QURATE RETAIL, INC. The following discussion and analysis provides information concerning our results of operations and financial condition. This discussion should be read in conjunction with our accompanying consolidated financial statements and the notes thereto. Additionally, see note 2 in the accompanying consolidated financial statements for an overview of new accounting standards that we have adopted or that we plan to adopt that have had or may have an impact on our financial statements.
Overview
We own controlling and non-controlling interests in a broad range of video and online commerce companies. Our largest businesses and reportable segments are QxH (QVCU.S. and HSN) andQVC International .QVC, Inc. ("QVC"), which includesQxH andQVC International , markets and sells a wide variety of consumer products inthe United States ("U.S.") and several foreign countries via highly engaging video-rich, interactive shopping experiences.Zulily, LLC ("Zulily") is an online retailer offering customers a fun and entertaining shopping experience with a fresh selection of new product styles launched every day, and is a reportable segment. Our "Corporate and other" category includes our consolidated subsidiaryCornerstone Brands, Inc. ("Cornerstone"), along with various cost and equity method investments. See discussion below for the entities that were included in Corporate and other in prior periods. InDecember 2019 , the novel coronavirus ("COVID-19") was reported to have surfaced inWuhan, China and has subsequently spread across the globe causing a global pandemic, impacting all countries whereQurate Retail operates. As a result of the spread of the virus, certain local governmental agencies have imposed travel restrictions, local quarantines or stay at home restrictions to contain the spread, which has caused a significant disruption to most sectors of the economy. In response to these stay at home restrictions, QVC has mandated that all employees work from home where possible and has reduced the number of employees, third parties and visitors who are allowed into its on-site facilities, such as the studios and fulfillment centers. QVC has implemented increased cleaning protocols, social distancing measures and temperature screenings for those employees who enter into certain facilities. In some cases, the move to a work from home arrangement for certain of its employees will be permanent, which has resulted in the reduction of office space. As a result of these resource constraints, QVC included fewer hours of live programming on some of its secondary channels and has experienced some delays in shipping at certain fulfillment centers. Due to ongoing staffing issues and labor shortages, QVC has increased wages and offered incentives, resulting in additional costs to the company. The inability to control the spread of COVID-19, or the expansion or extension of containment measures, such as stay at home restrictions could negatively impact our results in the future. The stay at home restrictions imposed in response to COVID-19 required many traditional brick and mortar retailers to temporarily close their stores, but allowed distance retailers, including QVC, to continue operating. As a result, from the end of the first quarter of 2020 and continuing through the first quarter of 2021, QVC observed an increase in new customers and an increase in demand for certain categories, such as home. Beginning in the second quarter of 2021, QVC observed a decline in new customers and a decline in demand for its home product category, while also seeing an increase in demand for its apparel product category. Zulily and QVC have seen increased freight surcharges fromChina due to COVID-19 and have made work accommodations in its fulfillment centers which has resulted in an increase in labor expense. In addition, there are several potential adverse impacts of COVID-19 that could cause a material negative impact to the Company's financial results, including its capital and liquidity. These include governmental restrictions on QVC's ability to continue to operate under stay at home restrictions and produce content; reduced demand for products we sell; decreases in the disposable income of existing and potential new customers; the impacts of any recession or inflationary environment and other uncertainties with respect to the continuity of government stimulus programs implemented in response to COVID-19; increased currency volatility resulting in adverse currency rate fluctuations; higher unemployment; labor shortages; and an adverse impact to our supply chain and shipping disruptions for both the products we import and purchase domestically and the products we sell, including essential products experiencing higher demand, due to factory closures, labor shortages and other resource constraints. While the future impact is currently uncertain, the inability to II-3
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control the spread of COVID-19 could cause any one of these adverse impacts, or combination of adverse impacts, to have a material impact on our financial results.
Beginning in the second quarter of 2021, QVC saw increased product shortages as a result of high market demand in some product categories such as home and electronics. QVC also experienced escalating shipping disruptions due to challenges in the global supply chain and labor market. These factors impacted QVC's ability to offer certain goods and ship orders timely to its customers. In addition, QVC began to see increased inflationary pressures during the period. If these pressures persist, it may result in certain increased costs outpacing its pricing power in the near term. OnDecember 18, 2021 , QVC experienced a fire at itsRocky Mount, Inc. fulfillment center inNorth Carolina . Rocky Mount was the QVC'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 will be closed for the foreseeable future. QVC has taken steps to mitigate disruption to operations including diverting inbound orders to its other fulfillment centers and will continue to leverage its existing fulfillment centers in the near-term. For the year endedDecember 31, 2021 , QVC incurred fire-related costs including$134 million in loss on inventory,$87 million in loss on fixed assets, and$29 million in other fire-related costs including$21 million of costs that were not fully reimbursable by QVC"s insurance policies, primarily related to shut-down pay and severance expense, that were netted with expected insurance recoveries (collectively, "Fire related costs, net"). While there can be no assurance, based on the provisions of QVC's insurance policies, and discussions with insurance carries, QVC has determined that recovery of certain fire-related costs is probable, and an insurance receivable balance of$129 million , net of$100 million of insurance proceeds received in advance, has been recorded as ofDecember 31, 2021 . As of the date of this report, QVC is still in the process of assessing damage to property and inventory and submitting relevant insurance claims. There is approximately$117 million of inventory at the Rocky Mount facility that is currently being assessed for damage and is included in Inventories in the consolidated balance sheet as ofDecember 31, 2021 . QVC anticipates any additional inventory losses will be covered by insurance policies. QVC expects to continue to record additional costs and recoveries until the property and inventory assessment is completed and the insurance claim is fully settled. While QVC has started taking steps to minimize the overall impact to the business, QVC expects a negative impact to net sales as a result of lost inventory as well as increased warehouse and logistics costs in 2022.
Strategies and Challenges
Televised Shopping Businesses. The goal of QVC is to extend its leadership in
video commerce, e-commerce, mobile commerce and social commerce by continuing to
create the world's most engaging shopping experiences, combining the best of
retail, media, and social, highly differentiated from traditional
brick-and-mortar stores or transactional e-commerce. QVC provides customers with
curated collections of unique products, made personal and relevant by the power
of storytelling. QVC curates experiences, conversations and communities for
millions of highly discerning shoppers, and also reach large audiences, across
its many platforms, for its thousands of brand partners.
