncertainty in various regions of the world in which our subsidiaries and affiliates operate, has impacted and could continue to adversely affect demand for our products and services since a substantial portion of our revenue is derived from discretionary spending by individuals, which typically falls, to varying degrees, during times of economic instability and inflationary pressures. Global financial markets may experience disruptions, including increased volatility and diminished liquidity and credit availability. If economic and financial market conditions in the U.S. or other key markets, including Japan and Europe, continue to be uncertain or deteriorate, our customers may respond by suspending, delaying or reducing their discretionary spending. Any further suspension, delay or reduction in discretionary spending could adversely affect revenue. Accordingly, our ability to increase or maintain revenue and earnings could be adversely affected to the extent that relevant economic environments decline. Such weak economic conditions may also inhibit our expansion into new European and other markets. We currently are unable to predict the extent of any of these potential adverse effects.

Previous wording

On December 18, 2021, QVC experienced a fire at its Rocky Mount fulfillment center in North Carolina. Rocky Mount was the Company’s second-largest fulfillment center, processing approximately 25% to 30% of volume for QVC-U.S., and also served as QVC-U.S.’s primary returns center for hard goods. The building was significantly damaged as a result of the fire and related smoke and did not reopen. The Company took steps to mitigate disruption to operations including diverting inbound orders, leveraging its existing fulfillment centers and supplementing these facilities with short-term leased space as needed. QVC sold the property in February 2023 and received cash proceeds of $2 million and $17 million during the three and six months ended June 30, 2023, respectively and recognized gains on the sale of $2 million and $15 million during the three and six months ended June 30, 2023, respectively. We assessed our network footprint and are making investments to expand capacity and increase throughput as a result of the loss of the Rocky Mount fulfillment center.

Current wording

On December 18, 2021, QVC experienced a fire at its Rocky Mount fulfillment center in North Carolina. Rocky Mount was the Company’s second-largest fulfillment center, processing approximately 25% to 30% of volume for QVC-U.S., and also served as QVC-U.S.’s primary returns center for hard goods. The building was significantly damaged as a result of the fire and related smoke and did not reopen. The Company took steps to mitigate disruption to operations including diverting inbound orders, leveraging its existing fulfillment centers and supplementing these facilities with short-term leased space as needed. QVC sold the property in February 2023 and received cash proceeds of $2 million and $19 million during the three and nine months ended September 30, 2023, respectively and recognized gains on the sale of $2 million and $17 million during the three and nine months ended September 30, 2023, respectively. We assessed our network footprint and are making investments to expand capacity and increase throughput as a result of the loss of the Rocky Mount fulfillment center.

Previous wording

Based on the provisions of QVC’s insurance policies certain fire related costs were recoverable. In June 2023, the Company agreed to a final insurance settlement with its insurance company and received all remaining proceeds related to the Rocky Mount claim. During the three and six months ended June 30, 2023, the Company received $225 million and $280 million of insurance proceeds, of which $210 million represented recoveries for business interruption losses. During the three and six months ended June 30, 2023, the Company recorded $16 million and $27 million of fire related costs, respectively, and recognized net gains of $209 million and $213 million, respectively, representing proceeds received in excess of recoverable losses in restructuring, penalties and fire related costs, net of (recoveries) in the condensed consolidated statement of operations.

Current wording

Based on the provisions of QVC’s insurance policies certain fire related costs were recoverable. In June 2023, the Company agreed to a final insurance settlement with its insurance company and received all remaining proceeds related to the Rocky Mount claim. During the nine months ended September 30, 2023, the Company received $280 million of insurance proceeds, of which $210 million represented recoveries for business interruption losses. During the three and nine months ended September 30, 2023, the Company recorded $5 million and $32 million of fire related costs, respectively, and recognized net losses of $5 million and net gains of $208 million, respectively, representing proceeds received in excess of recoverable losses in restructuring, penalties and fire related costs, net of (recoveries) in the condensed consolidated statement of operations.

Previous wording

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.

Current wording

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 two years and recorded an operating lease right-of-use asset and operating lease liability of $1 million.

