Annual report pursuant to Section 13 and 15(d)

Information about QVC's Operating Segments

v3.6.0.2
Information about QVC's Operating Segments
 12 Months Ended
Dec. 31, 2016
Segment Reporting [Abstract]  
Segment reporting disclosure
Information about QVC's Operating Segments and Geographical Data
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 year ended December 31, 2016, these costs totaled approximately $31 million. No adjustments were made relating to these costs for the year ended December 31, 2015.
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, 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,
 
 
2016
 
2015
 
2014
 
(in millions)
Net
revenue

Adjusted
OIBDA

Net
revenue

Adjusted
OIBDA

Net
revenue

Adjusted
OIBDA

QVC-U.S.
$
6,120

1,435

6,257

1,467

6,055

1,429

QVC-International
2,562

405

2,486

427

2,746

481

Consolidated QVC
$
8,682

1,840

8,743

1,894

8,801

1,910


Net revenue amounts by product category are not available from QVC's general purpose financial statements.
Other information
 
Years ended December 31,
 
 
2016
 
2015
 
2014
 
(in millions)
Depreciation

Amortization

Depreciation

Amortization

Depreciation

Amortization

QVC-U.S.
$
78

414

63

404

56

391

QVC-International
64

49

71

50

79

61

Consolidated QVC
$
142

463

134

454

135

452


 
Years ended December 31,
 
 
2016
 
2015
 
(in millions)
Total
assets

Capital
expenditures

Total
assets

Capital
expenditures

QVC-U.S.
$
9,595

152

9,913

169

QVC-International
1,950

27

2,145

46

Consolidated QVC
$
11,545

179

12,058

215


Long-lived assets, net of accumulated depreciation, by segment were as follows:
 
December 31,
 
(in millions)
2016

2015

QVC-U.S.
$
594

501

QVC-International
437

501

Consolidated QVC
$
1,031

1,002


The following table provides a reconciliation of Adjusted OIBDA to income before income taxes:
 
Years ended December 31,
 
(in millions)
2016

2015

2014

Adjusted OIBDA
$
1,840

1,894

1,910

Stock-based compensation
(32
)
(31
)
(44
)
Depreciation and amortization
(605
)
(588
)
(587
)
Equity in losses of investee
(6
)
(9
)
(8
)
Gains on financial instruments
2

—

—

Interest expense, net
(210
)
(208
)
(239
)
Foreign currency gain
38

14

3

Loss on extinguishment of debt
—

(21
)
(48
)
Income before income taxes
$
1,027

1,051

987


The following table summarizes net revenues based on revenues generated by subsidiaries located within the identified geographic area:
 
Years ended December 31,
 
(in millions)
2016

2015

2014

United States
$
6,120

6,257

6,055

Japan
897

808

908

Germany
865

837

970

United Kingdom
654

718

730

Other countries
146

123

138

Consolidated QVC
$
8,682

8,743

8,801


The following table summarizes net property and equipment based on physical location:
 
December 31,
 
(in millions)
2016

2015

United States
$
594

501

Germany
153

172

Japan
145

156

United Kingdom
83

106

Other countries
56

67

Consolidated QVC
$
1,031

1,002