UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 23, 2012
HSN, Inc.
(Exact name of registrant as specified in its charter)
Delaware |
001-34061 |
26-2590893 |
||
(State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
1 HSN Drive, St. Petersburg, FL |
33729 |
|||
(Address of principal executive offices) | (Zip Code) |
(727) 872-1000
(Registrants telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions. | ||
[ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
[ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
[ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
[ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition.
On February 23, 2012, HSN, Inc., a Delaware corporation ("HSNi"), announced its financial results for the fourth quarter and year ended December 31, 2011. A copy of HSNi's earnings press release is furnished as Exhibit 99.1 to this report on Form 8-K and is incorporated herein by this reference. The information contained in this report, including Exhibit 99.1, shall not be deemed "filed" with the U.S. Securities and Exchange Commission ("SEC") nor incorporated by reference in any registration statement filed by HSNi under the Securities Act of 1933, as amended (the "Securities Act").
Item 7.01. Regulation FD Disclosure.
On February 23, 2012, HSNi announced its financial results for the fourth quarter and year ended December 31, 2011. A copy of HSNi's earnings press release is furnished as Exhibit 99.1 to this report on Form 8-K and is incorporated herein by this reference. The information contained in this report, including Exhibit 99.1, shall not be deemed "filed" with the SEC nor incorporated by reference in any registration statement filed by HSNi under the Securities Act.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
99.1 Press Release dated February 23, 2012
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
HSN, Inc. |
|
Date: February 23, 2012 |
By: /s/ JUDY A. SCHMELING Judy A. Schmeling Executive Vice President and Chief Financial Officer |
EXHIBIT INDEX
Exhibit | Description |
99.1 | Press Release dated February 23, 2012 |
EXHIBIT 99.1
HSNi's Results For the Fourth Quarter 2011:
ST. PETERSBURG, Fla., Feb. 23, 2012 (GLOBE NEWSWIRE) -- HSN, Inc. (Nasdaq:HSNI) reported results for the fourth quarter and full year ended December 31, 2011 for HSN, Inc. ("HSNi") and its two operating segments, HSN and Cornerstone.
Table 1 | ||||||||||||||
SUMMARY RESULTS AND KEY OPERATING METRICS (a) | ||||||||||||||
($ in millions, except per share and average price point amounts) | ||||||||||||||
Q4 2011 | Q4 2010 | Change | FY 2011 | FY 2010 | Change | |||||||||
Net Sales | $ 955.0 | $ 915.2 | 4% | $ 3,177.2 | $ 2,996.8 | 6% | ||||||||
Non-GAAP: | ||||||||||||||
Adjusted EBITDA | $ 103.6 | $ 93.3 | 11% | $ 300.0 | $ 257.6 | 16% | ||||||||
Adjusted Net Income | $ 54.2 | $ 46.1 | 18% | $ 143.8 | $ 114.2 | 26% | ||||||||
Adjusted EPS | $ 0.89 | $ 0.77 | 16% | $ 2.37 | $ 1.92 | 23% | ||||||||
GAAP: | ||||||||||||||
Operating Income (c) | $ 83.7 | $ 77.4 | 8% | $ 232.0 | $ 196.1 | 18% | ||||||||
Net Income (c) | $ 46.5 | $ 41.3 | 13% | $ 123.1 | $ 98.5 | 25% | ||||||||
Diluted EPS (c) | $ 0.76 | $ 0.69 | 10% | $ 2.03 | $ 1.65 | 23% | ||||||||
HSNi: | ||||||||||||||
Average price point | $ 64.50 | $ 65.81 | (2%) | $ 64.81 | $ 62.62 | 3% | ||||||||
Units shipped (millions) | 17.1 | 15.9 | 7% | 56.5 | 54.4 | 4% | ||||||||
Gross profit margin | 35.3% | 34.5% | 80 bps | 36.2% | 35.4% | 80 bps | ||||||||
Return rate | 17.8% | 17.4% | (40 bps) | 18.2% | 17.8% | (40 bps) | ||||||||
44.6% | 41.3% | 330 bps | 42.0% | 39.2% | 280 bps | |||||||||
Digital sales penetration (b) | ||||||||||||||
(a) HSNi's two operating segments, HSN and Cornerstone, are presented separately in Tables 2 and 3 of this release. | ||||||||||||||
(b) Digital net sales as a percent of total HSNi net sales. | ||||||||||||||
(c) Included in these results are $3.0 million of non-cash asset impairment charges related to certain intangible and fixed assets at one of the Cornerstone brands. The asset impairment charges were $1.9 million on an after-tax basis, or $0.03 per diluted share. |
See reconciliation of Non-GAAP to GAAP measures in Table 4.
