Annual report pursuant to Section 13 and 15(d)

Segment Information (Note)

v2.4.0.6
Segment Information (Note)
 12 Months Ended
Dec. 31, 2012
Segment Reporting Information, Profit (Loss) [Abstract]  
Segment Information
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) 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):

 
 
Year Ended December 31, 2012
 
 
HSN
 
Cornerstone
 
Total
Adjusted EBITDA
 
$
250,836

 
$
73,441

 
$
324,277

Stock-based compensation expense
 
(11,167
)
 
(7,889
)
 
(19,056
)
Depreciation and amortization
 
(26,486
)
 
(11,519
)
 
(38,005
)
Sales tax settlement
 
—

 
(7,750
)
 
(7,750
)
Loss on disposition of fixed assets
 
(680
)
 
(42
)
 
(722
)
Operating income
 
$
212,503

 
$
46,241

 
258,744

Total other expense, net
 
 
 
 
 
(38,874
)
Income from continuing operations before income taxes
 
 
 
 
 
219,870

Income tax provision
 
 
 
 
 
(83,373
)
Income from continuing operations
 
 
 
 
 
136,497

Loss from discontinued operations, net of tax
 
 
 
 
 
(5,822
)
Net income
 
 
 
 
 
$
130,675


 
 
Year Ended December 31, 2011
 
 
HSN
 
Cornerstone
 
Total
Adjusted EBITDA
 
$
235,163

 
$
67,595

 
$
302,758

Stock-based compensation expense
 
(13,101
)
 
(13,300
)
 
(26,401
)
Depreciation and amortization
 
(27,652
)
 
(8,170
)
 
(35,822
)
Loss on disposition of fixed assets
 
(1,482
)
 
(11
)
 
(1,493
)
Operating income
 
$
192,928

 
$
46,114

 
239,042

Total other expense, net
 
 
 
 
 
(31,284
)
Income from continuing operations before income taxes
 
 
 
 
 
207,758

Income tax provision
 
 
 
 
 
(80,106
)
Income from continuing operations
 
 
 
 
 
127,652

Loss from discontinued operations, net of tax
 
 
 
 
 
(4,582
)
Net income
 
 
 
 
 
$
123,070

 
 
 
Year Ended December 31, 2010
 
 
HSN
 
Cornerstone
 
Total
Adjusted EBITDA
 
$
213,613

 
$
45,240

 
$
258,853

Stock-based compensation expense
 
(13,507
)
 
(7,725
)
 
(21,232
)
Depreciation and amortization
 
(30,184
)
 
(7,362
)
 
(37,546
)
Loss on disposition of fixed assets
 
(1,198
)
 
(74
)
 
(1,272
)
Operating income
 
$
168,724

 
$
30,079

 
198,803

Total other expense, net
 
 
 
 
 
(32,185
)
Income from continuing operations before income taxes
 
 
 
 
 
166,618

Income tax provision
 
 
 
 
 
(66,177
)
Income from continuing operations
 
 
 
 
 
100,441

Loss from discontinued operations, net of tax
 
 
 
 
 
(1,918
)
Net income
 
 
 
 
 
$
98,523


Financial information by segment is as follows (thousands):

 
 
Year Ended December 31,
 
 
2012
 
2011
 
2010
Net sales:
 
 
 
 
 
 
HSN
 
$
2,265,026

 
$
2,160,341

 
$
2,115,918

Cornerstone
 
1,001,713

 
909,015

 
768,390

Total
 
$
3,266,739

 
$
3,069,356

 
$
2,884,308

Identifiable assets:
 
 
 
 
 
 
HSN
 
$
1,083,714

 
$
1,178,565

 
$
1,138,024

Cornerstone
 
248,238

 
216,408

 
207,719

Total
 
1,331,952

 
1,394,973

 
1,345,743

Capital expenditures:
 
 
 
 
 
 
HSN
 
$
33,566

 
$
30,155

 
$
29,152

Cornerstone
 
12,237

 
11,914

 
7,854

Total
 
$
45,803

 
$
42,069

 
$
37,006


 
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.