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Table of Contents
Depreciation and Amortization
Depreciation and amortization for 2012 increased 6%, or $2.2 million, compared to the prior year. The increase was primarily due to
depreciation on leasehold improvements and equipment related to a new leased Cornerstone warehouse facility opened in 2012 and amortization
of intangibles acquired in the second quarter related to the Chasing Fireflies acquisition, partially offset by certain fixed assets becoming fully
depreciated during 2012.
Depreciation and amortization for 2011 decreased 5%, or $1.7 million, compared to the prior year. The decrease was primarily due to
certain fixed assets becoming fully depreciated during the period. 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.
HSNi's Adjusted EBITDA in 2012 increased 7%, or $21.5 million, and was 9.9% of net sales, consistent with the prior year. The increase
in Adjusted EBITDA was primarily due to a 6% increase in net sales and a 40 basis point improvement in gross profit margin, partially offset by
an 8% increase in operating expenses (excluding non-cash charges and the $7.8 million sales tax settlement). HSN's Adjusted EBITDA
increased 7%, or $15.7 million, primarily due to a 5% increase in net sales and a 40 basis point improvement in gross profit margin, partially
offset by a 6% increase in operating expenses (excluding non-cash charges) primarily for employee-related costs, digital and brand marketing
and bad debt expense. Cornerstone's Adjusted EBITDA increased 9%, or $5.8 million, primarily due to the addition of Chasing Fireflies.
HSNi’s Adjusted EBITDA in 2011 increased 17%, or $43.9 million, and was 9.9% of net sales as compared to 9.0% in 2010. The increase
in Adjusted EBITDA was primarily due to a 6% growth in net sales and 90 basis point improvement in gross profit margin as compared to 2010,
partially offset by the increase in operating expenses for investments in catalog circulation at Cornerstone and compensation and employee-
related costs. HSN’s Adjusted EBITDA in 2011 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 in 2011 increased 49%, or $22.4 million, primarily due to an 18%
increase in net sales and 90 basis point improvement in gross profit margin, partially offset by a 16% increase in operating expenses (excluding
non-cash charges) primarily for investments in its catalog circulation and compensation and employee-related costs.
23
Year Ended December 31,
2012
Change
2011
Change
2010
(Dollars in thousands)
HSN
$
26,486
(4)%
$
27,652
(8)%
$
30,184
Cornerstone
11,519
41%
8,170
11%
7,362
HSNi
$
38,005
6%
$
35,822
(5)%
$
37,546
As a percentage of HSNi net sales
1.2
%
0 bp
1.2
%
(10 bp)
1.3
%
Year Ended December 31,
2012
Change
2011
Change
2010
(Dollars in thousands)
HSN
$
250,836
7%
$
235,164
10%
$
213,613
As a percentage of HSN net sales
11.1
%
20 bp
10.9
%
80 bp
10.1
%
Cornerstone
$
73,441
9%
$
67,595
49%
$
45,240
As a percentage of Cornerstone net sales
7.3
%
(10 bp)
7.4
%
150 bp
5.9
%
HSNi
$
324,277
7%
$
302,759
17%
$
258,853
As a percentage of HSNi net sales
9.9
%
0 bp
9.9
%
90 bp
9.0
%