Home Shopping Network 2015 Annual Report Download - page 26

Download and view the complete annual report

Please find page 26 of the 2015 Home Shopping Network annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 100

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100

24
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,
2015 Change 2014 Change 2013
(Dollars in thousands)
HSN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 170,242 7% $ 159,208 3% $ 154,434
As a percentage of HSN net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7% 30 bp 6.4% (30 bp) 6.7%
Cornerstone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 71,018 15% $ 61,904 10% $ 56,344
As a percentage of Cornerstone net sales. . . . . . . . . . . . . . . . . . . . . . 6.2% 60 bp 5.6% 40 bp 5.2%
HSNi. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 241,260 9% $ 221,112 5% $ 210,778
As a percentage of HSNi net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5% 30 bp 6.2% - 6.2%
HSNi’s general and administrative expense in 2015 increased 9%, or $20.1 million, and was 6.5% of sales compared
to 6.2% in the prior year. HSNi’s general and administrative expense in 2014 increased 5%, or $10.3 million, and was 6.2% of
net sales consistent with the prior year.
HSN
HSN’s general and administrative expense in 2015 increased 7%, or $11.0 million, and was 6.7% of net sales
compared to 6.4% in the prior year. The increase in expense was primarily due to an $8.7 million increase in bad debt expense
as a result of changes in sales mix towards electronics, which typically result in higher write-offs of Flexpay receivables. The
increase was also attributable to an increase of $6.4 million in severance costs, including $3.2 million accrued for the planned
closure of HSN's Virginia distribution center and $2.0 million associated with a reorganization in the fourth quarter of 2015.
These increases were partially offset by a $5.2 million decrease in performance-based incentive compensation.
HSN’s general and administrative expenses for 2015 include approximately $3.2 million related to the planned closure
of its Roanoke, Virginia distribution center. The facility closure is planned to occur in 2016 as part of HSNi’s supply chain
optimization initiative that will include the consolidation of two distribution centers and is designed to increase operational
efficiencies and enhance customer service. As part of this initiative, HSNi will be expanding the capabilities of its Piney Flats,
Tennessee distribution center through automation of the facility. HSNi expects to incur approximately $4 million to $5 million
in total charges related to the closure of the Virginia facility. These charges include approximately $3 million to $4 million in
employee-related expenses, including severance payments and retention incentives. We expect to realize the initial financial
benefits associated with the supply chain optimization initiative, including labor and transportation savings, beginning in the
second half of 2016. HSNi expects to utilize much of these savings to remain competitive in the marketplace, including
initiatives to drive future sales growth and enhance customer service.
HSN’s general and administrative expense in 2014 increased 3%, or $4.8 million, and was 6.4% of net sales compared
to 6.7% in the prior year. The increase in expense was primarily due to higher bad debt expense driven by increased usage of
HSN's extended payment program ("Flexpay") and an increase in employee-related costs. The increase in employee-related
costs was primarily related to performance-based incentives, partially offset by a decrease in severance-related costs.
Cornerstone
Cornerstone’s general and administrative expense in 2015 increased 15%, or $9.1 million, and was 6.2% of net sales
compared to 5.6% in the prior year. The increase in expense was primarily due to a $6.7 million intangible asset impairment
charge; an increase in employee-related costs; and costs associated with its expanded retail strategy; offset by a $3.1 million
charge related to a settlement in the prior year with the Consumer Product Safety Commission ("CPSC"). Cornerstone
recognized a $6.7 million non-cash charge for the impairment of certain intangible assets associated with its 2012 acquisition of
Chasing Fireflies. See Note 3 of Notes to Consolidated Financial Statements for further discussion of the impairment charge.
Cornerstone’s general and administrative expense in 2014 increased 10%, or $5.6 million, and was 5.6% of net sales
compared to 5.2% in the prior year. The increase in expense was primarily due to a $3.1 million settlement with the Consumer
Product Safety Commission ("CPSC") and related legal fees.