Home Shopping Network 2010 Annual Report Download - page 33

Table of Contents
At December 31, 2010, we had $0.6 million recorded for uncertain tax positions. We are not able to reasonably estimate the timing of
payments in future periods; therefore, the liability of $0.6 million has not been included in the contractual obligations table above.
Off-Balance Sheet Arrangements
Other than the items described above, HSNi does not have any off-balance sheet arrangements as of December 31, 2010.
Seasonality
HSNi is affected by seasonality, although historically our business has exhibited less seasonality than many other retail businesses. Our
sales levels are generally higher in the fourth quarter. Reported revenues in the fourth quarter were 31%, 31% and 28% of total reported annual
revenues in 2010, 2009 and 2008, respectively.
Non-GAAP Measure
HSNi reports Adjusted EBITDA as a supplemental measure to generally accepted accounting principles (“GAAP”).
This measure is one of
the primary metrics by which HSNi evaluates the performance of its businesses, on which its internal budgets are based and by which
management is compensated. HSNi believes that investors should have access to the same information that it uses in analyzing its results.
Adjusted EBITDA is defined as operating income excluding, if applicable: (1) non-cash charges including: (a) stock-based compensation
expense, (b) amortization of non-cash marketing, (c) amortization of intangibles, (d) depreciation and gains and losses on asset dispositions, and
(e) goodwill, long-lived asset and intangible asset impairments; (2) pro forma adjustments for significant acquisitions; and (3) one-time items.
Adjusted EBITDA is not a measure determined in accordance with GAAP, and should not be considered in isolation or as a substitute for
operating income, net income or any other measure determined in accordance with GAAP. Adjusted EBITDA is used as a measurement of
operating efficiency and overall financial performance and HSNi believes it to be a helpful measure for those evaluating companies in the retail
and media industries. Adjusted EBITDA measures the amount of income generated each period that could be used to service debt, pay taxes and
fund capital expenditures. Adjusted EBITDA has certain limitations in that it does not take into account the impact to HSNi’s consolidated
statements of operations of certain expenses, including stock-based compensation, amortization of non-cash marketing, amortization of
intangibles, depreciation, gains and losses on asset dispositions, asset impairment charges, acquisition-related accounting and one-time items
Non-Cash Expenses That Are Excluded From HSNi’s Non-GAAP Measure
Stock-based compensation expense consists principally of expense associated with the grants of restricted stock, restricted stock units,
stock options and stock appreciation rights, including expense associated with the
30
(b)
The purchase obligations primarily relate to contracts with pay television operators and include obligations for future cable distribution and
commission guarantees.
Amount of Commitments Expiration Per Period
Commercial Commitments
Total
Amounts
Committed
Less Than 1
Year 1 -
3 Years
3 -
5 Years
More Than
5 Years
(In thousands)
Letters of credit and surety bonds (c)
$
30,293
$
30,243
$
50
$
—
$
—
(c)
The letters of credit (
“
LOCs
”
)
primarily consist of trade LOCs which are used for inventory purchases. Trade LOCs are guarantees of
payment based upon the delivery of goods. The surety bonds primarily consist of custom bonds which relate to the import of merchandise
into the United States.