SOURCE: ShopNBC

ShopNBC

November 18, 2010 09:00 ET

ShopNBC Q3 Adjusted EBITDA Rose to Positive $0.6 Million From a Loss of $5.6 Million as Net Sales Increased 11% to $132 Million

MINNEAPOLIS, MN--(Marketwire - November 18, 2010) - ShopNBC (NASDAQ: VVTV)

--  Net sales increased 11% to $132 million
--  Positive adjusted EBITDA of $0.6 million vs. ($5.6) million
--  Gross Profit increased 19% to $47 million
--  E-commerce sales penetration increased 680 bps to 40.5%

ShopNBC (NASDAQ: VVTV), the premium lifestyle brand in multi-media retailing, today announced financial results for its fiscal third quarter ended October 30, 2010. The company will host a conference call and webcast to review its results today at 11:00 a.m. ET. Details provided below.

SUMMARY RESULTS AND KEY OPERATING METRICS
($ Millions, except average price points)


                           Q3                             YTD
              For the three months ending     For the nine months ending
             ------------------------------  -----------------------------
            10/30/2010  10/31/2009  Change  10/30/2010  10/31/2009  Change
             ---------  ---------  --------  ---------  ---------  -------
Net Sales    $   132.3  $   119.4      10.8% $   383.4  $   372.6      2.9%
EBITDA       $     0.6  $    (5.6)      N/A  $    (5.7) $   (18.2)    68.8%
as adjusted
Net Loss     $    (5.8) $   (12.9)     55.0% $   (24.5) $   (33.2)    26.2%

Homes           76,768     73,063       5.1%    76,032     73,097      4.0%
(Average 000s)
Net Shipped      1,317      1,186      11.0%     3,590      3,084     16.4%
Units (000s)
Average      $      93  $      95      -2.5% $      99  $     114    -13.3%
 Price

Return Rate %     20.8%      21.9%  -110 bps      20.2%      21.8% -160 bps
Gross Margin %    35.6%      33.2%   240 bps      36.5%      33.1%  340 bps
Internet Net      40.5%      33.7%   680 bps      39.8%      31.5%  830 bps
Sales %
New            562,510    486,474      15.6%       N/A        N/A
 Customers
 12 month
 rolling
Active       1,110,187    959,508      15.7%       N/A        N/A
 Customers
 12 month
 rolling

"Our experienced multi-channel team achieved another consecutive quarter of improved performance," said Keith Stewart, CEO of ShopNBC. "Sales growth of 11%, gross margin improvements, and lower transactional costs contributed to a $0.6 million adjusted EBITDA profit in the third quarter. New and active customers in the quarter continued to engage, interact and shop across our multiple channels with e-commerce sales penetration of 40.5%, up 680 basis points compared to last year. This overall progress is a validation of our continued focus and efforts to turn the company around while executing on new strategies for growth."

Mr. Stewart added: "Going forward, we will continue to focus on customer-centric strategies that will help us build on our existing base. We intend to improve operating processes and gain added efficiencies through disciplined execution and lower transactional costs. Lastly, as the year comes to a close, we anticipate entering into negotiations with several of our cable and satellite affiliates -- representing approximately 25% of our household footprint -- to further reduce distribution costs and improve our channel positioning."

"We are committed to delivering long-term sustained growth. As part of these efforts, we are launching a proactive investor relations outreach program and have recently retained a New York-based IR firm to assist us in that effort."

Third Quarter 2010 Results

Third quarter revenues rose 11% to $132.3 million vs. Q3 2009. The company continued to make progress in its strategy to drive transaction volumes through the reduction of its net average selling price, which decreased 2.5% to $93 vs. $95 in the year-ago quarter while net shipped units increased by 11%. E-commerce sales, which carry lower transaction costs, grew to 40.5% of total company sales in the quarter, from 33.7% in Q3 2009.

Customer trends continued to improve with new and active customers increasing 15.6% and 15.7%, respectively, on a 12-month rolling basis vs. Q2 2009. Return rates for the quarter declined to 20.8% vs. 21.9% in Q3 2009, reflecting improvements in overall customer satisfaction and the benefit of strategic pricing changes.

Gross profit increased 19% to $47.1 million and gross profit margin improved 240 bps to 35.6% vs. 33.2% last year, largely driven by merchandise margin rate improvements across several key categories.

Adjusted EBITDA was positive $0.6 million compared to an adjusted EBITDA loss of $5.6 million in the year-ago period, driven by increased sales, improved gross margin and lower operating expenses.

Operating expenses in the third quarter decreased approximately 1% to $50.8 million, due to lower transactional costs and the impact of prior-year itemized non-recurring expenses.