Fourth Quarter 2011 Results vs Fourth Quarter 2010 Results
Full Year 2011 Results vs Full Year 2010 Results
"HSNi's positive performance for the quarter and the year was a result of maintaining our focus on expanding our digital presence, deepening customer engagement and emphasizing customer acquisition and retention," said Mindy Grossman, CEO of HSN, Inc. "HSN ended 2011 with its largest customer file growth in four years and Cornerstone's 12-month house file was at record levels for Frontgate, Ballard Designs and Garnet Hill. HSNi's digital growth of 13% for the quarter resulted in our highest digital penetration to date of 45%."
"We also implemented our capital return plan for shareholders in the fourth quarter and have purchased over 14% of the authorized amount to date, in addition to paying out our first quarterly dividend. These efforts reflect our ongoing commitment to drive shareholder value."
Table 2 | ||||||
SEGMENT RESULTS | ||||||
($ in millions) | ||||||
Three Months Ended December 31, |
Year Ended December 31, |
|||||
2011 | 2010 | Change | 2011 | 2010 | Change | |
Net Sales | ||||||
HSN | $ 639.2 | $ 636.8 | 0% | $ 2,160.3 | $ 2,115.9 | 2% |
Cornerstone | 315.8 | 278.4 | 13% | 1,016.8 | 880.9 | 15% |
Total HSNi | $ 955.0 | $ 915.2 | 4% | $ 3,177.2 | $ 2,996.8 | 6% |
Gross Profit | ||||||
HSN | $ 211.9 | $ 205.4 | 3% | $ 741.3 | $ 709.2 | 5% |
Cornerstone | 124.8 | 110.7 | 13% | 408.8 | 351.8 | 16% |
Total HSNi | $ 336.7 | $ 316.1 | 7% | $ 1,150.1 | $ 1,061.0 | 8% |
Adjusted EBITDA (Non-GAAP measure) | ||||||
HSN | $ 79.5 | $ 75.1 | 6% | $ 235.2 | $ 213.6 | 10% |
Cornerstone | 24.1 | 18.2 | 32% | 64.9 | 44.0 | 47% |
Total HSNi | $ 103.6 | $ 93.3 | 11% | $ 300.0 | $ 257.6 | 16% |
Operating Income | ||||||
HSN | $ 70.0 | $ 64.2 | 9% | $ 192.9 | $ 168.7 | 14% |
Cornerstone | 13.7 | 13.2 | 3% | 39.1 | 27.4 | 43% |
Total HSNi | $ 83.7 | $ 77.4 | 8% | $ 232.0 | $ 196.1 | 18% |
Table 3 | ||||||
SEGMENT KEY OPERATING METRICS | ||||||
Three Months Ended December 31, |
Year Ended December 31, |
|||||
2011 | 2010 | Change | 2011 | 2010 | Change | |
HSN: | ||||||
Average price point | $ 63.65 | $ 65.09 | (2%) | $ 62.79 | $ 61.00 | 3% |
Units shipped (millions) | 12.1 | 11.6 | 4% | 41.3 | 40.6 | 2% |
Gross profit margin | 33.2% | 32.3% | 90 bps | 34.3% | 33.5% | 80 bps |
Return rate | 19.5% | 18.7% | (80 bps) | 20.0% | 18.9% | (110 bps) |
Digital sales penetration (a) | 36.2% | 33.7% | 250 bps | 33.8% | 31.8% | 200 bps |
Cornerstone: | ||||||
Average price point | $ 66.44 | $ 67.66 | (2%) | $ 70.06 | $ 67.22 | 4% |
Units shipped (millions) | 5.0 | 4.3 | 16% | 15.2 | 13.8 | 10% |
Gross profit margin | 39.5% | 39.8% | (30 bps) | 40.2% | 39.9% | 30 bps |
Return rate | 14.0% | 14.2% | 20 bps | 14.3% | 14.8% | 50 bps |
Digital sales penetration (a) | 61.6% | 58.6% | 300 bps | 59.2% | 57.0% | 220 bps |
Catalog circulation (millions) | 86.2 | 78.9 | 9% | 308.0 | 275.3 | 12% |
(a) Digital net sales as a percent of segment net sales. |
HSN Segment Results for the Fourth Quarter 2011