Previous wording

QVC's consolidated net revenue decreased 4.0% and 3.9% for the three and six months ended June 30, 2024, respectively, as compared to the corresponding periods in the prior year. The three month decrease in net revenue is primarily due to a 2.4% decrease in units shipped primarily at QxH, partially offset by an increase in units shipped at QVC-International. The decrease was also driven by $31 million in unfavorable foreign exchange rates and a $10 million decrease in shipping and handling revenue primarily at QxH. These decreases were partially offset by a 0.6% increase in average selling price per unit ("ASP") driven by QxH, partially offset by a decrease in ASP at QVC-International. The six month decrease in net revenue is primarily due to a 2.0% decrease in units shipped primarily at QxH, partially offset by an increase in units shipped at QVC-International. The decrease was also driven by $48 million in unfavorable foreign exchange rates and a 0.7% decrease in ASP primarily at QVC-International, partially offset by an increase in ASP at QxH. These decreases to net revenue were partially offset by a $30 million decrease in estimated product returns at QxH.

Current wording

QVC's consolidated net revenue decreased $102 million or 4.6% and $274 million or 4.1% for the three and nine months ended September 30, 2024, respectively, as compared to the corresponding periods in the prior year. The three month decrease in net revenue is primarily due to a 3.9% decrease in units shipped attributable to QxH, partially offset by an increase in units shipped at QVC-International. The decrease was also driven by a 1.2% decrease in average selling price per unit ("ASP") primarily driven by QVC-International, and a $12 million decrease in shipping and handling revenue attributable to QxH. These decreases to net revenue were partially offset by a $38 million decrease in estimated product returns primarily attributable to QxH. The nine month decrease in net revenue is primarily due to a 2.7% decrease in units shipped primarily attributable to QxH, partially offset by an increase in units shipped at QVC-International. The decrease was also driven by a 0.9% decrease in ASP primarily attributable to QVC-International, partially offset by an increase in ASP at QxH, $49 million in unfavorable foreign exchange rates, and a $19 million decrease in shipping and handling revenue attributable to QxH. These decreases to net revenue were partially offset by a $68 million decrease in estimated product returns primarily driven by QxH.

Previous wording

During the three and six months ended June 30, 2024 and 2023, the changes in revenue and expenses were affected by changes in the exchange rates for the Japanese Yen, the Euro and the U.K. Pound Sterling. In the event the U.S. Dollar strengthens against these foreign currencies in the future, QVC's revenue and operating cash flow will be negatively affected.

Current wording

During the three and nine months ended September 30, 2024 and 2023, the changes in revenue and expenses were affected by changes in the exchange rates for the Japanese Yen, the Euro and the U.K. Pound Sterling. In the event the U.S. Dollar strengthens against these foreign currencies in the future, QVC's revenue and operating cash flow will be negatively affected.

Previous wording

In discussing our operating results, the term "currency exchange rates" refers to the currency exchange rates we use to convert the operating results for all countries where the functional currency is not the U.S. Dollar. We calculate the effect of changes in currency exchange rates as the difference between current period activity translated using the prior period's currency exchange rates. Throughout our discussion, we refer to the results of this calculation as the impact of currency exchange rate fluctuations. When we refer to "constant currency operating results", this means operating results without the impact of the currency exchange rate fluctuations. The disclosure of constant currency amounts or results permits investors to understand better QVC’s underlying performance without the effects of currency exchange rate fluctuations.

Current wording

In discussing our operating results, the term "currency exchange rates" refers to the currency exchange rates we use to convert the operating results for all countries where the functional currency is not the U.S. Dollar. We calculate the effect of changes in currency exchange rates as the difference between current period activity translated using the prior period's currency exchange rates. We refer to the results of this calculation as the impact of currency exchange rate fluctuations. Constant currency operating results refers to operating results without the impact of the currency exchange rate fluctuations. The disclosure of constant currency amounts or results permits investors to better understand QVC’s underlying performance without the effects of currency exchange rate fluctuations.

Previous wording

QxH's net revenue decline for the three months ended June 30, 2024 was primarily due to a 5.2% decrease in units shipped and a $9 million decrease in shipping and handling revenue. These declines were partially offset by a 2.4% increase in ASP. For the three months ended June 30, 2024, QxH experienced shipped sales growth in jewelry with declines across all other categories. For the six months ended June 30, 2024, QxH net revenue decreased due to a 4.6% decrease in units shipped. This decline was partially offset by a 0.9% increase in ASP and a $30 million decrease in estimated product returns. For the six months ended June 30, 2024, QxH experienced shipped sales growth in jewelry with declines across all other categories.

