Quarterly report pursuant to Section 13 or 15(d)

Segment Information

v2.3.0.15
Segment Information
 9 Months Ended
Sep. 30, 2011
Segment Information [Abstract]  
Segment Information

NOTE 4—SEGMENT INFORMATION

HSNi presents its operating segments and related financial information in a manner consistent with how the chief operating decision maker and executive management view the businesses, how the businesses are organized as to segment management, and the focus of the businesses with regards to the types of products or services offered or the target market. HSNi has two operating segments, HSN and Cornerstone. The accounting policies of the segments are the same as those described in Note 2 – Summary of Significant Accounting Policies included in HSNi's Annual Report on Form 10-K for the year ended December 31, 2010. Intercompany accounts and transactions have been eliminated in consolidation.

HSNi's primary metric is Adjusted EBITDA, which is defined as operating income excluding, if applicable: (1) non-cash charges including: (a) stock-based compensation expense, (b) amortization of intangibles, (c) depreciation and gains and losses on asset dispositions, and (d) goodwill, long-lived asset and intangible asset impairments; (2) pro forma adjustments for significant acquisitions; and (3) one-time items. Adjusted EBITDA is not a measure determined in accordance with GAAP, and should not be considered in isolation or as a substitute for operating income, net income or any other measure determined in accordance with GAAP. Adjusted EBITDA is used as a measurement of operating efficiency and overall financial performance and HSNi believes it to be a helpful measure for those evaluating companies in the retail and media industries. Adjusted EBITDA measures the amount of income generated each period that could be used to service debt, pay taxes and fund capital expenditures. Adjusted EBITDA has certain limitations in that it does not take into account the impact to HSNi's consolidated statements of operations of certain expenses, including stock-based compensation, amortization of intangibles, depreciation, gains and losses on asset dispositions, asset impairment charges, acquisition-related accounting expenses and one-time items.

 

The following tables reconcile Adjusted EBITDA to operating income for HSNi's operating segments and to HSNi's consolidated net income (in thousands):

 

00000000 00000000 00000000 00000000 00000000 00000000
     Three Months Ended September 30, 2011     Three Months Ended September 30, 2010  
     HSN     Cornerstone     Total     HSN     Cornerstone     Total  

Adjusted EBITDA

    $ 51,803      $ 11,280      $ 63,083      $ 43,122      $ 5,855      $ 48,977   

Stock-based compensation expense

      (2,792 )      (3,317 )      (6,109 )      (4,057 )      (1,696 )      (5,753 ) 

Depreciation and amortization of intangible assets

      (6,614 )      (2,120 )      (8,734 )      (7,601 )      (2,106 )      (9,707 ) 

Loss on disposition of fixed assets

      (1,043 )      —          (1,043 )      (720 )      —          (720 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Operating income

    $ 41,354      $ 5,843        47,197      $ 30,744      $ 2,053        32,797   
  

 

 

    

 

 

      

 

 

    

 

 

    

Other expense, net

          (7,925 )          (8,098 ) 
      

 

 

        

 

 

  

Income before income taxes

          39,272            24,699   

Income tax provision

          (14,968 )          (9,821 ) 
      

 

 

        

 

 

  

Net income

       $ 24,304          $ 14,878   
      

 

 

        

 

 

  

 

00000000 00000000 00000000 00000000 00000000 00000000
     Nine Months Ended September 30, 2011     Nine Months Ended September 30, 2010  
     HSN     Cornerstone     Total     HSN     Cornerstone     Total  

Adjusted EBITDA

    $ 155,624      $ 40,788      $ 196,412      $ 138,498      $ 25,824      $ 164,322   

Stock-based compensation expense

      (10,750 )      (8,642 )      (19,392 )      (10,098 )      (4,965 )      (15,063 ) 

Depreciation and amortization of intangible assets

      (20,788 )      (6,551 )      (27,339 )      (22,749 )      (6,659 )      (29,408 ) 

Loss on disposition of fixed assets

      (1,148 )      (200 )      (1,348 )      (1,148 )      (60 )      (1,208 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Operating income

    $ 122,938      $ 25,395        148,333      $ 104,503      $ 14,140        118,643   
  

 

 

    

 

 

      

 

 

    

 

 

    

Other expense, net

          (23,699 )          (24,469 ) 
      

 

 

        

 

 

  

Income before income taxes

          124,634            94,174   

Income tax provision

          (48,083 )          (36,938 ) 
      

 

 

        

 

 

  

Net income

       $ 76,551          $ 57,236   
      

 

 

        

 

 

  

 The net sales for each of HSNi's reportable segments are as follows (in thousands):

 

     Three Months Ended      Nine Months Ended  
     September 30,      September 30,  
     2011      2010      2011      2010  

Net sales:

      

HSN

    $ 513,013       $ 493,743       $ 1,521,181       $ 1,479,073   

Cornerstone

      238,224         214,616         700,977         602,491   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 751,237       $ 708,359       $ 2,222,158       $ 2,081,564