HSN's net sales were $639.2 million, an increase of 0.4% from the prior year. Digital sales grew 8% with penetration increasing 250 basis points to 36.2%. Sales grew primarily in electronics and home design, offset by sales declines in fashion and wellness. The average price point decreased 2% and the units shipped increased 4% primarily due to mix shifts within categories.
Gross profit increased 3% to $211.9 million. Gross profit margin improved 90 basis points to 33.2% from 32.3%. The margin increase was primarily attributable to decreased inventory reserves and liquidation charges, lower inbound freight costs, and lower transaction costs; partially offset by changes in product pricing and mix.
Adjusted EBITDA increased 6% to $79.5 million compared to $75.1 million in the prior year. The increase was due to the increase in gross profit, partially offset by an increase in operating expenses. Operating income increased 9% to $70.0 million compared to $64.2 million in the prior year.
Cornerstone Segment Results for the Fourth Quarter 2011
Net sales for Cornerstone for the 14-week period in 2011 increased 13% to $315.8 million compared to the 13-week period in 2010. Digital sales grew 19% with penetration increasing 300 basis points to 61.6%.
As a result of the sales growth, gross profit increased 13% to $124.8 million. Gross profit margin decreased 30 basis points to 39.5% from 39.8%. The margin decrease was primarily attributable to increased promotional activity, partially offset by lower inbound and outbound freight costs in the home brands.
Adjusted EBITDA increased 32% to $24.1 million. The increase was primarily due to growth in net sales, partially offset by a 12% increase in selling and marketing costs, particularly catalog production and distribution costs. Operating income was $13.7 million compared to $13.2 million in the prior year. Operating income at Cornerstone included non-cash asset impairment charges of $3.0 million related to certain intangible and fixed assets at one of the Cornerstone brands.
Liquidity and Capital Resources
As of December 31, 2011, HSNi had cash and cash equivalents of $381.8 million, up from $354.3 million at December 31, 2010. Net cash provided by operating activities for the year ended December 31, 2011 was $166.3 million compared to $133.6 million in the prior year. This increase was primarily driven by improved operating performance.
In October 2011, HSNi made a voluntary prepayment of the remaining $69.8 million balance of its term loan and in November 2011, HSNi paid its first quarterly dividend of $7.4 million. During the fourth quarter, HSNi repurchased approximately 791,000 shares of its common stock at a cost of $28.1 million, or an average cost of $35.46 per share, related to its share repurchase program authorized in September 2011. Including the additional shares repurchased through February 22, 2012, HSNi repurchased approximately 1,421,000 shares of its common stock at a cost of $50.8 million, or an average cost of $35.73.
On February 22, 2012, the Board of Directors approved a cash dividend of $0.125 per share. The dividend will be paid on March 21, 2012 to HSNi's record holders as of March 7, 2012.
