Quarterly report pursuant to Section 13 or 15(d)

Segment Information

v2.4.0.6
Segment Information
 3 Months Ended
Mar. 31, 2012
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, 2011. 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):

 

     Three Months Ended March 31, 2012     Three Months Ended March 31, 2011  
     HSN     Cornerstone     Total     HSN     Cornerstone     Total  

Adjusted EBITDA

    $ 57,322      $ 7,481      $ 64,803      $ 52,198      $ 5,076      $ 57,274   

Stock-based compensation expense

      (3,287 )      (2,713 )      (6,000 )      (4,176 )      (2,151 )      (6,327 ) 

Depreciation and amortization

      (6,565 )      (2,482 )      (9,047 )      (7,199 )      (2,069 )      (9,268 ) 

Loss on disposition of fixed assets

      (13 )      (31 )      (44 )      (54 )      (204 )      (258 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Operating income

    $ 47,457      $ 2,255        49,712      $ 40,769      $ 652        41,421   
  

 

 

    

 

 

      

 

 

    

 

 

    

Interest expense, net

          (7,393 )          (7,944 ) 
      

 

 

        

 

 

  

Income from continuing operations before income taxes

          42,319            33,477   

Income tax provision

          (16,026 )          (13,105 ) 
      

 

 

        

 

 

  

Income from continuing operations

          26,293            20,372   

Loss from discontinued operations, net of tax

          (123 )          (91 ) 
      

 

 

        

 

 

  

Net income

        $ 26,170          $ 20,281   
      

 

 

        

 

 

  

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

     Three Months Ended
March 31,		  
     2012      2011  

Net sales:

      

HSN

    $ 541,932       $ 526,175   

Cornerstone

      205,380         184,386   
  

 

 

     

 

 

  

Total

    $ 747,312       $ 710,561