10-Q 1 a2063408z10-q.txt 10-Q AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 14, 2001 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-Q (MARK ONE) ~~/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15() OF THE SECURITIES EXCHANGE ACT OF 1934~~

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001 ~~/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15() OF THE SECURITIES EXCHANGE ACT OF 1934~~

FOR THE TRANSITION PERIOD FROM ______________ TO ______________ COMMISSION FILE NO. 333-71305-01 ------------------------ HOME SHOPPING NETWORK, INC. (Exact name of registrant as specified in its charter) ~~DELAWARE 52-2649518 (State or Other Jurisdiction of (IRS Employer Identification Number) Incorporation or Organization)~~

152 WEST 57TH STREET, NEW YORK, NEW YORK, 10019 (Address of Registrant's principal executive offices) (212) 314-7300 (Registrant's telephone number, including area code) ------------------------ Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 2 HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 3 HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)

Accumulated other comprehensive income is comprised of unrealized gains on available for sale securities of $(5,980) and $(5,647) at September 30, 2001 and December 31, 2000, respectively and foreign currency translation adjustments of $(4,442) and $413 at September 30, 2001 and December 31, 2000, respectively. Comprehensive income for the three months ended September 30, 2001 was $19,169. The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 4 HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 5 HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1--ORGANIZATION AND BASIS OF PRESENTATION Home Shopping Network, Inc. (the "Company" or "Home Shopping"), is a holding company, whose subsidiary USANi LLC is engaged in diversified media and electronic commerce businesses. In December 1996, the Company consummated a merger with USA Networks, Inc. ("USA"), formerly known as HSN, Inc., and became a subsidiary of USA (the "Home Shopping Merger"). On July 27, 2000, the Company and Styleclick.com Inc., an enabler of e-commerce for manufacturers and retailers ("Styleclick.com"), completed the merger of Internet Shopping Network ("ISN") and Styleclick.com (the "Styleclick Transaction"). See Note 3. The Company is a holding company, the subsidiaries of which are focused on the new convergence of entertainment, information and direct selling. The five principal areas of business are: - CABLE AND STUDIOS, consisting of the cable networks USA Network and Sci Fi Channel and Studios USA, which produces and distributes television programming. - ELECTRONIC RETAILING, consisting primarily of HSN and America's Store, HSN International and HSN Interactive, including HSN.com. - ELECTRONIC COMMERCE SOLUTIONS, which primarily represents the Company's electronic commerce solutions business. - STYLECLICK, a facilitator of e-commerce websites and Internet enabled applications. - EMERGING NETWORKS, consists primarily of the cable television properties Trio and News World International, which were acquired on May 19, 2000, and SciFi.com, an emerging Internet content and commence site. BASIS OF PRESENTATION The interim Condensed Consolidated Financial Statements and Notes thereto of the Company are unaudited and should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto for the twelve months ended December 31, 2000. In the opinion of the Company, all adjustments necessary for a fair presentation of such Condensed Consolidated Financial Statements have been included. Such adjustments consist of normal recurring items. Interim results are not necessarily indicative of results for a full year. The interim Condensed Consolidated Financial Statements and Notes thereto are presented as permitted by the Securities and Exchange Commission and do not contain certain information included in the Company's audited Consolidated Financial Statements and Notes thereto. ACCOUNTING ESTIMATES Management of the Company is required to make certain estimates and assumptions during the preparation of consolidated financial statements in accordance with generally accepted accounting principles. These estimates and assumptions impact the reported amount of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. 