Home Shopping Network 2011 Annual Report Download - page 62

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HSN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expenses charged to operations under these agreements were $24.9 million, $24.7 million and $25.1 million
for the years ended December 31, 2011, 2010 and 2009, respectively.
HSNi also has funding commitments that could potentially require its performance in the event of demands
by third parties or contingent events, as follows (in thousands):
Amount of Commitments Expiration Per Period
Total Amounts
Committed
Less Than
1 Year 1 - 3 Years 3 - 5 Years
More Than
5 Years
Letters of credit and surety bonds .............. $ 34,687 $ 34,637 $ 50 $— $—
Purchase obligations ........................ 179,265 85,151 93,194 920 —
Total commercial commitments ........... $213,952 $119,788 $93,244 $920 $—
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
customs bonds, which relate to the import of merchandise into the United States.
The purchase obligations primarily relate to cable contracts and include obligations for future cable
distribution and commission guarantees.
NOTE 14—RELATED PARTY TRANSACTIONS
Relationship Between IAC and HSNi After the Spin-off
For purposes of governing certain of the ongoing relationships between HSNi and IAC at and after the
Spin-off and to provide for an orderly transition, effective August 20, 2008, HSNi entered into the following
agreements (collectively, the “Spin-Off Agreements”):
• a Separation and Distribution Agreement that sets forth the arrangements between IAC and HSNi
regarding the principal transactions necessary to separate HSNi from IAC, and that governs certain
aspects of the relationship of HSNi with IAC and the other Spincos after the Spin-off;
• a Tax Sharing Agreement that governs the respective rights, responsibilities and obligations of IAC and
HSNi after the Spin-Off with respect to tax periods ending on or before the Spin-off, including tax
liabilities and benefits, tax attributes, tax contests and other matters regarding income taxes, other taxes
and related tax returns;
• an Employee Matters Agreement that covers a wide range of compensation and benefit issues,
including the allocation among IAC and HSNi of responsibility for the employment and benefit
obligations and liabilities of each company’s current and former employees (and their dependents and
beneficiaries), as well as the provision of health and welfare benefits to employees of HSNi (the costs
of which were borne by HSNi) pursuant to IAC’s employee benefit plans through the end of 2008; and
• a Transition Services Agreement that governs the provision of transition services among IAC and
HSNi.
HSNi has satisfied its obligations under the Separation and Distribution Agreement, Employee Matters
Agreement and Transition Services Agreement. HSNi continues to be subject to certain post-spin obligations
under the Tax Sharing Agreement.
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