QVC intends to employ several strategies to achieve these objectives. Among
these strategies are to (i) Curate special products at compelling values;
(ii) Extend video reach and relevance; (iii) Reimagine daily digital discovery;
(iv) Expand and engage its passionate community; and (v) Deliver joyful customer
service. In addition, QVC is exploring opportunities to evolve the International
operating model to pursue growth opportunities in a more leveraged way across
markets.
QVC's future net revenue growth will primarily depend on sales growth from
e-commerce, mobile platforms and applications via streaming video, additions of
new customers from households already receiving QVC's broadcast programming and
increased spending from existing customers. QVC's future net revenue may also be
affected by (i) the willingness of cable television and direct-to-home satellite
system operators to continue carrying QVC's programming service; (ii) QVC's
ability to maintain favorable channel positioning, which may become more
difficult due to governmental action or from distributors converting analog
customers to digital; (iii) changes in television viewing habits because of
personal video recorders, video-on-demand and Internet video services;
(iv) QVC's ability to source new and compelling products and (v) general
economic conditions.
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In July 2020 , QVC implemented a planned workforce reduction with the goal of
making the organizational structure streamlined and more efficient. As a result,
QVC recorded $20 million of severance expense during the year ended December 31,
2020 , which is recorded in selling, general and administrative expense.
The current economic uncertainty in various regions of the world in which our
subsidiaries and affiliates operate could adversely affect demand for their
products and services since a substantial portion of their 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 United States ("U.S.") or
other key markets, including Japan and Europe , continue to be uncertain or
deteriorate, 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 businesses' 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 QVC's expansion into new European and other markets.
The Company is currently unable to predict the extent of any of these potential
adverse effects.
Early decisions by the Biden Administration confirm continuity of a bipartisan
consensus in the U.S. government favoring increased confrontation of China in
trade practices and economic matters, national security and human rights. The
imposition of any new U.S. tariffs or other restrictions on Chinese imports or
the taking of other actions against China in the future, and any responses by
China , could impair QVC's ability to meet customer demand and could result in
lost sales or an increase in its cost of merchandise, which would have a
material adverse impact on its business and results of operations.
Zulily. Zulily's goal is to be part of its customers' daily routine, allowing
them to visit Zulily sites and discover a selection of fresh, new and affordable
merchandise curated for them every morning. Zulily intends to employ the
following strategies to achieve these goals and objectives: (i) acquire new
customers; (ii) increase customer loyalty and repeat purchasing; (iii) add new
vendors and strengthen existing vendor relationships; (iv) invest in mobile
platform and channels with which its customers want to engage; and (v) invest in
low cost supply chain systems in the U.S. and cross border.
Zulily has limited contractual assurances of continued supply, pricing or access
to new products, and vendors could change the terms upon which they sell to
Zulily or discontinue selling to Zulily for future sales at any time. As Zulily
grows, continuing to identify a sufficient number of new emerging brands and
smaller boutique vendors may become more and more of a challenge. If Zulily is
not able to identify and effectively promote these new brands, it may lose
customers to competitors. Even if Zulily identifies new vendors, it may not be
able to purchase desired merchandise in sufficient quantities or on acceptable
terms in the future, and products from alternative sources, if any, may be of a
lesser quality or more expensive than those from existing vendors. An inability
to purchase suitable merchandise on acceptable terms or to source new vendors
could have an adverse effect on Zulily's business.
To support its large and diverse base of vendors and its flash sales model that
requires constantly changing products, Zulily must incur costs related to its
merchandising team, photography studios and creative personnel. As Zulily grows,
it may not be able to continue to expand its product offerings in a
cost-effective manner. In addition, the variety in size and sophistication of
Zulily's vendors presents different challenges to its infrastructure and
operations. Zulily's emerging brands and smaller boutique vendors may be less
experienced in manufacturing and shipping, which may lead to inconsistencies in
quality, delays in the delivery of merchandise or additional fulfillment cost.
Zulily's larger national brands may impose additional requirements or offer less
favorable terms than smaller vendors related to margins and inventory ownership
and risk and may also be unable to ship products timely.
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Results of Operations-Consolidated
General. We provide in the tables below information regarding our Consolidated
Operating Results and Other Income and Expense, as well as information regarding
the contribution to those items from our principal reportable segments. The
"Corporate and other" category consists of our consolidated subsidiary
Cornerstone, along with various cost and equity method investments. For a more
detailed discussion and analysis of the financial results of the principal
reporting segments, see "Results of Operations - Businesses" below.
