Quarterly report pursuant to Section 13 or 15(d)

Information about QVC's Operating Segments

v3.8.0.1
Information about QVC's Operating Segments
 3 Months Ended
Mar. 31, 2018
Segment Reporting [Abstract]  
Segment reporting disclosure
Information about QVC's Operating Segments
The Company has identified two reportable operating segments: QVC-U.S. and QVC-International. 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'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).
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 restructuring, integration and advisory fees incurred by QVC as a result of the acquisition of HSN by Qurate Retail on December 29, 2017 ("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, 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, 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.
Performance measures
 
Three months ended March 31,
 
 
2018
 
2017
 
(in millions)
Net
revenue

Adjusted
OIBDA

Net
revenue

Adjusted
OIBDA

QVC-U.S.
$
1,417

326

1,370

336

QVC-International
676

107

595

98

Consolidated QVC
$
2,093

433

1,965

434


Other information
 
Three months ended March 31,
 
 
2018
 
2017
 
(in millions)
Depreciation

Amortization

Depreciation

Amortization

QVC-U.S.
$
23

36

24

105

QVC-International
15

3

17

11

Consolidated QVC
$
38

39

41

116



March 31, 2018
 
December 31, 2017
 
(in millions)
Total
assets

Capital
expenditures

Total
assets

Capital
expenditures

QVC-U.S.
$
9,253

21

9,429

116

QVC-International
2,231

15

2,121

36

Consolidated QVC
$
11,484

36

11,550

152


Property and equipment, net of accumulated depreciation, by segment were as follows:
(in millions)
March 31, 2018

December 31, 2017

QVC-U.S.
$
543

559

QVC-International
481

446

Consolidated QVC
$
1,024

1,005


The following table provides a reconciliation of Adjusted OIBDA to income before income taxes:
 
Three months ended March 31,
 
(in millions)
2018

2017

Adjusted OIBDA
$
433

434

Transaction related costs
(4
)
—

Stock-based compensation
(9
)
(6
)
Depreciation and amortization
(77
)
(157
)
Equity in income (losses) of investee
1

(2
)
Interest expense, net
(57
)
(55
)
Foreign currency loss
(1
)
(2
)
Income before income taxes
$
286

212