Home Shopping Network 2010 Annual Report Download - page 43

Table of Contents
HSN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1—ORGANIZATION
Company Overview
HSN, Inc. (“HSNi”) markets and sells a wide range of third party and private label merchandise directly to consumers through
(i) television home shopping programming broadcast on the HSN television networks; (ii) catalogs, which consist primarily of the Cornerstone
portfolio of leading print catalogs which includes Frontgate, Ballard Designs, Garnet Hill, Smith+Noble, The Territory Ahead, TravelSmith and
Improvements; (iii) websites, which consist primarily of HSN.com and the seven branded websites operated by Cornerstone; (iv) retail and outlet
stores; and (v) mobile handheld devices. HSNi’s television home shopping business, related internet commerce and retail and outlet stores are
referred to herein as “HSN”
and all catalog operations, including related internet commerce and retail stores, are collectively referred to herein as
“Cornerstone.”
HSN offerings primarily consist of jewelry, fashion (apparel & accessories), beauty & wellness, and home & other (including housewares,
home fashions, electronics, fitness and other). Merchandise offered by Cornerstone primarily consists of home furnishings (including
indoor/outdoor furniture, window treatments and other home related goods) and apparel & accessories.
Basis of Presentation
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 August 20, 2008 concurrent with the spin-offs from IAC of Interval Leisure
Group, Inc., Ticketmaster Entertainment, Inc., and Tree.com, Inc. Throughout these financial statements, the separation transaction is referred to
as the “spin-off” and each of these companies as “Spincos.” In connection with the Spin-off, 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. The businesses operated
by HSNi following the spin-off are referred to herein as the “HSNi Businesses.”
HSNi also includes entities classified as discontinued operations
in Note 7.
In conjunction with the spin-off, HSNi completed the following transactions: (1) extinguished all intercompany receivable balances from
IAC, which totaled $1.5 billion by recording a non-cash distribution to IAC, (2) recapitalized the invested equity balance with common stock,
whereby holders of IAC common stock and/or Class B common stock received one-fifth of a share of HSNi common stock for every share of
IAC common stock and/or Class B common stock held at the close of business on August 11, 2008, the record date for the spin-
off, as more fully
described in our Registration Statement on Form S-1, as amended, (3) raised $390 million through a combination of $240 million of privately
issued debt securities and $150 million from a secured credit facility (See Note 11), and (4) transferred to IAC all cash in excess of $50 million,
which totaled $333.8 million.
These consolidated financial statements present our results of operations, financial position, shareholders’ equity 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
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