Home Shopping Network 2013 Annual Report Download - page 25

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General and Administrative Expense
General and administrative expense consists primarily of compensation and other employee-related costs (including
stock-based compensation) for personnel engaged in finance, legal, tax, human resources, information technology and
executive management functions, bad debts, facilities costs and fees for professional services.
Year Ended December 31,
2013 Change 2012 Change 2011
(Dollars in thousands)
HSN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 154,434 (5)% $ 162,417 7% $ 151,813
As a percentage of HSN net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7% (50 bp) 7.2% 20 bp 7.0%
Cornerstone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 56,344 (9)% $ 62,236 9% $ 57,169
As a percentage of Cornerstone net sales. . . . . . . . . . . . . . . . . . . . . . 5.2% (100 bp) 6.2% (10 bp) 6.3%
HSNi. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 210,778 (6)% $ 224,653 7% $ 208,982
As a percentage of HSNi net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2% (70 bp) 6.9% 10 bp 6.8%
HSNi’s general and administrative expense in 2013 decreased 6%, or $13.9 million, and was 6.2% of net sales
compared to 6.9% in the prior year. The decrease in expense was primarily due to a $7.8 million sales tax settlement at
Cornerstone that occurred in the prior year and lower bad debt expense related to HSN's extended payment program
("Flexpay"), partially offset by an increase in employee-related costs. There was also an increase in severance-related costs that
was offset by a decrease in stock-based compensation expense.
Additionally, Cornerstone recognized non-cash fair value adjustments in the fourth quarter of 2013 related to a
contingent consideration obligation and certain intangible assets associated with its 2012 acquisition of Chasing Fireflies. The
net impact of the reduction of the contingent consideration obligation and the intangible asset impairment charge was a
reduction of expense of $0.6 million which is included in "General and administrative expenses."
HSNi’s general and administrative expense in 2012 increased 7%, or $15.7 million, and was 6.9% of net sales
compared to 6.8% in the prior year. The increase in expense was primarily due to a $7.8 million sales tax settlement at
Cornerstone, an increase in bad debt expense due to higher usage of Flexpay and technology-related costs, partially offset by a
$6.1 million decrease in stock-based compensation.
Depreciation and Amortization
Year Ended December 31,
2013 Change 2012 Change 2011
(Dollars in thousands)
HSN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28,372 7% $ 26,486 (4)% $ 27,652
Cornerstone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,217 6% 11,519 41% 8,170
HSNi. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,589 7% $ 38,005 6% $ 35,822
As a percentage of HSNi net sales . . . . . . . . . . . . . . . . . . . . . . 1.2% 0 bp 1.2% 0 bp 1.2%
Depreciation and amortization in 2013 increased 7%, or $2.6 million, compared to the prior year. The increase was
primarily due to the incremental depreciation associated with recent capital expenditures for information and digital technology.
Depreciation and amortization in 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.