SOURCE: ShopNBC

ShopNBC

August 19, 2009 06:00 ET

ShopNBC Announces Second Quarter Fiscal 2009 Financial Results

MINNEAPOLIS, MN--(Marketwire - August 19, 2009) - ShopNBC (NASDAQ: VVTV), the premium lifestyle brand in electronic retailing, today announced financial results for its second fiscal quarter ended August 1, 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.

Second Quarter Results

Second quarter revenues were $119.3 million, a 16% decrease from the same period last year, driven primarily by the intended reduction of the company's average selling price. EBITDA, as adjusted, was a loss of ($5.7) million compared to an EBITDA, as adjusted, loss of ($10.7) million in the year-ago period. Net loss for the second quarter was ($8.2) million compared to a net loss of ($15.7) million for the same quarter last year.

Second Quarter Highlights

The company noted several key improvements in the quarter:

Leadership. The Board of Directors unanimously appointed TV shopping and retail veteran Randy Ronning as Chairman of the Board, and selected direct response veteran Edwin Garrubbo as a Director. The company also strengthened its senior management team during the quarter with the appointment of industry veteran Carol Steinberg as Senior Vice President of E-Commerce.

Suzanne Somers. Renowned TV personality, successful entrepreneur, and national best-selling author of 19 books joined the ShopNBC network. Launching September 18, 2009, Suzanne Somers will bring the full range of her product line and loyal fan base to ShopNBC's on-air, online and print platforms, which will span the categories of home, jewelry, fashion & accessories, food, vitamin supplements, and beauty & personal care.

Customers. Customer trends continued to improve with new and active customers up by 59% and 32%, respectively, in the second 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 18% in the quarter.

Merchandising. Gross profit margin increased to 34.8% vs. 31.5% in the previous quarter. Improved margins were driven by a higher percentage of merchandise sold at full margin and a leaner mix of electronics. The company intends to improve gross margins throughout the second half of the year, as the company increases its number of higher margin reorders and expands its merchandise assortment in higher margin categories.

--  Net average selling price was lowered to $112 during the quarter vs.
    $194 in the year-ago quarter.
--  A record 106 new vendors were added to ShopNBC's new and existing
    merchandise categories of home, fashion, beauty and jewelry. The company
    launched a record 60 new show titles, product categories and brands in the
    quarter, such as Intelligent Nutrients organic beauty, Thomas Kinkade
    paintings, cosmeceutical pioneer Janson Beckett, Encanto footwear, and a
    new show series "Discovering Gourmet Foods." Additionally, a record 32 new
    guest experts were added to the network's talent ranks, including TV
    shopping veteran Dave King, gem expert Paul Deasy, and fashion expert
    Khaliah Ali, to mention a few.
--  Successful sales events and key items wins: "Founders Day" with sales
    of $7.5 million; "Must Watch" with sales of $5 million, which included a
    finale at midnight with $500,000 in sales in 20 minutes of 1,200 Invicta
    Reserve Men's Lupah Watches; "Mid-Year Clearance" with sales of $14 million
    and over 1,000 sell-outs; a Toshiba 17" Notebook Package w/HP All-in-One
    Printer with sales of $2.1 million; and an Invicta Men's Subaqua Noma III
    Swiss Quartz Chronograph Watch with sales of $1.9 million.
--  Net units in the quarter increased a record 40% as lower price points
    and new merchandise drove increased customer activity. Net unit successes
    include a record 10,200 Grand Suites 600TC Embroidered Egyptian Cotton
    Sheet Sets in June; a new record of 14,400 Grand Suites 800TC Egyptian
    Cotton Solid Sateen Sheet Sets in July; 6,500 Sterling Silver 8-9mm Colored
    Freshwater Cultured Pearl Earrings; and 5,900 TomTom ONE-S 3rd Edition
    portable GPS car navigation systems.
    

Monetized Illiquid Auction Rate Securities. ShopNBC monetized its portfolio of illiquid auction rate securities for $19.4 million in cash. The company's auction rate securities portfolio had a carrying value of $15.7 million and the sale resulted in a non-operating gain of $3.7 million.

Cash and Securities Balance. Second quarter cash and securities balance ended at $36.3 million, including $8.5 million of restricted cash. This cash and securities balance is a decrease of $18.1 million vs. the prior quarter driven by the EBITDA loss of ($5.7) million and $13.5 million of working capital spend. The company did not repurchase any shares in the quarter.

Operating Expenses. Operating expenses decreased $12 million year-over-year or 19% 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, reduced online marketing spend, and a significant decline in transactional costs in the areas of order capture, customer service and fulfillment.