Operating Results
Years ended December 31,
2021 2020 2019
amounts in millions
Revenue
QxH $ 8,277 8,505 8,277
QVC International 3,077 2,967 2,709
Zulily 1,453 1,636 1,571
Corporate and other 1,238 1,070 901
Inter-segment eliminations (1) (1) -
Consolidated Qurate Retail $ 14,044 14,177 13,458
Operating Income (Loss)
QxH $ 1,018 1,128 973
QVC International 489 439 354
Zulily (469) (12) (1,091)
Corporate and other 49 17 (52)
Consolidated Qurate Retail $ 1,087 1,572 184
Adjusted OIBDA
QxH $ 1,439 1,547 1,536
QVC International 562 510 446
Zulily (12) 83 48
Corporate and other 91 58 (1)
Consolidated Qurate Retail $ 2,080 2,198 2,029
Revenue. Our consolidated revenue decreased 0.9% and increased 5.3% for the
years ended
QxH,QVC International and Zulily revenue decreased$228 million , increased$110 million , and decreased$183 million , respectively, during the year endedDecember 31, 2021 , as compared to the same period in the prior year. See "Results of Operations - Businesses" below for a more complete discussion of the results of operations of QVC and Zulily. Corporate and other revenue increased$168 million for the year endedDecember 31, 2021 , as compared to the corresponding period in the prior year due entirely to an increase in revenue at Cornerstone due to strong customer demand in the home category. QxH,QVC International and Zulily revenue increased$228 million ,$258 million , and$65 million , respectively, during the year endedDecember 31, 2020 compared to the same period in the prior year. See "Results of Operations - Businesses" below for a more complete discussion of the results of operations of QVC and Zulily. Corporate and other revenue increased$169 million for the year endedDecember 31, 2020 , as compared to the corresponding prior year period due to an increase in Cornerstone revenue of$169 million as a result of strong customer response in the home category due to increased demand for home furnishings, interior décor and outdoor living items. II-6 Table of Contents
Operating income (loss). Our consolidated operating income decreased
Zulily operating losses increased$457 million for the year endedDecember 31, 2021 , as compared to the corresponding prior year period, primarily due to impairment of intangible assets at Zulily during the fourth quarter of 2021.QxH andQVC International operating income decreased$110 million and increased$50 million , respectively, for the year endedDecember 31, 2021 , compared to the same period in the prior year. See "Results of Operations - Businesses" below for a more complete discussion of the results of operations of QVC and Zulily. Operating income for Corporate and other improved$32 million for the year endedDecember 31, 2021 , as compared to the corresponding period in the prior year, due to revenue growth across Cornerstone's portfolio and lower promotional activity resulting in better margin performance. Zulily operating losses decreased$1,079 million for the year endedDecember 31, 2020 , as compared to the corresponding prior year period, primarily due to no impairment of intangible assets at Zulily compared to the impairment taken in the prior year.QxH andQVC International operating income increased$155 million and$85 million , respectively, for the year endedDecember 31, 2020 , as compared to the corresponding prior year period. See "Results of Operations - Businesses" below for a more complete discussion of the results of operations of QVC and Zulily. Operating income for Corporate and other improved$69 million for the year endedDecember 31, 2020 , as compared to the corresponding prior year period, primarily due to a reduction in operating losses at Cornerstone as a result of strong home category revenue and product margin performance. Adjusted OIBDA. To provide investors with additional information regarding our financial results, we also disclose Adjusted OIBDA, which is a non-GAAP financial measure. We define Adjusted OIBDA as operating income (loss) plus depreciation and amortization, stock-based compensation, separately reported litigation settlements, transaction related costs (including restructuring, integration, and advisory fees), impairments and fire related costs. Our chief operating decision maker and management team use this measure of performance in conjunction with other measures to evaluate our businesses and make decisions about allocating resources among our businesses. We believe this is an important indicator of the operational strength and performance of our businesses by identifying those items that are not directly a reflection of each business' performance or indicative of ongoing business trends. In addition, this measure allows us to view operating results, perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance. Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, net income, cash flows provided by operating activities and other measures of financial performance prepared in accordance withU.S. generally accepted accounting principles. The following table provides a reconciliation of Operating income (loss) to Adjusted OIBDA. Year ended December 31, 2021 2020 2019 amounts in millions Operating income (loss)$ 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
Consolidated Adjusted OIBDA decreased $118 million and increased $169 million
for the years ended December 31, 2021 and 2020, respectively, as compared to the
corresponding prior year periods.
QxH, QVC International , and Zulily Adjusted OIBDA decreased $108 million ,
increased $52 million , and decreased $95 million and for the year ended December
31, 2021 , respectively, as compared to the corresponding prior year period. See
"Results of Operations - Businesses" below for a more complete discussion of the
results of operations of QVC and Zulily. Corporate and other Adjusted OIBDA
increased $33 million for the year ended December 31, 2021 , as
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compared to the corresponding period in the prior year due to higher Adjusted OIBDA at Cornerstone due to strong home category revenue and product margin performance.
QxH,QVC International , and Zulily Adjusted OIBDA increased$11 million ,$64 million and$35 million for the year endedDecember 31, 2020 , respectively, as compared to corresponding prior year period. See "Results of Operations - Businesses" below for a more complete discussion of the results of operations of QVC and Zulily. Corporate and other Adjusted OIBDA increased$59 million for the year endedDecember 31, 2020 , as compared to the corresponding period in the prior year due to higher Adjusted OIBDA at Cornerstone due to strong home category revenue and product margin performance.
Other Income and Expense
Components of Other Income (Expense) are presented in the table below.
Years ended December 31,
2021 2020 2019
amounts in millions
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 Other income (expense)$ (449) (521) (806) Interest expense. Interest expense increased$60 million and$34 million for the years endedDecember 31, 2021 and 2020, respectively, as compared to the corresponding prior year periods. The increase for the year endedDecember 31, 2021 is due to dividends declared and paid related to our Preferred Stock, recorded through interest expense. The increase for the year endedDecember 31, 2020 is due to QVC refinancing its borrowings on its senior secured credit facility with newly issued senior secured notes, which have higher interest rates, as well as dividends incurred and paid related to the Preferred Stock during the period, partially offset by lower outstanding debt balances due to repayment of amounts outstanding on QVC's senior secured credit facility.
