HSN, Inc. Reports Third Quarter 2010 Results
HSNi net sales increased 10% with sales growth of 6% at HSN and 23% at Cornerstone HSNi internet net sales increased 15% with internet penetration reaching 39% Cornerstone Adjusted EBITDA increased 237% continuing the trend of strong growth in EBITDA
ST. PETERSBURG, Fla., Nov. 3, 2010 (GLOBE NEWSWIRE) -- HSN, Inc. (Nasdaq:HSNI) reported results for the third quarter ended September 30, 2010 for HSN, Inc. ("HSNi") and its two operating segments, HSN and Cornerstone.
Table 1 听 听 听
SUMMARY RESULTS AND KEY OPERATING METRICS (a)
($ in millions, except per share and average price point amounts)
听 听 听 听
听 听 听 听
听 听Q3 2010听 听Q3 2009听 听Change听
听 听 听 听
Net Sales 听$听708.4 听$听641.2 10%
Non-GAAP: 听 听 听
Adjusted EBITDA 听$听49.0 听$听48.8 0%
Adjusted Net Income听 听$听18.7 听$听18.6 1%
Adjusted EPS 听$听0.31 听$听0.32 (3%)
GAAP: 听 听 听
Operating Income 听$听32.8 听$听36.1 (9%)
Net Income听 听$听14.9 听$听16.6 (10%)
Diluted EPS听 听$听0.25 听$听0.29 (14%)
听 听 听 听
HSNi: 听 听 听
Average price point 听$听60.25 听$听58.35 3%
Units shipped (millions) 听13.1 听12.3 6%
Gross profit % 听35.3% 听37.0% (170 bps)
Return rate % 听18.2% 听18.1% (10 bps)
Internet net sales% (b) 38.8% 37.2% 160 bps
听 听 听 听
(a) Segment results for HSNi's two operating segments, HSN and Cornerstone, are
presented separately in Tables 2 and 3 of this release.
(b) Internet net sales as a percent of total HSNi net sales.
听
See reconciliation of GAAP to non-GAAP measures in Table 4.
Third Quarter 2010 Results vs Third Quarter 2009 Results
HSNi's net sales grew 10% to $708.4 million over the prior year.听Net sales for HSN increased 6% which included 10% sales growth at HSN.com. Cornerstone's net sales increased 23% to $214.7 million with internet sales representing 56.9% of its net sales. HSNi's Adjusted EBITDA was $49.0 million compared to $48.8 million in the prior year.听These results were driven by a 10% increase in net sales, partially offset by a 170 basis point decrease in gross profit margin and a 7% increase in operating expenses, excluding non-cash charges.听Operating income decreased 9% to $32.8 million compared to $36.1 million in the prior year. Included in Adjusted EBITDA and operating income is a $2.5 million sales provision for an upcoming voluntary product recall at one of the Cornerstone brands and costs related to a $2.5 million legal settlement.听听听 Adjusted EPS was $0.31 compared to $0.32 in the prior year.听GAAP diluted EPS was $0.25 compared to $0.29 in the prior year.听The combined impact of the product recall and legal settlement on Adjusted EPS and GAAP diluted EPS was $3.0 million, net of taxes, or $0.05 per diluted share.听
"HSNi's net sales growth of 10% reinforces the strength of the HSN and Cornerstone brands. Our efforts to reach customers across multiple channels continue to be successful and contributed to an e-commerce net sales gain of 15% in the quarter," said HSNi CEO Mindy Grossman.听听听 "At HSN, our strategy of utilizing content to create communities and drive commerce delivered a net sales increase of 6% and best customer growth of 9%, due primarily to strength in apparel, accessories and electronics as well as the addition of new brand partners and marketing initiatives.听At Cornerstone, net sales increased 23%, the largest year-over-year growth rate of any quarter since 2005," added Ms. Grossman.听"We undertook key strategic initiatives this quarter that were focused on customer engagement by creating content-immersive experiences and leveraging our unique multichannel platform."