OTHER INFORMATION
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
This press release may contain forward-looking statements relating to the future performance of HSNi, its operating segments and its consolidated subsidiaries that are based on current expectations, forecasts and assumptions. These statements relate to expectations concerning matters that are not historical fact. These forward-looking statements are based largely on information currently available to our management and on our current expectations, assumptions, plans, estimates, judgments and projections about our business and our industry, and such statements involve inherent risks and uncertainties. Although we believe our expectations are based on reasonable estimates and assumptions, they are not guarantees of performance and there are a number of known and unknown risks, uncertainties, contingencies and other factors (many of which are outside our control) that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include but are not limited to: the continued impact of the current macroeconomic environment on consumer confidence and spending levels; whether national economic stimulus initiatives and measures to improve the economy will be successful in achieving their objectives within the expected timeframes; other changes in political, business and economic conditions, particularly those that affect consumer confidence, consumer spending or digital sales growth; changes in our relationships with pay television operators, vendors, manufacturers and other third parties; changes in product delivery costs, particularly if we are unable to offset them; our ability to offer new or alternative products and services in a cost effective manner and consumer acceptance of these products and services; any technological or regulatory developments that could negatively impact the way we do business, including regulations regarding state and local sales and use taxes; HSNi's business prospects and strategy, including whether HSNi's initiatives will be effective; and the loss of any key member of our senior management team. More information about potential factors that could affect HSNi's business and financial results is included in our filings with the U.S. Securities and Exchange Commission. Other unknown or unpredictable factors that could also adversely affect HSNi's business, financial condition and results of operations may arise from time to time. In light of these risks and uncertainties, any forward-looking statements may not prove to be accurate. All written or oral forward-looking statements that are made or attributable to us are expressly qualified in their entirety by this cautionary notice. Accordingly, you should not place undue reliance on any forward-looking statements, which only reflect the views of HSNi management as of the date of this press release. Such statements speak only to the date such statements are made and HSNi does not undertake to update any forward-looking statements. Historical results should not be considered as an indication of future performance.
Conference Call
Mindy Grossman, Chief Executive Officer, and Judy Schmeling, Executive Vice President and Chief Financial Officer, will hold a conference call on February 23, 2012 at 9:00 a.m., Eastern Time, to discuss these results. Those interested in participating in the conference call should dial 877-307-0246 or 224-357-2394 at least five minutes prior to the call. There will also be a simultaneous audio webcast available via HSNi's website at http://www.hsni.com.
A replay of the conference call can be accessed until Thursday, March 8, 2012 by dialing 855-859-2056 or 404-537-3406, plus the pass code 42849184 and will also be hosted on the company's website for a limited time.
About HSN, Inc.
HSN, Inc. (Nasdaq:HSNI) is a $3 billion interactive multichannel retailer with strong direct-to-consumer expertise among its two operating segments, HSN and Cornerstone. HSNi offers innovative, differentiated retail experiences on TV, online, via mobile devices, in catalogs, and in brick and mortar stores. HSN, a leading interactive multi-channel retailer which offers a curated assortment of exclusive products combined with top brand names, now reaches approximately 96 million homes (24 hours a day, seven days a week, live 364 days a year). HSN.com is a top 10 trafficked digital sales site that offers a differentiated digital experience by leveraging content, community and commerce. In addition to its existing media platforms, HSN is the industry leader in transactional innovation, including services such as HSN Shop by Remote®, the only service of its kind in the U.S., the HSN Shopping App for mobile handheld devices and HSN on Demand®. Cornerstone comprises leading home and apparel lifestyle brands including Ballard Designs®, Frontgate®, Garnet Hill®, Grandin Road®, Improvements®, Smith + Noble®, The Territory Ahead® and TravelSmith®. Cornerstone distributes more than 300 million catalogs annually, operates eight separate digital sales sites and operates 19 retail and outlet stores.
