Home Shopping Network 2015 Annual Report Download - page 27

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25
Depreciation and Amortization
Year Ended December 31,
2015 Change 2014 Change 2013
(Dollars in thousands)
HSN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,371 (1)% $ 29,762 5% $ 28,372
Cornerstone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,047 (1)% 14,172 16% 12,217
HSNi. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43,418 (1)% $ 43,934 8% $ 40,589
As a percentage of HSNi net sales . . . . . . . . . . . . . . . . . . . . . . 1.2% - 1.2% - 1.2%
Depreciation and amortization in 2015 decreased 1%, or $0.5 million, compared to the prior year. Capital
expenditures in the current year have been for investments in our distribution centers, including our warehouse automation
project that has not yet been put into service, information technology and infrastructure.
Depreciation and amortization in 2014 increased 8%, or $3.3 million, compared to the prior year. The increase was
primarily due to the incremental depreciation associated with recent capital expenditures for facilities, including distribution
centers, and information and digital technology.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP measure and is defined in Note 6 of Notes to Consolidated Financial Statements.
Year Ended December 31,
2015 Change 2014 Change 2013
(Dollars in thousands)
HSN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 302,881 5% $ 289,141 11% $ 261,292
As a percentage of HSN net sales . . . . . . . . . . . . . . . . . 11.9% 20 bp 11.7% 40 bp 11.3%
Cornerstone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54,561 3% $ 53,199 (31)% $ 76,574
As a percentage of Cornerstone net sales . . . . . . . . . . . 4.8% - 4.8% (220 bp) 7.0%
HSNi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 357,442 4% $ 342,340 1% $ 337,866
As a percentage of HSNi net sales . . . . . . . . . . . . . . . . 9.7% 20 bp 9.5% (40 bp) 9.9%
HSNi's Adjusted EBITDA in 2015 increased 4%, or $15.1 million, and was 9.7% of net sales, compared to 9.5% in the
prior year. The increase in Adjusted EBITDA was due to a 3% increase in net sales and a 10 basis point increase in gross profit
as a percentage of net sales offset by a 3% increase in operating expenses (excluding non-cash charges and certain other items
identified in the Non-GAAP to GAAP reconciliation included in Note 6 of Notes to Consolidated Financial Statements).
HSNi's Adjusted EBITDA in 2014 increased 1%, or $4.5 million, and was 9.5% of net sales, compared to 9.9% in the
prior year. The increase in Adjusted EBITDA was due to a 5% increase in net sales offset by a 60 basis point decrease in gross
profit as a percentage of net sales and 4% increase in operating expenses (excluding non-cash charges and the $3.1 million
CPSC settlement).
HSN
HSN's Adjusted EBITDA in 2015 increased 5%, or $13.7 million, and was 11.9% of net sales compared to 11.7% in
the prior year. The increase in Adjusted EBITDA is primarily due to a 3% increase in net sales, partially offset by a 2%
increase in operating expenses (excluding non-cash charges and certain other items identified in the Non-GAAP to GAAP
reconciliation included in Note 6 of Notes to Consolidated Financial Statements). Operating expenses increased primarily due
to higher bad debt expense and media spend for direct-response television marketing, partially offset by lower net marketing
expense and on-air distribution costs. HSN's operating expenses (excluding non-cash charges and certain other items identified
in the Non-GAAP to GAAP reconciliation included in Note 6 of Notes to Consolidated Financial Statements) were 22.4% of
net sales compared to 22.6% in the prior year.
HSN's Adjusted EBITDA in 2014 increased 11%, or $27.8 million, and was 11.7% of net sales compared to 11.3% in
the prior year. The increase in Adjusted EBITDA is primarily due to a 7% increase in net sales, partially offset by a 4%
increase in operating expenses (excluding non-cash charges). Operating expenses increased primarily due to additional
distribution of HSN2; employee-related costs, particularly for performance-based incentives and healthcare; media spend for