Quarterly report pursuant to Section 13 or 15(d)

SEGMENT INFORMATION

v2.4.0.6
SEGMENT INFORMATION
 9 Months Ended
Jun. 30, 2012
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 June 30, 2012     Three Months Ended June 30, 2011  
     HSN     Cornerstone     Total     HSN     Cornerstone     Total  

Adjusted EBITDA

    $ 52,709      $ 26,903      $   79,612      $ 51,624      $ 25,012      $   76,636   

Stock-based compensation expense

      (2,752 )      (1,898 )      (4,650 )      (3,781 )      (3,174 )      (6,955 ) 

Depreciation and amortization

      (6,609 )      (2,980 )      (9,589 )      (6,976 )      (1,936 )      (8,912 ) 

(Loss) gain on disposition of fixed assets

      (31 )      —          (31 )      (52 )      1        (51 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Operating income

    $   43,317      $ 22,025        65,342      $   40,815      $ 19,903        60,718   
  

 

 

    

 

 

      

 

 

    

 

 

    

Interest expense, net

          (7,849 )          (7,739 ) 
      

 

 

        

 

 

  

Income from continuing operations before income taxes

          57,493            52,979   

Income tax provision

          (21,882 )          (20,422 ) 
      

 

 

        

 

 

  

Income from continuing operations

          35,611            32,557   

Loss from discontinued operations, net of tax

          (1,690 )          (590 ) 

Loss on sale of discontinued operations, net of tax

          (3,174 )          —     
      

 

 

        

 

 

  

Net income

        $ 30,747          $ 31,967   
      

 

 

        

 

 

  

 

                                                                                                                             
     Six Months Ended June 30, 2012     Six Months Ended June 30, 2011  
     HSN     Cornerstone     Total     HSN     Cornerstone     Total  

Adjusted EBITDA

    $ 110,031      $ 35,849      $ 145,880      $ 103,822      $ 31,147      $ 134,969   

Stock-based compensation expense

      (6,039 )      (4,611 )      (10,650 )      (7,958 )      (5,324 )      (13,282 ) 

Depreciation and amortization

      (13,174 )      (5,381 )      (18,555 )      (14,174 )      (3,834 )      (18,008 ) 

Loss on disposition of fixed assets

      (45 )      (29 )      (74 )      (106 )      (7 )      (113 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Operating income

    $ 90,773      $ 25,828        116,601      $ 81,584      $ 21,982        103,566   
  

 

 

    

 

 

      

 

 

    

 

 

    

Interest expense, net

          (15,184 )          (15,620 ) 
      

 

 

        

 

 

  

Income from continuing operations before income taxes

          101,417            87,946   

Income tax provision

          (38,518 )          (34,089 ) 
      

 

 

        

 

 

  

Income from continuing operations

          62,899            53,857   

Loss from discontinued operations, net of tax

          (2,808 )          (1,610 ) 

Loss on sale of discontinued operations, net of tax

          (3,174 )          —     
      

 

 

        

 

 

  

Net income

        $ 56,917          $ 52,247   
      

 

 

        

 

 

  

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

 

     Three Months Ended
June 30,		      Six Months Ended
June 30, 		 
   2012      2011      2012      2011  

Net sales:

      

HSN

    $ 501,943       $ 481,994       $ 1,043,875       $ 1,008,168   

Cornerstone

      265,244         239,070         461,220         412,110   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 767,187       $ 721,064       $ 1,505,095       $ 1,420,278