Annual report pursuant to Section 13 and 15(d)

Information about QVC's Operating Segments

v3.3.1.900
Information about QVC's Operating Segments
 12 Months Ended
Dec. 31, 2015
Segment Reporting [Abstract]  
Segment reporting disclosure
Information about QVC's Operating Segments and Geographical Data
During the year ended December 31, 2015, QVC put into action the One Q Reorganization Plan which reorganized the Company's reporting structure. This plan essentially discontinued the historical operational strategy of mirroring the original U.S. business in the different markets where each market was managed as a separate entity, and created a new segment lead. Beginning in the fourth quarter of 2015, QVC has changed its reportable segments to QVC-U.S. and QVC-International, and has presented the financial information for 2015, 2014 and 2013 to conform to this change. These segments reflect changes in the way the Company evaluates its business performance and manages its operations. At this time, QVC reorganized the reporting structure and discontinued the historical operational strategy of mirroring the original U.S. business in the different markets where each market was managed as a separate entity. 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, QVC-U.S. 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).
Both of the Company's 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.
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 or sales per subscriber equivalent. The Company defines Adjusted OIBDA as 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, including the ability to service debt and fund capital expenditures. 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 and stock-based compensation 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, and cash flow provided by operating activities and other measures of financial performance prepared in accordance with U.S. GAAP.
Performance measures
 
Years ended December 31,
 
 
2015
 
2014
 
2013
 
(in millions)
Net
revenue

Adjusted
OIBDA

Net
revenue

Adjusted
OIBDA

Net
revenue

Adjusted
OIBDA

QVC-U.S.
$
6,257

1,467

6,055

1,429

5,844

1,352

QVC-International
2,486

427

2,746

481

2,779

489

Consolidated QVC
$
8,743

1,894

8,801

1,910

8,623

1,841


Net revenue amounts by product category are not available from QVC's general purpose financial statements.
Other information
 
Years ended December 31,
 
 
2015
 
2014
 
2013
 
(in millions)
Depreciation

Amortization

Depreciation

Amortization

Depreciation

Amortization

QVC-U.S.
$
63

404

56

391

55

362

QVC-International
71

50

79

61

72

69

Consolidated QVC
$
134

454

135

452

127

431


 
Years ended December 31,
 
 
2015
 
2014
 
(in millions)
Total
assets

Capital
expenditures

Total
assets

Capital
expenditures

QVC-U.S.
$
9,913

169

9,902

141

QVC-International
2,145

46

2,323

42

Consolidated QVC
$
12,058

215

12,225

183


Long-lived assets, net of accumulated depreciation, were as follows:
 
December 31,
 
(in millions)
2015

2014

QVC-U.S.
$
501

463

QVC-International
501

563

Consolidated QVC
$
1,002

1,026


The following table provides a reconciliation of Adjusted OIBDA to income before income taxes:
 
Years ended December 31,
 
(in millions)
2015

2014

2013

Adjusted OIBDA
$
1,894

1,910

1,841

Stock-based compensation
(31
)
(44
)
(38
)
Depreciation and amortization
(588
)
(587
)
(558
)
Equity in losses of investee
(9
)
(8
)
(4
)
Gains on financial instruments
—

—

15

Interest expense, net
(208
)
(239
)
(214
)
Foreign currency gain
14

3

1

Loss on extinguishment of debt
(21
)
(48
)
(57
)
Income before income taxes
$
1,051

987

986


The following table summarizes net revenues based on revenues generated by subsidiaries located within the identified geographic area:
 
Years ended December 31,
 
(in millions)
2015

2014

2013

United States
$
6,257

6,055

5,844

Germany
837

970

971

Japan
808

908

1,024

United Kingdom
718

730

657

Other countries
123

138

127

Consolidated QVC
$
8,743

8,801

8,623


The following table summarizes net property and equipment based on physical location:
 
December 31,
 
(in millions)
2015

2014

United States
$
501

463

Germany
172

209

Japan
156

176

United Kingdom
106

119

Other countries
67

59

Consolidated QVC
$
1,002

1,026