Home Shopping Network 2015 Annual Report Download - page 49

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NOTE 5—ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following (in thousands):
December 31,
2015 2014
Accrued sales returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 39,649 $ 40,789
Accrued cable and satellite distribution fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,081 41,375
Accrued freight and fulfillment expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,342 35,225
Accrued compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,616 40,327
Other accrued expenses and current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,354 83,358
Total accrued expenses and other current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 235,042 $ 241,074
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 and/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 performance 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, gains and losses; 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, 2015
HSN Cornerstone Total
Adjusted EBITDA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 302,881 $ 54,561 $ 357,442
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13,889) (4,519) (18,408)
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (29,371) (14,047) (43,418)
Asset impairments, net (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (5,568) (5,568)
Exit and reorganization costs (b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,208) — (5,208)
Loss on disposition of fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (791) (15) (806)
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 253,622 $ 30,412 284,034
Total other expense, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,180)
Income from continuing operations before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268,854
Income tax provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (99,615)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 169,239
(a) Results for the year ended December 31, 2015 exclude $6.7 million of charges for the impairment of intangible assets and $1.1 million of other non-cash
adjustments.
(b) Results for the year ended December 31, 2015 exclude $3.2 million for certain costs associated with the planned closure of one of HSN's distribution
centers as part of its supply chain optimization initiative and $2.0 million of severance costs associated with a reorganization at HSN.