The HSN, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=8695
GAAP FINANCIAL STATEMENTS | ||||||||
HSN, INC. CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
(unaudited; in thousands except per share amounts) | ||||||||
Three Months Ended December 31, |
Year Ended December 31, |
|||||||
2011 | 2010 | 2011 | 2010 | |||||
Net sales | $ 954,996 | $ 915,216 | $ 3,177,154 | $ 2,996,780 | ||||
Cost of sales | 618,303 | 599,074 | 2,027,100 | 1,935,766 | ||||
Gross profit | 336,693 | 316,142 | 1,150,054 | 1,061,014 | ||||
Operating expenses: | ||||||||
Selling and marketing | 163,341 | 155,789 | 577,210 | 538,689 | ||||
General and administrative | 63,877 | 57,747 | 241,970 | 226,971 | ||||
Production and programming | 16,188 | 15,538 | 61,915 | 60,235 | ||||
Depreciation and amortization | 9,621 | 9,624 | 36,960 | 39,032 | ||||
Total operating expenses | 253,027 | 238,698 | 918,055 | 864,927 | ||||
Operating income | 83,666 | 77,444 | 231,999 | 196,087 | ||||
Interest expense, net | (7,895) | (8,054) | (31,593) | (32,523) | ||||
Income before income taxes | 75,771 | 69,390 | 200,406 | 163,564 | ||||
Income tax provision | (29,253) | (28,103) | (77,336) | (65,041) | ||||
Net income | $ 46,518 | $ 41,287 | $ 123,070 | $ 98,523 | ||||
Net income per share: | ||||||||
Basic | $ 0.79 | $ 0.71 | $ 2.10 | $ 1.72 | ||||
Diluted | $ 0.76 | $ 0.69 | $ 2.03 | $ 1.65 | ||||
Shares used in computing earnings per share: | ||||||||
Basic | 58,818 | 57,817 | 58,636 | 57,414 | ||||
Diluted | 60,816 | 59,973 | 60,689 | 59,546 | ||||
Dividends declared per common share | $ -- | $ -- | $ 0.125 | $ -- |
HSN, INC. CONSOLIDATED BALANCE SHEETS | ||
(unaudited; in thousands) | ||
December 31, | ||
2011 | 2010 | |
ASSETS | ||
Current assets: | ||
Cash and cash equivalents | $ 381,808 | $ 354,259 |
Accounts receivable, net | 222,583 | 195,748 |
Inventories | 296,460 | 296,390 |
Deferred income taxes | 24,302 | 28,801 |
Prepaid expenses and other current assets | 44,966 | 42,443 |
Total current assets | 970,119 | 917,641 |
Property and equipment, net | 158,434 | 154,987 |
Intangible assets, net | 258,048 | 260,623 |
Other non-current assets | 8,372 | 12,492 |
TOTAL ASSETS | $ 1,394,973 | $ 1,345,743 |
LIABILITIES AND SHAREHOLDERS' EQUITY | ||
Current liabilities: | ||
Accounts payable, trade | $ 270,227 | $ 244,301 |
Current maturities of long-term debt | -- | 5,820 |
Accrued expenses and other current liabilities | 193,991 | 216,114 |
Total current liabilities | 464,218 | 466,235 |
Long-term debt, net of current maturities | 239,111 | 302,938 |
Deferred income taxes | 78,131 | 80,203 |
Other long-term liabilities | 23,816 | 19,904 |
Total liabilities | 805,276 | 869,280 |
TOTAL SHAREHOLDERS' EQUITY | 589,697 | 476,463 |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 1,394,973 | $ 1,345,743 |
HSN, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
(unaudited; in thousands) | ||
Year Ended December 31, |
||
2011 | 2010 | |
Cash flows from operating activities: | ||
Net income | $ 123,070 | $ 98,523 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 36,960 | 39,032 |
Stock-based compensation expense | 26,401 | 21,232 |
Amortization of cable and satellite distribution fees | 850 | 3,358 |
Amortization of debt issuance costs | 2,941 | 2,571 |
Loss on disposition of fixed assets | 1,684 | 1,272 |
Deferred income taxes | 2,238 | (2,808) |
Bad debt expense | 19,758 | 19,827 |
Excess tax benefits from stock-based awards | (10,246) | (3,112) |
Asset impairments | 2,976 | -- |
Changes in current assets and liabilities: | ||
Accounts receivable | (46,703) | (32,699) |
Inventories | (70) | (34,917) |