Table 2 听 听 听 听 听 听
SEGMENT RESULTS
($ in millions)
听 听 听 听 听 听 听
听 Three Months Ended
September 30, Nine Months Ended
September 30,
听 2010 2009 Change 2010 2009 听Change听
Net Sales 听 听 听 听 听 听
HSN听 听$听493.7 听$听467.0 6% 听$听1,479.1 听$听1,396.1 6%
Cornerstone听 听214.7 听174.2 23% 听602.5 听514.8 17%
Total HSNi 听$听708.4 听$听641.2 10% 听$听2,081.6 听$听1,910.9 9%
听 听 听 听 听 听 听
Gross Profit听 听 听 听 听 听 听
HSN 听$听169.9 听$听168.6 1% 听$听503.7 听$听473.4 6%
Cornerstone 听79.8 听68.5 17% 听241.2 听206.8 17%
Total HSNi听 听$听249.7 听$听237.1 5% 听$听744.9 听$听680.2 10%
听 听 听 听 听 听 听
Adjusted EBITDA (Non-GAAP measure) 听 听 听 听 听 听
HSN听 听$听43.1 听$听47.1 (8%) 听$听138.5 听$听120.6 15%
Cornerstone听 听5.9 听1.7 237% 听25.8 听(2.5) 1116%
Total HSNi 听$听49.0 听$听48.8 0% 听$听164.3 听$听118.1 39%
听 听 听 听 听 听 听
Operating Income (Loss) 听 听 听 听 听 听
HSN听 听$听30.7 听$听37.1 (17%) 听$听104.5 听$听92.0 14%
Cornerstone听 听2.1 听(1.0) 293% 听14.1 听(11.3) 225%
Total HSNi 听$听32.8 听$听36.1 (9%) 听$听118.6 听$听80.7 47%
听 听 听 听 听 听 听
See reconciliation of GAAP to non-GAAP measures in Table 4. 听 听 听 听 听 听
听 听 听 听
听
Table 3 听 听 听 听 听 听
SEGMENT KEY OPERATING METRICS
听 听 听 听 听 听 听
听 Three Months Ended
September 30, Nine Months Ended
September 30,
听 2010 2009 听Change听 2010 2009 听Change听
HSN: 听 听 听 听 听 听
Average price point 听$听57.82 听$听56.63 2% 听$听57.96 听$听57.14 1%
Units shipped (millions) 听9.7 听9.5 3% 听29.0 听27.6 5%
Gross profit % 34.4% 36.1% (170 bps) 听34.1% 听33.9% 20 bps
Return rate % 19.2% 19.5% 30 bps 听19.0% 听18.8% (20 bps)
Internet net sales % (a) 30.9% 29.8% 110 bps 31.0% 29.4% 160 bps
Cornerstone: 听 听 听 听 听 听
Average price point 听$听67.22 听$听64.03 5% 听$听67.03 听$听65.70 2%
Units shipped (millions) 听3.4 听2.9 18% 听9.5 听8.4 13%
Gross profit % 37.2% 39.3% (210 bps) 听40.0% 听40.2% (20 bps)
Return rate % 15.9% 14.2% (170 bps) 15.0% 15.1% 10 bps
Internet net sales % (a) 56.9% 56.9% 0 bps 56.3% 56.0% 30 bps
Catalog circulation (millions) 听63.3 听55.5 14% 听196.5 听180.0 9%
听 听 听 听 听 听 听
(a) Internet net sales as a percent of segment net sales.
HSN Segment Results for the Third Quarter 2010
HSN's net sales increased 6% to $493.7 million.听The sales growth was driven by strong performances in apparel, accessories and electronics.听HSN.com sales increased 10% over the prior year and represented 30.9% of HSN's net sales, up from 29.8% in the prior year.听Units shipped and average price point increased 3% and 2%, respectively.
Gross profit increased 1% to $169.9 million.听Gross profit margin declined 170 basis points to 34.4% primarily driven by increased product costs, retail price reductions and inventory reserve provisions.听During the third quarter of 2009, HSN benefited from a reduction in inventories and the related reserves.听
Operating expenses, excluding non-cash charges, increased 4%.听The increase was primarily attributable to the costs associated with HSN2, HSN's second television shopping channel that debuted in August, costs for brand and event marketing and accrued costs for the legal settlement.听
Adjusted EBITDA decreased 8% to $43.1 million from $47.1 million.听Operating income decreased 17% to $30.7 million compared to $37.1 million in the prior year due to the increase in operating expenses, including non-cash charges.
