SOURCE: ShopNBC

November 18, 2009 08:00 ET

ShopNBC Announces Third Quarter Fiscal 2009 Financial Results

MINNEAPOLIS, MN--(Marketwire - November 18, 2009) - ShopNBC (NASDAQ: VVTV), the premium lifestyle brand in electronic retailing, today announced financial results for its third fiscal quarter ended October 31, 2009. ShopNBC is available anywhere: cable and satellite TV, mobile devices (iPhone and iPod Touch), online at www.ShopNBC.com, and streamed live at www.ShopNBC.TV.

Third Quarter Results

Third quarter revenues were $119.4 million, a 4% decrease from the same period last year, as the company shifted its merchandise mix, intentionally lowered its average selling price by 49% and increased unit volume by 90%. EBITDA, as adjusted, was a loss of ($5.6) million compared to an EBITDA, as adjusted, loss of ($13.3) million in the year-ago period. Net loss for the third quarter was ($12.9) million compared to a net loss of ($20.8) million for the same quarter last year.

Third Quarter Highlights

The company noted several key improvements in the quarter:

Customers. Customer trends continued to improve with new and active customers up a record 118% and 64%, respectively, in the third quarter vs. the same period last year. Increased customer demand in the quarter led to a 4% growth in net orders over last year, the company's first increase in seven quarters. This is an acceleration of the company's first half performance of new and active customer growth of 60% and 29%, respectively. Return rates for the quarter were 21.9% vs. 29.2% in the year-ago quarter, reflecting improvements in delivery time, customer service, product quality, and lower price points. The customer service contact rate decreased 24% in the quarter.

Merchandising. Gross profit margin was 33.2%, 130 basis points lower compared to last year, driven primarily by increased promotional activity. These promotions contributed to the significant new customer growth the company achieved in the quarter.

-- Net average selling price was lowered to a record $95 during the quarter vs. $187 in the year-ago quarter, which is a 49% decline.

-- A record 122 new vendors were added to ShopNBC's new and existing merchandise categories of home, fashion, beauty and jewelry. The company launched 58 new show titles, product categories and brands in the quarter, such as Suzanne Somers, Esprit Outerwear, Laundry by Shelli Segal, Sensual Solutions by Dr. Robert Rey, Sensa Weight-Loss System, Brilliante Purely Platinum, The Culinary Institute of America, and Griot's Auto Care.

-- A record 103 new guests -- 90 of those being experts in their field -- were added to the network's talent ranks, including the hottest celebrity hair stylist Ted Gibson, chef Marcus Samuelson, and America's favorite shoe expert Miss Meghan Cleary.

-- Successful sales events and key items wins: "Trick or Treat Value Pay" with sales of $11 million; "Beauty & Style Week" event with sales of $5.6 million; Mitsubishi 65" DLP HDTV with sales of $2.2 million ($2,351 DPM); and an Invicta Reserve Limited Anniversary Edition Swiss Quartz Chronograph Strap Watch with sales of $2 million ($6,780 DPM).

-- Net shipped units in the quarter increased a record 90% as lower price points and new merchandise drove increased customer activity. Net unit successes include 28,000 Sensa Weight-Loss System Starter Kits; 17,500 Grand Suites 700 Thread Count Sheet Sets; 10,000 Pro-V Stainless Steel Mandolin Slicers; and 15,500 14K Colors of Gold Elongated Hoop Earrings.

Cash and Securities Balance. Third quarter cash and securities balance ended at $32.5 million, including $10.5 million of restricted cash. This cash and securities balance is a decrease of $3.9 million vs. the prior quarter driven by the EBITDA loss of ($5.6) million, capital expenditures of $2.3 million, and $4.3 million of working capital benefit.

Operating Expenses. Operating expenses decreased $12 million year-over-year or 20% in the quarter. This decrease was driven by broad-based reductions in the company's cost structure, including lower cable and satellite fees, lower headcount vs. the prior-year period, and a significant decline in transactional costs in the areas of order capture, customer service, credit and fulfillment.

Distribution. In the quarter, the company successfully concluded all of its carriage agreements that were up for renewal in the last year while preserving 100% of our distribution footprint of 73 million homes, leading to a cost savings of approximately $24 million in fiscal 2009 and improved channel positions in many markets.

ShopNBC.com. The company's Internet penetration was an industry leading 34% of total sales in the quarter, up 300 basis points vs. last year. ShopNBC.com attracted new and returning customers with expanded product categories, assortments, and content enhancements. This resulted in 31% of the company's new customers. In addition, the live chat programs and extended social networking provided stronger customer engagement, which substantially increased buyer conversion rates to 6.3% and an increase in orders of 78% over last year's same period. In the fourth fiscal quarter of 2009, the company will further enhance the shopping experience of ShopNBC.com with the launch of its commerce-enabled mobile site as well as incentives that drive customers to the Web site to decrease transaction costs.

