Quarterly report pursuant to Section 13 or 15(d)

Information about QVC's Operating Segments

v3.20.1
Information about QVC's Operating Segments
 3 Months Ended
Mar. 31, 2020
Segment Reporting [Abstract]  
Segment reporting disclosure
Information about QVC's Operating Segments
The Company evaluates performance and makes decisions about allocating resources to its operating segments based on financial measures such as net revenue, Adjusted OIBDA, gross margin, average sales price per unit, number of units shipped and revenue. For segment reporting purposes, the Company defines Adjusted OIBDA, as net revenue less cost of goods sold, operating expenses, and selling, general and administrative expenses (excluding stock-based compensation). The Company believes this measure is an important indicator of the operational strength and performance of its segments by identifying those items that are not directly a reflection of each segment's performance or indicative of ongoing business trends. In addition, this measure allows management to view operating results and perform analytical comparisons and benchmarking among the Company's businesses and identify strategies to improve performance. This measure of performance excludes depreciation, amortization, stock-based compensation, transaction costs (if any) and impairment loss (if any) that are included in the measurement of operating income pursuant to U.S. 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 U.S. GAAP.

QVC's chief operating decision maker ("CODM") is QVC's Chief Executive Officer. QVC's CODM has ultimate responsibility for enterprise decisions. QVC's CODM determines, in particular, resource allocation for, and monitors performance of, the consolidated enterprise. The segment managers have responsibility for operating decisions, allocating resources and assessing performance within their respective segments. QVC's CODM relies on internal management reporting that analyzes enterprise results and segment results to the Adjusted OIBDA level.
For the three months ended March 31, 2020 and 2019, QVC identified QxH and QVC-International as its two reportable segments. Both operating segments are retailers of a wide range of consumer products, which are marketed and sold primarily by merchandise-focused televised-shopping programs as well as via the Internet and mobile applications.
Performance measures
 
Three months ended March 31,
 
 
2020
 
2019
 
(in millions)
Net
revenue

Adjusted
OIBDA

Net
revenue

Adjusted
OIBDA

QxH
$
1,792

293

1,857

352

QVC-International
635

97

644

101

Consolidated QVC
$
2,427

390

2,501

453


Other information
 
Three months ended March 31,
 
 
2020
 
2019
 
(in millions)
Depreciation

Amortization

Depreciation

Amortization

QxH
$
29

68

28

69

QVC-International
14

3

18

3

Consolidated QVC
$
43

71

46

72



March 31, 2020
 
(in millions)
Total
assets

Capital
expenditures

Property and equipment, net

QxH
$
12,156

35

790

QVC-International
2,145

4

398

Consolidated QVC
$
14,301

39

1,188


The following table provides a reconciliation of Adjusted OIBDA to operating income and income before income taxes:
 
Three months ended March 31,
 
(in millions)
2020

2019

Adjusted OIBDA
$
390

453

Stock-based compensation
(6
)
(9
)
Depreciation and amortization
(114
)
(118
)
Operating Income
270

326

Equity in losses of investee
(1
)
—

Losses on financial instruments
(4
)
(2
)
Interest expense, net
(65
)
(61
)
Foreign currency gain (loss)
1

(3
)
Income before income taxes
$
201

260