Cornerstone Segment Results for the Third Quarter 2010
Net sales for Cornerstone increased 23% to $214.7 million compared to $174.2 million in the prior year.听The sales growth was attributable to an increase in demand for luxury and outdoor products, the execution of strategic merchandising and marketing initiatives and an investment in catalog circulation in Cornerstone's three largest brands, Frontgate, Ballard Designs and Garnet Hill.听The return rate increased to 15.9% from 14.2% primarily due to a $2.5 million sales provision recorded for the voluntary product recall.
Gross profit increased 17% to $79.8 million.听Gross profit margin declined 210 basis points to 37.2% from 39.3% in the prior year.听The margin decline was primarily attributable to increased product costs, shipping costs associated with rate increases on larger package deliveries and a $2.5 million sales provision for the voluntary product recall, partially offset by leverage over fixed warehousing costs.听听听听听
Adjusted EBITDA increased 237% to $5.9 million from $1.7 million as a result of the growth in net sales, partially offset by catalog expenses, the product recall and accrued costs for the legal settlement. Adjusted EBITDA as a percent of net sales, improved 170 basis points to 2.7% from 1.0% in the prior year.听
Operating income in the current quarter was $2.1 million compared to an operating loss of $1.0 million due to the growth in net sales, partially offset by听catalog expenses,听the product recall, stock-based compensation for performance-based awards and accrued costs for the legal settlement.
Liquidity and Capital Resources
As of September 30, 2010, HSNi had cash and cash equivalents of $259.4 million.听Net cash provided by operating activities in the nine months ended September 30, 2010 was $6.2 million compared to $117.0 million generated in the same period last year.听This variance is principally due to an increase in inventories to support sales growth and increased payments of trade payables and income taxes, partially offset by the improved operating performance.听Total debt was approximately $334.1 million as of September 30, 2010, resulting in a ratio of total debt to EBITDA, as defined in HSNi's credit agreement, of approximately 1.33x, as compared to a maximum allowable leverage ratio of 2.75x.听
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.听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.听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.听HSNi's actual results could differ materially from those predicted.听Factors that could cause or contribute to such differences include but are not limited to:听the continued impact of the macroeconomic environment on consumer confidence and spending levels; whether national economic stimulus initiatives and measures to stabilize financial institutions and 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 e-commerce growth; any technological or regulatory developments that could negatively impact the way we do business; changes in the interest rate environment and developments in the overall credit markets; HSNi's business prospects and strategy, including whether HSNi's initiatives will be effective; changes in our relationships with pay television operators, vendors, manufacturers and other third parties; the loss of any key member of our senior management team; our ability to offer new or alternative products and services in a cost effective manner and consumer acceptance of these products and services; and changes in product delivery costs. 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 ("SEC"). 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.听All written or oral forward-looking statements that are made or attributable to us are expressly qualified in their entirety by this cautionary notice.听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.听Such statements speak only to the date such statements are made and HSNi does not undertake to update any forward-looking statements.听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 November 3, 2010 at 9:00 a.m., Eastern Time, to discuss these results.听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.听There will also be a simultaneous audio webcast available via HSNi's website at .听
A replay of the conference call can be accessed until Wednesday, November 17, 2010, by dialing 800-642-1687 or 706-645-9291, plus the passcode 17713726 and will also be hosted on HSNi's website for a limited time.听
jvid视频 HSN, Inc.
