Home Shopping Network 2010 Annual Report Download - page 28

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Table of Contents
HSNi’s selling and marketing expense in 2009 decreased 11% or $59.7 million and represented 18.5% of net sales as compared to 20.1%
in 2008. This decrease is primarily due to a $54.9 million decline in catalog production and distribution costs associated with a 24% planned
reduction in catalog circulation. The decrease is also attributable to a $4.9 million decline in compensation and other employee-related costs in
2009 primarily due to headcount reductions at Cornerstone. These decreases within selling and marketing expense were partially offset by an
increase in on-air distribution costs. The increase in on-air distribution costs was due to a $5.0 million reduction of a liability in 2008 resulting
from settlement of certain key contract conditions with a vendor.
General and Administrative Expense
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, bad
debts, facilities costs and fees for professional services.
HSNi’s general and administrative expense in 2010 increased 2% or $4.5 million and was 7.6% of net sales as compared to 8.1% in the
prior year. The increase in expense was driven by an increase in compensation and other employee-related costs primarily due to stock-based
compensation, partially offset by a decrease in performance driven incentives.
HSNi’s general and administrative expense in 2009 increased less than 1% or $1.8 million and was 8.1% of net sales compared to 7.8% in
the prior year. The increase was driven by an increase in compensation and other employee-related costs primarily due to performance driven
incentives, offset by an $8.2 million decrease in stock-based compensation expense. The decrease in stock-based compensation expense is
primarily due to the charge recognized in 2008 related to the modification of existing stock-based compensation awards in connection with the
spin-off.
Production and Programming Expense
Production and programming expense consists primarily of compensation and other employee-related costs (including stock-based
compensation) for personnel engaged in production and programming at HSN. Expenses associated with on-air distribution of HSN, including
expenses relating to pay television operators, are included in selling and marketing expense.
Production and programming expense for 2010 increased 6% or $3.1 million and was 2.8% of HSN’s net sales, consistent with the prior
year.
25
Year Ended December 31,
2010
Change
2009
Change
2008
(Dollars in thousands)
HSN
$
160,361
0%
$
159,869
1%
$
158,218
As a percentage of HSN net sales
7.6
%
(38 bp)
8.0
%
(12 bp)
8.1
%
Cornerstone
$
66,610
6%
$
62,595
0%
$
62,426
As a percentage of Cornerstone net sales
7.6
%
(88 bp)
8.4
%
124 bp
7.2
%
HSNi
$
226,971
2%
$
222,464
1%
$
220,644
As a percentage of HSNi net sales
7.6
%
(52 bp)
8.1
%
28 bp
7.8
%
Year Ended December 31,
2010
Change
2009
Change
2008
(Dollars in thousands)
Production and programming expense
$
60,235
6%
$
57,090
(5%)
$
60,217
As a percentage of HSN net sales
2.8
%
0 bp
2.8
%
(23 bp)
3.1
%