SOURCE: ShopNBC

ShopNBC

May 19, 2010 09:00 ET

ShopNBC Reports Fiscal First Quarter 2010 Results

MINNEAPOLIS, MN--(Marketwire - May 19, 2010) -


--  ShopNBC adjusted EBITDA loss of ($4.3) million vs. ($6.8) million in
    the prior year
--  Gross Margin increased 510 bps to 36.6% vs. 31.5% last year
--  ShopNBC e-commerce sales penetration at 39.6%

ShopNBC (NASDAQ: VVTV), the premium lifestyle brand in multi-media retailing, today announced financial results for its fiscal first quarter ended May 1, 2010.

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

                                                         Q1
                                             For the three months ending
                                           ---------  ---------  ---------
                                           5/1/2010   5/2/2009     Change
                                           ---------  ---------  ---------
Net Sales                                  $   125.0  $   133.8       -6.6%
EBITDA, as adjusted                        $    (4.3) $    (6.8)      36.8%
Net Loss                                   $   (11.0) $   (12.0)       8.7%

Homes (Average 000s)                          75,681     72,929        3.8%
Net Shipped Units (000s)                       1,079        877       23.0%
Average Price Point                        $     108  $     144      -25.0%
Return Rate %                                   19.2%      21.7%  -250 bps
Gross Margin %                                  36.6%      31.5%   510 bps
Internet Net Sales %                            39.6%      30.1%   950 bps
New Customers - 12 month rolling             548,731    372,005       47.5%
Active Customers - 12 month rolling        1,050,599    807,603       30.1%

First Quarter 2010 Results

First quarter revenues were $125.0 million, a 6.6% decrease from the same period last year, primarily due to lower sales in Consumer Electronics. The company continued to strategically lower its net average selling price to $108 vs. $144 in the year-ago quarter, while increasing net shipped units by 23%. E-commerce sales penetration was a record 39.6% of total company sales in the quarter, up 950 basis points vs. last year.

Customer trends continued to improve with new and active customers up 48% and 30%, respectively, on a 12-month rolling basis vs. same period last year. Return rates for the quarter were 19.2% vs. 21.7% in the year-ago quarter, reflecting improvements in overall customer satisfaction and strategically lowered price points.

Gross profit increased 8.4% to $45.7 million and gross profit margin improved 510 basis points to 36.6% vs. 31.5% last year, driven by merchandise margin rate improvements in several key categories.

Adjusted EBITDA was a loss of ($4.3) million compared to an Adjusted EBITDA loss of ($6.8) million in the year-ago period, driven by improvements in gross margin.

Operating expenses in the first quarter increased slightly to $54.9 million, or 1.9%.

Net loss for the first quarter was ($11.0) million compared to a net loss of ($12.0) million for the same quarter last year.

Liquidity and Capital Resources

First quarter cash and cash equivalents balance ended at $25.9 million, including $5.0 million of restricted cash. The cash and cash equivalents balance is an increase of $3.8 million vs. the prior quarter driven by working capital. Additionally, the company entered into a 3-year revolving credit facility in November 2009 to finance working capital investment and fund other company growth initiatives. To date, the company has not drawn upon the line of credit. The company has a current availability of $20 million under the facility, of which $12 million of such availability is subject to meeting certain future financial objectives.

ShopNBC Strengthens Merchandising Organization

In the first quarter, Rod Ghormley joined as ShopNBC's Vice President of Home. Previously, Mr. Ghormley served as Senior Vice President and General Merchandise Manager for ShopKo's home division, and he held executive merchandise positions at Amazon, QVC, and Foley's Department Stores. The company also appointed Scott Garozzo as ShopNBC's Director of Jewelry. Previously, Mr. Garozzo served as Senior Vice President of Merchandising & Product Development at SHR & Simmons Jewelry Company. Prior to that, he held merchandising positions in the jewelry category at QVC and Lord & Taylor.

"We continued to make progress in the first quarter across the many leading indicators that drive our business," said Keith Stewart, CEO of ShopNBC. "Our gross profit margin improved by 510 basis points to 36.6%. Our e-commerce penetration continued to perform at industry-leading levels, up 950 basis points to 39.6%. Disciplined execution in merchandising and financial planning remained in focus, reflecting well-controlled inventories, working capital management and tight expense controls, as we offered the customer a continuous flow of new and exciting merchandise."

Added Mr. Stewart: "Looking ahead, we expect our customer activity and leading indicators to continue trending positively. While sales in the business segment of Consumer Electronics were soft in the quarter, we have clearly defined strategies in place to ensure this business improves. We remain excited about our multi-channel offerings and go-forward plans to drive the top line and deliver sustained, profitable growth."

Conference Call Information

The company has scheduled its conference call for 11 a.m. ET / 10 a.m. CT on Wednesday, May 19, 2010, to discuss the results for the fiscal first quarter 2010. To participate in the conference call, please dial 1-800-369-2063 (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 1-800-925-1214 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 7807468 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.

