Annual report pursuant to Section 13 and 15(d)

Leases and Transponder Service Agreements

v3.22.4
Leases and Transponder Service Agreements
 12 Months Ended
Dec. 31, 2022
Leases and Transponder Service Agreements [Abstract]  
Lease of lessee disclosure
(9) Leases
The Company has finance lease agreements with transponder and transmitter network suppliers for the right to transmit its signals. QVC also has leases for data processing equipment, facilities, office space and land that are classified as operating leases. Our leases have remaining lease terms of less than 1 year to 20 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, 2022, 2021 and 2020, were as follows:
Year ended December 31,
(in millions) 2022 2021 2020
Finance lease cost
     Depreciation of leased assets $ 5  19  19 
     Interest on lease liabilities 3  8  8 
Total finance lease cost 8  27  27 
Operating lease cost (1) 73  42  39 
     Total lease cost $ 81  69  66 
(1) Included within operating lease costs were short-term lease costs and variable lease costs, which were not material to the financial statements.
The remaining weighted-average lease term and the weighted-average discount rate were as follows:
December 31, 2022
Weighted-average remaining lease term (years):
     Finance leases 1.9
     Operating leases 13.4
Weighted-average discount rate:
     Finance leases 2.1  %
     Operating leases 10.9  %
Supplemental balance sheet information related to leases was as follows:
December 31,
(in millions) 2022 2021
Operating Leases:
  Operating lease right-of-use assets $ 419  201 
  Accrued liabilities $ 35  26 
  Other long-term liabilities 377  177 
      Total operating lease liabilities $ 412  203 
Finance Leases:
   Property and equipment $ 17  277 
   Accumulated depreciation (13) (151)
     Property and equipment, net $ 4  126 
   Current portion of debt and finance lease obligations $ 2  20 
   Long-term portion of debt and finance lease obligations 2  137 
     Total finance lease liabilities $ 4  157 
Supplemental cash flow information related to leases for the years ended December 31, 2022, 2021 and 2020 was as follows:
Year ended December 31,
(in millions) 2022 2021 2020
Cash paid for amounts included in the measurement of lease liabilities:
     Operating cash flows for operating lease $ 57  38  44 
     Operating cash flows for finance leases 3  8  8 
     Financing cash flows for finance leases 6  18  18 
Right-of-use assets obtained in exchange for lease obligations:
      Operating leases 256  11  31 
      Finance leases $ —  11  — 
Future payments under noncancelable operating leases and finance leases with initial terms of one year or more as of December 31, 2022 consisted of the following:
(in millions) Finance leases Operating leases Total leases
2023 $ 3  74  77 
2024 1  66  67 
2025 —  56  56 
2026 —  48  48 
2027 —  49  49 
Thereafter —  550  550 
Total lease payments 4  843  847 
Less: imputed interest —  (431) (431)
Total lease liabilities $ 4  412  416 
Sale leaseback

In June 2022, QVC modified the finance lease for its distribution center in Ontario, California which reduced the term of the lease and removed QVC’s ability to take ownership of the distribution center at the end of the lease term. QVC will make annual payments over the modified lease term. Since the lease was modified and removed QVC’s ability to take ownership at the end of the lease term, the Company accounted for the modification similar to a sale and leaseback transaction and, as a result, QVC received net cash proceeds of $250 million and recognized a $240 million gain on the sale of the distribution center during the second quarter of 2022, calculated as the difference between the aggregate consideration received (including cash and forgiveness of the remaining financing obligation of $84 million) and the carrying value of the distribution center. The gain is included in gains on sale leaseback transactions in the consolidated statement of operations. The Company accounted for the modified lease as an operating lease and recorded a $37 million right-of-use asset and a $31 million operating lease liability, with the difference attributable to prepaid rent.

In July 2022, QVC sold five owned and operated properties located in the U.S. to an independent third party and received net cash proceeds of $443 million. Concurrent with the sale, the Company entered into agreements to lease each of the properties back from the purchaser over an initial term of 20 years with the option to extend the terms of the property leases for up to four consecutive terms of five years. QVC recognized a $277 million gain related to the successful sale leaseback during the third quarter of 2022 calculated as the difference between the aggregate consideration received and the carrying value of the properties. The Company accounted for the leases as operating leases and recorded a $207 million right-of-use asset and a $205 million operating lease liability, with the difference attributable to initial direct costs.
Bethlehem Operating Lease

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.