HSN, Inc. (Nasdaq:HSNI) is a $3 billion interactive multi-channel retailer with strong direct-to-consumer expertise among its two operating segments, HSN and Cornerstone. HSNi offers innovative, differentiated retail experiences on TV, online, via mobile devices, in catalogs, and in brick and mortar stores. HSN, a leading interactive multi-channel retailer which offers a curated assortment of exclusive products combined with top brand names, now reaches approximately 95 million homes (24 hours a day, seven days a week, live 364 days a year). HSN.com is a top 10 trafficked e-commerce site that offers a differentiated e-commerce experience by leveraging content, community and commerce. In addition to its existing media platforms, HSN is the industry leader in transactional innovation, including services such as HSN Shop by Remote庐, the only service of its kind in the U.S., the HSN Shopping App for mobile handheld devices and HSN on Demand庐. Cornerstone comprises leading home and apparel lifestyle brands including Ballard Designs庐, Frontgate庐, Garnet Hill庐, Improvements庐, Smith + Noble庐, The Territory Ahead庐 and TravelSmith庐. Cornerstone distributes more than 200 million catalogs annually, operates seven separate e-commerce sites and operates 23 retail and outlet stores.
GAAP FINANCIAL STATEMENTS
HSN, INC. CONSOLIDATED STATEMENTS OF OPERATIONS 听 听 听 听
(unaudited; in thousands except per share amounts) 听 听 听 听
听 听 听 听 听
听Three Months Ended
September 30, Nine Months Ended
September 30,
听 2010 2009 2010 2009
听 听 听 听 听
Net sales听 听$听708,359 听$听641,244 听$听2,081,564 听$听1,910,947
Cost of sales听 听458,632 听404,176 听1,336,693 听1,230,784
Gross profit 听249,727 听237,068 听744,871 听680,163
Operating expenses:听 听 听 听 听
Selling and marketing 听132,404 听120,997 听382,899 听367,909
General and administrative 听58,654 听55,501 听169,224 听160,220
Production and programming 听16,165 听14,922 听44,697 听42,383
Amortization of intangible assets 听141 听140 听422 听421
Depreciation听 听9,566 听9,430 听28,986 听28,510
Total operating expenses 听216,930 听200,990 听626,228 听599,443
Operating income 听32,797 听36,078 听118,643 听80,720
Other (expense) income: 听 听 听 听
Interest income 听182 听124 听428 听212
Interest expense 听(8,271) 听(8,768) 听(24,873) 听(26,517)
Total other expense, net 听(8,089) 听(8,644) 听(24,445) 听(26,305)
Income from continuing operations before income taxes 听24,708 听27,434 听94,198 听54,415
Income tax provision 听(9,821) 听(10,849) 听(36,938) 听(21,210)
Income from continuing operations 听14,887 听16,585 听57,260 听33,205
Loss from discontinued operations, net of tax听 听(9) 听(13) 听(24) 听(69)
Net income 听$听14,878 听$听16,572 听$听57,236 听$听33,136
听 听 听 听 听
Income from continuing operations per share: 听 听 听 听
Basic 听$听0.26 听$听0.29 听$听1.00 听$听0.59
Diluted 听$听0.25 听$听0.29 听$听0.96 听$听0.58
听 听 听 听 听
Net income per share: 听 听 听 听
Basic 听$听0.26 听$听0.29 听$听1.00 听$听0.59
Diluted听 听$听0.25 听$听0.29 听$听0.96 听$听0.58
听 听 听 听 听
Shares used in computing earnings per share: 听 听 听 听
Basic 听57,607 听56,391 听57,279 听56,362
Diluted听 听59,724 听57,502 听59,403 听57,151
听
听
HSN, INC. CONSOLIDATED BALANCE SHEETS
(unaudited; in thousands)
听 September 30,
2010 December 31,
2009
ASSETS 听 听
Current assets: 听 听
Cash and cash equivalents 听$听259,386 听$听269,921
Accounts receivable 听133,116 听182,746
Inventories 听338,378 听261,473
Deferred income taxes 听22,101 听21,960
Prepaid expenses and other current assets 听51,245 听47,152
Total current assets 听804,226 听783,252
Property and equipment, net 听153,071 听157,051
Intangible assets, net 听260,763 听261,185
Other non-current assets 听13,924 听17,162
TOTAL ASSETS 听$听1,231,984 听$听1,218,650
