߲ݴý

Quarterly report pursuant to Section 13 or 15(d)

Information ߲ݴý Liberty's Operating Segments

v3.10.0.1
Information ߲ݴý Liberty's Operating Segments
 6 Months Ended
Jun. 30, 2018
Information ߲ݴý Liberty's Operating Segments
Information ߲ݴý Liberty's Operating Segments

(11)Information ߲ݴý ߲ݴý's Operating Segments

߲ݴý, through its ownership interests in subsidiaries and other companies, is primarily engaged in the video and online commerce industries. ߲ݴý identifies its reportable segments as (A)those operating segments that represent 10% or more of its consolidated annual revenue, annual Adjusted OIBDA or total assets and (B)those equity method affiliates whose share of earnings represent 10% or more of ߲ݴý's annual pre-tax earnings.

߲ݴý evaluates performance and makes decisions about allocating resources to its operating segments based on financial measures such as revenue, Adjusted OIBDA, gross margin, average sales price per unit and revenue or sales per customer equivalent. In addition, ߲ݴý reviews nonfinancial measures such as unique website visitors, number of units shipped, conversion rates and active customers, as appropriate.

߲ݴý defines Adjusted OIBDA as revenue less cost of sales, operating expenses, and selling, general and administrative expenses excluding all stock-based compensation. ߲ݴý believes this measure is an important indicator of the operational strength and performance of its businesses, including each business's ability to service debt and fund capital expenditures. In addition, this measure allows management to view operating results and perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance. This measure of performance excludes depreciation and amortization, stock-based compensation, certain purchase accounting adjustments, separately reported litigation settlements, transaction related costs (including restructuring, integration, and advisory fees), and impairment charges that are included in the measurement of operating income pursuant to 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 GAAP. ߲ݴý generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current prices.

During the second quarter of 2018 the Company changed its reportable segments to include QVC U.S. and QVC International, and presented prior period information to conform with this change. Previously, QVC was considered one reportable segment.As a result of the GCI Liberty Split-Off, and the related management transitions, a new Chief Operating Decision Maker (“CODM”) was identified, and the information that the new CODM reviews is aggregated differently than it was prior to the Transactions.

For the six months ended June30,2018, ߲ݴý has identified the following operating segments as its reportable segments:

·

QVC U.S. and QVC International – QVC markets and sells a wide variety of consumer products in the United States and several foreign countries, primarily by means of its televised shopping programs and via the Internet through its domestic and international websites and mobile applications.

·

HSN – HSN markets and sells a wide variety of consumer products primarily in the United States by means of its televised shopping programs and via the Internet and mobile transactions through its domestic websites.

·

zulily – zulily markets and sells a wide variety of consumer products in the United States and several foreign countries through flash sales events, primarily through its desktop, mobile and app experiences.

߲ݴý's operating segments are strategic business units that offer different products and services. They are managed separately because each segment requires different technologies, distribution channels and marketing strategies.The accounting policies of the segments are the same as those described in the Company's Summary of Significant Accounting Policies in the Annual Report on Form 10-K for the year ended December31,2017.

Performance Measures

Three months endedJune30,

2018

2017

Adjusted

Adjusted

Revenue

OIBDA

Revenue

OIBDA

amountsinmillions

QVC U.S.

$

1,427

355

1,367

361

QVC International

656

100

612

107

HSN

473

46

NA

NA

zulily

415

29

367

26

Corporate and other

262

12

6

(13)

Consolidated ߲ݴý

$

3,233

542

2,352

481

Six months ended June30,

2018

2017

Adjusted

Adjusted

Revenue

OIBDA

Revenue

OIBDA

amountsinmillions

QVC U.S.

$

2,844

681

2,737

697

QVC International

1,332

207

1,207

205

HSN

982

89

NA

NA

zulily

834

56

726

41

Corporate and other

471

1

10

(25)

Inter-segment eliminations

—

—

(1)

—

Consolidated ߲ݴý

$

6,463

1,034

4,679

918

Other Information

June30, 2018

Total assets

Investments inaffiliates

Capital expenditures

amountsinmillions

QVC U.S.

$

9,191

40

42

QVC International

2,148

—

26

HSN

2,723

—

6

zulily

2,245

—

12

Corporate and other

1,522

139

12

Consolidated ߲ݴý

$

17,829

179

98

The following table provides a reconciliation of Consolidated segment Adjusted OIBDA to Operating income (loss) and Earnings (loss) from continuing operations before income taxes:

Three months ended

Six months ended

June30,

June30,

2018

2017

2018

2017

amountsinmillions

Consolidated segment Adjusted OIBDA

$

542

481

1,034

918

Stock-based compensation

(23)

(21)

(46)

(37)

Depreciation and amortization

(159)

(206)

(322)

(414)

Transaction related costs

(2)

—

(14)

—

Operating income (loss)

358

254

652

467

Interest expense

(96)

(89)

(194)

(179)

Share of earnings (loss) of affiliates, net

(46)

(9)

(60)

(36)

Realized and unrealized gains (losses) on financial instruments, net

20

101

119

276

Other, net

(13)

(7)

(9)

(6)

Earnings (loss) before income taxes

$

223

250

508

522