Annual report pursuant to Section 13 and 15(d)

Leases and Transponder Service Agreements

v3.20.4
Leases and Transponder Service Agreements
 12 Months Ended
Dec. 31, 2020
Leases and Transponder Service Agreements [Abstract]  
Leases of lessee disclosure
(9) Leases
The Company adopted ASC 842, Leases, on January 1, 2019 utilizing the modified retrospective transition approach and did not restate comparative periods.
The Company has finance lease agreements with transponder and transmitter network suppliers for the right to transmit its signals in the U.S. and Germany. The Company is also party to a finance lease agreement for data processing hardware and a warehouse.
QVC also leases data processing equipment, facilities, office space and land. These leases are classified as operating leases. Effective with the adoption of ASC 842 on January 1, 2019, operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future lease payments using our incremental borrowing rate. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Our leases have remaining lease terms of less than 1 year to 14 years, some of which may include the option to extend or terminate the leases.
The components of lease cost for the years ended December 31, 2020 and 2019, were as follows:
Year ended December 31,
(in millions) 2020 2019
Finance lease cost
     Depreciation of leased assets $ 19  20 
     Interest on lease liabilities 8  9 
Total finance lease cost 27  29 
Operating lease cost 39  32 
     Total lease cost $ 66  61 
For the year ended December 31, 2018, the Company recorded depreciation expense on finance leases (previously referred to as capital leases) of $14 million, and recorded operating lease expenses of $34 million.
The remaining weighted-average lease term and the weighted-average discount rate were as follows:
December 31, 2020
Weighted-average remaining lease term (years):
     Finance leases 8.5
     Operating leases 11.0
Weighted-average discount rate:
     Finance leases 5.1  %
     Operating leases 6.0  %
Supplemental balance sheet information related to leases was as follows:
December 31,
(in millions) 2020 2019
Operating Leases:
  Operating lease right-of-use assets $ 221  214 
  Accrued liabilities $ 25  28 
  Other long-term liabilities 195  190 
      Total operating lease liabilities $ 220  218 
Finance Leases:
   Property and equipment $ 278  282 
   Accumulated depreciation (141) (129)
     Property and equipment, net $ 137  153 
   Current portion of debt and finance lease obligations $ 18  18 
   Long-term portion of debt and finance lease obligations 150  163 
     Total finance lease liabilities $ 168  181 
Supplemental cash flow information related to leases for the years ended December 31, 2020 and 2019 was as follows:
Year ended December 31,
(in millions) 2020 2019
Cash paid for amounts included in the measurement of lease liabilities:
     Operating cash flows from operating lease $ 44  35 
     Operating cash flows from finance leases 8  9 
     Financing cash flows from finance leases 18  22 
Right-of-use assets obtained in exchange for lease obligations:
      Operating leases 31  151 
      Finance leases $ —  16 
Future payments under noncancelable operating leases and finance leases with initial terms of one year or more as of December 31, 2020 consisted of the following:
(in millions) Finance leases Operating leases Total leases
2021 $ 26  38  64 
2022 26  32  58 
2023 25  27  52 
2024 24  24  48 
2025 22  21  43 
Thereafter 89  167  256 
Total lease payments 212  309  521 
Less: imputed interest (44) (89) (133)
Total lease liabilities $ 168  220  388 
On October 5, 2018, QVC entered into a lease (“ECDC Lease”) for an East Coast distribution center. The 1.7 million square foot rental building is located in Bethlehem, Pennsylvania and has an initial term of 15 years. QVC obtained initial access to a portion of the ECDC Lease during March 2019 and obtained access to the remaining portion during September 2019. In total, QVC recorded a right of use asset of $141 million and an operating lease liability of $131 million relating to the ECDC Lease, with the difference attributable to prepaid rent. QVC is required to pay an initial base rent of $10 million per year, with payments that began in the third quarter of 2019 and increasing to $14 million per year, as well as all real estate taxes and other building operating costs. QVC also has the option to extend the term of the ECDC Lease for up to two consecutive terms of 5 years each and one final term of 4 years.