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Table of Contents
The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in
this annual report. Historical results and trends which might appear should not be taken as indicative of future operations. Our results of
operations and financial condition, as reflected in the accompanying statements and related notes, are subject to management’s evaluation and
interpretations of business conditions, changing market conditions and other factors.
Spin-Off
HSNi was incorporated in Delaware in May 2008 in connection with the spin-off of several businesses previously owned by
IAC/InterActiveCorp, or IAC. The spin-off from IAC occurred on August 20, 2008 and occurred concurrent with the spin-offs from IAC of
Interval Leisure Group, Inc., Ticketmaster Entertainment, Inc., and Tree.com, Inc. In this annual report, we refer to the separation transaction as
the “spin-off” and each of these companies as “Spincos.” Effective August 21, 2008, HSNi’s shares began trading on the NASDAQ Global
Select Market under the symbol “HSNI.”
HSNi was formed to hold HSN and Cornerstone, the businesses that previously comprised most of IAC’s retailing segment. Prior to the
spin-off, HSNi was a wholly owned subsidiary of IAC and did not have any material assets or liabilities nor did HSNi engage in any business or
other activities and, other than in connection with the spin-off, did not acquire or incur any material assets or liabilities. HSN primarily consists
of the HSN television networks, HSN.com and a limited number of outlet stores; and Cornerstone includes the Cornerstone Brands portfolio of
leading print catalogs, related websites and a number of retail and outlet stores. The businesses operated by HSNi following the spin-off are
referred to herein as the “HSNi Businesses.” HSNi also includes the entity classified as discontinued operations in the Management Overview
under the heading “Discontinued Operations.”
Basis of Presentation
The consolidated financial statements present our results of operations, financial position, shareholders’ equity and comprehensive income
and cash flows on a combined basis up through the spin-off on August 20, 2008, and on a consolidated basis thereafter. We prepared these
financial statements relating to periods prior to the spin-off on a combined basis because they excluded certain investments and assets that were
owned, either directly or indirectly, by legal entities that comprise the HSNi Businesses. The ownership of these investments and assets were
retained by IAC after the spin-off. The historical combined financial statements of HSNi and its subsidiaries reflect the contribution or other
transfer to HSNi of all of the subsidiaries and assets and the assumption by HSNi of all of the liabilities relating to the HSNi Businesses in
connection with the spin-off and the allocation to HSNi of certain IAC corporate expenses relating to the HSNi Businesses. Accordingly, the
historical combined financial statements of HSNi reflect the historical financial position, results of operations and cash flows of the HSNi
Businesses since their respective dates of acquisition by IAC, based on the historical consolidated financial statements and accounting records of
IAC and using the historical results of operations and historical bases of the assets and liabilities of the HSNi Businesses with the exception of
accounting for income taxes. For purposes of these financial statements, income taxes have been principally computed for HSNi on an as if
stand-alone, separate tax return basis.
In the opinion of HSNi’s management, the assumptions underlying the consolidated statements are reasonable. However, this financial
information does not necessarily reflect what the historical financial position, results of operations and cash flows of HSNi would have been had
HSNi been a stand-alone company during the periods presented prior to the spin-off.
20
ITEM 7.
MANAGEMENT
’
S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS