SOURCE: ShopNBC

November 18, 2008 16:18 ET

ShopNBC Announces Third Quarter Fiscal 2008 Financial Results

MINNEAPOLIS, MN--(Marketwire - November 18, 2008) - ShopNBC (NASDAQ: VVTV), a 24-hour TV shopping network, today announced financial results for its third fiscal quarter ended November 1, 2008.

Third Quarter Results

Third quarter revenues were $124.8 million, a 32% decrease from the same period last year. EBITDA, as adjusted, was ($13.3) million compared to approximately $1 million in the year-ago period. Net loss for the third quarter was ($20.8) million compared to a net loss of ($5.7) million for the same quarter last year.

"Revenues in the third quarter were disappointing," said John Buck, ShopNBC's Chairman and CEO. "While certainly it's been a tough economy with consumer confidence at historic lows, we take full responsibility for our sales performance. We are in a transition period at the Company and working hard to improve the fundamentals of this business for long-term sustained growth. The Board and management recognize the challenges facing this business, and we are taking decisive action by working on three strategic initiatives on parallel paths to increase shareholder value."

The Company stated these initiatives include:

--  Sharp focus on the Company's balance sheet through tight control of
    expenses and working capital resulting in a cash and securities balance
    which stands at $81 million, an improvement of approximately $2 million
    over the previous quarter.
--  Executing key operational efficiencies and initiatives to improve the
    fundamentals of ShopNBC's multi-channel, electronic retailing business
    model.
--  Actively exploring strategic alternatives to enhance shareholder value
    by a Special Committee of Independent Directors of the Company's Board. An
    update for this initiative will be provided on tomorrow's investor call by
    Special Committee Chairman George Vandeman.
    

Third Quarter Highlights

--  The Company continued control of operating expenses, which decreased year-
    over-year by 12% in the quarter.
--  Increased gross margins from 33.7% in Q2 to 34.5% in the third quarter
    while return rates decreased from 31.5% in Q2 to 29.2%, respectively. The
    Company will continue to work with its vendors to improve gross margins.
--  Realigned merchandising, broadcast operations, sales and product
    planning, calendar and events, and e-commerce teams for improved
    operational efficiencies and customer centricity.
--  Continued to aggressively negotiate with its cable and satellite
    providers in the quarter. The Company's priority is to achieve a
    significant reduction in its distribution costs next year.
    

Business Outlook

"In this difficult retail environment, we are highly focused on managing the business thoughtfully yet decisively by protecting our balance sheet for the long term," said Buck. "At the same time, we are working on improving the fundamentals of our business and exploring a full range of strategic alternatives. Given the changes being implemented at the Company and the volatile economic conditions, we will not be providing guidance at this time."

Conference Call Information

The Company has scheduled its conference call for 11 a.m. EST / 10 a.m. CST on Wednesday, November 19, 2008, to discuss the results for the fiscal third quarter. To participate in the conference call, please dial 1-888-455-9646 (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 1-866-470-4775 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 1742627 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) and equity in income of Ralph Lauren Media, LLC; non-recurring 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 70 million homes in the United States via cable affiliates and satellite: DISH Network channel 228 and 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.

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)



                              Q3                           YTD
                  For the three months ending   For the nine months ending
                  ----------  ----------  ---  ----------  ----------  ---
                  11/1/2008   11/3/2007    %   11/1/2008   11/3/2007    %
                  ----------  ----------  ---  ----------  ----------  ---
Program Distribution
   Cable FTEs         43,326      41,726    4%     42,886      41,156    4%
   Satellite FTEs     28,846      27,687    4%     28,632      27,421    4%
                  ----------  ----------  ---  ----------  ----------  ---
Total FTEs
 (Average 000s)       72,172      69,413    4%     71,518      68,577    4%

Net Sales per FTE
 (Annualized)     $     6.92  $    10.46  -34% $     7.85  $    10.77  -27%

Product Mix
   Jewelry                33%         38%              39%         39%
   Apparel, Fashion
    Accessories and
    Health & Beauty       12%         10%              10%          9%
   Computers &
    Electronics           25%         25%              20%         24%
   Watches, Coins
    & Collectibles        21%         16%              23%         16%
   Home & All Other        9%         11%               8%         12%

Shipped Units
 (000s)                  782       1,069  -27%      2,655       3,350  -21%

Average Price Point
 - shipped units  $      212  $      240  -12% $      223  $      233   -4%
                  ----------  ----------  ---  ----------  ----------  ---


*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
                            ----------  ----------  ----------  ----------
                             November    November    November    November
                                1,          3,          1,          3,
                               2008        2007        2008        2007
                            ----------  ----------  ----------  ----------
 Net sales                  $  124,769  $  184,821  $  422,984  $  563,543
 Cost of sales                  81,694     119,837     282,072     365,124
  (exclusive of
  depreciation
  and amortization shown
  below)

