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Table of Contents
costs. Cornerstone’s Adjusted EBITDA increased $11.4 million primarily as a result of productivity improvements from the 24% planned
reduction in catalog circulation, offset by a $49.6 million decrease in gross profit.
Operating Income (Loss)
NM = not meaningful
HSNi’s operating income in 2010 increased 26% or $40.4 million from 2009 and was 6.5% of net sales as compared to 5.7% in the prior
year. The increase in operating income 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, a $10.0 million increase in stock-based compensation expense and higher on-air distribution
costs at HSN.
HSNi’s operating income for 2009 was $155.7 million as compared to $3.1 billion of operating loss in 2008. The increase in operating
income is primarily attributable to the $3.2 billion in asset impairment charges at HSN and Cornerstone during 2008, a decrease in catalog costs
at Cornerstone related to the 24% reduction in circulation, a $14.9 million decrease in amortization of non-cash marketing and intangible assets,
a $9.0 million reduction in stock-based compensation expense, offset by an $8.9 million increase in HSNi’s compensation and other employee-
related costs.
In 2008, due to a significant deterioration in the macroeconomic environment for retailers, particularly in the home and apparel categories,
and a significant decline in our stock price, we recognized $3.2 billion of asset impairment charges related to the write-down of goodwill and
intangible assets at our HSN and Cornerstone reporting units.
The decrease in amortization of intangible assets in 2009 is due to the impairment of customer lists recognized in the fourth quarter of 2008
and certain intangibles becoming fully amortized during 2008. The amortization of non-cash marketing referred to in this report consists of non-
cash marketing and advertising secured by IAC from Universal Television as part of a transaction with Vivendi Universal Entertainment, LLLP
(“VUE”). The decrease in stock-
based compensation expense in 2009 as compared to the previous year is primarily due to the charge recognized
in 2008 related to the modification of stock-based compensation awards in connection with the spin-off.
Other Income (Expense)
27
Year Ended December 31,
2010
Change
2009
Change
2008
(Dollars in thousands)
HSN
$
168,724
7%
$
157,233
NM
$(2,332,789)
As a percentage of HSN net sales
8.0
%
14 bp
7.8
%
NM
(119.2%)
Cornerstone
$
27,363
1833%
$
(1,579
)
NM
$(769,522)
As a percentage of Cornerstone net sales
3.1
%
332 bp
(0.2%)
NM
(88.8%)
HSNi
$
196,087
26%
$
155,654
NM
$
(3,102,311
)
As a percentage of HSNi net sales
6.5
%
88 bp
5.7
%
NM
(109.9%)
Year Ended December 31,
2010
Change
2009
Change
2008
(Dollars in thousands)
Interest income
$
601
75%
$
343
(29
%)
$
480
Interest expense
(33,085
)
(6%)
(35,283
)
115
%
(16,420
)
Total other expense, net
$
(32,484
)
(7%)
$
(34,940
)
119
%
$
(15,940
)
As a percentage of HSNi net sales
(1.1%)
19 bp
(1.3%)
(71 bp
)
(0.6%)