Quarterly report pursuant to Section 13 or 15(d)

SEGMENT INFORMATION

v2.4.0.6
SEGMENT INFORMATION
 9 Months Ended
Sep. 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) other significant items. Significant items, while periodically affecting our results, may vary significantly from period to period and have a disproportionate effect in a given period, thereby affecting the comparability of results. 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 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 other significant 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 September 30, 2012     Three Months Ended September 30, 2011  
     HSN     Cornerstone     Total     HSN     Cornerstone     Total  

Adjusted EBITDA

    $   56,790      $ 14,969      $   71,759      $   51,803      $ 13,040      $   64,843   

Stock-based compensation expense

      (2,771 )      (1,857 )      (4,628 )      (2,792 )      (3,317 )      (6,109 ) 

Depreciation and amortization

      (6,665 )      (3,029 )      (9,694 )      (6,614 )      (1,829 )      (8,443 ) 

Sales tax settlement

      —          (7,750 )      (7,750 )      —          —          —     

Loss on disposition of fixed assets

      (374 )      (1 )      (375 )      (1,043 )      —          (1,043 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Operating income

    $ 46,980      $ 2,332        49,312      $ 41,354      $ 7,894        49,248   
  

 

 

    

 

 

      

 

 

    

 

 

    

Total other expense, net

          (21,988 )          (7,848 ) 
      

 

 

        

 

 

  

Income from continuing operations before income taxes

          27,324            41,400   

Income tax provision

          (9,766 )          (15,772 ) 
      

 

 

        

 

 

  

Income from continuing operations

          17,558            25,628   

Income (loss) from discontinued operations, net of tax

          128            (1,324 ) 
      

 

 

        

 

 

  

Net income

        $ 17,686          $ 24,304   
      

 

 

        

 

 

  

 

                                                                                                     
     Nine Months Ended September 30, 2012     Nine Months Ended September 30, 2011  
     HSN     Cornerstone     Total     HSN     Cornerstone     Total  

Adjusted EBITDA

    $ 166,821      $ 50,819      $ 217,640      $ 155,624      $ 44,189      $ 199,813   

Stock-based compensation expense

      (8,810 )      (6,468 )      (15,278 )      (10,750 )      (8,642 )      (19,392 ) 

Depreciation and amortization

      (19,839 )      (8,411 )      (28,250 )      (20,788 )      (5,663 )      (26,451 ) 

Sales tax settlement

      —          (7,750 )      (7,750 )      —          —          —     

Loss on disposition of fixed assets

      (418 )      (31 )      (449 )      (1,148 )      (8 )      (1,156 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Operating income

    $ 137,754      $ 28,159        165,913      $ 122,938      $ 29,876        152,814   
  

 

 

    

 

 

      

 

 

    

 

 

    

Total other expense, net

          (37,172 )          (23,468 ) 
      

 

 

        

 

 

  

Income from continuing operations before income taxes

          128,741            129,346   

Income tax provision

          (48,284 )          (49,861 ) 
      

 

 

        

 

 

  

Income from continuing operations

          80,457            79,485   

Loss from discontinued operations, net of tax

          (5,854 )          (2,934 ) 
      

 

 

        

 

 

  

Net income

        $ 74,603          $ 76,551   
      

 

 

        

 

 

  

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

 

     Three Months Ended
September 30,		      Nine Months Ended
September 30,		  
   2012      2011      2012      2011  

Net sales:

      

HSN

    $ 537,393       $ 513,013       $ 1,581,268       $ 1,521,181   

Cornerstone

      241,376         214,097         702,596         626,206   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 778,769       $ 727,110       $ 2,283,864       $ 2,147,387