Prepaid expenses and other assets | (2,000) | 3,645 |
Accounts payable, accrued expenses and other current liabilities | 8,394 | 17,692 |
Net cash provided by operating activities | 166,253 | 133,616 |
Cash flows from investing activities: | ||
Capital expenditures | (42,319) | (37,508) |
Net cash used in investing activities | (42,319) | (37,508) |
Cash flows from financing activities: | ||
Repayment of long-term debt | (69,841) | (30,159) |
Cash dividends paid | (7,384) | -- |
Issuance of common stock, net of withholding taxes | (2,585) | 15,277 |
Repurchases of common stock | (26,821) | -- |
Excess tax benefits from stock-based awards | 10,246 | 3,112 |
Net cash used by financing activities | (96,385) | (11,770) |
Net increase in cash and cash equivalents | 27,549 | 84,338 |
Cash and cash equivalents at beginning of period | 354,259 | 269,921 |
Cash and cash equivalents at end of period | $ 381,808 | $ 354,259 |
Table 4 | ||||||||
RECONCILIATIONS OF NON-GAAP TO GAAP MEASURES | ||||||||
HSN, INC. RECONCILIATION OF ADJUSTED EPS TO GAAP DILUTED EPS | ||||||||
(unaudited; in thousands except per share amounts) | ||||||||
Three Months Ended December 31, |
Year Ended December 31, |
|||||||
2011 | 2010 | 2011 | 2010 | |||||
Adjusted EPS | $ 0.89 | $ 0.77 | $ 2.37 | $ 1.92 | ||||
Adjusted Net Income | $ 54,178 | $ 46,091 | $ 143,804 | $ 114,166 | ||||
Stock-based compensation expense | (7,010) | (6,168) | (26,401) | (21,232) | ||||
Amortization of intangible assets | -- | (140) | (375) | (561) | ||||
Asset impairments | (2,976) | -- | (2,976) | -- | ||||
Loss on disposition of fixed assets | (337) | (64) | (1,684) | (1,272) | ||||
Impact of income taxes | 2,663 | 1,568 | 10,702 | 7,422 | ||||
Net Income | $ 46,518 | $ 41,287 | $ 123,070 | $ 98,523 | ||||
GAAP diluted weighted average shares outstanding | 60,816 | 59,973 | 60,689 | 59,546 | ||||
GAAP Diluted EPS | $ 0.76 | $ 0.69 | $ 2.03 | $ 1.65 |
HSN, INC. RECONCILIATION OF NON-GAAP DETAILED SEGMENT RESULTS TO GAAP | ||||||||||||
(unaudited; in thousands) | ||||||||||||
Three Months Ended December 31, 2011 |
Three Months Ended December 31, 2010 |
|||||||||||
HSN | Cornerstone | Total | HSN | Cornerstone | Total | |||||||
Adjusted EBITDA | $ 79,540 | $ 24,070 | $ 103,610 | $ 75,115 | $ 18,185 | $ 93,300 | ||||||
Stock-based compensation expense | (2,351) | (4,659) | (7,010) | (3,408) | (2,760) | (6,168) | ||||||
Depreciation and amortization | (6,865) | (2,756) | (9,621) | (7,435) | (2,189) | (9,624) | ||||||
Asset impairments | -- | (2,976) | (2,976) | -- | -- | -- | ||||||
Loss on disposition of fixed assets | (334) | (3) | (337) | (50) | (14) | (64) | ||||||
Operating income | $ 69,990 | $ 13,676 | 83,666 | $ 64,222 | $ 13,222 | 77,444 | ||||||
Interest expense, net | (7,895) | (8,054) | ||||||||||
Income before income taxes | 75,771 | 69,390 | ||||||||||
Income tax provision | (29,253) | (28,103) | ||||||||||
Net income | $ 46,518 | $ 41,287 | ||||||||||
Year Ended December 31, 2011 |
Year Ended December 31, 2010 |
|||||||||||
HSN | Cornerstone | Total | HSN | Cornerstone | Total | |||||||
Adjusted EBITDA | $ 235,163 | $ 64,857 | $ 300,020 | $ 213,612 | $ 44,011 | $ 257,623 | ||||||
Stock-based compensation expense | (13,101) | (13,300) | (26,401) | (13,507) | (7,725) | (21,232) | ||||||
Depreciation and amortization | (27,652) | (9,308) | (36,960) | (30,183) | (8,849) | (39,032) | ||||||
Asset impairments | -- | (2,976) | (2,976) | -- | -- | -- | ||||||
Loss on disposition of fixed assets | (1,482) | (202) | (1,684) | (1,198) | (74) | (1,272) | ||||||
Operating income | $ 192,928 | $ 39,071 | 231,999 | $ 168,724 | $ 27,363 | 196,087 | ||||||