Current wording

QxH's net revenue decline of $96 million for the three months ended September 30, 2024 resulted from a 6.4% decrease in units shipped and an $11 million decrease in shipping and handling revenue. These declines were partially offset by a $30 million decrease in estimated product returns. For the nine months ended September 30, 2024, QxH's net revenue decline of $218 million resulted from a 5.2% decrease in units shipped, partially offset by a $60 million decrease in estimated product returns and a 0.6% increase in ASP. For the three and nine months ended September 30, 2024, QxH experienced shipped sales declines across all product categories.

Previous wording

QVC-International's net revenue was flat in constant currency for the three months ended June 30, 2024 primarily due to a 3.7% increase in units shipped across all markets except Italy offset by a 2.6% decrease in ASP across all markets. For the three months ended June 30, 2024, QVC-International experienced shipped sales growth in constant currency in jewelry, beauty and electronics with declines across all other product categories except apparel which remained flat. QVC-International's net revenue decline in constant currency for the six months ended June 30, 2024 was primarily due to a 3.6% decrease in ASP across all markets. These declines were partially offset by a 3.8% increase in units shipped across all markets except Italy. For the six months ended June 30, 2024, QVC-International experienced shipped sales growth in constant currency across beauty, jewelry and electronics with declines in all other categories.

Current wording

QVC-International's net revenue declined $4 million in constant currency for the three months ended September 30, 2024 due to a 3.0% decrease in ASP across all markets except Japan partially offset by a 1.4% increase in units shipped across all markets except Japan. For the three months ended September 30, 2024, QVC-International experienced shipped sales growth in constant currency in home, accessories and electronics with declines across all other product categories except jewelry which remained flat. QVC-International's net revenue declined $7 million in constant currency for the nine months ended September 30, 2024. This decline was due to a 3.4% decrease in ASP across all markets. These declines were primarily offset by a 3.0% increase in units shipped across all markets except Italy. For the nine months ended September 30, 2024, QVC-International experienced shipped sales growth in constant currency across all product categories except for apparel and beauty.

Previous wording

QVC's cost of goods sold as a percentage of net revenue was 64.4% and 64.7% for the three and six months ended June 30, 2024, respectively, compared to 65.5% and 66.7% for the three and six months ended June 30, 2023, respectively. The decrease in cost of goods sold as a percentage of revenue for the three and six months ended June 30, 2024 is primarily due to product margin favorability across both segments and lower freight costs at QxH, partially offset by higher freight costs at QVC-International. The product margin favorability for the three and six months ended June 30, 2024 was driven by the net impact of merchandising efforts including cost reduction and pricing actions, as well as mix within product categories and less inventory liquidation in the current period at QxH.

Current wording

QVC's cost of goods sold as a percentage of net revenue was 65.3% and 64.9% for the three and nine months ended September 30, 2024, respectively, compared to 64.9% and 66.1% for the three and nine months ended September 30, 2023, respectively. The increase in cost of goods sold as a percentage of revenue for the three months ended September 30, 2024 is driven by higher warehouse costs primarily at QxH and to a lesser extent QVC-International. The decrease in cost of goods sold as a percentage of revenue for the nine months ended September 30, 2024 is primarily due to product margin favorability across both segments and lower freight costs at QxH, partially offset by higher freight costs at QVC-International. The product margin favorability for the nine months ended September 30, 2024 was driven by the net impact of merchandising efforts including cost reduction and pricing actions, as well as mix within product categories and less inventory liquidation in the current period at QxH.

Previous wording

QVC's operating expenses are principally comprised of commissions, order processing and customer service expenses, credit card processing fees and telecommunications expenses. Operating expenses were 7.8% and 7.9% of net revenue for the three and six months ended June 30, 2024, respectively, and were 8.0% for each of the three and six months ended June 30, 2023. For the three and six months ended June 30, 2024, the decreases in operating expenses as a percent of sales are driven by lower commissions expense at QxH.

Current wording

QVC's operating expenses are principally comprised of commissions, order processing and customer service expenses, credit card processing fees and telecommunications expenses. Operating expenses were 7.9% of net revenue for each of the three and nine months ended September 30, 2024, respectively, and were 8.0% for each of the three and nine months ended September 30, 2023. For the three and nine months ended September 30, 2024, the decreases in operating expenses as a percent of sales are driven by lower commissions expense at QxH.