LIABILITIES AND SHAREHOLDERS' EQUITY 听 听
Current liabilities: 听 听
Accounts payable, trade 听$听209,359 $ 222,787
Current maturities of long-term debt 听19,048 听4,762
Accrued expenses and other current liabilities 听171,021 听222,739
Total current liabilities 听399,428 听450,288
Long-term debt, net of current maturities 听315,059 听333,960
Deferred income taxes 听71,516 听76,413
Other long-term liabilities 听18,999 听13,959
Total liabilities 听805,002 听874,620
听 听 听
TOTAL SHAREHOLDERS' EQUITY 听426,982 听344,030
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 听$听1,231,984 听$听1,218,650
听
HSN, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; in thousands)
听Nine Months Ended
September 30,
听 2010 2009
听 听 听
Cash flows from operating activities attributable to continuing operations: 听 听
Net income 听$听57,236 听$听33,136
Less: Loss from discontinued operations, net of tax 听(24) 听(69)
Income from continuing operations 听57,260 听33,205
Adjustments to reconcile income from continuing operations to net cash听provided by operating activities attributable to continuing operations:听 听 听
Depreciation 听28,986 听28,510
Amortization of intangible assets 听422 听421
Stock-based compensation expense听 听15,063 听8,084
Amortization of cable and satellite distribution fees 听2,519 听2,520
Amortization of debt issuance costs 听1,929 听1,915
Loss on disposition of fixed assets 听1,208 听398
Deferred income taxes 听(4,777) 听(4,665)
Bad debt expense 12,981 11,757
Excess tax benefits from stock-based awards 听(1,383) 听--听
Changes in current assets and liabilities:听 听 听
Accounts receivable 听36,763 听29,079
Inventories 听(76,905) 听9,490
Prepaid expenses and other current assets 听(5,156) 听(4,740)
Accounts payable, accrued expenses and other current liabilities 听(62,740) 听1,037
Net cash provided by operating activities attributable to continuing operations 听6,170 听117,011
Cash flows from investing activities attributable to continuing operations: 听 听
Capital expenditures 听(26,153) 听(25,512)
Net cash used in investing activities attributable to continuing operations 听(26,153) 听(25,512)
Cash flows from financing activities attributable to continuing operations: 听 听
Repayment under revolving credit facility 听-- 听(20,000)
Repayment of long-term debt 听(4,762) 听(11,250)
Proceeds from issuance of common stock, net of withholding taxes听 听12,823 听--
Excess tax benefits from stock-based awards 听1,383 听--
Net cash provided by (used in) financing activities attributable to continuing operations 听9,444 听(31,250)
Total cash (used in) provided by continuing operations 听(10,539) 听60,249
Total cash provided by operating activities attributable to discontinued听operations 听4 听1,028
Net (decrease) increase in cash and cash equivalents 听(10,535) 听61,277
Cash and cash equivalents at beginning of period 听269,921 听177,463
Cash and cash equivalents at end of period 听$听259,386 听$听238,740
听
Table 4
RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES
HSN, INC. RECONCILIATION OF GAAP EPS TO ADJUSTED EPS
(unaudited; in thousands except per share amounts)
听 听 听 听 听
听Three Months Ended
September 30,Nine Months Ended
September 30,
听 2010 2009 2010 2009
听 听 听 听 听
Diluted earnings per share 听$听0.25 听$听0.29 听$听0.96 听$听0.58
Net income 听$听14,878 听$听16,572 听$听57,236 听$听33,136
Stock-based compensation expense 听5,753 听3,057 听15,063 听8,084
Amortization of intangible assets 听141 听140 听422 听421
Loss on disposition of fixed assets 听720 听93 听1,208 听398
Loss from discontinued operations, net of tax 听9 听13 听24 听69
Impact of income taxes 听(2,775) 听(1,300) 听(5,854) 听(3,455)
Adjusted Net Income听 听$听18,726 听$听18,575 听$听68,099 听$听38,653