6 HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) NOTE 1--ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED) They also impact the reported amount of net earnings during any period. Actual results could differ from those estimates. Significant estimates underlying the accompanying consolidated financial statements include the inventory carrying adjustment, program rights and film cost amortization, sales return and other revenue allowances, allowance for doubtful accounts, recoverability of intangibles and other long-lived assets, estimates of film revenue ultimates and various other operating allowances and accruals. NEW ACCOUNTING PRONOUNCEMENTS FILM ACCOUNTING The Company adopted SOP 00-2, ACCOUNTING BY PRODUCERS OR DISTRIBUTORS OF FILMS ("SOP 00-2") during the nine months ended September 30, 2001. SOP 00-2 established new film accounting standards, including changes in revenue recognition and accounting for advertising, development and overhead costs. Specifically, SOP 00-2 requires advertising costs for theatrical and television product to be expensed as incurred. This compares to the Company's previous policy of first capitalizing these costs and then expensing them over the related revenue streams. In addition, SOP 00-2 requires development costs for abandoned projects and certain indirect overhead costs to be charged directly to expense, instead of those costs being capitalized to film costs, which was required under the previous accounting rules. SOP 00-2 also requires all film costs to be classified in the balance sheet as non-current assets. Provisions of SOP 00-2 in other areas, such as revenue recognition, generally are consistent with the Company's existing accounting policies. SOP 00-2 was adopted as of January 1, 2001, and the Company recorded a one-time, non-cash benefit of $1.9 million, net of tax. The net effect is reflected as a cumulative effect of an accounting change in the accompanying consolidated statement of operations. GOODWILL AND OTHER INTANGIBLE ASSETS In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, "Business Combinations," and No. 142, "Goodwill and Other Intangible Assets," effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with the Statements. Other intangible assets will continue to be amortized over their useful lives. The Company will apply the new rules on accounting for goodwill and other intangible assets beginning in the first quarter of 2002, and is presently in the process of evaluating the potential impacts of the new rules. RECLASSIFICATIONS Certain amounts in the prior years' consolidated financial statements have been reclassified to conform to the 2001 presentation, including all amounts charged to customers for shipping and handling, which are now presented as revenue. 7 HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES See the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000 (the "2000 Form 10-K") for a summary of all significant accounting policies. NOTE 3--BUSINESS ACQUISITIONS The following unaudited pro forma condensed consolidated financial information for the nine months ended September 30, 2000 is presented to show the results of the Company as if the Styleclick Transaction had occurred on January 1, 2000. The pro forma results reflect certain adjustments, including increased amortization related to goodwill, and are not necessarily indicative of what the results would have been had the transactions actually occurred on January 1, 2000.

NOTE 4--STATEMENTS OF CASH FLOWS SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000: On January 20, 2000, the Company completed its acquisition of Ingenious Designs, Inc. ("IDI"), by issuing approximately 190,000 shares of USA common stock for all the outstanding stock of IDI, for a total value of approximately $5.0 million. NOTE 5--INDUSTRY SEGMENTS The Company operates principally in five industry segments: Cable and studios, Electronic retailing, Electronic commerce solutions, Styleclick, and Emerging networks. The Cable and studios segment consists of the cable networks USA Network and Sci Fi Channel and Studios USA, which produces and distributes television programming. The Electronic retailing segment consists of Home Shopping Network, America's Store, HSN International and HSN Interactive, including HSN.com, which are engaged in the sale of merchandise through electronic retailing. The Electronic commerce solutions segment primarily represents the Company's customer and e-care businesses. The Styleclick segment represents Styleclick, Inc., a facilitator of e-commerce websites and Internet enabled applications. The Emerging networks segment consists primarily of the cable television properties Trio 8 HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) NOTE 5--INDUSTRY SEGMENTS (CONTINUED) and NewsWorld International, which were acquired on May 19, 2000, and SciFi.com, an emerging Internet content and commerce site.