 Operating expense:
  Distribution and selling      51,743      59,126     162,653     179,619
  General and
   administrative                5,582       5,423      17,599      19,128
  Depreciation and
   amortization                  4,246       4,734      12,811      15,581
  Restructuring costs              175       1,061         505       3,104
  CEO transition costs           1,883       2,096       2,713       2,096
                            ----------  ----------  ----------  ----------
   Total operating expense      63,629      72,440     196,281     219,528
                            ----------  ----------  ----------  ----------
 Operating loss                (20,554)     (7,456)    (55,369)    (21,109)
                            ----------  ----------  ----------  ----------
 Other income (loss):
  Other loss                      (969)          -        (969)       (119)
  Interest income                  745       1,728       2,331       4,543
                            ----------  ----------  ----------  ----------
   Total other income             (224)      1,728       1,362       4,424
                            ----------  ----------  ----------  ----------
 Loss before income taxes
  and equity in net income
  of affiliates                (20,778)     (5,728)    (54,007)    (16,685)
 Gain on sale of RLM
  investment                         -           -           -      40,240
 Equity in income of
  affiliates                         -           -           -         609
 Income tax provision                -           -         (33)       (921)
                            ----------  ----------  ----------  ----------

 Net income (loss)             (20,778)     (5,728)    (54,040)     23,243
 Accretion of redeemable
  preferred stock                  (73)        (73)       (219)       (218)
                            ----------  ----------  ----------  ----------
 Net income (loss)
  available to common
  shareholders              $  (20,851) $   (5,801) $  (54,259) $   23,025
                            ==========  ==========  ==========  ==========

 Net income (loss) per
  common share              $    (0.62) $    (0.16) $    (1.62) $     0.54
                            ==========  ==========  ==========  ==========

 Net income (loss) per
  common share
  ---assuming dilution      $    (0.62) $    (0.16) $    (1.62) $     0.54
                            ==========  ==========  ==========  ==========

 Weighted average number of
  common shares outstanding:
    Basic                   33,590,834  36,330,800  33,580,955  42,438,322
                            ==========  ==========  ==========  ==========
    Diluted                 33,590,834  36,330,800  33,580,955  42,458,720
                            ==========  ==========  ==========  ==========



                          VALUEVISION MEDIA, INC.
                             AND SUBSIDIARIES
                        Consolidated Balance Sheets
              (In thousands except share and per share data)



                                                November 1,   February 2,
                                                   2008          2008
                                                ------------  ------------
                                                (Unaudited)

ASSETS
Current assets:
   Cash and cash equivalents                    $     56,444  $     25,605
   Short-term investments                              4,975        33,473
   Accounts receivable, net                           43,178       109,489
   Inventories                                        70,513        79,444
   Prepaid expenses and other                          5,198         4,172
                                                ------------  ------------
     Total current assets                            180,308       252,183

Long term investments                                 20,487        26,306
Property and equipment, net                           33,532        36,627
FCC broadcasting license                              31,943        31,943
NBC Trademark License Agreement, net                   8,188        10,608
Cable distribution and marketing agreement, net          329           872
Other assets                                             567           541
                                                ------------  ------------
                                                $    275,354  $    359,080
                                                ============  ============

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Accounts payable                             $     58,391  $     73,093
   Accrued liabilities                                34,073        44,609
   Deferred revenue                                      705           648
                                                ------------  ------------
     Total current liabilities                        93,169       118,350

Deferred revenue                                       1,997         2,322

Series A Redeemable Convertible Preferred
 Stock, $.01 par value, 5,339,500 shares
 authorized; 5,339,500 shares issued and
 outstanding                                          44,117        43,898

Shareholders' equity:
   Common stock, $.01 par value, 100,000,000
    shares authorized; 33,590,834 and
    34,070,422 shares issued and outstanding            336           341
   Warrants to purchase 2,036,858 shares of
    common stock                                      12,041        12,041
   Additional paid-in capital                        273,638       274,172
   Accumulated other comprehensive losses             (6,314)       (2,454)
   Accumulated deficit                              (143,630)      (89,590)
                                                ------------  ------------
     Total shareholders' equity                      136,071       194,510
                                                ------------  ------------
                                                $    275,354  $    359,080
                                                ============  ============



                          VALUEVISION MEDIA, INC.
                             AND SUBSIDIARIES

       Reconciliation of EBITDA, as adjusted, to Net Income (Loss):



                                                    Nine-Month  Nine-Month
                              Third       Third       Period      Period
                              Quarter     Quarter     Ended       Ended
                             1-Nov-08    3-Nov-07    1-Nov-08    3-Nov-07
                            ----------  ----------  ----------  ----------


EBITDA, as adjusted (000s) $  (13,283) $      947  $  (36,343) $    1,461
Less:
     Non-operating gains
      (losses) and equity
      in income of RLM            (969)          -        (969)     40,730
     Restructuring costs          (175)     (1,061)       (505)     (3,104)
     CEO transition costs       (1,883)     (2,096)     (2,713)     (2,096)
     Non-cash share-based
      compensation                (967)       (512)     (2,997)     (1,789)
                            ----------  ----------  ----------  ----------
EBITDA (as defined) (a)        (17,277)     (2,722)    (43,527)     35,202
                            ----------  ----------  ----------  ----------


A reconciliation of EBITDA
 to net income (loss) is as
 follows:

EBITDA, as defined             (17,277)     (2,722)    (43,527)     35,202
Adjustments:
Depreciation and
 amortization                   (4,246)     (4,734)    (12,811)    (15,581)
Interest income                    745       1,728       2,331       4,543
Income taxes                         -           -         (33)       (921)
                            ----------  ----------  ----------  ----------
     Net income (loss)      $  (20,778) $   (5,728) $  (54,040) $   23,243
                            ==========  ==========  ==========  ==========

(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) and equity in income of Ralph Lauren Media, LLC; non-recurring 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