Segment Information | 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 reportable segments, HSN and Cornerstone. The accounting policies of the segments are the same as those described in Note 2 – Summary of Significant Accounting Policies included in HSNi's Annual Report on Form 10-K for the year ended December 31, 2015 . 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): Three Months Ended June 30, 2016 Three Months Ended June 30, 2015 HSN Cornerstone Total HSN Cornerstone Total Adjusted EBITDA $ 66,280 $ 16,121 $ 82,401 $ 68,194 $ 21,831 $ 90,025 Stock-based compensation expense (3,867 ) (1,217 ) (5,084 ) (3,617 ) (1,151 ) (4,768 ) Depreciation and amortization (7,275 ) (3,426 ) (10,701 ) (7,590 ) (3,495 ) (11,085 ) Distribution center closure (a) — — — (3,032 ) — (3,032 ) Asset impairment (b) — (20,400 ) (20,400 ) — — — Loss on disposition of fixed assets — (2 ) (2 ) (430 ) (7 ) (437 ) Operating income $ 55,138 $ (8,924 ) 46,214 $ 53,525 $ 17,178 70,703 Total other expense, net (3,840 ) (3,880 ) Income before income taxes 42,374 66,823 Income tax provision (15,929 ) (25,191 ) Net income $ 26,445 $ 41,632 (a) In the second quarter of 2015, HSN recorded a $3.0 million charge associated with the planned closure of one of its distribution centers as part of its supply chain optimization initiative. See Note 13 for further information. (b) In the second quarter of 2016, Cornerstone recorded a non-cash impairment charge of $20.4 million associated with the assets held for sale. See Note 14 for further information. Six Months Ended June 30, 2016 Six Months Ended June 30, 2015 HSN Cornerstone Total HSN Cornerstone Total Adjusted EBITDA $ 126,971 $ 21,163 $ 148,134 $ 134,384 $ 28,791 $ 163,175 Stock-based compensation expense (7,906 ) (2,554 ) (10,460 ) (7,226 ) (2,198 ) (9,424 ) Depreciation and amortization (14,278 ) (6,949 ) (21,227 ) (15,008 ) (7,326 ) (22,334 ) Distribution center closure (a) — — — (3,032 ) — (3,032 ) Asset impairment (b) — (20,400 ) (20,400 ) — — — Loss on disposition of fixed assets (4 ) — (4 ) (665 ) (8 ) (673 ) Operating income $ 104,783 $ (8,740 ) 96,043 $ 108,453 $ 19,259 127,712 Total other expense, net (7,987 ) (7,177 ) Income before income taxes 88,056 120,535 Income tax provision (33,026 ) (45,214 ) Net income $ 55,030 $ 75,321 (a) In the second quarter of 2015, HSN recorded a $3.0 million charge associated with the planned closure of one of its distribution centers as part of its supply chain optimization initiative. See Note 13 for further information. (b) In the second quarter of 2016, Cornerstone recorded a non-cash impairment charge of $20.4 million associated with the assets held for sale. See Note 14 for further information. The net sales for each of HSNi's reportable segments are as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Net sales: HSN $ 557,163 $ 572,304 $ 1,135,547 $ 1,172,796 Cornerstone 297,145 313,338 535,527 554,733 Total $ 854,308 $ 885,642 $ 1,671,074 $ 1,727,529 |