Home Shopping Network 2013 Annual Report Download - page 47

45
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) other significant items. Significant items, while periodically affecting our results, may vary
significantly from period to period and have a disproportionate effect in a given period, thereby affecting the comparability of
results. 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 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 other significant items.
The following tables reconcile Adjusted EBITDA to operating income for HSNi’s operating segments and to HSNi’s
consolidated net income (in thousands):
Year Ended December 31, 2013
HSN Cornerstone Total
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 261,292 $ 76,574 $ 337,866
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,657) (3,386) (14,043)
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (28,372) (12,217) (40,589)
Assets impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (3,040) (3,040)
Fair value adjustment to contingent consideration obligation. . . . . . . . . . . . . . . . . . . . . . . . . . . — 3,600 3,600
Loss on disposition of fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,079) (61) (1,140)
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 221,184 $ 61,470 282,654
Total other expense, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,513)
Income from continuing operations before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276,141
Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (97,692)
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178,449
Loss from discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 178,449
Year Ended December 31, 2012
HSN Cornerstone Total
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 250,836 $ 73,441 $ 324,277
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,167) (7,889) (19,056)
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (26,486) (11,519) (38,005)
Sales tax settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (7,750) (7,750)
Loss on disposition of fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (680) (42) (722)
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 212,503 $ 46,241 258,744
Total other expense, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (38,874)
Income from continuing operations before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219,870
Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (83,373)
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136,497
Loss from discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,822)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 130,675