ShopNBC.com. The company's Internet business is attracting new and returning customers at an increasing rate as online product assortment expands. Year-to-date conversion is up 36%. Use of live chat for sales assistance and enhanced email retention programs allowed for stronger visitor engagement, customer education, and overall site penetration. Going forward, the company will optimize ShopNBC.com with the next phase of its mobile strategy, expand its social networking initiatives, and improve its natural search presence in key merchandise categories.

"The second quarter was another solid foundation building period for the company in its turnaround," said Keith Stewart, ShopNBC's President and CEO. "We have the right leadership team in place. We are buying the right merchandise and building up our reorder business. With improved inventory levels, higher margins and lower price points, positive business metrics continued to take form. The customer is responding to our new merchandise strategy and to our new expert guests, all of which can be seen in the positive trends in new and active customer counts."

Added Stewart: "These are the critical building blocks being laid, and they are very good signs for this business. I am highly encouraged about the progress made during the first half of the year. Year-to-date EBITDA, as adjusted, is $10.5 million better than last year. These steps are a necessary precursor to improved sales and profits."

Conference Call Information

The company has scheduled its conference call for 11 a.m. EDT / 10 a.m. CDT on Wednesday, August 19, 2009, to discuss the results for the fiscal second quarter. To participate in the conference call, please dial 1-800-369-2172 (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 1-800-297-0782 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 8457395 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) 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 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 73 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 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)


                               Q2                         YTD

                  For the three months ending   For the six months ending
                 8/1/2009 8/2/2008        %   8/1/2009 8/2/2008        %
                  -------  -------  ---------  -------  -------  ---------
Program
 Distribution
  Cable FTEs       43,885   42,988          2%  43,836   42,673          3%
  Satellite FTEs   29,524   28,676          3%  29,348   28,528          3%
                  -------  -------  ---------  -------  -------  ---------
Total FTEs
 (Average 000s)    73,410   71,664          2%  73,183   71,201          3%

Net Sales per FTE
 (Annualized)     $  6.50  $  7.92        -18% $  6.92  $  8.32        -17%

Customer Counts
 Year-to-Date
New               102,421   64,436         59% 215,448  135,027         60%
Active            351,057  265,323         32% 557,456  431,643         29%

Product Mix
  Jewelry              28%      39%                 24%      41%
  Apparel,
   Fashion
   Accessories,
   Health &
   Beauty              12%       9%                 11%      10%
  Computers &
   Electronics         16%      18%                 23%      17%
  Watches, Coins
   & Collectibles      33%      26%                 33%      23%
  Home & All
   Other               11%       8%                  9%       9%

Net Units (000s)      980      701         40%   1,832    1,475         24%

Average Price
 Point - net
 units            $   112  $   194        -42% $   127  $   195        -35%

Return Rate          21.8%    31.5%  -9.7 ppt     21.7%    34.0% -12.3 ppt
                  -------  -------  ---------  -------  -------  ---------

*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 Six Month
                                Periods Ended           Periods Ended
                            ----------------------  ----------------------
                            August 1,   August 2,   August 1,   August 2,
                               2009        2008        2009        2008
                            ----------  ----------  ----------  ----------
Net sales                   $  119,345  $  141,927  $  253,147  $  298,215
Cost of sales                   77,785      94,046     169,398     200,378
  (exclusive of
   depreciation
   and amortization shown
   below)

Operating expense:
  Distribution and selling      43,885      53,827      89,124     110,910
  General and
   administrative                4,309       5,682       8,936      12,017
  Depreciation and
   amortization                  3,427       4,246       7,216       8,565
  Restructuring costs              485           -         589         330
  CEO transition costs             223         553         300         830
                            ----------  ----------  ----------  ----------
    Total operating expense     52,329      64,308     106,165     132,652
                            ----------  ----------  ----------  ----------
Operating loss                 (10,769)    (16,427)    (22,416)    (34,815)
                            ----------  ----------  ----------  ----------

Other income (expense):
  Interest income                  146         761         363       1,586
  Interest expense (Series
   B Preferred Stock)           (1,235)          -      (1,978)          -
  Gain on sale of
   investments                   3,628           -       3,628           -
                            ----------  ----------  ----------  ----------
    Total other income
     (expense)                   2,539         761       2,013       1,586
                            ----------  ----------  ----------  ----------
Loss before income taxes        (8,230)    (15,666)    (20,403)    (33,229)
Income tax (provision)
 benefit                            (5)        (18)        157         (33)
                            ----------  ----------  ----------  ----------