Share of earnings (losses) of affiliates. Share of losses of affiliates
decreased
The decrease in 2021 is related to the decrease in the Company's alternative energy entities that have either been sold or are being wound down as the federal tax credits expire. The decrease of loss in 2020 is due to fewer losses related to the Company's alternative energy solutions entities compared to the prior year, almost completely offset by an increase in share of losses due to an other than temporary impairment of QVC'sChina equity method investment. The alternative energy entities typically operate at a loss, and the Company records its share of such losses, but have favorable tax attributes and credits, which are recorded in the Company's tax accounts. II-8
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Realized and unrealized gains (losses) on financial instruments. Realized and
unrealized gains (losses) on financial instruments are comprised of changes in
the fair value of the following:
Years ended December 31,
2021 2020 2019
amounts in millions
Equity securities $ 77 (1) (22)
Exchangeable senior debentures (130) (277) (337)
Indemnification asset (21) 143 123
Other financial instruments 173 25 (15)
$ 99 (110) (251)
The changes in these accounts are due primarily to market factors and changes in
the fair value of the underlying stocks or financial instruments to which these
relate. The increase from loss to gain in year ended December 31, 2021 as
compared to the corresponding prior year period was primarily due to a decrease
in unrealized losses on the Company's exchangeable senior debentures driven by
less growth in stock prices of the securities underlying the debentures than the
prior year, an increase in unrealized gains related to derivative instruments
which were settled, and an increase from the unrealized gain related to equity
securities, partially offset by an unrealized loss on the indemnification asset
from a gain in 2020. The decrease in losses for the year ended December 31, 2020
as compared to the corresponding prior year period was primarily driven by a
decrease in unrealized losses on the Company's exchangeable senior debentures
driven by less growth in stock prices of the securities underlying the
debentures than the prior year, a decrease in unrealized losses related to
derivative instruments, a decrease in unrealized losses related to equity
securities, and an increase in unrealized gains on the indemnification asset
Gains (losses) on transactions, net. Gains (losses) on transactions, net,
decreased $214 million and increased $225 million for the years ended December
31, 2021 and 2020, respectively, as compared to the corresponding prior year
periods. The change in gains (losses) on transactions, net for the year ended
December 31, 2020 is due to the sale of one of the Company's alternative energy
investments during the third quarter of 2020, as compared to no other
transactions during 2021 or 2019. For the 2020 sale, the Company received total
cash consideration of $272 million and recorded a gain of $224 million on the
sale of the alternative energy investment.
Tax sharing income (expense) with Liberty Broadband. The Company has a tax
sharing agreement with Liberty Broadband. As a result, the Company recognized
tax sharing income of $10 million for the year ended December 31, 2021 , and tax
sharing expense of $39 million and $26 million for the years ended December 31,
2020 and 2019, respectively.
Other, net. Other, net increased $26 million and decreased $38 million for the
years ended December 31, 2021 and 2020, respectively, when compared to the
corresponding prior year period. The activity captured in Other, net is
primarily attributable to gains (losses) on early extinguishment of debt,
foreign exchange gains (losses) and interest income. The increase in Other, net
for the year ended December 31, 2021 , as compared to the same period in the
prior year, was a result of no debt retirements with extinguishment
gains/(losses) in the year ended December 31, 2021 . The decrease in other, net
for the year ended December 31, 2020 , as compared to the same period in the
prior year, is primarily due to a loss on extinguishment of debt of $40 million
primarily related to the retirement of the QVC 5.125% Senior Secured Notes due
2022.
Income taxes. The Company had an income tax expense of $217 million , an income
tax benefit of $211 million and income tax benefit of $217 million for the years
ended December 31, 2021 , 2020 and 2019, respectively. Our effective tax rate
for the years ended December 31, 2021 , 2020 and 2019 was 34.0%, 20.1% and 34.9%
respectively.
In 2021 the effective tax rate was higher than the U.S. federal tax rate of 21%
primarily due to foreign tax expense, state income tax expense, the impairment
of goodwill that is not deductible for tax purposes, and non-deductible interest
expense related to preferred stock, partially offset by benefits from tax
credits generated by our alternative energy investments.
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For the year endedDecember 31, 2020 , the Company recorded an income tax benefit. The 2020 tax benefit was primarily driven by the impacts of a corporate realignment and tax credits generated by alternative energy investments. See note 8 to the accompanying consolidated financial statements for more information related to the corporate realignment. In 2019 the effective tax rate was higher than theU.S. federal tax of 21% primarily due to tax benefits from tax credits and incentives generated by our alternative energy investments and tax benefits from losses generated in 2019 that were eligible for carryback to tax years with federal income tax rates greater than theU.S. statutory tax rate of 21%, partially offset by a goodwill impairment that is not deductible for tax purposes and an increase in the valuation allowance against certain deferred tax assets. Net earnings (loss). We had net earnings of$421 million ,$1,262 million , and net losses of$405 million for the years endedDecember 31, 2021 , 2020 and 2019, respectively. The change in net earnings (loss) was the result of the above-described fluctuations in our revenue, expenses and other gains and losses.
Liquidity and Capital Resources
As ofDecember 31, 2021 substantially all of our cash and cash equivalents are invested inU.S. Treasury securities, other government securities or government guaranteed funds, AAA rated money market funds and other highly rated financial and corporate debt instruments. The following are potential sources of liquidity: available cash balances, equity issuances, dividend and interest receipts, proceeds from asset sales, debt (including availability under QVC's bank credit facilities, as discussed in note 6 of the accompanying consolidated financial statements), and cash generated by the operating activities of our wholly-owned subsidiaries. Cash generated by the operating activities of our subsidiaries is only a source of liquidity to the extent such cash exceeds the working capital needs of the subsidiaries and is not otherwise restricted. For example, under QVC's bond indentures, it is able to pay dividends or make other restricted payments if it is not in default on its senior secured notes and its consolidated leverage ratio is no greater than 3.5 to 1.0. In addition, under QVC's bank credit facility it is able to pay dividends or make other restricted payments if it is not in default on the bank credit facility and its consolidated leverage ratio is no greater than 4.0 to 1.0. Further, under QVC's bond indentures and the bank credit facility credit agreement, unlimited dividends are permitted to service the debt ofQurate Retail so long as there is no default (i.e., no leverage test is needed). As ofDecember 31, 2021 the Company's leverage ratio was 2.1. The Company's issuer debt credit rating did not change during the year endedDecember 31, 2021 .Qurate Retail and its subsidiaries are in compliance with their debt covenants as ofDecember 31, 2021 . As ofDecember 31, 2021 ,Qurate Retail's liquidity position consisted of the following: Cash and cash equivalents amounts in millions QVC $ 510 Zulily 6 Corporate and other 71 Total Qurate Retail $ 587 To the extent that the Company recognizes any taxable gains from the sale of assets, we may incur tax expense and be required to make tax payments, thereby reducing any cash proceeds. Additionally, we have$2.75 billion available for borrowing under QVC's bank credit facility atDecember 31, 2021 . As ofDecember 31, 2021 , QVC had approximately$272 million of cash and cash equivalents held in foreign subsidiaries that is available for domestic purposes with no significant tax consequences upon repatriation to theU.S. QVC accrues taxes on the unremitted earnings of its international subsidiaries. Approximately 79% of this foreign cash balance was that ofQVC Japan . QVC owns 60% ofQVC Japan and shares all profits and losses with the 40% minority interest holder, Mitsui
&
Co, LTD.