Previous wording

QVC's selling, general, and administrative expenses (excluding stock-based compensation) include personnel, IT, marketing and advertising expenses, production costs and provision for doubtful accounts. Such expenses decreased $7 million for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023 and increased as a percentage of net revenue from 14.8% to 15.1%. Selling, general, and administrative expenses decreased $15 million for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023 and increased as a percentage of net revenue from 14.6% to 14.8%.

Current wording

QVC's selling, general, and administrative expenses (excluding stock-based compensation) include personnel, IT, marketing and advertising expenses, production costs and provision for doubtful accounts. Such expenses decreased $8 million for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023 and increased as a percentage of net revenue to 14.8% from 14.4%. Selling, general, and administrative expenses decreased $23 million for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023 and increased as a percentage of net revenue to 14.8% from 14.6%.

Previous wording

For the three months ended June 30, 2024, the decrease was primarily due to an $11 million decrease in consulting expenses primarily at QxH and $4 million of favorability from foreign exchange rates. These decreases were partially offset by an $8 million increase in marketing costs, mainly at QxH. For the six months ended June 30, 2024, the decrease was primarily driven by a $28 million decrease in consulting expenses primarily at QxH and $6 million of favorability from foreign exchange rates. These decreases were partially offset by a $25 million increase in marketing costs at QxH. The decrease in consulting expenses for the three and six months ended June 30, 2024 related to investments in Project Athens made in the prior year.

Current wording

For the three months ended September 30, 2024, the decrease was driven by a $4 million decrease in consulting expenses and a $4 million decrease in personnel costs both at QxH. For the nine months ended September 30, 2024, the decrease resulted from a $32 million decrease in consulting expenses primarily at QxH, a $6 million decrease in non-income related taxes and $5 million of favorability from foreign exchange rates. These decreases were primarily offset by a $24 million increase in marketing costs at QxH. The decrease in consulting expenses for the three and nine months ended September 30, 2024 related to investments in Project Athens made in the prior year. The increase in marketing costs was driven by QVC's Age of Possibility campaign.

Previous wording

QVC recorded restructuring costs of $18 million for the three and six months ended June 30, 2024 related to the shift in its IT operating model. QVC recorded a gain of $211 million and $215 million for the three and six months ended June 30, 2023, respectively, in restructuring, penalties and fire related costs, net of recoveries. For the three months ended June 30, 2023, the gain primarily related to a $225 million gain on insurance proceeds received in excess of fire losses partially offset by $16 million of other fire related costs. For the six months ended June 30, 2023, the gain related to a $240 million gain on insurance proceeds received in excess of fire losses and a $15 million gain on the sale of the Rocky Mount property, partially offset by $27 million of other fire related costs and $13 million of restructuring costs related to workforce reduction.

Current wording

QVC recorded restructuring costs of $18 million for the nine months ended September 30, 2024 related to the shift in its IT operating model. QVC recorded a loss of $19 million for the three months ended September 30, 2023 and a gain of $196 million for the nine months ended September 30, 2023, in restructuring, penalties and fire related costs, net of recoveries. For the three months ended September 30, 2023, the loss was primarily related to a Consumer Product Safety Commission ("CPSC") civil penalty of $16 million (see note 10 to the accompanying condensed consolidated financial statements) and $5 million of other fire related costs, partially offset by a $2 million gain on the sale of the Rocky Mount property. For the nine months ended September 30, 2023, the gain related to a $240 million gain on insurance proceeds received in excess of fire losses and a $17 million gain on the sale of the Rocky Mount property, partially offset by $32 million of other fire related costs, the CPSC civil penalty of $16 million and $13 million of restructuring costs related to workforce reduction.

Previous wording

QVC recorded a $1 million gain on sale of assets and sale leaseback transactions for the six months ended June 30, 2024 related to the sale leaseback of a property in Germany. QVC recorded $6 million and $119 million of gains on sales of assets and sale leaseback transactions for the three and six months ended June 30, 2023, respectively. The $6 million gain for the three months ended June 30, 2023 is primarily related to the sale of a channel positioning right. The $119 million gain for the six months ended June 30, 2023 is primarily related to the sale leaseback of two properties located in Germany and the U.K.

