Home Shopping Network 2012 Annual Report Download - page 55

Table of Contents
HSNi measures certain assets, such as property and equipment and intangible assets, at fair value on a non-
recurring basis. These assets are
recognized at fair value if they are deemed to be impaired. On July 1, 2012, substantially all of the assets and certain liabilities of The Territory
Ahead were sold. An impairment charge of $5.9 million
was recorded in the second quarter of 2012 to reduce the carrying value of the net assets
to their estimated net realizable value based on the known selling price of $1.1 million and the estimated costs to sell the business. See Note 17
for further discussion of the sale of The Territory Ahead. There were no other fair value adjustments to the carrying values of HSNi's property
and equipment and intangible assets during December 31, 2012.
During the year ended December 31, 2011, HSNi recognized fair value adjustments of $2.2 million for indefinite-lived intangible assets of
The Territory Ahead. The fair value of the intangible assets, consisting principally of trademarks and trade names, was assessed using the relief
from royalty method (level 3 criteria). Key inputs used in this calculation included revenue growth, discount, royalty and terminal growth rates.
The fair value adjustment of $2.2 million is included in "Loss from discontinued operations, net of tax" in the accompanying consolidated
statements of operations. See Note 3 for a discussion of this impairment charge.
Also during the year ended December 31, 2011, HSNi recognized fair value adjustments of $0.8 million
for property and equipment of The
Territory Ahead, consisting principally of leasehold improvements. The fair value was determined using discounted future cash flows (level 3
criteria). Key inputs used in this calculation included revenue growth, operating expenses and a discount rate that HSNi believed a buyer would
assume when determining a purchase price for the assets. The fair value adjustment of $0.8 million is included in "Loss from discontinued
operations, net of tax" in the accompanying consolidated statements of operations. See Note 4 for a discussion of this impairment charge.
NOTE 10—EARNINGS PER SHARE
HSNi computes basic earnings per share using the weighted average number of common shares outstanding for the period. HSNi computes
diluted earnings per share using the treasury stock method, which includes the weighted average number of common shares outstanding for the
period plus the potential dilution that could occur if various equity awards to issue common stock were exercised or restricted equity awards
were vested resulting in the issuance of common stock that could share in HSNi’s earnings.
Basic Earnings Per Share
For the years ended December 31, 2012, 2011 and 2010, basic earnings per share was computed using the number of weighted average
shares of common stock outstanding for the period.
Diluted Earnings Per Share
For the years ended December 31, 2012, 2011 and 2010, diluted earnings per share was computed using the number of shares of common
stock outstanding for the year and, if dilutive, the incremental common stock that HSNi would issue upon the assumed exercise of stock options
and stock appreciation rights and the vesting of restricted stock units using the treasury stock method.
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