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Additionally, our operating businesses have generated, on average, more than
$1 billion in annual cash provided by operating activities over the prior three
years and we do not anticipate any significant reductions in that amount in
future periods.
Years ended December 31,
2021 2020 2019
Cash Flow Information amounts in millionsNet cash provided (used) by operating activities$ 1,225 2,455 1,284 Net cash provided (used) by investing activities$ (501) (161) (600) Net cash provided (used) by financing activities$ (914) (2,181) (661) During the year endedDecember 31, 2021 ,Qurate Retail's primary uses of cash were payments for issuance of financial instruments of$694 million , payment of cash dividends of$563 million , repurchases of common stock of$365 million , capital expenditures of$244 million , investments in and loans to equity method investments of$202 million and expenditures for television distribution rights of$187 million , partially offset by net debt borrowings of$443 million , proceeds from settlements of financial assets of$311 million and proceeds from dispositions of investments of$81 million . The projected uses ofQurate Retail's cash in the next year, outside of normal operating expenses (inclusive of tax payments), are the costs to service outstanding debt, approximately$320 million for estimated interest payments on outstanding debt, including corporate level and other subsidiary debt, anticipated capital improvement spending of approximately$290 million , the repayment of certain debt obligations, the potential buyback of common stock under the approved share buyback program, payment of dividends to the holders of the Preferred Stock, other forms of capital returns to investors and additional investments in existing or new businesses. The Company also may be required to make net payments of income tax liabilities to settle items under discussion with tax authorities. 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.
Off-Balance Sheet Arrangements and Aggregate Material Cash Requirements
In connection with agreements for the sale of assets by our Company, we may
retain liabilities that relate to events occurring prior to the sale, such as
tax, environmental, litigation and employment matters. We generally indemnify
the purchaser in the event that a third party asserts a claim against the
purchaser that relates to a liability retained by us. These types of
indemnification obligations may extend for a number of years. We are unable to
estimate the maximum potential liability for these types of indemnification
obligations as the sale agreements may not specify a maximum amount and the
amounts are dependent upon the outcome of future contingent events, the nature
and likelihood of which cannot be determined at this time. Historically, we
have not made any significant indemnification payments under such agreements and
no amount has been accrued in the accompanying consolidated financial statements
with respect to these indemnification obligations.
We have contingent liabilities related to legal and tax proceedings and other
matters arising in the ordinary course of business. Although it is reasonably
possible we may incur losses upon conclusion of such matters, an estimate of any
loss or range of loss cannot be made. In the opinion of management, it is
expected that amounts, if any, which may be required to satisfy such
contingencies will not be material in relation to the accompanying consolidated
financial statements.
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Information concerning the amount and timing of required payments, both accrued
and off-balance sheet, under our material cash requirements, excluding uncertain
tax positions as it is undeterminable when payments will be made, is summarized
below.
Payments due by period
Less than After
Total 1 year 2 - 3 years 4 - 5 years 5 years
amounts in millions
Consolidated material cash requirements
Long-term debt (1) $ 6,883 3 1,356 1,087 4,437
Interest payments (2) 4,329 321 627 513 2,868
Finance and operating lease obligations 651 107 181 133 230
Preferred Stock (3) 2,197 101 202 202 1,692
Purchase orders and other obligations (4) 3,594 3,524 54 12 4 Total$ 17,654 4,056 2,420 1,947 9,231
Amounts are reflected in the table at the outstanding principal amount,
assuming the debt instruments will remain outstanding until the stated
maturity date, and may differ from the amounts stated in our consolidated
(1) balance sheet to the extent debt instruments (i) were issued at a discount or
premium or (ii) have elements which are reported at fair value in our
consolidated balance sheets. Amounts do not assume additional borrowings or
refinancings of existing debt.
Amounts (i) are based on our outstanding debt at
(2) assume the interest rates on our variable rate debt remain constant at the
maturity.
This amount reflects the annual 8.0% dividend on shares of Preferred Stock
(3) outstanding as of
(4) Amounts include open purchase orders for inventory and non-inventory
purchases along with other material cash requirements.
Critical Accounting Estimates
The preparation of our financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Listed below are the accounting estimates that we believe are critical to our financial statements due to the degree of uncertainty regarding the estimates or assumptions involved and the magnitude of the asset, liability, revenue or expense being reported. All of these accounting estimates and assumptions, as well as the resulting impact to our financial statements, have been discussed with the audit committee of our board of directors. Fair Value Measurements of Non-Financial Instruments. Our non-financial instrument valuations are primarily comprised of our annual assessment of the recoverability of our goodwill and other nonamortizable intangible assets, such as tradenames and our evaluation of the recoverability of our other long-lived assets upon certain triggering events, and our determination of the estimated fair value allocation of net tangible and identifiable intangible assets acquired in business combinations. If the carrying value of our long-lived assets exceeds their undiscounted cash flows, we are required to write the carrying value down to fair value. Any such write down is included in impairment of long-lived assets in our consolidated statements of operations. A high degree of judgment is required to estimate the fair value of our long-lived assets. We may use quoted market prices, prices for similar assets, present value techniques and other valuation techniques to prepare these estimates. We may need to make estimates of future cash flows and discount rates as well as other assumptions in order to implement these valuation techniques. Due to the high degree of judgment involved in our estimation techniques, any value ultimately derived from our long-lived assets may differ from our estimate of fair value. As each of our operating segments has long-lived assets, this critical accounting policy affects the financial position and results of operations
of
each segment.
