Quarterly report pursuant to Section 13 or 15(d)

Segment Information (Note)

v2.4.0.6
Segment Information (Note)
 3 Months Ended
Mar. 31, 2013
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 included in HSNi's Annual Report on Form 10-K for the year ended December 31, 2012. 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 March 31, 2013
 
 
HSN
 
Cornerstone
 
Total
Adjusted EBITDA
 
$
58,934

 
$
7,906

 
$
66,840

Stock-based compensation expense
 
(2,823
)
 
(886
)
 
(3,709
)
Depreciation and amortization
 
(6,821
)
 
(3,131
)
 
(9,952
)
Loss on disposition of fixed assets
 
(661
)
 
—

 
(661
)
Operating income
 
$
48,629

 
$
3,889

 
52,518

Total other expense, net
 
 
 
 
 
(1,640
)
Income from continuing operations before income taxes
 
 
 
 
 
50,878

Income tax provision
 
 
 
 
 
(19,325
)
Income from continuing operations
 
 
 
 
 
31,553

Loss from discontinued operations, net of tax
 
 
 
 
 
(9
)
Net income
 
 
 
 
 
$
31,544


 
 
Three Months Ended March 31, 2012
 
 
HSN
 
Cornerstone
 
Total
Adjusted EBITDA
 
$
57,322

 
$
8,947

 
$
66,269

Stock-based compensation expense
 
(3,287
)
 
(2,713
)
 
(6,000
)
Depreciation and amortization
 
(6,565
)
 
(2,401
)
 
(8,966
)
Loss on disposition of fixed assets
 
(13
)
 
(31
)
 
(44
)
Operating income
 
$
47,457

 
$
3,802

 
51,259

Total other expense, net
 
 
 
 
 
(7,334
)
Income from continuing operations before income taxes
 
 
 
 
 
43,925

Income tax provision
 
 
 
 
 
(16,637
)
Income from continuing operations
 
 
 
 
 
27,288

Loss from discontinued operations, net of tax
 
 
 
 
 
(1,118
)
Net income
 
 
 
 
 
$
26,170

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

 
 
Three Months Ended March 31,
 
 
2013
 
2012
Net sales:
 
 
 
 
HSN
 
$
550,129

 
$
541,932

Cornerstone
 
222,522

 
195,976

Total
 
$
772,651

 
$
737,908