Net loss for the third quarter was reduced to ($5.8) million compared to a net loss of ($12.9) million for the same quarter last year.

Liquidity and Capital Resources

The Q3 quarter-end cash and cash equivalents balance was $20.6 million, including $5.0 million of restricted cash. The cash and cash equivalents balance declined $2.3 million from the second quarter, driven by working capital use in the quarter. On a year-to-date basis, cash and cash equivalents have decreased $1.4 million.

Additionally, the company recently announced that it entered into a $25 million term loan with a lending group led by Crystal Financial LLC. The loan has a 5-year maturity, bears a variable interest rate, which will initially be set at 11%, and will be used to finance general working capital needs. The loan replaces a previous $20 million revolving credit facility, and is secured primarily by the company's inventory and accounts receivable.

Conference Call / Webcast Information

Conference Call Dial-In: 1-800-369-2063 (pass code: 7467622; keypad: SHOPNBC)

Webcast URL: https://e-meetings.verizonbusiness.com conference number 8656218, pass code: SHOPNBC. An archived version of the webcast will be available for 30 days.

Call Replay: 1-800-867-1929 with pass code 81810, available for 30 days.

About ShopNBC

ShopNBC is a multi-media retailer operating with a premium lifestyle brand. Over 1 million customers benefit from ShopNBC as an authority and destination in the categories of home, electronics, beauty, health, fitness, fashion, jewelry and watches. As part of the company's "ShopNBC Anywhere" initiative, customers can interact and shop via cable and satellite TV in 76 million homes (DISH Network channels 134 and 228; DIRECTV channel 316); mobile devices including iPhone, BlackBerry and Droid; online at www.ShopNBC.com; live streaming at www.ShopNBC.TV; and social networking sites Facebook, Twitter and YouTube. ShopNBC is owned and operated by ValueVision Media (NASDAQ: VVTV). For more information, please visit www.ShopNBC.com/IR.

EBITDA and EBITDA, as adjusted

EBITDA represents net loss for the respective periods excluding depreciation and amortization expense, interest income (expense) and income taxes. The company defines Adjusted EBITDA as EBITDA excluding non-operating gains (losses); non-cash impairment charges and write-downs; restructuring, rebranding, and chief executive officer transition costs; and non-cash share-based compensation expense. The company has included the term "Adjusted EBITDA" in our EBITDA reconciliation in order to adequately assess the operating performance of our "core" television and internet businesses and in order to maintain comparability to our analyst's coverage and financial guidance, when given. Management believes that Adjusted EBITDA 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 Adjusted EBITDA as a metric measure to evaluate operating performance under its management and executive incentive compensation programs. Adjusted EBITDA should not be construed as an alternative to operating income (loss) or to cash flows from operating activities as determined in accordance with generally accepted accounting principles and should not be construed as a measure of liquidity. Adjusted EBITDA may not be comparable to similarly entitled measures reported by other companies.

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 and satellite distribution for the company's programming and the fees associated therewith; the success of the company's e-commerce and new sales initiatives; the success of its strategic alliances and relationships; the ability of the company to manage its operating expenses successfully; the ability of the Company to establish and maintain acceptable commercial terms with third party vendors and other third parties with whom the Company has contractual relationships; 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.
                             AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS
              (In thousands except share and per share data)


                                                  October 30,  January 30,
                                                      2010         2010
                                                  -----------  -----------
                                                  (Unaudited)

                      ASSETS
Current assets:
   Cash and cash equivalents                      $    15,674  $    17,000
   Restricted cash and investments                      4,961        5,060
   Accounts receivable, net                            57,312       68,891
   Inventories                                         51,997       44,077
   Prepaid expenses and other                           4,029        4,333
                                                  -----------  -----------
     Total current assets                             133,973      139,361
Property and equipment, net                            26,651       28,342
FCC broadcasting license                               23,111       23,111
NBC Trademark License Agreement, net                    1,734        4,154
Other Assets                                            1,386        1,246
                                                  -----------  -----------
                                                  $   186,855  $   196,214
                                                  ===========  ===========

       LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Accounts payable                               $    51,618  $    58,777
   Accrued liabilities                                 44,493       26,487
   Deferred revenue                                       728          728
                                                  -----------  -----------
     Total current liabilities                         96,839       85,992

Deferred revenue                                          607        1,153
Long Term Payable                                       1,937        4,841
Accrued Dividends - Series B Preferred Stock            8,903        4,681
Series B Mandatorily Redeemable Preferred Stock        12,531       11,243
 $.01 par value, 4,929,266 shares authorized;
 4,929,266 shares issued and outstanding
                                                  -----------  -----------
     Total liabilities                                120,817      107,910