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As of
Goodwill Tradenames Total
amounts in millions
QxH $ 5,228 2,878 8,106
QVC International 855 - 855
Zulily 244 160 404
Corporate and other 12 - 12
$ 6,339 3,038 9,377
We perform our annual assessment of the recoverability of our goodwill and other non-amortizable intangible assets during the fourth quarter of each year, or more frequently, if events or circumstances indicate impairment may have occurred. We utilize a qualitative assessment for determining whether a quantitative goodwill and other non-amortizable intangible asset impairment analysis is necessary. The accounting guidance permits entities to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative goodwill impairment test. In evaluating goodwill on a qualitative basis the Company reviews the business performance of each reporting unit and evaluates other relevant factors as identified in the relevant accounting guidance to determine whether it is more likely than not that an indicated impairment exists for any of our reporting units. The Company considers whether there are any negative macroeconomic conditions, industry specific conditions, market changes, increased competition, increased costs in doing business, management challenges, the legal environments and how these factors might impact company specific performance in future periods. As part of the analysis the Company also considers fair value determinations for certain reporting units that have been made at various points throughout the current and prior years for other purposes. In 2021 and 2019, impairments of$233 million and$440 million were recorded to Zulily's goodwill, respectively. There were no goodwill impairments in 2020. In 2021 and 2019, impairments of$130 million and$580 million were recorded to Zulily's tradename, respectively. Also in 2019, an impairment of$147 million was recorded to HSN's tradenames. There were no impairments of other intangible assets in 2020. Retail Related Adjustments and Allowances. QVC records adjustments and allowances for sales returns, inventory obsolescence and uncollectible receivables. Each of these adjustments is estimated based on historical experience. Sales returns are calculated as a percent of sales and are netted against revenue in its consolidated statements of operations. For the years endedDecember 31, 2021 , 2020 and 2019, sales returns represented 15.3%, 15.6% and 17.3% of QVC's gross product revenue, respectively. The inventory obsolescence reserve is calculated as a percent of QVC's inventory at the end of a reporting period based on, among other factors, the aging of its inventory balance, the likely method of disposition, and the estimated recoverable values based on historical experience of inventory markdowns and liquidation. The change in the reserve is included in cost of goods sold in the consolidated statements of operations. As ofDecember 31, 2021 , QVC's inventory was$1,355 million , which was net of the obsolescence reserve of$122 million . As ofDecember 31, 2020 , inventory was$1,119 million , which was net of the obsolescence reserve of$170 million . QVC's allowance for credit losses is calculated as a percent of accounts receivable at the end of a reporting period, and is based on historical experience, with the change in such allowance recorded as a provision for credit losses in selling, general, and administrative ("SG&A") expenses in the consolidated statements of operations. Trade accounts receivable (including installment payment, credit card and customer receivables) were$1,521 million and$1,630 million , as ofDecember 31, 2021 and 2020, respectively. Allowance for credit losses related to uncollectible trade accounts receivable was$86 million and$108 million as ofDecember 31, 2021 and 2020, respectively. Each of these estimates requires management judgment and may not reflect actual results. Income Taxes. We are required to estimate the amount of tax payable or refundable for the current year and the deferred income tax liabilities and assets for the future tax consequences of events that have been reflected in our financial statements or tax returns for each taxing jurisdiction in which we operate. This process requires our management to make judgments regarding the timing and probability of the ultimate tax impact of the various agreements and transactions that we enter into. Based on these judgments we may record tax reserves or adjustments to valuation allowances on deferred tax assets to reflect the expected realizability of future tax benefits. Actual income taxes could vary from these estimates due to future changes in income tax law, significant changes in the jurisdictions in which we operate, II-13
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our inability to generate sufficient future taxable income or unpredicted results from the final determination of each year's liability by taxing authorities. These changes could have a significant impact on our financial position.
Results of Operations-Businesses
QVC
QVC 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. In theU.S. , QVC's televised shopping programs, including live and recorded content, are broadcast across multiple channels nationally on a full-time basis, including QVC, QVC2, QVC3, HSN, and HSN2. The Company'sU.S. programming is also available on QVC.com and HSN.com, QVC's "U.S. websites"; virtual multichannel video programming distributors (including Hulu + Live TV, AT&T TV and YouTube TV); applications via streaming video; Facebook Live, Roku, Apple TV, Amazon Fire, Xfinity Flex and Samsung TV Plus; mobile applications; social pages and over-the-air broadcasters. QVC's digital platforms enable consumers to purchase goods offered on its broadcast programming, along with a wide assortment of products that are available only on itsU.S. websites. QVC.com and its other digital platforms (including its mobile applications, social pages and others) are natural extensions of its business model, allowing customers to engage in its shopping experience wherever they are, with live or on-demand content customized to the device they are using. In addition to offering video content, QVC'sU.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 theU.S. , primarily inGermany ,Austria ,Japan , theUnited Kingdom ("U.K."), theRepublic of Ireland , andItaly . In some of the countries where QVC operates, QVC's televised shopping programs are broadcast across multiple QVC channels: QVC Style and QVC2 inGermany and QVC Beauty, QVC Extra and QVC Style in theU.K. Similar to theU.S. , QVC's international businesses also engage customers via websites, mobile applications and social pages. QVC's international business employs product sourcing teams who select products tailored to the interests of each local market.
QVC's operating results were as follows:
Years ended December 31,
2021 2020 2019
amounts in millions
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 compensation and
transaction related costs) (1,194) (1,211) (1,088)
Adjusted OIBDA 2,001 2,057 1,982
Fire related costs, net (21) - -Impairment of intangible assets - - (147) Stock-based compensation (44) (37) (39) Depreciation and amortization (429) (453) (468) Transaction related costs - - (1) Operating income$ 1,507 1,567 1,327 II-14 Table of Contents
Net revenue was generated from the following geographical areas:
Years ended December 31,
2021 2020 2019
amounts in millions
QxH $ 8,277 8,505 8,277$ 11,354 11,472 10,986 QVC's consolidated net revenue decreased 1.0% and increased 4.4% for the years endedDecember 31, 2021 and 2020, respectively, as compared to the corresponding prior years. The 2021 decrease of$118 million in net revenue was primarily due to a 1.3% decrease in units sold, driven by QxH, a decline of 0.8% in average selling price per unit ("ASP"), primarily driven by QxH, and a decrease of$18 million in shipping and handling revenue across both segments. These declines were partially offset by an$84 million decrease in estimated product returns, primarily driven by QxH, and$57 million in favorable foreign exchange rates.