Current wording

QVC recorded a $1 million gain on sale of assets and sale-leaseback transactions for the nine months ended September 30, 2024 related to the sale-leaseback of a property in Germany. QVC recorded $119 million of gains on sales of assets and sale-leaseback transactions for the nine months ended September 30, 2023 primarily related to the sale-leaseback of two properties located in Germany and the U.K.

Previous wording

Stock-based compensation includes compensation related to options and restricted stock units granted to certain officers and employees. QVC recorded $2 million and $14 million of stock-based compensation expense for the three and six months ended June 30, 2024, respectively, and recorded $11 million and $20 million of stock-based compensation expense for the three and six months ended June 30, 2023, respectively. The decrease in stock-based compensation expense for the three and six months ended June 30, 2024 is primarily related to changes in the market price of Qurate Retail’s Series A common stock.

Current wording

Stock-based compensation includes compensation related to options and restricted stock units granted to certain officers and employees. QVC recorded $1 million and $15 million of stock-based compensation expense for the three and nine months ended September 30, 2024, respectively, and recorded $7 million and $27 million of stock-based compensation expense for the three and nine months ended September 30, 2023, respectively. The decrease in stock-based compensation expense for the three and nine months ended September 30, 2024 is primarily related to a decline in the probability of satisfying performance objectives and changes in the market price of Qurate Retail’s Series A common stock.

Previous wording

For the three and six months ended June 30, 2024, property and equipment depreciation decreased primarily due to assets that are fully depreciated in the current period. The increase in software amortization for the six months ended June 30, 2024 is due to software additions including an enhancement to QVC’s Enterprise Resource Planning system that was placed into service in the second quarter of 2023. The decrease in channel placement amortization and related expenses for the three and six months ended June 30, 2024 is primarily due to lower subscriber counts.

Current wording

For the three and nine months ended September 30, 2024, property and equipment depreciation decreased primarily due to assets that are fully depreciated in the current period. The decrease in software amortization for the three months ended September 30, 2024 is due to software assets fully depreciating in the second quarter of 2024. The increase in software amortization for the nine months ended September 30, 2024 is due to software additions. The decrease in channel placement amortization and related expenses for the nine months ended September 30, 2024 is primarily due to lower subscriber counts.

Previous wording

For the three months ended June 30, 2024, there was no change in consolidated interest expense as compared to the corresponding period in the prior year. For the six months ended June 30, 2024, consolidated interest expense, net increased $25 million as compared to the corresponding period in the prior year primarily due to the reversal of interest expense related to the settlement of state income tax reserves during the prior year.

Current wording

For the three months ended September 30, 2024, consolidated interest expense, net decreased $1 million as compared to the corresponding period in the prior year. For the nine months ended September 30, 2024, consolidated interest expense, net increased $24 million as compared to the corresponding periods in the prior year primarily due to the reversal of interest expense related to the settlement of state income tax reserves during the prior year.

Previous wording

Certain loans between QVC and its subsidiaries are deemed to be short-term in nature, and accordingly, the translation of these loans is recorded in the condensed consolidated statements of operations. For the three and six months ended June 30, 2024, the change in foreign currency gain (loss) was also due to variances in interest and operating payables balances between QVC and its international subsidiaries denominated in the currency of the subsidiary and the effects of currency exchange rate changes on those balances.

Current wording

Certain loans between QVC and its subsidiaries are deemed to be short-term in nature, and accordingly, the translation of these loans is recorded in the condensed consolidated statements of operations. For the three and nine months ended September 30, 2024, the change in foreign currency (loss) gain was due to variances in short-term loans, interest and operating payables balances between QVC and its international subsidiaries denominated in the currency of the subsidiary and the effects of currency exchange rate changes on those balances.

Previous wording

For the three and six months ended June 30, 2023, QVC recorded a gain on extinguishment of debt of $10 million related to the repurchase of the 2024 Notes and 2025 Notes (each defined below).

Current wording

For the nine months ended September 30, 2023, QVC recorded a gain on extinguishment of debt of $10 million related to the repurchase of the 2024 Notes and 2025 Notes (each defined below).