"Merchandising efforts to unlock our customer growth potential showed real signs of progress in the third quarter, as we build new businesses in strategic product categories," said Keith Stewart, ShopNBC's President and CEO. "Record gains were made in new and active customer counts. Net shipped units were at record levels. E-commerce is proving to be a powerful complement for additional growth. With a focus on delivering a premium shopping experience across our multichannel platform of TV and the Web, the customer is reacting strongly to our initiatives."

Added Stewart: "Year-to-date EBITDA, as adjusted, is $18.2 million better than last year. We are highly focused on delivering the high expectations that have grown during the turnaround of ShopNBC. I remain confident about our fourth quarter plans."

Conference Call Information

The company has scheduled its conference call for 11 a.m. EST / 10 a.m. CST on Wednesday, November 18, 2009, to discuss the results for the fiscal second quarter. To participate in the conference call, please dial 1-888-606-5948 (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 1-866-403-7090 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 2244891 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 writedowns, restructuring and CEO transition costs; and non-cash share-based compensation 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 when given. 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 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 73 million homes in the United States via cable and satellite television: DISH Network channels 134 and 228; DIRECTV channel 316. As part of the network's ShopNBC Anywhere initiative, customers can shop via cable and satellite TV, mobile devices (iPhone and iPod Touch), online at www.ShopNBC.com, and streamed live at www.ShopNBC.TV. ShopNBC is owned and operated by ValueVision Media (NASDAQ: VVTV).

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 accordingly are 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.

                         VALUE VISION MEDIA, INC.
                         Key Performance Metrics*
                                (Unaudited)


                                Q3                          YTD
                         For the three months       For the nine months
                               ending                     ending
                   10/31/2009 11/1/2008   %    10/31/2009 11/1/2008   %
                      -------  -------  -------  -------  -------  -------
Program Distribution
   Cable FTEs          43,331   43,326        0%  43,624   42,886        2%
   Satellite FTEs      29,732   28,846        3%  29,473   28,632        3%
                      -------  -------  -------  -------  -------  -------
Total FTEs (Average
 000s)                 73,063   72,172        1%  73,097   71,518        2%

Net Sales per FTE
 (Annualized)         $  6.54  $  6.92       -6% $  6.80  $  7.85      -13%

Customer Counts
 Year-to-Date
New                   138,940   63,716      118% 359,571  202,233       78%
Active                413,618  251,605       64% 780,348  552,566       41%

Product Mix
   Jewelry                 26%      33%               25%      39%
   Apparel, Fashion
    Accessories and
    Health & Beauty        16%      12%               13%      10%
   Computers &
    Electronics            11%      25%               19%      20%
   Watches, Coins &
    Collectibles           33%      21%               33%      23%
   Home & All Other        14%       9%               10%       8%

Net Shipped Units
 (000s)                 1,186      625       90%   3,084    2,074       49%

Average Price Point -
 net units            $    95  $   187      -49% $   114  $   193      -41%

Return Rate              21.9%    29.2% -7.3ppt     21.8%    32.7% -10.9ppt
                      -------  -------  -------  -------  -------  -------

*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      For the Nine Month
                                Periods Ended            Periods Ended
                            ----------------------  ----------------------
                            October 31  November 1  October 31  November 1
                               2009        2008        2009        2008
                            ----------  ----------  ----------  ----------
Net sales                   $  119,441  $  124,769  $  372,588  $  422,984
Cost of sales                   79,774      81,694     249,172     282,072
 (exclusive of
 depreciation and
 amortization shown below)
Operating expense:
   Distribution and selling     41,774      51,743     130,898     162,653
   General and
    administrative               4,264       5,582      13,200      17,599
   Depreciation and
    amortization                 3,507       4,246      10,723      12,811
   Restructuring costs             126         175         715         505
   CEO transition costs          1,567       1,883       1,867       2,713
                            ----------  ----------  ----------  ----------
      Total operating
       expense                  51,238      63,629     157,403     196,281
                            ----------  ----------  ----------  ----------
Operating loss                 (11,571)    (20,554)    (33,987)    (55,369)
                            ----------  ----------  ----------  ----------
Other income (expense):
   Interest income                   2         745         365       2,331
   Interest expense (Series
    B Preferred Stock)          (1,350)          -      (3,328)          -
   Gain (loss) on sale of
    investments                      -        (969)      3,628        (969)
                            ----------  ----------  ----------  ----------
      Total other income
       (expense)                (1,348)       (224)        665       1,362
                            ----------  ----------  ----------  ----------
Loss before income taxes       (12,919)    (20,778)    (33,322)    (54,007)
Income tax (provision)
 benefit                             -           -         157         (33)
                            ----------  ----------  ----------  ----------

