Quarterly report pursuant to Section 13 or 15(d)

Segment Information (Note)

v2.4.0.8
Segment Information (Note)
 9 Months Ended
Sep. 30, 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 performance 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, gains and losses that are excluded from the company's definition of Adjusted EBITDA.
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, 2013
 
Three Months Ended September 30, 2012
 
HSN
 
Cornerstone
 
Total
 
HSN
 
Cornerstone
 
Total
Adjusted EBITDA
$
57,136

 
$
17,426

 
$
74,562

 
$
56,790

 
$
14,969

 
$
71,759

Stock-based compensation expense
(2,128
)
 
(896
)
 
(3,024
)
 
(2,771
)
 
(1,857
)
 
(4,628
)
Depreciation and amortization
(7,368
)
 
(3,034
)
 
(10,402
)
 
(6,665
)
 
(3,029
)
 
(9,694
)
Sales tax settlement
—

 
—

 
—

 
—

 
(7,750
)
 
(7,750
)
Loss on disposition of fixed assets
(10
)
 
(41
)
 
(51
)
 
(374
)
 
(1
)
 
(375
)
Operating income
$
47,630

 
$
13,455

 
61,085

 
$
46,980

 
$
2,332

 
49,312

Total other expense, net
 
 
 
 
(1,625
)
 
 
 
 
 
(21,988
)
Income from continuing operations before income taxes
 
 
 
 
59,460

 
 
 
 
 
27,324

Income tax provision
 
 
 
 
(17,408
)
 
 
 
 
 
(9,766
)
Income from continuing operations
 
 
 
 
42,052

 
 
 
 
 
17,558

Income from discontinued operations, net of tax
 
 
 
 
—

 
 
 
 
 
128

Net income
 
 
 
 
$
42,052

 
 
 
 
 
$
17,686



 
Nine Months Ended September 30, 2013
 
Nine Months Ended September 30, 2012
 
HSN
 
Cornerstone
 
Total
 
HSN
 
Cornerstone
 
Total
Adjusted EBITDA
$
173,205

 
$
53,350

 
$
226,555

 
$
166,821

 
$
50,819

 
$
217,640

Stock-based compensation expense
(7,712
)
 
(2,567
)
 
(10,279
)
 
(8,810
)
 
(6,468
)
 
(15,278
)
Depreciation and amortization
(21,226
)
 
(9,079
)
 
(30,305
)
 
(19,839
)
 
(8,411
)
 
(28,250
)
Sales tax settlement
—

 
—

 
—

 
—

 
(7,750
)
 
(7,750
)
Loss on disposition of fixed assets
(1,028
)
 
(41
)
 
(1,069
)
 
(418
)
 
(31
)
 
(449
)
Operating income
$
143,239

 
$
41,663

 
184,902

 
$
137,754

 
$
28,159

 
165,913

Total other expense, net
 
 
 
 
(4,928
)
 
 
 
 
 
(37,172
)
Income from continuing operations before income taxes
 
 
 
 
179,974

 
 
 
 
 
128,741

Income tax provision
 
 
 
 
(63,098
)
 
 
 
 
 
(48,284
)
Income from continuing operations
 
 
 
 
116,876

 
 
 
 
 
80,457

Loss from discontinued operations, net of tax
 
 
 
 
—

 
 
 
 
 
(5,854
)
Net income
 
 
 
 
$
116,876

 
 
 
 
 
$
74,603

 
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,
 
 
2013
 
2012
 
2013
 
2012
Net sales:
 
 
 
 
 
 
 
 
HSN
 
$
538,639

 
$
537,393

 
$
1,614,949

 
$
1,581,268

Cornerstone
 
260,251

 
241,376

 
769,198

 
702,596

Total
 
$
798,890

 
$
778,769

 
$
2,384,147

 
$
2,283,864