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ShopNBC Announces First Quarter Fiscal 2009 Financial Results
(Market Wire Via Acquire Media NewsEdge) MINNEAPOLIS, MN -- (MARKET WIRE) -- 05/19/09 --
ShopNBC (NASDAQ: VVTV), the premium
lifestyle brand in electronic retailing, today announced financial results
for its first fiscal quarter ended May 2, 2009.
First Quarter Results
First quarter revenues were $134 million, a 14% decrease from the same
period last year. The sales decline was driven by a 26% decrease in the
average selling price, offset by a 10% increase in unit volume. EBITDA, as
adjusted, was a loss of ($6.8) million compared to EBITDA, as adjusted, of
($12.4) million in the year-ago period. Net loss for the first quarter was
($12.0) million compared to a net loss of ($17.6) million for the same
quarter last year.
First Quarter Highlights
GE Preferred Stock. In the quarter, the company negotiated an agreement
with GE to restructure and extend the majority of its payment obligation of
$44.3 million Series A preferred stock by five years. This extension
provides the company with the time, flexibility and financial resources to
execute the turnaround of its business. The impact of this transaction on
the financial statements for the quarter include a $3.4 million cash
payment of principal, interest expense of $743,000, and the newly issued
Series B preferred stock with a valuation of $10 million on the balance
sheet.
Cash and Securities Balance. First quarter cash and securities balance
ended at $54.4 million, which includes $15.7 million of illiquid auction
rate securities. This cash and securities balance is a decrease of $17
million vs. the prior quarter driven by the EBITDA loss of ($6.8) million,
the $3.4 million cash payment to GE, working capital usage of $3 million,
and $2 million of capital spending. The company also repurchased 1.6
million shares for $900,000 at an average price of $0.58 per share.
Cable and Satellite Distribution. Of the 72 million homes in ShopNBC's
distribution footprint, carriage agreements pertaining to approximately 65%
of these homes had expired at the end of calendar year 2008. The company
has completed most of its negotiations with its cable and satellite
providers. The company stated that it expects to preserve 100% of its
footprint, and with regard to negotiations completed to date, it expects to
realize a 33% rate reduction. This is expected to result in a cost savings
in the range of $22 million to $25 million in fiscal 2009.
Operating Expenses. Operating expenses decreased $14.5 million
year-over-year or 21% in the quarter. This reduction was driven by the
successful renegotiation of certain cable and satellite agreements. The
company also realized significant cost savings in the quarter due to lower
headcount vs. the prior-year period, reduced online marketing spend, and a
significant decline in transactional costs in the areas of order capture,
customer service and fulfillment. To the extent the company completes an
order faster, shifts order processing to a voice response system or online
ordering, improves product quality, and reduces return rates, customer
satisfaction will continue to improve while the cost of each transaction
decreases.
Customers. Customer trends continued to improve with new and active
customers up by 60% and 23%, respectively, in the first quarter vs. the
same period last year. Return and cancel rates decreased by double digits
vs. last year's same period, reflecting improvements in delivery time,
customer service, product quality, and lower price points. Customer service
inquiries decreased 20% in the quarter.
Merchandising. Gross profit margin was 31.5% in the first quarter, slightly
down from 32.0% in the prior-year period, but a 260 basis point improvement
over the previous quarter. The company expects margins will improve
throughout the year as the shift in merchandise mix occurs along with
growth in the key categories of home, fashion and beauty while the core
jewelry business is repositioned at more moderate price points, higher
margins, and broader appeal.
-- Average selling price was intentionally lowered to $144 in the
quarter, down 26% vs. prior year.
-- 94 new vendors were added across current and new product categories
who will offer a continuous flow of unique, distinctive and relevant
products. The company launched 62 new brands, collections and concepts in
the quarter that will surprise and delight its new and existing customers.
-- Successful sales events: Spring Forward With Invicta Watches with
orders of $10 million and top-selling items producing levels of $52,000 per
minute to $84,000 per minute; Diamond Day with orders of $4 million; 7,000
plus units of Toshiba Notebooks generating over $5.6 million in orders over
a weekend; and 5,000 plus units of 17" Blu-ray Notebook Packages generating
over $6 million in orders.
-- Unit volume increased 10% in the quarter as lower price points and new
merchandise proved successful in driving increased customer activity. Unit
volume successes: 13,500 Isomers Stem Genesis units; 14,000 Garmin units;
23,500 Obama Coin & Stamp Collection units; 9,000 Skinn Foundation Set
units; and 10,000 Wrinkle Magic units.
ShopNBC.com. A redesign of the website was launched in the quarter, which
led to major improvements in its online customer experience, and an
increase in new and returning buyer conversation rates vs. last year. The
company also debuted "ShopNBC Anywhere" in the first quarter. As part of
this mobile platform strategy, ShopNBC launched an application for iPhone
and iPod touch devices -- the first of its kind in the TV shopping
industry.