Interest expense, net | (31,593) | (32,523) | ||||||||||
Income before income taxes | 200,406 | 163,564 | ||||||||||
Income tax provision | (77,336) | (65,041) | ||||||||||
Net income | $ 123,070 | $ 98,523 |
SEE IMPORTANT NOTES AT END OF THIS DOCUMENT
HSN, INC.'S PRINCIPLES OF FINANCIAL REPORTING
HSNi reports Adjusted EBITDA, Adjusted Net Income and Adjusted EPS, all of which are supplemental measures to GAAP. These measures are among the primary metrics by which we evaluate the performance of our businesses, on which our internal budgets are based and by which management is compensated. We believe that investors should have access to, and we are obligated to provide, the same set of tools that we use in analyzing our results. These non-GAAP measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. HSNi endeavors to compensate for the limitations of the non-GAAP measures presented by providing the comparable GAAP measures with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the non-GAAP measures. We encourage investors to examine the reconciling adjustments between the GAAP and non-GAAP measures contained in this release and which we discuss below.
Definitions of Non-GAAP Measures
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) one-time items. Adjusted EBITDA is not a measure determined in accordance with GAAP, and should not be considered 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 measures the amount of income generated each period that could be used to service debt, pay taxes and fund capital expenditures. Adjusted EBITDA should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. Adjusted EBITDA has certain limitations in that it does not take into account the impact to HSNi's statement of operations of certain expenses, including stock-based compensation, amortization of intangibles, depreciation, gains and losses on asset dispositions, asset impairment charges, acquisition-related accounting and one-time items.
Adjusted Net Income generally captures all items on the statement of operations that have been, or ultimately will be, settled in cash and is defined as net income available to common shareholders excluding, net of tax effects, if applicable: (1) stock-based compensation expense, (2) amortization of intangible assets, (3) gains and losses on asset dispositions, (4) goodwill, long-lived asset and intangible asset impairments, (5) pro forma adjustments for significant acquisitions, (6) one-time items and (7) discontinued operations. We believe Adjusted Net Income is useful to investors because it represents HSNi's consolidated results taking into account charges which are not allocated to the operating businesses such as interest expense and taxes, but excluding the effects of identified non-cash expenses or one-time items.
Adjusted EPS is defined as Adjusted Net Income divided by diluted weighted average shares outstanding for Adjusted EPS purposes. We believe Adjusted EPS is useful to investors because it represents, on a per share basis, HSNi's consolidated results, taking into account charges which are not allocated to the operating businesses such as interest expense and taxes, but excluding the effects of identified non-cash expenses or one-time items. Adjusted Net Income and Adjusted EPS have the same limitations as Adjusted EBITDA. Therefore, we think it is important to evaluate these measures along with our consolidated statement of operations.
CONTACT: Felise Glantz Kissell (Analysts/Investors) 727-872-7529 felise.kissell@hsn.net Gigi Ganatra Duff (Media) 727-872-4808 gigi.ganatraduff@hsn.net