Qurate Retail, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Information About Liberty's Operating Segments

Information About Liberty's Operating Segments

9 Months Ended

Sep. 30, 2017

Information About Liberty's Operating Segments

Information About Liberty's Operating Segments

(13) Information About Liberty's Operating Segments

Liberty, through its ownership interests in subsidiaries and other companies, is primarily engaged in the video, online commerce and cable industries. Liberty identifies its reportable segments as (A) those consolidated subsidiaries that represent 10% or more of its consolidated annual revenue, annual Adjusted OIBDA or total assets and (B) those equity method affiliates whose share of earnings represent 10% or more of Liberty's annual pre-tax earnings.

Liberty evaluates performance and makes decisions about allocating resources to its operating segments based on financial measures such as revenue, Adjusted OIBDA, gross margin, average sales price per unit and revenue or sales per customer equivalent. In addition, Liberty reviews nonfinancial measures such as unique website visitors, number of units shipped, conversion rates and active customers, as appropriate.

Liberty defines Adjusted OIBDA as revenue less cost of sales, operating expenses, and selling, general and administrative expenses excluding all stock-based compensation. Liberty believes this measure is an important indicator of the operational strength and performance of its businesses, including each business's ability to service debt and fund capital expenditures. In addition, this measure allows management to view operating results and perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance. This measure of performance excludes depreciation and amortization, stock-based compensation, certain purchase accounting adjustments, separately reported litigation settlements and restructuring and impairment charges that are included in the measurement of operating income pursuant to GAAP. Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP. Liberty generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current prices.

For the nine months ended September 30, 2017, Liberty has identified the following consolidated subsidiaries as its reportable segments:

QVC – a consolidated subsidiary that markets and sells a wide variety of consumer products in the United States and several foreign countries, primarily by means of its televised shopping programs and via the Internet through its domestic and international websites and mobile applications.

zulily – a consolidated subsidiary that markets and sells unique products in the United States and several foreign countries through flash sales events, primarily through its desktop and mobile websites and mobile applications.

Liberty's operating segments are strategic business units that offer different products and services. They are managed separately because each segment requires different technologies, distribution channels and marketing strategies. The accounting policies of the segments are the same as those described in the Company's Summary of Significant Accounting Policies in the Annual Report on Form 10-K for the year ended December 31, 2016.

Performance Measures


	Three months ended September 30,
	2017			2016
			Adjusted		Adjusted
	Revenue		OIBDA	Revenue	OIBDA
	amounts in millions
QVC Group
QVC	$	2,010	412	1,948	393
zulily		367	12	359	18
Corporate and other		—	(8)	—	(5)
Inter-segment eliminations		(2)	—	(4)	—
Total QVC Group		2,375	416	2,303	406
Ventures Group
Corporate and other		6	(6)	109	(4)
Total Ventures Group		6	(6)	109	(4)
Consolidated Liberty	$	2,381	410	2,412	402


	Nine months ended September 30,
	2017			2016
			Adjusted		Adjusted
	Revenue		OIBDA	Revenue	OIBDA
	amounts in millions
QVC Group
QVC	$	5,954	1,314	6,024	1,271
zulily		1,093	53	1,080	72
Corporate and other		—	(18)	—	(17)
Inter-segment eliminations		(3)	—	(10)	—
Total QVC Group		7,044	1,349	7,094	1,326
Ventures Group
Corporate and other		16	(21)	391	8
Total Ventures Group		16	(21)	391	8
Consolidated Liberty	$	7,060	1,328	7,485	1,334

Other Information


	September 30, 2017
	Total assets		Investments in affiliates	Investment in Liberty Broadband	Capital expenditures
	amounts in millions
QVC Group
QVC	$	11,263	38	—	83
zulily		2,374	—	—	41
Corporate and other		343	198	—	—
Total QVC Group		13,980	236	—	124
Ventures Group
Corporate and other		7,467	337	4,068	2
Total Ventures Group		7,467	337	4,068	2
Consolidated Liberty	$	21,447	573	4,068	126

The following table provides a reconciliation of Consolidated segment Adjusted OIBDA to Operating income (loss) and Earnings (loss) from continuing operations before income taxes:


	Three months ended			Nine months ended
	September 30,			September 30,
	2017		2016	2017	2016
	amounts in millions
Consolidated segment Adjusted OIBDA	$	410	402	1,328	1,334
Stock-based compensation		(22)	(20)	(59)	(75)
Depreciation and amortization		(180)	(225)	(594)	(663)
Operating income (loss)		208	157	675	596
Interest expense		(88)	(92)	(267)	(277)
Share of earnings (loss) of affiliates, net		(86)	(22)	(122)	(21)
Realized and unrealized gains (losses) on financial instruments, net		369	606	1,186	942
Other, net		7	(8)	1	130
Earnings (loss) before income taxes from continuing operations	$	410	641	1,473	1,370