Home Shopping Network 2008 Annual Report Download - page 28

Download and view the complete annual report

Please find page 28 of the 2008 Home Shopping Network annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 91

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91

25
costs associated with America’s Store and other miscellaneous items. The increase in compensation and other
employee-related costs in 2008 is primarily due to headcount additions and a $0.9 million increase in non-cash
compensation expense due to the modification of existing stock-based compensation awards in connection with the
spin-off.
HSNi’s selling and marketing expense in 2007 increased $10.9 million from 2006, primarily due to
increases of $6.7 million in on-air distribution costs at HSN, $6.2 million in compensation and other employee-
related costs and $4.2 million in advertising and promotional expenditures, which is net of a decrease of $6.6 million
in catalog circulation costs. The increase in on-air distribution costs is primarily related to newly executed contracts
with cable and satellite distribution partners. Compensation and other employee-related costs increased in 2007 due
in part to a 15% increase in headcount as well as increased management transition costs. The decrease in catalog
costs is primarily due to the planned reduction in circulation at certain catalog brands.
General and Administrative Expense
2008
%
Change 2007
%
Change 2006
HSN
158,218
$
12%
141,379
$
7%
131,538
$
As a percentage of HSN net sales
8%
62 bp
7%
49 bp
7%
Cornerstone
62,426
$
(12%)
70,576
$
29%
54,723
$
As a percentage of Cornerstone net sales
7%
25 bp
7%
144 bp
6%
HSNi
220,644
$
4%
211,955
$
14%
186,261
$
As a percentage of HSNi net sales 8% 53 bp 7% 82 bp 6%
Year Ended December 31,
(Dollars in thousands)
General and administrative expense consists primarily of compensation and other employee-related costs
(including stock-based compensation) for personnel engaged in finance, legal, tax, human resources, information
technology and executive management functions, facilities costs and fees for professional services.
HSNi’s general and administrative expense in 2008 increased $8.7 million to $220.6 million as compared
to the prior year. This increase is primarily due to a $6.6 million increase in non-cash compensation expense
associated with the modification of existing stock-based compensation awards in connection with the spin-off, an
increase in personnel related expenses at HSN and a $5.2 million increase in bad debt expense, offset by a reduction
in allocated expenses from our former parent company. HSN increased its bad debt provision in anticipation of
losses associated with its Flexpay extended payment program. Flexpay, which is offered exclusively through HSN,
allows customers to pay for merchandise in interest free monthly payments over a two to six month period.
HSNi’s general and administrative expense in 2007 increased $25.7 million from 2006, primarily due to
higher compensation and other employee-related costs of $14.3 million and increases of $3.9 million in bad debt
expense and $3.4 million in professional fees. Between 2006 and 2007, HSNi invested in leadership by increasing
compensation and expanding its management team. General and administrative expense was further impacted by
increases in compensation and other employee-related costs associated with retail store expansion and internet
development at Cornerstone. The increase in bad debt expense is primarily due to increased Flexpay sales.