Quarterly report pursuant to Section 13 or 15(d)

Segment Information (Note)

v2.4.0.8
Segment Information (Note)
 6 Months Ended
Jun. 30, 2014
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 and/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, 2013. 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; 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 June 30, 2014
 
Three Months Ended June 30, 2013
 
HSN
 
Cornerstone
 
Total
 
HSN
 
Cornerstone
 
Total
Adjusted EBITDA
$
62,657

 
$
19,435

 
$
82,092

 
$
57,135

 
$
28,017

 
$
85,152

Stock-based compensation expense
(3,053
)
 
(731
)
 
(3,784
)
 
(2,761
)
 
(784
)
 
(3,545
)
Depreciation and amortization
(7,423
)
 
(3,380
)
 
(10,803
)
 
(7,037
)
 
(2,914
)
 
(9,951
)
Loss on disposition of fixed assets
(104
)
 
(34
)
 
(138
)
 
(357
)
 
—

 
(357
)
Operating income
$
52,077

 
$
15,290

 
67,367

 
$
46,980

 
$
24,319

 
71,299

Total other expense, net
 
 
 
 
(1,810
)
 
 
 
 
 
(1,661
)
Income from continuing operations before income taxes
 
 
 
 
65,557

 
 
 
 
 
69,638

Income tax provision
 
 
 
 
(24,617
)
 
 
 
 
 
(26,367
)
Income from continuing operations
 
 
 
 
40,940

 
 
 
 
 
43,271

Income from discontinued operations, net of tax
 
 
 
 
—

 
 
 
 
 
9

Net income
 
 
 
 
$
40,940

 
 
 
 
 
$
43,280

 
 
Six Months Ended June 30, 2014
 
Six Months Ended June 30, 2013
 
HSN
 
Cornerstone
 
Total
 
HSN
 
Cornerstone
 
Total
Adjusted EBITDA
$
121,799

 
$
20,051

 
$
141,850

 
$
116,069

 
$
35,925

 
$
151,994

Stock-based compensation expense
(6,197
)
 
(1,613
)
 
(7,810
)
 
(5,584
)
 
(1,670
)
 
(7,254
)
Depreciation and amortization
(14,860
)
 
(6,699
)
 
(21,559
)
 
(13,858
)
 
(6,046
)
 
(19,904
)
CPSC settlement (a)
—

 
(3,100
)
 
(3,100
)
 
—

 
—

 
—

Loss on disposition of fixed assets
(104
)
 
(42
)
 
(146
)
 
(1,018
)
 
(1
)
 
(1,019
)
Operating income
$
100,638

 
$
8,597

 
109,235

 
$
95,609

 
$
28,208

 
123,817

Total other expense, net
 
 
 
 
(3,509
)
 
 
 
 
 
(3,301
)
Income from continuing operations before income taxes
 
 
 
 
105,726

 
 
 
 
 
120,516

Income tax provision
 
 
 
 
(40,604
)
 
 
 
 
 
(45,692
)
Income from continuing operations
 
 
 
 
65,122

 
 
 
 
 
74,824

Income from discontinued operations, net of tax
 
 
 
 
—

 
 
 
 
 
—

Net income
 
 
 
 
$
65,122

 
 
 
 
 
$
74,824

 
 
 
 
 
 
 
 
 
 
 
 
(a) The company reached a $3.1 million settlement related to a civil penalty assessed by the Consumer Product Safety Commission. For further discussion, see Note 12-Commitments and Contingencies.
 
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,
 
 
2014
 
2013
 
2014
 
2013
Net sales:
 
 
 
 
 
 
 
 
HSN
 
$
556,488

 
$
526,181

 
$
1,100,975

 
$
1,076,310

Cornerstone
 
298,716

 
286,425

 
531,649

 
508,947

Total
 
$
855,204

 
$
812,606

 
$
1,632,624

 
$
1,585,257