Previous wording

Our effective tax rate was 32.0% and 33.0% for the three and six months ended June 30, 2024, respectively, compared to an effective tax rate of 28.0% and 27.8% for the three and six months ended June 30, 2023, respectively. The 2024 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 2023 rate.

Current wording

Our effective tax rate was 30.3% and 32.1% for the three and nine months ended September 30, 2024, respectively, compared to an effective tax rate of 35.1% and 29.0% for the three and nine months ended September 30, 2023, respectively. The 2024 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 2023 rate.

Previous wording

QVC Adjusted OIBDA increased by $9 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase is comprised of a $9 million increase at QxH.

Current wording

QVC Adjusted OIBDA decreased by $26 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The decrease is comprised of a $19 million decrease at QxH and a $7 million decrease at QVC-International.

Previous wording

QVC Adjusted OIBDA increased by $58 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase is comprised of a $55 million increase at QxH and a $3 million increase at QVC-International.

Current wording

QVC Adjusted OIBDA increased by $32 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase is comprised of a $36 million increase at QxH, offset by a $4 million decrease at QVC-International.

Previous wording

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.

Current wording

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 nine months ended September 30, 2023. The remaining outstanding 2024 Notes were repaid in March 2024. As of September 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.

Previous wording

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.

Current wording

Availability under the Fifth Amended and Restated Credit Agreement at September 30, 2024 was $1.75 billion. The interest rate on the senior secured credit facility was 6.5% and 6.8% at September 30, 2024 and 2023, respectively.

Previous wording

The following information contains the summarized financial information for the combined parent (QVC, Inc.) and subsidiary guarantors (Affiliate Relations Holdings, Inc.; Affiliate Investment, Inc.; AMI 2, Inc.; ER Marks, Inc.; QVC Global Corporate Holdings, LLC; QVC GCH Company, LLC; QVC Rocky Mount, Inc.; QVC San Antonio, LLC; QVC Global Holdings I, Inc.; HSN, Inc; HSNi, LLC; HSN Holding LLC; AST Sub, Inc.; Home Shopping Network En Espanol, L.P.; Home Shopping Network En Espanol, L.L.C; Ingenious Designs LLC; NLG Merger Corp.; Ventana Television, Inc.; and Ventana Television Holdings, Inc.) pursuant to Rules 3-10, 13-01 and 13-02 of Regulation S-X.

Current wording

The following information contains the summarized financial information for the combined parent (QVC, Inc.) and subsidiary guarantors (Affiliate Relations Holdings, Inc.; Affiliate Investment, Inc.; AMI 2, Inc.; ER Marks, Inc.; QVC Global Corporate Holdings, LLC; QVC GCH Company, LLC; QVC Rocky Mount, Inc.; QVC San Antonio, LLC; QVC Global Holdings I, Inc.; HSN, Inc; HSNi, LLC; HSN Holding LLC; Home Shopping Network En Espanol, L.P.; Home Shopping Network En Espanol, L.L.C; Ingenious Designs LLC; NLG Merger Corp.; Ventana Television, Inc.; and Ventana Television Holdings, Inc.) pursuant to Rules 3-10, 13-01 and 13-02 of Regulation S-X.

Previous wording

During the six months ended June 30, 2024, QVC's primary uses of cash were $1,292 million of principal payments of the senior secured credit facility and finance lease obligations, $423 million of principal repayment of senior secured notes, $94 million of capital and television distribution rights expenditures, $50 million of dividends to Qurate Retail and $22 million in dividend payments from the Company’s Japanese operations ("QVC-Japan") to Mitsui & Co. LTD (“Mitsui”). These uses of cash were funded primarily with $1,660 million of principal borrowings from the senior secured credit facility, and $248 million of cash provided by operating activities. As of June 30, 2024, QVC's cash, cash equivalents and restricted cash balance was $330 million.

Current wording

During the nine months ended September 30, 2024, QVC's primary uses of cash were $1,473 million of principal payments of the senior secured credit facility and finance lease obligations, $775 million of principal repayment of senior secured notes, $141 million of capital and television distribution rights expenditures, $91 million of dividends to Qurate Retail, and $51 million in dividend payments from the Company’s Japanese operations ("QVC-Japan") to Mitsui & Co. LTD (“Mitsui”). These uses of cash were funded primarily with $1,895 million of principal borrowings from the senior secured credit facility, $346 million of cash provided by operating activities. As of September 30, 2024, QVC's cash, cash equivalents and restricted cash balance was $314 million.