NOTE 6--GUARANTEE OF NOTES On November 23, 1998, USA and the USANi LLC completed an offering of $500.0 million 6 3/4% Senior Notes due 2005 (the "Old Notes"). In May 1999, the Old Notes were exchanged in full for $500.0 million of new 6 3/4% Senior Notes due 2005 (the "Notes") that have terms that are substantially identical to the Old Notes. Interest is payable on the Notes on May 15 and November 15 of each year, commencing May 15, 1999. The Notes are jointly, severally, fully and unconditionally guaranteed by certain subsidiaries of USA, including Holdco, and all of the subsidiaries of the Company (other than subsidiaries that are, individually and in the aggregate, inconsequential to the Company on a consolidated basis) (collectively, the "Subsidiary Guarantors"). All of the Subsidiary Guarantors (other than Holdco) (the "Wholly Owned Subsidiary Guarantors") are wholly owned, directly or indirectly, by USA or the Company, as the case may be. Separate financial statements for each of the Wholly Owned Subsidiary Guarantors are not presented and such Wholly Owned Subsidiary Guarantors are not filing separate reports under the Securities Exchange Act of 1934 because USA's and the Company's management has determined that the information contained in such documents would not be material to investors. The Company and its subsidiaries have no material restrictions on their ability to transfer amounts to fund USA's operations. 9 ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Home Shopping Network, Inc. (the "Company" or "Holdco") is a holding company, whose subsidiary, USANi LLC, is engaged in diversified media and electronic commerce businesses. In December 1996, the Company consummated a merger with USA Networks, Inc. ("USA"), and became a subsidiary of USA (the "Home Shopping Merger"). On July 27, 2000, the Company and Styleclick.com Inc., an enabler of e-commerce for manufacturers and retailers, completed the merger of Internet Shopping Network ("ISN") and Styleclick.com (the "Styleclick Transaction"). The Styleclick Class A common stock is quoted on the Nasdaq Stock Market under the symbol "IBUY". The Company is a holding company, the subsidiaries of which are focused on the new convergence of entertainment, information and direct selling. The five principal areas of business are: - CABLE AND STUDIOS, consisting of the cable networks USA Network and Sci Fi Channel and Studios USA, which produces and distributes television programming. - ELECTRONIC RETAILING, consisting primarily of HSN and America's Store, HSN International and HSN Interactive, including HSN.com. - ELECTRONIC COMMERCE SOLUTIONS, which primarily represents the Company's electronic commerce solutions business. - STYLECLICK, a facilitator of e-commerce websites and Internet enabled applications. - EMERGING NETWORKS, consists primarily of the cable television properties Trio and NewsWorld International, which were acquired on May 19, 2000, and SciFi.com, an emerging Internet content and commence site. THIS REPORT INCLUDES FORWARD-LOOKING STATEMENTS RELATING TO SUCH MATTERS AS ANTICIPATED FINANCIAL PERFORMANCE, BUSINESS PROSPECTS, NEW DEVELOPMENTS, NEW MERCHANDISING STRATEGIES AND SIMILAR MATTERS. STATEMENTS IN THIS REPORT THAT ARE NOT HISTORICAL FACTS ARE HEREBY IDENTIFIED AS "FORWARD-LOOKING STATEMENTS" FOR THE PURPOSE OF THE SAFE HARBOR PROVIDED BY SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934 AND SECTION 27A OF THE SECURITIES ACT OF 1933. FORWARD-LOOKING STATEMENTS, WHEREVER THEY OCCUR IN THIS REPORT, ARE NECESSARILY ESTIMATES REFLECTING THE BEST JUDGMENT OF THE SENIOR MANAGEMENT OF THE COMPANY AND INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE SUGGESTED BY THE FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS SHOULD, THEREFORE, BE CONSIDERED IN LIGHT OF VARIOUS IMPORTANT FACTORS, INCLUDING THOSE SET FORTH IN THIS REPORT. THE RISKS AND UNCERTAINTIES THAT MAY AFFECT THE OPERATIONS, PERFORMANCE, DEVELOPMENT AND RESULTS OF THE COMPANY'S BUSINESS INCLUDE, BUT ARE NOT LIMITED TO, THE FOLLOWING: MATERIAL ADVERSE CHANGES IN ECONOMIC CONDITIONS GENERALLY OR IN THE MARKETS SERVED BY THE COMPANY; FUTURE REGULATORY AND LEGISLATIVE ACTIONS AFFECTING THE COMPANY'S OPERATING AREAS; COMPETITION FROM OTHERS; PRODUCT DEMAND AND MARKET ACCEPTANCE; THE ABILITY TO PROTECT PROPRIETARY INFORMATION AND TECHNOLOGY OR TO OBTAIN NECESSARY LICENSES ON COMMERCIALLY REASONABLE TERMS; THE ABILITY TO EXPAND INTO AND SUCCESSFULLY OPERATE IN FOREIGN MARKETS; AND OBTAINING AND RETAINING SKILLED WORKERS AND KEY EXECUTIVES. