Quarterly report pursuant to Section 13 or 15(d)

Information about QVC's Operating Segments

v3.19.3
Information about QVC's Operating Segments
 9 Months Ended
Sep. 30, 2018
Segment Reporting [Abstract]  
Segment reporting disclosure
Information about QVC's Operating Segments
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. For segment reporting purposes, the Company defines Adjusted OIBDA, as net 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 as well as the closure of the France market ("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 by identifying those items that are not directly a reflection of each segment's performance or indicative of ongoing business trends. 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.
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. 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).
During the first quarter of 2019, the Company changed its reportable operating segments to combine QVC-U.S. and HSN into one reportable segment called QxH and presented prior period information to conform with this change. As a result of the QRG Initiatives and additional synergies between QVC-U.S. and HSN, the CODM began reviewing the QVC-U.S. and HSN information as one business unit during the first quarter.
For the three and nine months ended September 30, 2019, QVC has identified QxH and QVC-International as its two reportable segments. 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.
Performance measures
Three months ended September 30,
 
Nine months ended September 30,
 

2019
 
2018
 
2019
 
2018
 
(in millions)
Net
revenue

Adjusted
OIBDA

Net
revenue

Adjusted
OIBDA

Net
revenue

Adjusted
OIBDA

Net
revenue

Adjusted
OIBDA

QxH
$
1,854

346

1,929

371

5,585

1,093

5,755

1,141

QVC-International
650

106

640

93

1,934

313

1,972

300

   Consolidated QVC
$
2,504

452

2,569

464

7,519

1,406

7,727

1,441


Other information
Three months ended September 30,
 
Nine months ended September 30,
 

2019
 
2018
 
2019
 
2018
 
(in millions)
Depreciation

Amortization

Depreciation

Amortization

Depreciation

Amortization

Depreciation

Amortization

QxH
$
29

65

29

63

85

201

88

168

QVC-International
14

4

14

2

58

10

42

8

Consolidated QVC
$
43

69

43

65

143

211

130

176



September 30, 2019
 
(in millions)
Total
assets

Capital
expenditures

Property and equipment, net

QxH
$
12,472

202

778

QVC-International
2,160

23

401

Consolidated QVC
$
14,632

225

1,179


The following table provides a reconciliation of Adjusted OIBDA to operating income and income before income taxes:
Three months ended September 30,
 
Nine months ended September 30,
 
(in millions)
2019

2018

2019

2018

Adjusted OIBDA
$
452

464

1,406

1,441

Transaction related costs
—

(41
)
(1
)
(50
)
Stock-based compensation
(10
)
(10
)
(30
)
(34
)
Depreciation and amortization
(112
)
(108
)
(354
)
(306
)
Operating income
330

305

1,021

1,051

Equity in losses of investee
—

(1
)
(1
)
(2
)
Losses on financial instruments
(2
)
(1
)
(5
)
—

Interest expense, net
(61
)
(50
)
(182
)
(183
)
Foreign currency loss
—

(1
)
(3
)
—

Income before income taxes
$
267

252

830

866