Annual report pursuant to Section 13 and 15(d)

Information about QVC's Operating Segments

v3.8.0.1
Information about QVC's Operating Segments
 12 Months Ended
Dec. 31, 2017
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 years ended December 31, 2017 and 2016, these costs totaled approximately $36 million and $31 million, respectively. 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,
 
 
2017
 
2016
 
2015
 
(in millions)
Net
revenue

Adjusted
OIBDA

Net
revenue

Adjusted
OIBDA

Net
revenue

Adjusted
OIBDA

QVC-U.S.
$
6,140

1,446

6,120

1,435

6,257

1,467

QVC-International
2,631

451

2,562

405

2,486

427

Consolidated QVC
$
8,771

1,897

8,682

1,840

8,743

1,894


Net revenue amounts by product category are not available from QVC's general purpose financial statements.
Other information
 
Years ended December 31,
 
 
2017
 
2016
 
2015
 
(in millions)
Depreciation

Amortization

Depreciation

Amortization

Depreciation

Amortization

QVC-U.S.
$
93

330

78

414

63

404

QVC-International
62

34

64

49

71

50

Consolidated QVC
$
155

364

142

463

134

454


 
Years ended December 31,
 
 
2017
 
2016
 
(in millions)
Total
assets

Capital
expenditures

Total
assets

Capital
expenditures

QVC-U.S.
$
9,429

116

9,595

152

QVC-International
2,121

36

1,950

27

Consolidated QVC
$
11,550

152

11,545

179


Property and equipment, net of accumulated depreciation, by segment were as follows:
 
December 31,
 
(in millions)
2017

2016

QVC-U.S.
$
559

594

QVC-International
446

437

Consolidated QVC
$
1,005

1,031


The following table provides a reconciliation of Adjusted OIBDA to income before income taxes:
 
Years ended December 31,
 
(in millions)
2017

2016

2015

Adjusted OIBDA
$
1,897

1,840

1,894

Stock-based compensation
(31
)
(32
)
(31
)
Depreciation and amortization
(519
)
(605
)
(588
)
Equity in losses of investee
(3
)
(6
)
(9
)
Gains on financial instruments
—

2

—

Interest expense, net
(214
)
(210
)
(208
)
Foreign currency (loss) gain
(6
)
38

14

Loss on extinguishment of debt
—

—

(21
)
Income before income taxes
$
1,124

1,027

1,051


The following table summarizes net revenues based on revenues generated by subsidiaries located within the identified geographic area:
 
Years ended December 31,
 
(in millions)
2017

2016

2015

United States
$
6,140

6,120

6,257

Japan
934

897

808

Germany
899

865

837

United Kingdom
640

654

718

Other countries
158

146

123

Consolidated QVC
$
8,771

8,682

8,743


The following table summarizes property and equipment, net of accumulated depreciation, based on physical location:
 
December 31,
 
(in millions)
2017

2016

United States
$
559

594

Germany
164

153

Japan
143

145

United Kingdom
84

83

Other countries
55

56

Consolidated QVC
$
1,005

1,031