Previous wording

During the six months ended June 30, 2023, QVC's primary uses of cash were $515 million of principal payments of the senior secured credit facility and finance lease obligations, $396 million of principal repayment of senior secured notes, $300 million of dividends to Qurate Retail, $186 million of capital and television distribution rights expenditures and $24 million in dividend payments from QVC-Japan to Mitsui. These uses of cash were funded primarily with $887 million of principal borrowings from the senior secured credit facility, $200 million in proceeds from sale of fixed assets, $54 million of insurance proceeds for fixed asset loss, and $591 million of cash provided by operating activities. As of June 30, 2023, QVC's cash, cash equivalents and restricted cash balance was $658 million.

Current wording

During the nine months ended September 30, 2023, QVC's primary uses of cash were $1,086 million of principal payments of the senior secured credit facility and finance lease obligations, $396 million of principal repayment of senior secured notes, $344 million of dividends to Qurate Retail, $227 million of capital and television distribution rights expenditures and $35 million in dividend payments from QVC-Japan to Mitsui. These uses of cash were funded primarily with $1,022 million of principal borrowings from the senior secured credit facility, $764 million of cash provided by operating activities, $202 million in proceeds from sale of fixed assets and $54 million of insurance proceeds for fixed asset loss. As of September 30, 2023, QVC's cash, cash equivalents and restricted cash balance was $292 million.

Previous wording

The change in cash provided by operating activities for the six months ended June 30, 2024 compared to the previous year was primarily due to changes in working capital and lower net income. Working capital at any specific point in time is subject to many variables, including seasonality, inventory management, the timing of cash receipts and payments, vendor payment terms, and fluctuations in foreign exchange rates.

Current wording

The change in cash provided by operating activities for the nine months ended September 30, 2024 compared to the previous year was primarily due to changes in working capital and lower net income. Working capital at any specific point in time is subject to many variables, including seasonality, inventory management, the timing of cash receipts and payments, vendor payment terms, and fluctuations in foreign exchange rates.

Previous wording

As of June 30, 2024, $207 million of the $330 million in cash, cash equivalents and restricted cash was held by foreign subsidiaries. Cash in foreign subsidiaries is available for domestic purposes with no significant tax consequences upon repatriation to the U.S. QVC accrues taxes on the unremitted earnings of its international subsidiaries. Approximately 67% of this foreign cash balance was that of QVC-Japan. QVC owns 60% of QVC-Japan and shares all profits and losses with the 40% minority interest holder, Mitsui. We believe that we currently have appropriate legal structures in place to repatriate foreign cash as tax efficiently as possible and meet the business needs of QVC.

Current wording

As of September 30, 2024, $165 million of the $314 million in cash, cash equivalents and restricted cash was held by foreign subsidiaries. Cash in foreign subsidiaries is available for domestic purposes with no significant tax consequences upon repatriation to the U.S. QVC accrues taxes on the unremitted earnings of its international subsidiaries. Approximately 58% of this foreign cash balance was that of QVC-Japan. QVC owns 60% of QVC-Japan and shares all profits and losses with the 40% minority interest holder, Mitsui. We believe that we currently have appropriate legal structures in place to repatriate foreign cash as tax efficiently as possible and meet the business needs of QVC.

Previous wording

payments to Qurate Retail. Refer to the off-balance sheet arrangements and aggregate contractual obligations table below for a summary of other material cash requirements as of June 30, 2024. The Company expects that cash on hand and cash provided by operating activities in future periods and outstanding borrowing capacity will be sufficient to fund projected uses of cash.

Current wording

QVC’s material cash requirements for 2024, outside of normal operating expenses, include the costs to service outstanding debt, expenditures for affiliation agreements with television providers, and capital expenditures. Capital expenditures are expected to be between $170 and $185 million, including $118 million already expended for the nine months ended September 30, 2024. The Company also may make dividend payments to Qurate Retail. Refer to the off-balance sheet arrangements and aggregate contractual obligations table below for a summary of other material cash requirements as of September 30, 2024. The Company expects that cash on hand and cash provided by operating activities in future periods and outstanding borrowing capacity will be sufficient to fund projected uses of cash.