Annual report pursuant to Section 13 and 15(d)

Segment Information

v2.4.0.6
Segment Information
 12 Months Ended
Dec. 31, 2011
Segment Information [Abstract]  
Segment Information

NOTE 6—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. 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 (loss) for HSNi's operating segments and to HSNi's consolidated net income (in thousands):

 

     Year Ended December 31, 2011  
     HSN     Cornerstone     Total  

Adjusted EBITDA

    $ 235,163      $ 64,857      $ 300,020   

Stock-based compensation expense

      (13,101 )      (13,300 )      (26,401 ) 

Depreciation and amortization

      (27,652 )      (9,308 )      (36,960 ) 

Asset impairments

      —          (2,976 )      (2,976 ) 

Loss on disposition of fixed assets

      (1,482 )      (202 )      (1,684 ) 
  

 

 

    

 

 

    

 

 

  

Operating income

    $ 192,928      $ 39,071        231,999   
  

 

 

    

 

 

    

Other expense, net

          (31,593 ) 
      

 

 

  

Income before income taxes

          200,406   

Income tax provision

          (77,336 ) 
      

 

 

  

Net income

        $ 123,070   
      

 

 

  

 

 

     Year Ended December 31, 2010  
     HSN     Cornerstone     Total  

Adjusted EBITDA

    $ 213,612      $ 44,011      $ 257,623  

Stock-based compensation expense

      (13,507 )      (7,725 )      (21,232 ) 

Depreciation and amortization

      (30,183 )      (8,849 )      (39,032 ) 

Loss on disposition of fixed assets

      (1,198 )      (74 )      (1,272 ) 
  

 

 

    

 

 

    

 

 

  

Operating income

    $ 168,724      $ 27,363        196,087   
  

 

 

    

 

 

    

Other expense, net

          (32,523 ) 
      

 

 

  

Income before income taxes

          163,564   

Income tax provision

          (65,041 ) 
      

 

 

  

Net income

        $ 98,523   
      

 

 

  

 

     Year Ended December 31, 2009  
     HSN     Cornerstone     Total  

Adjusted EBITDA

    $ 196,139      $ 9,998      $ 206,137  

Stock-based compensation expense

      (9,041 )      (2,223 )      (11,264 ) 

Depreciation and amortization

      (29,228 )      (9,309 )      (38,537 ) 

Loss on disposition of fixed assets

      (637 )      (45 )      (682 ) 
  

 

 

    

 

 

    

 

 

  

Operating income (loss)

    $ 157,233      $ (1,579 )      155,654   
  

 

 

    

 

 

    

Other expense, net

          (35,030 ) 
      

 

 

  

Income before income taxes

          120,624   

Income tax provision

          (48,136 ) 
      

 

 

  

Net income

        $ 72,488   
      

 

 

  

Financial information by segment is as follows (thousands):

 

     Year Ended December 31,  
     2011      2010      2009  

Net sales:

         

HSN

    $ 2,160,341       $ 2,115,918       $ 2,007,897   

Cornerstone

      1,016,813         880,862         741,712   
  

 

 

     

 

 

     

 

 

  

Total

    $ 3,177,154       $ 2,996,780       $ 2,749,609   
  

 

 

     

 

 

     

 

 

  

Identifiable assets:

         

HSN

    $ 1,178,565       $ 1,138,024       $ 1,035,233   

Cornerstone

      216,408         207,719         183,417   
  

 

 

     

 

 

     

 

 

  

Total

      1,394,973         1,345,743         1,218,650   
  

 

 

     

 

 

     

 

 

  

Capital expenditures:

         

HSN

    $ 30,155       $ 29,152       $ 35,216   

Cornerstone

      12,164         8,356         6,162   
  

 

 

     

 

 

     

 

 

  

Total

    $ 42,319       $ 37,508       $ 41,378   
  

 

 

     

 

 

     

 

 

  

 

HSNi does not report revenue from external customers for each product or each group of similar products as it is impracticable to do so. HSNi maintains operations principally in the United States with no long-lived assets and insignificant net sales in all other countries.