Home Shopping Network 2011 Annual Report Download - page 28

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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. The increase in expense is primarily due to costs incurred for marketing
events and an increase in compensation and employee-related costs.
Depreciation and Amortization
Year Ended December 31,
2011 Change 2010 Change 2009
(Dollars in thousands)
HSN......................................... $27,652 (8%) $30,183 3% $29,228
Cornerstone ................................... 9,308 5% 8,849 (5%) 9,309
HSNi ........................................ $36,960 (5%) $39,032 1% $38,537
As a percentage of HSNi net sales ................. 1.2% (10 bp) 1.3% (10 bp) 1.4%
Depreciation and amortization for 2011 decreased $2.1 million compared to the prior year. The decrease is
primarily due to certain fixed assets becoming fully depreciated during the period. Depreciation and amortization
for 2010 increased $0.5 million compared to the prior year and is 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 2011 and 2010 and were for investments
in information technology, campus renovations 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.
Year Ended December 31,
2011 Change 2010 Change 2009
(Dollars in thousands)
HSN ....................................... $235,163 10% $213,612 9% $196,139
As a percentage of HSN net sales ................ 10.9% 80 bp 10.1% 30 bp 9.8%
Cornerstone ................................. $ 64,857 47% $ 44,011 340% $ 9,998
As a percentage of Cornerstone net sales ........... 6.4% 140 bp 5.0% 370 bp 1.3%
HSNi ....................................... $300,020 16% $257,623 25% $206,137
As a percentage of HSNi net sales ................ 9.4% 80 bp 8.6% 110 bp 7.5%
NM = not meaningful
HSNi’s Adjusted EBITDA in 2011 increased 16%, or $42.4 million, and is 9.4% of net sales as compared to
8.6% in 2010. The increase in Adjusted EBITDA is primarily due to a 6% growth in net sales and 80 basis point
improvement in gross profit margin as compared to 2010, partially offset by the increase in operating expenses
for investments in Cornerstone’s catalog circulation and compensation and employee-related costs. HSN’s
Adjusted EBITDA increased 10%, or $21.6 million, primarily due to a 2% increase in net sales and 80 basis
point improvement in gross profit margin, partially offset by a 2% increase in operating expenses (excluding
non-cash charges) primarily for compensation and employee-related costs. Cornerstone’s Adjusted EBITDA
increased 47%, or $20.8 million, primarily due to a 15% increase in net sales and 30 basis point improvement in
gross profit margin, partially offset by a 12% increase in operating expenses (excluding non-cash charges)
primarily for investments in its catalog circulation and compensation and employee-related costs.
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 a 9% growth in net sales, partially offset by
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