Home Shopping Network 2011 Annual Report Download - page 48

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HSN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6—SEGMENT INFORMATION
HSNi presents its operating segments and related financial information in a manner consistent with how the
chief operating decision maker and executive management view the businesses, how the businesses are organized
as to segment management, and the focus of the businesses with regards to the types of products or services
offered or the target market. HSNi has two operating segments, HSN and Cornerstone. The accounting policies
of the segments are the same as those described in Note 2 – Summary of Significant Accounting Policies.
Intercompany accounts and transactions have been eliminated in consolidation.
HSNi’s primary metric is Adjusted EBITDA, which is defined as operating income excluding, if applicable:
(1) non-cash charges including: (a) stock-based compensation expense, (b) amortization of intangibles,
(c) depreciation and gains and losses on asset dispositions, and (d) 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
intangibles, depreciation, gains and losses on asset dispositions, asset impairment charges, acquisition-related
accounting expenses and one-time items.
The following tables reconcile Adjusted EBITDA to operating income (loss) for HSNi’s operating segments
and to HSNi’s consolidated net income (in thousands):
Year Ended December 31, 2011
HSN Cornerstone Total
Adjusted EBITDA ............................................. $235,163 $ 64,857 $300,020
Stock-based compensation expense ................................. (13,101) (13,300) (26,401)
Depreciation and amortization ..................................... (27,652) (9,308) (36,960)
Asset impairments .............................................. — (2,976) (2,976)
Loss on disposition of fixed assets .................................. (1,482) (202) (1,684)
Operating income .............................................. $192,928 $ 39,071 231,999
Other expense, net .............................................. (31,593)
Income before income taxes ....................................... 200,406
Income tax provision ............................................ (77,336)
Net income .................................................... $123,070
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