Annual report pursuant to Section 13 and 15(d)

Information about QVC's Operating Segments

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Information about QVC's Operating Segments
 12 Months Ended
Dec. 31, 2020
Segment Reporting [Abstract]  
Segment reporting disclosure Information about QVC's Operating Segments and Geographical DataThe 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 or sales per subscriber equivalent. 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 expenses related to the QRG Initiatives (see note 1) and expenses related to the closure of operations in France (collectively, "transaction related costs") and 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 and transaction related costs 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.
The Company's chief operating decision maker ("CODM") is the Company's Chief Executive Officer who has ultimate responsibility for enterprise decisions. QVC's CODM determines, in particular, resource allocation for, and monitors performance of, the consolidated enterprise, QxH, and QVC-International. 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 (see below).
During the first quarter of 2019, the Company changed its reportable operating segments to combine QVC-U.S. and HSN into one reportable segment called QxH and presented prior period information to conform with this change. As a result of the QRG Initiatives and additional synergies between QVC-U.S. and HSN, the CODM began reviewing the QVC-U.S. and HSN information as one business unit during the first quarter.
For the year ended December 31, 2020, QVC has 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 in certain markets.
QVC allocates certain corporate costs for management reporting purposes from its QxH segment to the QVC-International segment. These management cost allocations are related to certain functions such as merchandising, commerce platforms, information technology, human resources, legal, finance, brand and communications, corporate development and administration that support all of QVC’s operations. For the years ended December 31, 2020, 2019 and 2018, the costs allocated to QVC-International totaled $33 million, $27 million and $39 million, respectively.
Performance measures
Years ended December 31,
2020 2019 2018
(in millions) Net
revenue		 Adjusted
OIBDA		 Net
revenue		 Adjusted
OIBDA		 Net
revenue		 Adjusted
OIBDA
QxH $ 8,505  1,547  8,277  1,536  8,544  1,630 
QVC-International 2,967  510  2,709  446  2,738  429 
Consolidated QVC $ 11,472  2,057  10,986  1,982  11,282  2,059 
Other information
Years ended December 31,
2020 2019 2018
(in millions) Depreciation Amortization Depreciation Amortization Depreciation Amortization
QxH $ 116  270  113  269  118  227 
QVC-International 55  12  73  13  56  10 
Consolidated QVC $ 171  282  186  282  174  237 
Years ended December 31,
2020 2019
(in millions) Total
assets		 Capital
expenditures		 Total
assets		 Capital
expenditures
QxH $ 14,103  182  12,659  257 
QVC-International 2,455  36  2,268  34 
Consolidated QVC $ 16,558  218  14,927  291 
The increase in total assets at December 31, 2020 is primarily due to the note receivable issued to the Company as part of the common control transaction with Qurate Retail in December 2020, which resides in the QxH reportable segment (see note 2 (r) and 14).
Property and equipment, net of accumulated depreciation, by segment were as follows:
December 31,
(in millions) 2020 2019
QxH $ 771  800 
QVC-International 407  415 
Consolidated QVC $ 1,178  1,215 
The following table provides a reconciliation of Adjusted OIBDA to income before income taxes:
Years ended December 31,
(in millions) 2020 2019 2018
Adjusted OIBDA $ 2,057  1,982  2,059 
Impairment loss —  (147) (30)
Transaction related costs —  (1) (60)
Stock-based compensation (37) (39) (46)
Depreciation and amortization (453) (468) (411)
Operating Income 1,567  1,327  1,512 
Equity in losses of investee (30) —  (3)
Gains (losses) on financial instruments 3  (5) (2)
Interest expense, net (257) (240) (243)
Foreign currency gain (loss) 6  (3) — 
Loss on extinguishment of debt (42) —  (2)
Income before income taxes $ 1,247  1,079  1,262 
The following table summarizes net revenues based on revenues generated by subsidiaries located within the identified geographic area:
Years ended December 31,
(in millions) 2020 2019 2018
United States $ 8,505  8,277  8,544 
Japan 1,132  1,028  947 
Germany 978  890  943 
United Kingdom 696  640  679 
Other countries 161  151  169 
Consolidated QVC $ 11,472  10,986  11,282 
The following table summarizes property and equipment, net of accumulated depreciation, based on physical location:
December 31,
(in millions) 2020 2019
United States $ 771  800 
Germany 150  154 
Japan 149  153 
United Kingdom 75  75 
Other countries 33  33 
Consolidated QVC $ 1,178  1,215