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO PUBLICLY RELEASE ANY REVISIONS TO THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS. 10 CONSOLIDATED RESULTS OF OPERATIONS THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 VS. THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 NET REVENUES For the three months ended September 30, 2001, revenues increased by $83.8 million, or 10.8%, to $863.2 million from $779.4 million in 2000 primarily due to increases of $62.2 million, $26.4 million and $2.3 million from the Cable and studios, Electronic retailing and Electronic commerce solutions operations, respectively, offset partially by a decrease in revenues of Styleclick of $4.3 million and Emerging networks of $2.8 million. For the nine months ended September 30, 2001, revenues increased by $298.8 million, or 12.5%, to $2.69 billion from $2.39 billion in 2000 primarily due to increases of $174.4 million, $118.9 million, $10.4 million and $5.3 million from the Cable and studios, Electronic retailing, Electronic commerce services and Emerging networks operations, respectively, offset partially by a decrease in Styleclick revenues of $10.2 million. The Cable and studios increase resulted from significant increases in license fees earned by Studios USA, including amounts related to the three Law & Order programs currently airing on NBC, increased license fees earned in secondary markets, and increased revenues associated with THE DISTRICT. Revenues at Cable increased slightly, due mainly to a $16 million adjustment related to affiliate fees recorded in Q3 2001. Advertising revenue was lower than the prior year due to the weak advertising market, which was worsened by the events of September 11th. Note that the cable networks provided $1.8 million of advertising to affiliated USA companies in the three months ended September 30, 2001. In addition, the networks recognized $17.3 million of barter revenue pursuant to agreements with third parties. The Electronic retailing increase primarily resulted from Home Shopping Network's domestic business, which generated increased sales in the three and nine months ended September 30, 2001 of $27.6 million and $92.4 million, respectively, including increased sales of $23.4 million and $60.2 million, respectively, from HSN.com. In addition, the Improvements business purchased in 2001 contributed $15.6 million of revenue. On-air sales declined in the quarter $11.5 million due to a dramatic, but relatively short-lived, decline in viewership following the national tragedy of September 11th. HSN ceased its live programming shortly after the attacks and aired live news programming from USA Cable's NWI. For the three months ended September 30, 2001, total units shipped domestically increased slightly to 8.8 million units compared to 8.6 million units in 2000, while the return rate decreased slightly to 19.4% from 19.8% in 2000. Electronic retailing operations in Germany had decreased sales of $3.0 million in the three months ended September 30, 2001, as revenues were $50.8 million in the three months ended September 30, 2001 compared to $53.8 million. The decreased sales reflect in part operating challenges associated with the addition of 4 live hours of programming earlier in the year, as sales continued to be hindered by the conversion to a new order management system, which delayed certain shipments. Furthermore, the return rate increased to 35.2% from 25.7% in 2000. Net revenues in Germany for the nine months ended September 30, 2001 increased by $20.2 million to $182.4 million compared to $162.2 million in 2000. Electronic commerce services revenue increased due primarily to increases in revenue for the transactional sites that ECS manages, offset partially by a decrease in ECS teleservices. Emerging networks revenue for the three months ended September 30, 2001 was impacted by a new affiliate distribution deal, resulting in lower subscriber rates. Styleclick net revenues decreased due to the shutdown of the transactional web sites, First Auction and First Jewelry, in connection with its increased focus on its e-commerce service provider business. OPERATING COSTS AND EXPENSES For the three months ended September 30, 2001, operating expenses increased by $72.7 million, or 10.4%, to $770.7 million from $698.0 million in 2000, primarily due to increases in costs related to revenues and other costs of $71.7 million, including $41.0 million from Electronic retailing, $25.4 million from Cable and studios, and $10.6 million from Electronic commerce solutions, offset 11 partially by a reduction from Styleclick of $9.8 million. In addition, for the three months ended September 30, 2001, amortization of cable distribution fees increased $1.1 million. For the nine months ended September 30, 2001, operating expenses increased by $275.5 million, or 13.2%, to $2.36 billion from $2.09 billion in 2000, primarily due to increases in costs related to revenues and other costs of $275.5 million, including $146.5 million from Electronic retailing, $81.1 million from Cable and studios, $26.0 million from Electronic commerce solutions, $7.8 million from Emerging networks, offset partially by a reduction from Styleclick of $15.8 million. In addition, for the nine months ended September 30, 2001, depreciation and amortization increased $23.1 million and amortization of cable distribution fees increased $4.0 million. For Electronic retailing, domestic costs increased due to higher fixed overhead costs for fulfillment, which helped contribute, along with pricing incentives offered after September 11th, to a lower gross margin of 32.0% as compared to 34.6% in the prior year. Furthermore, the Company incurred higher selling and marketing costs, including programs to attract new customers, and costs related to the Improvements business, which was purchased in 2001. Internationally, costs increased in Germany due to the decline in gross margin to 29.1% from 36.1% in 2000, increased