Home Shopping Network 2015 Annual Report Download - page 31

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We issue inventory purchase orders in the normal course of business, which represent authorizations to purchase that are
cancelable by their terms. We do not consider purchase orders to be firm inventory commitments; therefore, they are excluded
from the table above. If we choose to cancel a purchase order, we may be obligated to reimburse the vendor for unrecoverable
outlays incurred prior to cancellation.
At December 31, 2015, we had $4.1 million, including penalties and interest, recorded for uncertain tax positions. We
are not able to reasonably estimate the timing of payments in future periods; therefore, the liability of $4.1 million has not been
included in the contractual obligations table above.
Off-Balance Sheet Arrangements
Other than the items described above, HSNi does not have any material off-balance sheet arrangements as of
December 31, 2015.
Seasonality
HSNi is affected by seasonality, although historically our business has exhibited less seasonality than many other retail
businesses. Our sales levels are generally higher in the fourth quarter. Reported revenues in the fourth quarter were 30%, 31%
and 30% of total reported annual revenues in 2015, 2014 and 2013, respectively.
Non-GAAP Measure
HSNi reports Adjusted EBITDA as a supplemental measure to generally accepted accounting principles ("GAAP"). This
measure is one of the primary metrics by which HSNi evaluates the performance of its businesses, on which its internal budgets
are based and by which management is compensated. HSNi believes that investors should have access to the same information
that it uses in analyzing its results.
Adjusted EBITDA 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, gains and losses; including stock-based
compensation, amortization of intangibles, depreciation, gains and losses on asset dispositions, asset impairment charges,
acquisition-related accounting and other significant items.
Items That Are Excluded From HSNi's Non-GAAP Measure
The following items are excluded from Adjusted EBITDA, HSNi's Non-GAAP measure:
Stock-based compensation expense consists principally of expense associated with the grants of restricted stock,
restricted stock units, stock options and stock appreciation rights. These expenses are not paid in cash, and HSNi includes the
related shares in its calculations of diluted shares outstanding. Upon vesting of restricted stock and restricted stock units and the
exercise of certain stock options and stock appreciation rights, the awards can be settled, at HSNi's discretion, on a net basis,
with HSNi remitting the required tax withholding amount from its current funds.
Amortization of intangibles is a non-cash expense relating primarily to acquisitions. At the time of an acquisition, the
intangible assets of the acquired company, such as distribution agreements, customer relationships and merchandise
agreements, are recorded at fair value and amortized over their estimated lives.
Depreciation, gains and losses on asset dispositions and long-lived asset impairment charges are non-cash items relating
to our long-lived assets.