Quarterly report pursuant to Section 13 or 15(d)

Segment Information (Note)

v3.7.0.1
Segment Information (Note)
 3 Months Ended
Mar. 31, 2017
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 reportable 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, 2016. 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 HSNi’s consolidated net income to operating income for HSNi's operating segments and Adjusted EBITDA (in thousands):
 
Three Months Ended March 31, 2017
 
Three Months Ended March 31, 2016
 
HSN
 
Cornerstone
 
Total
 
HSN
 
Cornerstone
 
Total
Net income
 
 
 
 
$
21,248

 
 
 
 
 
$
28,585

Income tax provision
 
 
 
 
13,467

 
 
 
 
 
17,097

Income before income taxes
 
 
 
 
34,715

 
 
 
 
 
45,682

Total other expense, net
 
 
 
 
3,864

 
 
 
 
 
4,147

Operating income
$
37,512

 
$
1,067

 
38,579

 
$
49,645

 
$
184

 
49,829

Non-cash charges:
 
 
 
 
 
 
 
 
 
 
 
   Stock-based compensation expense
3,392

 
1,312

 
4,704

 
4,039

 
1,337

 
5,376

   Depreciation and amortization
7,707

 
3,179

 
10,886

 
7,003

 
3,522

 
10,525

   Gain (loss) on disposition of fixed assets
(49
)
 
—

 
(49
)
 
3


(1
)

2

Adjusted EBITDA
$
48,562

 
$
5,558

 
$
54,120

 
$
60,690

 
$
5,042

 
$
65,732

 
 
 
 
 
 
 
 
 
 
 
 

The net sales for each of HSNi's reportable segments are as follows (in thousands):
 
 
Three Months Ended March 31,
 
 
2017
 
2016
Net sales:
 
 
 
 
HSN
 
$
560,529

 
$
578,383

Cornerstone
 
224,906

 
238,382

Total
 
$
785,435

 
$
816,765