investments in adding an additional 4 live hours of programming and increased marketing expenses for new product lines. The Cable and studios increase resulted primarily from costs associated with the increased revenues of all of the businesses, including the costs of providing increased product to the broadcast networks, and $5.1 million of higher expense for development costs, offset partially by efficient use of programming by Cable, resulting in reduced program amortization, and increased usage of internally developed product. Costs for Electronic commerce solutions increased primarily to higher operating expenses, while costs for Emerging networks increased due to the acquisition of Trio and NewsWorld International on May 19, 2000. Styleclick's operating costs were reduced due to the overall scale back in the transactional business. Note that Styleclick recorded a $2 million write-down of its inventory in the nine months ended September 30, 2001. Depreciation and amortization increased principally as a result of acquisitions and capital investments. The three and nine months ended September 30, 2001 reflect restructuring and one-time charges of $4.0 million and $8.7 million, respectively. The amounts represent non-recurring charges related to restructuring operations, consolidating Styleclick's operations in Chicago, the shut down of the Firstauction.com website, and employee terminations and benefits. OTHER INCOME (EXPENSE) For the three and nine months ended September 30, 2001, net interest expense increased by $4.7 million and $13.3 million, respectively, compared to 2000 primarily due to lower short-term investment levels. Other expense, net for the three and nine months ended September 30, 2001 decreased $76.1 million and $92.8 million, respectively, due primarily to the gain recorded in the three months ended September 30, 2000 related to the Styleclick merger plus higher equity losses in unconsolidated subsidiaries in 2001. MINORITY INTEREST Minority interest primarily represents Universal's and Liberty's ownership interest in USANi LLC, the public's ownership interest in Styleclick since July 27, 2000 and partner's interest in HOT Germany, which the Company began to consolidate as of January 1, 2000. INCOME TAXES The Company's effective tax rate of 50.0% and 46.1% for the three and nine months ended September 30, 2001 is higher than the statutory rate due to the effects of state taxes and non-deductible goodwill. 12 SEASONALITY Holdco's businesses are subject to the effects of seasonality. Cable and Studios revenues are influenced by advertiser demand and the seasonal nature of programming, and generally peak in the spring and fall. Holdco believes seasonality impacts its Electronic Retailing segment but not to the same extent it impacts the retail industry in general. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK INTEREST RATE RISK The Company's exposure to market rate risk for changes in interest rates relates primarily to the Company's short-term investment portfolio and issuance of debt. The Company does not use derivative financial instruments in its investment portfolio. The Company has a prescribed methodology whereby it invests its excess cash in debt instruments of government agencies and high quality corporate issuers. To further mitigate risk, the vast majority of the securities have a maturity date within 60 days. The portfolio is reviewed on a periodic basis and adjusted in the event that the credit rating of a security held in the portfolio has deteriorated. At September 30, 2001, the Company's outstanding debt approximated $541.0 million, substantially all of which is fixed rate obligations. If market rates decline, the Company runs the risk that the related required payments on the fixed rate debt will exceed those based on the current market rate. FOREIGN CURRENCY EXCHANGE RISK The Company conducts business in certain foreign markets. However, the level of operations in foreign markets is insignificant to the consolidated results. EQUITY PRICE RISK The Company has no investments in equity securities of unconsolidated publicly-traded companies. It is not customary for the Company to make investments in equity securities as part of its investment strategy. 13 PART II--OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In the ordinary course of business, the Company and its subsidiaries are parties to litigation involving property, personal injury, contract and other claims. The amounts that may be recovered in these matters may be subject to insurance coverage. Although amounts recovered in litigation are not expected to be material to the financial position or operations of the Company, this litigation, regardless of outcome or merit, could result in substantial costs and diversion of management and technical resources, any of which could materially harm our business. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits.

(b) Reports on Form 8-K filed during the quarter ended September 30, 2001. None. 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HOME SHOPPING NETWORK, INC. By: /s/ BARRY DILLER ----------------------------------------- Barry Diller Chairman and Chief Executive Officer November 14, 2001

HOME SHOPPING NETWORK INC 10-Q