GAAP diluted weighted average shares outstanding听 听59,724 听57,502 听59,403 听57,151
Adjusted EPS听 听$听0.31 听$听0.32 听$听1.15 听$听0.68
听
听
HSN, INC. RECONCILIATION OF NON-GAAP DETAILED SEGMENT RESULTS TO GAAP
(unaudited; in thousands)
听 听 听 听 听 听 听
听 听 听 听 听 听 听
听 Three Months Ended
September 30, 2010 Three Months Ended
September 30, 2009
听 听HSN听 Cornerstone 听Total听 听HSN听 Cornerstone 听Total听
听 听 听 听 听 听 听
Adjusted EBITDA 听$听43,122 听$听5,855 听$听48,977 听$听47,061 听$听1,737 听$听48,798
Stock-based compensation expense 听(4,057) 听(1,696) 听(5,753) 听(2,463) 听(594) 听(3,057)
Amortization of intangible assets 听(141) 听-- 听(141) 听(140) 听-- 听(140)
Depreciation 听(7,460) 听(2,106) 听(9,566) 听(7,253) 听(2,177) 听(9,430)
Loss on disposition of fixed assets 听(720) 听-- 听(720) 听(61) 听(32) 听(93)
Operating income (loss) 听$听30,744 听$听2,053 听32,797 听$听37,144 听$听(1,066) 听36,078
Other expense, net 听 听 听(8,089) 听 听 听(8,644)
Income from continuing operations听
before income taxes 听 听 听24,708 听 听 听27,434
Income tax provision 听 听 听(9,821) 听 听 听(10,849)
Income from continuing operations听 听 听 听14,887 听 听 听16,585
Loss from discontinued operations,
net of tax 听 听 听(9) 听 听 听(13)
Net income 听 听 听$听14,878 听 听 听$听16,572
听 听 听 听 听 听 听
听 听 听 听 听 听 听
听 Nine Months Ended
September 30, 2010 Nine Months Ended
September 30, 2009
听 听HSN听 Cornerstone 听Total听 听HSN听 Cornerstone 听Total听
听 听 听 听 听 听 听
Adjusted EBITDA 听$听138,498 听$听25,824 听$听164,322 听$听120,675 听$听(2,542) 听$听118,133
Stock-based compensation expense 听(10,098) 听(4,965) 听(15,063) 听(6,462) 听(1,622) 听(8,084)
Amortization of intangible assets 听(422) 听-- 听(422) 听(421) 听-- 听(421)
Depreciation 听(22,327) 听(6,659) 听(28,986) 听(21,387) 听(7,123) 听(28,510)
Loss on disposition of fixed assets 听(1,148) 听(60) 听(1,208) 听(360) 听(38) 听(398)
Operating income (loss) 听$听104,503 听$听14,140 听118,643 听$听92,045 听$听(11,325) 听80,720
Other expense, net 听 听 听(24,445) 听 听 听(26,305)
Income from continuing operations听
before income taxes 听 听 听94,198 听 听 听54,415
Income tax provision 听 听 听(36,938) 听 听 听(21,210)
Income from continuing operations听 听 听 听57,260 听 听 听33,205
Loss from discontinued operations,听
net of tax 听 听 听(24) 听 听 听(69)
Net income 听 听 听$听57,236 听 听 听$听33,136
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)听non-cash charges including: (a) stock-based compensation expense, (b) amortization of non-cash marketing, (c)听amortization of intangibles, (d)听depreciation and gains and losses on asset dispositions, and (e)听goodwill, long-lived asset and intangible asset impairments; (2)听pro forma adjustments for significant acquisitions; and (3)听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.听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 non-cash marketing, 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)听stock-based compensation expense and amortization of non-cash marketing, (2)听amortization of intangible assets, (3) gains and losses on asset dispositions, (4) goodwill, long-lived asset and intangible asset impairments, (5)听pro forma adjustments for significant acquisitions, (6)听one-time items, and (7)听discontinued operations.听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.听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.听Adjusted Net Income and Adjusted EPS have the same limitations as Adjusted EBITDA.听Therefore, we think it is important to evaluate these measures along with our consolidated statement of operations.
CONTACT: HSN, Inc.
Analysts/Investors
Felise Glantz Kissell
727-872-7529
felise.kissell@hsn.net
Media
Mia Carbonell
727-872-4084
mia.carbonell@hsn.net
Released November 3, 2010