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NOTE 17—DISCONTINUED OPERATIONS
In May 2012, substantially all of the assets and certain liabilities of Smith+Noble, a Cornerstone brand specializing in
window treatments, were sold for $5.5 million. HSNi does not expect to have any significant continuing involvement or cash
flows from Smith+Noble; therefore, the results of operations for Smith+Noble are presented separately as “Loss from
discontinued operations, net of tax” in the consolidated statements of operations for all periods presented, and the cash flows
from Smith+Noble are presented separately as discontinued operations in the consolidated statements of cash flows for all
periods presented. Cornerstone recorded an after-tax loss on the sale of $0.1 million in the second quarter of 2012, which is
included in “Loss from discontinued operations, net of tax” in the accompanying consolidated statements of operations.
In July 2012, substantially all of the assets and certain liabilities of The Territory Ahead, a Cornerstone brand
specializing in casual apparel for men and women, were sold for approximately $1.1 million. HSNi does not expect to have
any significant continuing involvement or cash flows from The Territory Ahead; therefore, the results of operations for The
Territory Ahead are presented separately as “Loss from discontinued operations, net of tax” in the consolidated statements of
operations for all periods presented, and the cash flows from The Territory Ahead are presented separately as discontinued
operations in the consolidated statements of cash flows for all periods presented. An impairment charge of $5.9 million, or $3.7
million net of taxes, was recorded in the second quarter of 2012 to reduce the carrying value of the net assets to their estimated
net realizable value and is included in “Loss from discontinued operations, net of tax” in the accompanying statements of
operations.
The following table reflects the results of Smith+Noble and The Territory Ahead that are reported as discontinued
operations for all periods presented (in thousands):
Year Ended December 31,
2013 2012 2011
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 40,154 $ 107,798
Loss from discontinued operations (including loss on sale of $6.0 million recognized in the
second quarter of 2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ (9,370) $ (7,353)
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 3,548 2,771
Loss from discontinued operations, net of tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ (5,822) $ (4,582)
NOTE 18—ACQUISITION
In April 2012, HSNi, through Cornerstone, acquired substantially all of the assets and liabilities of Chasing Fireflies,
LLC, a leading direct-to-consumer premium children's and family lifestyle brand. The purchase price was $22.9 million in
cash and contingent consideration valued at $6.5 million as of the acquisition date. The fair value of the contingent
consideration was estimated by applying a probability-weighted income approach. The acquisition has been accounted for as a
business combination and the total purchase consideration has been assigned to the assets acquired, primarily inventory and
other assets totaling $8.6 million and liabilities assumed totaling $2.6 million, at their estimated fair value as of the acquisition
date. The allocation of the identifiable intangible assets and goodwill includes $13.5 million primarily for trade names and
customer relationships and $9.9 million for goodwill. Proforma information has not been presented for this acquisition as it
was not material to HSNi's consolidated results of operations or financial position.
HSNi performed its annual impairment testing in the fourth quarter of fiscal 2013 for the goodwill and indefinite-lived
intangible assets related to the acquisition of Chasing Fireflies. Based on this analysis, HSNi determined the fair value of the
indefinite-lived intangible assets was lower than its carrying value; therefore, an impairment charge of $3.0 million was
recorded during the fourth quarter of fiscal 2013. See Note 3 for a further discussion on goodwill and indefinite-lived
intangible assets. Based on the revised plan financial results, HSNi also determined Chasing Fireflies is less likely to achieve
the targets necessary to earn the full amount of the contingent consideration associated with the acquisition. Therefore, HSNi
adjusted the fair value of the previously recorded contingent consideration in the fourth quarter of 2013 by $3.6 million. The
net impact of the impairment charge and the contingent consideration adjustment is a reduction of expense of $0.6 million and
is included in "General and administrative expense" in the accompanying consolidated statements of operations.