Home Shopping Network 2010 Annual Report Download - page 29

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Table of Contents
Production and programming expense for 2009 decreased 5% or $3.1 million and was 2.8% of HSN’s net sales compared to 3.1% in the
prior year. The decline in production and programming costs is primarily due to a decrease in labor costs due to lower headcount.
Depreciation
Depreciation for 2010 and 2009 increased $0.5 million each year as compared to the respective prior year, primarily due to the incremental
depreciation associated with recent capital expenditures, partially offset by certain fixed assets becoming fully depreciated during the periods.
The capital expenditures were primarily at HSN in 2010 and were for investments in information technology, campus renovations and broadcast-
related investments. The capital expenditures in 2009 were also primarily at HSN and were for investments in equipment relating to high-
definition television programming, campus renovations and other information technology and broadcast-related investments.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP measure and is defined in Note 6 of Notes to Consolidated Financial Statements.
NM=not meaningful
HSNi’s Adjusted EBITDA in 2010 increased 25% or $51.5 million and is 8.6% of net sales as compared to 7.5% in 2009. The increase in
Adjusted EBITDA is primarily due to the 9% growth in net sales, partially offset by the increase in operating expenses for investments in
Cornerstone’s catalog circulation and on-air distribution costs at HSN. HSN’
s Adjusted EBITDA increased 9% or $17.5 million primarily due to
the 5% increase in net sales, partially offset by the 3% increase in operating expenses, excluding non-cash charges. Cornerstone’s Adjusted
EBITDA increased $34.0 million primarily due to the 19% increase in net sales, partially offset by the 5% increase in operating expenses,
excluding non-cash charges.
HSNi’s Adjusted EBITDA in 2009 increased 30% or $47.2 million from 2008 primarily driven by an increase in productivity at
Cornerstone from the reduced catalog circulation resulting in a $54.9 million reduction in catalog costs. These cost reductions were offset by an
$8.9 million increase in HSNi’s compensation and other employee-
related costs. Adjusted EBITDA margins for HSNi increased 187 basis points
to 7.5% from 5.6% in the prior year. HSN’s Adjusted EBITDA increased 22% or $35.9 million primarily due to the $45.5 million increase in
gross profit, partially offset by a $10.5 million increase in compensation and other employee-related
26
Year Ended December 31,
2010
Change
2009
Change
2008
(Dollars in thousands)
HSN
$
29,622
3%
$
28,666
5%
$
27,348
Cornerstone
8,849
(5%)
9,309
(8%)
10,090
HSNi
$
38,471
1%
$
37,975
1%
$
37,438
As a percentage of HSNi net sales
1.3
%
(10 bp)
1.4
%
6 bp
1.3
%
Year Ended December 31,
2010
Change
2009
Change
2008
(Dollars in thousands)
HSN
$
213,612
9%
$
196,139
22%
$
160,279
As a percentage of HSN net sales
10.1
%
33 bp
9.8
%
158 bp
8.2
%
Cornerstone
$
44,011
340%
$
9,998
NM
$
(1,375
)
As a percentage of Cornerstone net sales
5.0
%
365 bp
1.3
%
151 bp
(0.2%)
HSNi
$
257,623
25%
$
206,137
30%
$
158,904
As a percentage of HSNi net sales
8.6
%
110 bp
7.5
%
187 bp
5.6
%