Commitments and Contingencies

Shareholders' equity:
   Common stock, $.01 par value, 100,000,000
    shares authorized; 32,796,077 and 32,672,735
    shares issued and outstanding                         328          327
   Warrants to purchase 6,022,115 shares of
    common stock                                          637          637
   Additional paid-in capital                         318,932      316,721
   Accumulated deficit                               (253,859)    (229,381)
                                                  -----------  -----------
     Total shareholders' equity                        66,038       88,304
                                                  -----------  -----------
                                                  $   186,855  $   196,214
                                                  ===========  ===========









                          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 30,  October 31,  October 30,  October 31,
                            2010         2009         2010         2009
                        -----------  -----------  -----------  -----------
 Net sales              $   132,283  $   119,441  $   383,437  $   372,588
 Cost of sales               85,234       79,774      243,495      249,172
                        -----------  -----------  -----------  -----------
       Gross profit          47,049       39,667      139,942      123,416

 Operating expense:
   Distribution and
    selling                  42,752       41,774      133,815      130,898
   General and
    administrative            4,445        4,264       14,007       13,200
   Depreciation and
    amortization              2,997        3,507       10,215       10,723
   Restructuring costs          412          126          838          715
   Rebranding costs              39            -           39            -
   CEO transition costs           -        1,567            -        1,867
                        -----------  -----------  -----------  -----------
     Total operating
      expense                50,645       51,238      158,914      157,403
                        -----------  -----------  -----------  -----------
 Operating loss              (3,596)     (11,571)     (18,972)     (33,987)
                        -----------  -----------  -----------  -----------
 Other income
  (expense):
   Interest income                -            2           51          365
   Interest expense          (2,203)      (1,350)      (6,148)      (3,328)
   Gain on sale of
    investments                   -            -            -        3,628
                        -----------  -----------  -----------  -----------
     Total other income
      (expense)              (2,203)      (1,348)      (6,097)         665
                        -----------  -----------  -----------  -----------
 Loss before income
  taxes                      (5,799)     (12,919)     (25,069)     (33,322)
 Income tax (provision)
  benefit                       (15)           -          591          157
                        -----------  -----------  -----------  -----------

 Net loss                    (5,814)     (12,919)     (24,478)     (33,165)
 Excess of preferred
  stock carrying value
  over redemption value           -            -            -       27,362
 Accretion of
  redeemable
  Series A preferred
  stock                           -            -            -          (62)
                        -----------  -----------  -----------  -----------
 Net loss available to
  common shareholders   $    (5,814) $   (12,919) $   (24,478) $    (5,865)
                        ===========  ===========  ===========  ===========

 Net loss per common
  share                 $     (0.18) $     (0.40) $     (0.75) $     (0.18)
                        ===========  ===========  ===========  ===========

 Net loss per common
  share
  ---assuming dilution  $     (0.18) $     (0.40) $     (0.75) $     (0.18)
                        ===========  ===========  ===========  ===========

 Weighted average
  number of common
  shares outstanding:
       Basic             32,781,462   32,332,278   32,721,377   32,569,618
                        ===========  ===========  ===========  ===========
       Diluted           32,781,462   32,332,278   32,721,377   32,569,618
                        ===========  ===========  ===========  ===========










                          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 30,  October 31,  October 30,  October 31,
                            2010         2009         2010         2009
                        -----------  -----------  -----------  -----------


EBITDA, as adjusted
 (000's)                $       578  $    (5,630) $    (5,656) $   (18,152)
Less:
     Non-operating gain
      on sale of
      investments                 -            -            -        3,628
     Restructuring
      costs                    (412)        (126)        (838)        (715)
     CEO transition
      costs                       -       (1,567)           -       (1,867)
     Rebranding costs           (39)           -          (39)           -
     Non-cash
      share-based
      compensation             (616)        (741)      (2,114)      (2,530)
                        -----------  -----------  -----------  -----------
EBITDA (as defined) (a)        (489)      (8,064)      (8,647)     (19,636)
                        -----------  -----------  -----------  -----------


A reconciliation of
 EBITDA to net loss is
 as follows:

EBITDA, as defined             (489)      (8,064)      (8,647)     (19,636)
Adjustments:
Depreciation and
 amortization                (3,107)      (3,507)     (10,325)     (10,723)
Interest income                   -            2           51          365
Interest expense             (2,203)      (1,350)      (6,148)      (3,328)
Income taxes                    (15)           -          591          157
                        -----------  -----------  -----------  -----------
     Net loss           $    (5,814) $   (12,919) $   (24,478) $   (33,165)
                        ===========  ===========  ===========  ===========


(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-operating
gains (losses); non-cash impairment charges and writedowns, restructuring,
rebranding 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