Net loss                        (8,235)    (15,684)    (20,246)    (33,262)
Excess of preferred stock
 carrying value
 over redemption value               -           -      27,362           -
Accretion of redeemable
 Series A preferred stock            -         (73)        (62)       (146)
                            ----------  ----------  ----------  ----------
Net income (loss)
 available to
 common shareholders        $   (8,235) $  (15,757) $    7,054  $  (33,408)
                            ==========  ==========  ==========  ==========

Net income (loss) per
 common share               $    (0.26) $    (0.47) $     0.22  $    (0.99)
                            ==========  ==========  ==========  ==========

Net income (loss) per
 common share
 ---assuming dilution       $    (0.26) $    (0.47) $     0.21  $    (0.99)
                            ==========  ==========  ==========  ==========

Weighted average number of
 common shares outstanding:
    Basic                   32,272,841  33,574,131  32,688,289  33,576,015
                            ==========  ==========  ==========  ==========
    Diluted                 32,272,841  33,574,131  33,391,279  33,576,015
                            ==========  ==========  ==========  ==========




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


                                                   August 1,   January 31,
                                                      2009         2009
                                                  -----------  -----------
                                                  (Unaudited)

                         ASSETS
Current assets:
  Cash and cash equivalents                       $    27,869  $    53,845
  Restricted cash                                       8,461        1,589
  Accounts receivable, net                             56,770       51,310
  Inventories                                          48,834       51,057
  Prepaid expenses and other                            4,942        3,668
                                                  -----------  -----------
    Total current assets                              146,876      161,469
Long term investments                                       -       15,728
Property and equipment, net                            29,998       31,723
FCC broadcasting license                               23,111       23,111
NBC Trademark License Agreement, net                    5,768        7,381
Other Assets                                              491        2,088
                                                  -----------  -----------
                                                  $   206,244  $   241,500
                                                  ===========  ===========

          LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                $    46,232  $    64,615
  Accrued liabilities                                  36,785       30,657
  Deferred revenue                                        725          716
                                                  -----------  -----------
    Total current liabilities                          83,742       95,988

Deferred revenue                                        1,510        1,849
Accrued Dividends (Series B Preferred Stock)            2,067            -
Series B Mandatorily Redeemable Preferred Stock        11,013            -
 $.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;
   32,317,620 and 33,690,266 shares issued and
   outstanding                                            323          337
  Warrants to purchase 6,029,487 shares of
   common stock                                           671          138
  Additional paid-in capital                          314,547      286,380
  Accumulated deficit                                (207,629)    (187,383)
                                                  -----------  -----------
    Total shareholders' equity                        107,912       99,472
                                                  -----------  -----------
                                                  $   206,244  $   241,500
                                                  ===========  ===========




                          VALUEVISION MEDIA, INC.
                             AND SUBSIDIARIES

            Reconciliation of EBITDA, as adjusted, to Net Loss:


                                                      Six-Month  Six-Month
                                  Second     Second     Period     Period
                                 Quarter    Quarter     Ended      Ended
                                1-Aug-09   2-Aug-08   1-Aug-09   2-Aug-08
                                ---------  ---------  ---------  ---------


EBITDA, as adjusted (000's)     $  (5,733) $ (10,666) $ (12,521) $ (23,059)
Less:
     Gain on sale of
      investments                   3,628          -      3,628          -
     Restructuring costs             (485)         -       (589)      (330)
     CEO transition costs            (223)      (553)      (300)      (830)
     Non-cash share-based
      compensation                   (901)      (962)    (1,790)    (2,031)
                                ---------  ---------  ---------  ---------
EBITDA (as defined) (a)            (3,714)   (12,181)   (11,572)   (26,250)
                                ---------  ---------  ---------  ---------


A reconciliation of EBITDA to
 net loss is as follows:

EBITDA, as defined                 (3,714)   (12,181)   (11,572)   (26,250)
Adjustments:
Depreciation and amortization      (3,427)    (4,246)    (7,216)    (8,565)
Interest income                       146        761        363      1,586
Interest expense                   (1,235)         -     (1,978)         -
Income taxes                           (5)       (18)       157        (33)
                                ---------  ---------  ---------  ---------
     Net loss                   $  (8,235) $ (15,684) $ (20,246) $ (33,262)
                                =========  =========  =========  =========

(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.

Contact Information

  • Contacts:
    Frank Elsenbast
    Chief Financial Officer
    952-943-6262

    Anthony Giombetti
    Media Relations
    612-308-1190