"The company continued to make meaningful improvements to its fundamentals
in a number of key areas across the entire organization in the first
quarter," said Keith Stewart, ShopNBC's President and CEO. "As a result of
these operational improvements and efficiencies, positive business metrics
continued to take form, which is highly encouraging. With our strategic
merchandise objectives in place to position ShopNBC as the authority and
destination for home, fashion and jewelry shoppers, I remain confident
about the future of our multi-channel electronic retailing business and am
optimistic about our financial performance for the balance of the year."
Added Stewart, "Given the rapid changes being implemented to improve
on-going business operations and turn around the company's financial
results, guidance will not be provided at this time."
Conference Call Information
The Company has scheduled its conference call for 11 a.m. EDT / 10 a.m. CDT
on Wednesday, May 20, 2009, to discuss the results for the fiscal first
quarter. To participate in the conference call, please dial 1-888-282-0357
(pass code: SHOPNBC) five to ten minutes prior to the call time. If you are
unable to participate live in the conference call, a replay will be
available for 30 days. To access the replay, please dial 1-866-463-4107
with pass code 7467622 (keypad: SHOPNBC).
You also may participate via live audio stream by logging on to
https://e-meetings.verizonbusiness.com. To access the audio stream, please
use conference number 3882059 with pass code: SHOPNBC. A rebroadcast of the
audio stream will be available using the same access information for 30
days after the initial broadcast.
EBITDA and EBITDA, as adjusted
The Company defines EBITDA as net income (loss) for the respective periods
excluding depreciation and amortization expense, interest income (expense)
and income taxes. The Company defines EBITDA, as adjusted, as EBITDA
excluding non-recurring non-operating gains (losses); non-cash impairment
charges and write offs, restructuring and CEO transition costs; and
non-cash share-based payment expense. Management has included the term
EBITDA, as adjusted, in order to adequately assess the operating
performance of the Company's "core" television and Internet businesses and
in order to maintain comparability to its analyst's coverage and financial
guidance. Management believes that EBITDA, as adjusted, allows investors to
make a more meaningful comparison between our core business operating
results over different periods of time with those of other similar small
cap, higher growth companies. In addition, management uses EBITDA, as
adjusted, as a metric measure to evaluate operating performance under its
management and executive incentive compensation programs. EBITDA, as
adjusted, should not be construed as an alternative to operating income
(loss) or to cash flows from operating activities as determined in
accordance with GAAP and should not be construed as a measure of liquidity.
EBITDA, as adjusted, may not be comparable to similarly entitled measures
reported by other companies.
About ShopNBC
ShopNBC is a multi-channel electronic retailer operating with a premium
lifestyle brand. The shopping network reaches 72 million homes in the
United States via cable affiliates and satellite: DISH Network channel 134
and 228; DIRECTV channel 316. www.ShopNBC.com is recognized as a top
e-commerce site. ShopNBC is owned and operated by ValueVision Media
(NASDAQ: VVTV). For more information, please visit www.ShopNBC.com/ir.
Forward-Looking Information
This release contains certain "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements are based on management's current expectations and are
accordingly subject to uncertainty and changes in circumstances. Actual
results may vary materially from the expectations contained herein due to
various important factors, including (but not limited to): consumer
spending and debt levels; interest rates; competitive pressures on sales,
pricing and gross profit margins; the level of cable distribution for the
Company's programming and the fees associated therewith; the success of the
Company's e-commerce and rebranding initiatives; the performance of its
equity investments; the success of its strategic alliances and
relationships; the ability of the Company to manage its operating expenses
successfully; risks associated with acquisitions; changes in governmental
or regulatory requirements; litigation or governmental proceedings
affecting the Company's operations; and the ability of the Company to
obtain and retain key executives and employees. More detailed information
about those factors is set forth in the Company's filings with the
Securities and Exchange Commission, including the Company's annual report
on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form
8-K. The Company is under no obligation (and expressly disclaims any such
obligation) to update or alter its
forward-looking statements whether as a result of new information, future
events or otherwise.
VALUEVISION MEDIA, INC.
Key Performance Metrics*
(Unaudited)
Q1
For the three months ending
5/2/2009 5/3/2008 %
--------- --------- ---------
Program Distribution
Cable FTEs 43,739 42,361 3%
Satellite FTEs 29,190 28,394 3%
--------- --------- ---------
Total FTEs (Average 000s) 72,929 70,755 3%
Net Sales per FTE (Annualized) $ 7.34 $ 8.72 -16%
Customer Counts Year-to-Date
New 113,027 70,591 60%
Active 343,137 279,547 23%
Product Mix
Jewelry 21% 44%
Apparel, Fashion Accessories and
Health & Beauty 10% 10%
Computers & Electronics 29% 17%
Watches, Coins & Collectibles 33% 20%
Home & All Other 7% 9%
Net Units (000s) 852 774 10%
Average Price Point - net units $ 144 $ 195 -26%
Return Rate 21.7% 36.0% -14.3ppt
--------- --------- ---------
*Includes ShopNBC TV and ShopNBC.com only.
VALUEVISION MEDIA, INC.
AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except share and per share data)
(Unaudited)
For the Three Month
Periods Ended
----------------------
May 2, May 3,
2009 2008
---------- ----------
Net sales $ 133,802 $ 156,288
Cost of sales 91,613 106,332
(exclusive of depreciation
and amortization shown below)
Operating expense:
Distribution and selling 45,239 57,083
General and administrative 4,627 6,335
Depreciation and amortization 3,789 4,319
Restructuring costs 104 330
CEO transition costs 77 277
---------- ----------
Total operating expense 53,836 68,344
---------- ----------
Operating loss (11,647) (18,388)
---------- ----------
Other income (expense):
Interest income 216 825
Interest expense - (Series B Preferred Stock) (743) -
---------- ----------
Total other income (expense) (527) 825
---------- ----------
Loss before income taxes (12,174) (17,563)
Income tax (provision) benefit 162 (15)
---------- ----------
Net loss (12,012) (17,578)
Excess of preferred stock carrying value
over redemption value 27,895 -
Accretion of redeemable
Series A preferred stock (62) (73)
---------- ----------
Net income (loss) available to common shareholders $ 15,821 $ (17,651)
========== ==========
Net income (loss) per common share $ 0.48 $ (0.53)
========== ==========
Net income (loss) per common share
---assuming dilution $ 0.48 $ (0.53)
========== ==========
Weighted average number of common shares
outstanding:
Basic 33,103,736 33,577,899
========== ==========
Diluted 33,110,074 33,577,899
========== ==========
VALUEVISION MEDIA, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands except share and per share data)
May 2, January 31,
2009 2009
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 37,013 $ 53,845
Restricted cash 1,642 1,589
Accounts receivable, net 57,242 51,310
Inventories 44,177 51,057
Prepaid expenses and other 4,963 3,668
----------- -----------
Total current assets 145,037 161,469
Long term investments 15,728 15,728
Property and equipment, net 30,897 31,723
FCC broadcasting license 23,111 23,111
NBC Trademark License Agreement, net 6,574 7,381
Other Assets 522 2,088
----------- -----------
$ 221,869 $ 241,500
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 51,776 $ 64,615
Accrued liabilities 40,574 30,657
Deferred revenue 722 716
----------- -----------
Total current liabilities 93,072 95,988
Deferred revenue 1,684 1,849
Accrued Dividends (Series B Preferred Stock) 817 -
Series B Mandatorily Redeemable Preferred Stock 10,519 -
$.01 par value, 4,929,266 shares authorized;
4,929,266 shares issued and outstanding
Commitments and Contingencies
Series A Redeemable Convertible Preferred Stock,
$.01 par value, 5,339,500 shares authorized - 44,191
Shareholders' equity:
Common stock, $.01 par value, 100,000,000
shares authorized; 32,236,085 and 32,690,266
shares issued and outstanding 322 337
Warrants to purchase 6,029,487 shares of
common stock 671 138
Additional paid-in capital 314,179 286,380
Accumulated deficit (199,395) (187,383)
----------- -----------
Total shareholders' equity 115,777 99,472
----------- -----------
$ 221,869 $ 241,500
=========== ===========
VALUEVISION MEDIA, INC.
AND SUBSIDIARIES
Reconciliation of EBITDA, as adjusted, to Net Loss:
First Quarter First Quarter
2-May-09 3-May-08
------------- -------------
EBITDA, as adjusted (000's) $ (6,789) $ (12,394)
Less:
Restructuring costs (104) (330)
CEO transition costs (77) (277)
Non-cash share-based compensation (888) (1,068)
------------- -------------
EBITDA (as defined) (a) (7,858) (14,069)
------------- -------------
A reconciliation of EBITDA to net loss is as
follows:
EBITDA, as defined (7,858) (14,069)
Adjustments:
Depreciation and amortization (3,789) (4,319)
Interest income 216 825
Interest expense (743) -
Income taxes 162 (15)
------------- -------------
Net loss $ (12,012) $ (17,578)
============= =============
(a) EBITDA as defined for this statistical presentation represents net
income (loss) from continuing operations for the respective periods
excluding depreciation and amortization expense, interest income (expense)
and income taxes. The Company defines EBITDA, as adjusted, as EBITDA
excluding non-recurring non-operating gains (losses); non-cash impairment
charges and writedowns, restructuring and CEO transition costs; and non-
cash share-based compensation expense.
Management has included the term EBITDA, as adjusted, in its EBITDA
reconciliation in order to adequately assess the operating performance of
the Company's "core" television and Internet businesses and in order to
maintain comparability to its analyst's coverage and financial guidance.
Management believes that EBITDA, as adjusted, allows investors to make a
more meaningful comparison between our core business operating results over
different periods of time with those of other similar small cap, higher
growth companies. In addition, management uses EBITDA, as adjusted, as a
metric measure to evaluate operating performance under its management and
executive incentive compensation programs. EBITDA, as adjusted, should not
be construed as an alternative to operating income (loss) or to cash flows
from operating activities as determined in accordance with GAAP and should
not be construed as a measure of liquidity. EBITDA, as adjusted, may not
be comparable to similarly entitled measures reported by other companies.
Contacts:
Frank Elsenbast
Chief Financial Officer
952-943-6262
Anthony Giombetti
Media Relations
612-308-1190
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