The 2020 increase of
During the years endedDecember 31, 2021 and 2020, 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 theU.S. Dollar strengthens against these foreign currencies in the future, QVC's revenue and operating cash flow will be negatively affected. In discussing QVC's operating results, the term "currency exchange rates" refers to the currency exchange rates QVC uses to convert the operating results for all countries where the functional currency is not theU.S. dollar. QVC calculates 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 this 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. The percentage change in net revenue for QVC inU.S. Dollars and in constant currency was as follows: Year ended December 31, 2021 Year ended December 31, 2020 Foreign Foreign Currency Currency U.S. dollars Exchange Impact Constant currency U.S. dollars Exchange Impact Constant currency QxH (2.7) % - % (2.7) % 2.8 % - % 2.8 % QVC International 3.7 % 1.9 % 1.8 % 9.5 % 2.0 % 7.5 %
In 2021, the QxH net revenue decrease was primarily due to a 1.4% decrease in units shipped, a 1.7% decline in ASP and a$12 million decrease in shipping and handling revenue, partially offset by a$60 million decrease in estimated product returns. For the year endedDecember 31, 2021 , QxH experienced shipped sales growth in apparel and accessories with declines in all other categories. The decrease in estimated product returns was primarily driven by a decrease in sales volume partially offset by a shift in product mix to higher return rate categories.QVC-International net revenue growth in constant currency was primarily due to a 1.8% increase in ASP, driven by ASP increases inJapan and theU.K. , and a$24 million decrease in estimated product returns driven byGermany . These increases were partially offset by a 0.9% decrease in units shipped.QVC-International experienced shipped sales growth in constant currency in all categories except electronics and beauty. II-15
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In 2020, the QxH net revenue increase was primarily due to a 1.8% increase in units shipped, a$171 million decrease in estimated product returns and a$7 million increase in shipping and handling revenue, partially offset by a 1.3% decline in ASP. For the year endedDecember 31, 2020 , QxH experienced shipped sales growth in home and accessories with declines in all other categories. The decrease in estimated product returns was primarily driven by a shift in product mix to lower return rate categories, partially offset by an increase in sales volume. The increase in shipping and handling revenue was primarily driven by the increase in units shipped and fewer promotional offers.QVC-International net revenue growth in constant currency was primarily due to a 4.6% increase in units shipped, driven by increases in units shipped across all markets, a 1.5% increase in ASP, driven by ASP increases inGermany and theU.K. and a$15 million increase in shipping and handling revenue driven by increases in all markets exceptItaly , primarily due to the increase in units shipped.QVC-International experienced shipped sales growth in constant currency in home, beauty and electronics with declines in all other categories. QVC's cost of goods sold as a percentage of net revenue was 64.9%, 64.7% and 65.1% for the years endedDecember 31, 2021 , 2020 and 2019, respectively. The increase in cost of goods sold as a percentage of revenue in 2021 is primarily due to increased warehouse expenses driven by higher wages due to labor shortages and increased freight costs at QxH. These increases were partially offset by decreased obsolescence as a result of less aged inventory at QxH and product margin favorability. Product margin favorability was primarily driven byQVC-International , partially offset by margin pressure at QxH. For 2020, the decrease in cost of goods sold as a percentage of revenue in 2020 is primarily due strategic promotional and pricing initiatives, which decreased product costs as a percentage of net revenue across both segments and favorable estimated product returns at QxH, which was partially offset by increased fulfillment costs at QxH, primarily related to increased freight charges. QVC's operating expenses are principally comprised of commissions, order processing and customer service expenses, credit card processing fees, and telecommunications expenses. Operating expenses increased$5 million or 1% and$18 million or 2% for the years endedDecember 31, 2021 and 2020, respectively, as compared to the prior years. The increase in 2021 was primarily due to a$9 million increase in customer service expenses, driven by QxH, due to higher labor costs. This increase was partially offset by a decrease in commissions and credit card fees primarily due to lower sales volume at QxH. The increase in 2020 was primarily due to a$15 million increase in customer service expenses, primarily at QxH, a$6 million increase in credit card fees at across both segments, and a$5 million increase due to unfavorable exchange rates partially offset by a$6 million decrease in commissions, primarily at QxH. The increase in customer service expenses is primarily driven by increased call volume during the year. The increase in credit card fees is primarily due to increased sales and lower sales penetration of QVC'sU.S. Private Label Credit Cards, which do not charge credit card fees. The decrease in commissions is primarily due to increased digital penetration. QVC's SG&A expenses (excluding transaction related costs as defined below and stock-based compensation) include personnel, information technology, provision for credit losses, production costs and marketing and advertising expense. Such expenses decreased$17 million , and were 10.5% of net revenue for the year endedDecember 31, 2021 as compared to the prior year and increased$123 million to 10.6% of net revenue for the year endedDecember 31, 2020 as compared to the prior year. The decrease in 2021 was primarily due to a$74 million decrease in personnel costs across both segments and a$39 million decrease in estimated credit losses primarily at QxH. These decreases were partially offset by an$80 million increase in marketing primarily at QxH, a$9 million increase due to unfavorable exchange rates, and an increase in IT expenses. The decrease related to personnel costs was primarily driven by a decrease to QVC's incentive pay across both segments. The decrease to estimated credit losses was due to lower loss rates in the current year, a favorable shift in product category mix and favorable adjustments of prior periods based on actual collections. The increase in marketing costs in 2021 was driven by greater investment in advertising in addition to the increasing cost of digital marketing. The increase in 2020 was primarily due to a$111 million increase in personnel costs across both segments, a$53 million increase in online marketing primarily at QxH and$7 million in unfavorable exchange rates. These increases were partially offset by a$34 million decrease in estimated credit losses primarily at QxH, a$14 million decline in outside services primarily at QxH and a$10 million decrease in travel expenses across both segments. The increase related to personnel costs was primarily due to an increase to QVC's estimated incentive pay across both segments, and a work from II-16
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home allowance as a result of COVID-19, which was partially offset by the closure of QVC's operations inFrance in 2019. The decrease to estimated credit losses was due to favorable adjustments based on actual collections, a decrease in the number of installment counts taken by customers, the implementation of fraud screening and a favorable shift in product category mix. The decrease in travel expenses was primarily due to less travel as a result of COVID-19. Fire related costs, net includes expenses related to the Rocky Mount fulfillment center fire net of expected and received insurance recoveries. QVC recorded$21 million of fire related costs, net for the year endedDecember 31, 2021 including losses on inventory and fixed assets that were offset by insurance recoveries, as well as costs that were not fully reimbursable by QVC's insurance policies primarily related to shut-down pay and severance expense. There was no impairment loss recorded by QVC for the years endedDecember 31, 2021 and 2020. QVC recorded an impairment loss of$147 million for the year endedDecember 31, 2019 related to the decrease in the fair value of the HSN indefinite-lived tradename as a result of the quantitative assessment that was performed by the Company (see note 5 to the accompanying consolidated financial statements).
