Quarterly report pursuant to Section 13 or 15(d)

Information about QVC's Operating Segments

v3.5.0.2
Information about QVC's Operating Segments
 9 Months Ended
Sep. 30, 2016
Segment Reporting [Abstract]  
Segment reporting disclosure
Information about QVC's Operating Segments
During the year ended December 31, 2015, QVC began reporting its results based on two operating segments: QVC-U.S. and QVC-International, as a result of the One Q Reorganization Plan ("One Q"). The One Q organizational structure is intended to allow the Company to better leverage its global scale and capabilities, to enhance its competitive position and to create operational efficiencies. Beginning in the first quarter of 2016, QVC began allocating certain additional corporate costs for management reporting purposes, which were historically included in its QVC-U.S. 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 three and nine months ended September 30, 2016, these costs totaled approximately $8 million and $24 million, respectively.
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).
QVC-U.S. and QVC-International 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, cash flow provided by operating activities and other measures of financial performance prepared in accordance with U.S. GAAP.
Performance measures
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2016
 
2015
 
2016
 
2015
 
(in millions)
Net
revenue

Adjusted
OIBDA

Net
revenue

Adjusted
OIBDA

Net
revenue

Adjusted
OIBDA

Net
revenue

Adjusted
OIBDA

QVC-U.S.
$
1,338

308

1,420

333

4,173

997

4,168

988

QVC-International
610

85

587

97

1,851

274

1,775

298

Consolidated QVC
$
1,948

393

2,007

430

6,024

1,271

5,943

1,286


Net revenue amounts by product category are not available from our general purpose financial statements.
Other information
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2016
 
2015
 
2016
 
2015
 
(in millions)
Depreciation

Amortization

Depreciation

Amortization

Depreciation

Amortization

Depreciation

Amortization

QVC-U.S.
$
22

103

15

97

55

308

47

303

QVC-International
16

13

18

11

48

37

54

38

Consolidated QVC
$
38

116

33

108

103

345

101

341



September 30, 2016
 
December 31, 2015
 
(in millions)
Total
assets

Capital
expenditures

Total
assets

Capital
expenditures

QVC-U.S.
$
9,391

120

9,913

169

QVC-International
2,147

20

2,145

46

Consolidated QVC
$
11,538

140

12,058

215


Long-lived assets, net of accumulated depreciation, by segment were as follows:
(in millions)
September 30, 2016

December 31, 2015

QVC-U.S.
$
597

501

QVC-International
490

501

Consolidated QVC
$
1,087

1,002


The following table provides a reconciliation of Adjusted OIBDA to income before income taxes:
 
Three months ended September 30,
 
Nine months ended September 30,
 
(in millions)
2016

2015

2016

2015

Adjusted OIBDA
$
393

430

1,271

1,286

Stock-based compensation
(8
)
(9
)
(24
)
(24
)
Depreciation and amortization
(154
)
(141
)
(448
)
(442
)
Equity in losses of investee
(2
)
(3
)
(4
)
(7
)
Interest expense, net
(52
)
(49
)
(159
)
(158
)
Foreign currency gain
5

12

27

11

Loss on extinguishment of debt
—

—

—

(21
)
Income before income taxes
$
182

240

663

645