Net loss                       (12,919)    (20,778)    (33,165)    (54,040)
Excess of preferred stock
 carrying value
 over redemption value               -           -      27,362           -
Accretion of redeemable
 Series A preferred stock            -         (73)        (62)       (219)
                            ----------  ----------  ----------  ----------
Net loss available to
 common shareholders        $  (12,919) $  (20,851) $   (5,865) $  (54,259)
                            ==========  ==========  ==========  ==========

Net loss per common share   $    (0.40) $    (0.62) $    (0.18) $    (1.62)
                            ==========  ==========  ==========  ==========

Net loss per common share
 ---assuming dilution       $    (0.40) $    (0.62) $    (0.18) $    (1.62)
                            ==========  ==========  ==========  ==========

Weighted average number of
 common shares outstanding:
      Basic                 32,332,278  33,590,834  32,569,618  33,580,955
                            ==========  ==========  ==========  ==========
      Diluted               32,332,278  33,590,834  32,569,618  33,580,955
                            ==========  ==========  ==========  ==========






                          VALUEVISION MEDIA, INC.
                             AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS
              (In thousands except share and per share data)


                                                  October 31,  January 31,
                                                      2009         2009
                                                  -----------  -----------
                                                  (Unaudited)

                      ASSETS
Current assets:
   Cash and cash equivalents                      $    22,014  $    53,845
   Restricted cash                                     10,461        1,589
   Accounts receivable, net                            54,577       51,310
   Inventories                                         61,005       51,057
   Prepaid expenses and other                           4,759        3,668
                                                  -----------  -----------
     Total current assets                             152,816      161,469

Long term investments                                       -       15,728
Property and equipment, net                            29,816       31,723
FCC broadcasting license                               23,111       23,111
NBC Trademark License Agreement, net                    4,961        7,381
Other Assets                                            1,991        2,088
                                                  -----------  -----------
                                                  $   212,695  $   241,500
                                                  ===========  ===========

          LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Accounts payable                               $    69,596  $    64,615
   Accrued liabilities                                 28,977       30,657
   Deferred revenue                                       728          716
                                                  -----------  -----------
     Total current liabilities                         99,301       95,988

Deferred revenue                                        1,334        1,849
Long Term Obligations                                   1,897            -
Accrued Dividends - Series B Preferred Stock            3,355            -
Series B Mandatorily Redeemable Preferred Stock        11,075            -
   $.01 par value, 4,929,266 shares authorized;
    4,929,266 shares issued and outstanding
                                                  -----------  -----------
     Total liabilities                                116,962       97,837

Commitments and Contingencies

Series A Redeemable Convertible Preferred Stock,            -       44,191
   $.01 par value, 5,339,500 shares authorized
Shareholders' equity:
   Common stock, $.01 par value, 100,000,000
    shares authorized; 32,336,402 and 33,690,266
    shares issued and outstanding                         323          337
   Warrants to purchase 6,029,487 and 29,487
    shares of common stock                                671          138
   Additional paid-in capital                         315,287      286,380
   Accumulated deficit                               (220,548)    (187,383)
                                                  -----------  -----------
     Total shareholders' equity                        95,733       99,472
                                                  -----------  -----------
                                                  $   212,695  $   241,500
                                                  ===========  ===========






                          VALUEVISION MEDIA, INC.
                             AND SUBSIDIARIES

            Reconciliation of EBITDA, as adjusted, to Net Loss:



                              For the Three Month     For the Nine Month
                                Periods Ended           Periods Ended
                            ----------------------  ----------------------
                           October 31, November 1,  October 31, November 1,
                               2009        2008        2009        2008
                            ----------  ----------  ----------  ----------


EBITDA, as adjusted (000's) $   (5,630) $  (13,283) $  (18,152) $  (36,343)
Less:
     Gain (loss) on sale of
      investments                    -        (969)      3,628        (969)
     Restructuring costs          (126)       (175)       (715)       (505)
     CEO transition costs       (1,567)     (1,883)     (1,867)     (2,713)
     Non-cash share-based
      compensation                (741)       (967)     (2,530)     (2,997)
                            ----------  ----------  ----------  ----------
EBITDA (as defined) (a)         (8,064)    (17,277)    (19,636)    (43,527)
                            ----------  ----------  ----------  ----------


A reconciliation of EBITDA
 to net loss is as follows:

EBITDA, as defined              (8,064)    (17,277)    (19,636)    (43,527)
Adjustments:
Depreciation and
 amortization                   (3,507)     (4,246)    (10,723)    (12,811)
Interest income                      2         745         365       2,331
Interest expense                (1,350)          -      (3,328)          -
Income taxes                         -           -         157         (33)
                            ----------  ----------  ----------  ----------
     Net loss               $  (12,919) $  (20,778) $  (33,165) $  (54,040)
                            ==========  ==========  ==========  ==========

(a) EBITDA as defined for this statistical presentation represents 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 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
when given.  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
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.


Contact Information

  • Contact:
    ShopNBC
    Media Relations
    Anthony Giombetti
    612-308-1190