There were no transaction related costs recorded by QVC for the years ended
Stock-based compensation includes compensation related to options and restricted stock granted to certain officers and employees. QVC recorded$44 million ,$37 million and$39 million of stock-based compensation expense for the years endedDecember 31, 2021 , 2020 and 2019, respectively. The increase in 2021 was primarily due to fewer cancellations of restricted stock awards and the issuance of awards to certain officers. There was no significant change for 2020. Depreciation and amortization decreased$24 million and$15 million for the years endedDecember 31, 2021 andDecember 31, 2020 , respectively, as compared to the corresponding prior years. Depreciation and amortization included$62 million ,$66 million and$66 million of acquisition related amortization during the years endedDecember 31, 2021 , 2020, and 2019, respectively. For the year endedDecember 31, 2021 , property and equipment depreciation decreased primarily due to the sale of QVC'sLancaster andSan Antonio facilities during 2021. The increase in software amortization for the year endedDecember 31, 2021 is due to software additions including QVC's new Enterprise Resource Planning ("ERP") system. The decrease in channel placement amortization and related expenses for the year endedDecember 31, 2021 was due to lower subscriber counts. For the year endedDecember 31, 2020 , property and equipment depreciation decreased primarily due to the disposition of assets inFrance in 2019.
Zulily
Zulily's operating results for the last three years were as follows:
Years ended
December 31, December 31, December 31,
2021 2020 2019
amounts in millions
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
compensation and transaction related
costs) (298) (281) (302)
Adjusted OIBDA (12) 83 48
Stock-based compensation (13) (15) (15)
Depreciation and amortization (81) (80) (104)Impairment of intangible assets (363) -
(1,020)
Operating income (loss) $ (469) (12) (1,091)
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Net revenue consists primarily of sales of women's, children's and men's
apparel, children's merchandise and other product categories such as home,
accessories and beauty products. Zulily recognizes product sales at the time all
revenue recognition criteria has been met, which is generally at shipment. Net
revenue represents the sales of these items plus shipping and handling charges
to customers and private label credit card income, net of estimated refunds and
returns, store credits, and promotional discounts. Net revenue is primarily
driven by Zulily's active customers, the frequency with which customers purchase
and average order value.
Zulily's consolidated net revenue decreased 11.2% and increased 4.1% for the
years ended December 31, 2021 and December 31, 2020 , respectively, as compared
to the corresponding prior years. The decrease in net revenue for the year ended
December 31, 2021 was primarily attributed to a 15.3% decrease in total units
shipped resulting from an 18.1% decrease in active customers, predominately
driven by product scarcity, higher ad costs in online channels, and reduction in
marketing spend. This is partially offset by a 5.8% increase in average sale
price primarily to offset shipping costs. The increase in net revenue for the
year ended December 31, 2020 was primarily attributed to increases of 4.3% in
average sale price and 0.2% in total units shipped driven by increased demand
for online shopping and Zulily's merchandise as a result of stay-at-home orders
and the temporary closure of brick-and-mortar retail due to COVID-19.
Zulily's cost of goods sold as a percentage of net revenue was 77.6%, 75.1% and
75.0% for the years ended December 31, 2021 , 2020 and 2019, respectively. Cost
of goods sold as a percentage of net revenue increased for the years ended
December 31, 2021 and December 31, 2020 , as compared to the corresponding prior
years primarily due to higher shipping costs and increased wages in the
fulfilment centers, partially offset by favorable product margin.
Zulily's operating expenses are principally comprised of credit card processing
fees and customer service expenses. Operating expenses decreased for the year
ended December 31, 2021 , as compared to the same period in the prior year,
driven by decreased sales volumes. Operating expenses increased for the year
ended December 31, 2020 , as compared to the same period in the prior year,
driven by increased sales volumes.
Zulily's SG&A expenses include personnel related costs for general corporate
functions, marketing and advertising expenses and information technology. As a
percentage of net revenue, SG&A increased from 17.2% to 20.5% for the year ended
December 31, 2021 as compared to the year ended December 31, 2020 , primarily due
to sales deleverage, coupled with the prior year's recognition of a $10 million
reversal in a sales tax accrual which was originally recorded at the acquisition
date. As a percentage of net revenue, SG&A decreased from 19.2% to 17.2% for
the year ended December 31, 2020 as compared to the year ended December 31,
2019 , primarily due to lower marketing spending and more leverage attributable
to the increase in sales, coupled with the recognition of a $10 million reversal
in a sales tax accrual which was originally recorded at the acquisition date.
Zulily's stock-based compensation expense decreased 13.3% for the year ended
Zulily's stock-based compensation expense remained flat for the year ended
Zulily's depreciation and amortization expense remained flat for the year ended
Zulily's depreciation and amortization expense decreased by$24 million for the year endedDecember 31, 2020 , as compared to the corresponding period in the prior year primarily related to the amortization of Zulily's customer relationship asset following a utilization pattern assuming greater benefit earlier in the customer relationship life.
For discussion of the impairment of intangible assets in 2021 and 2019, see note 5 of the accompanying consolidated financial statements.
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