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 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)


                                                    May 1,     January 30,
                                                     2010         2010
                                                  -----------  -----------
                                                  (Unaudited)

                                   ASSETS
Current assets:
   Cash and cash equivalents                      $    20,932  $    17,000
   Restricted cash and investments                      4,961        5,060
   Accounts receivable, net                            52,901       68,891
   Inventories                                         42,690       44,077
   Prepaid expenses and other                           4,198        4,333
                                                  -----------  -----------
     Total current assets                             125,682      139,361
Property and equipment, net                            27,339       28,342
FCC broadcasting license                               23,111       23,111
NBC Trademark License Agreement, net                    3,348        4,154
Other Assets                                            1,056        1,246
                                                  -----------  -----------
                                                  $   180,536  $   196,214
                                                  ===========  ===========

                    LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Accounts payable                               $    43,251  $    58,777
   Accrued liabilities                                 39,890       26,487
   Deferred revenue                                       728          728
                                                  -----------  -----------
     Total current liabilities                         83,869       85,992

Deferred revenue                                          970        1,153
Long Term Payable                                           -        4,841
Accrued Dividends - Series B Preferred Stock            6,047        4,681
Series B Mandatorily Redeemable Preferred Stock        11,531       11,243
 $.01 par value, 4,929,266 shares authorized;
 4,929,266 shares issued and outstanding
                                                  -----------  -----------
     Total liabilities                                102,417      107,910

Commitments and Contingencies

Shareholders' equity:
   Common stock, $.01 par value, 100,000,000
    shares authorized; 32,686,735 and 32,672,735
    shares issued and outstanding                         327          327
   Warrants to purchase 6,022,115 shares of
    common stock                                          637          637
   Additional paid-in capital                         317,507      316,721
   Accumulated deficit                               (240,352)    (229,381)
                                                  -----------  -----------
     Total shareholders' equity                        78,119       88,304
                                                  -----------  -----------
                                                  $   180,536  $   196,214
                                                  ===========  ===========









                          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 1,           May 2,
                                               2010             2009
                                          ---------------  ---------------
 Net sales                                        124,977  $       133,802
 Cost of sales                                     79,240           91,613
   (exclusive of depreciation
   and amortization shown below)
 Operating expense:
   Distribution and selling                        46,042           45,239
   General and administrative                       4,768            4,627
   Depreciation and amortization                    3,690            3,789
   Restructuring costs                                376              104
   CEO transition costs                                 -               77
                                          ---------------  ---------------
     Total operating expense                       54,876           53,836
                                          ---------------  ---------------
 Operating loss                                    (9,139)         (11,647)
                                          ---------------  ---------------
 Other income (expense):
   Interest income                                     42              216
   Interest expense                                (1,850)            (743)
                                          ---------------  ---------------
     Total other expense                           (1,808)            (527)
                                          ---------------  ---------------
 Loss before income taxes                         (10,947)         (12,174)
 Income tax (provision) benefit                       (24)             162
                                          ---------------  ---------------

 Net loss                                         (10,971)         (12,012)
 Excess of preferred stock carrying value
  over redemption value                                 -           27,362
 Accretion of redeemable
  Series A preferred stock                              -              (62)
                                          ---------------  ---------------
 Net income (loss) available to
  common shareholders                     $       (10,971) $        15,288
                                          ===============  ===============

 Net income (loss) per common share       $         (0.34) $          0.46
                                          ===============  ===============

 Net income (loss) per common share
   ---assuming dilution                   $         (0.34) $          0.46
                                          ===============  ===============

 Weighted average number of
 common shares outstanding:
      Basic                                    32,679,504       33,103,736
                                          ===============  ===============
      Diluted                                  32,679,504       33,110,074
                                          ===============  ===============









                          VALUEVISION MEDIA, INC.
                             AND SUBSIDIARIES

            Reconciliation of EBITDA, as adjusted, to Net Loss:



                                         For the Three Month Periods Ended
                                          --------------------------------
                                              May 1,           May 2,
                                               2010             2009
                                          ---------------  ---------------


EBITDA, as adjusted (000's)               $        (4,292) $        (6,789)
Less:
     Restructuring costs                             (376)            (104)
     CEO transition costs                               -              (77)
     Non-cash share-based compensation               (781)            (888)
                                          ---------------  ---------------
EBITDA (as defined) (a)                            (5,449)          (7,858)
                                          ---------------  ---------------


A reconciliation of EBITDA to net loss is
 as follows:

EBITDA, as defined                                 (5,449)          (7,858)
Adjustments:
Depreciation and amortization                      (3,690)          (3,789)
Interest income                                        42              216
Interest expense                                   (1,850)            (743)
Income taxes                                          (24)             162
                                          ---------------  ---------------
     Net loss                             $       (10,971) $       (12,012)
                                          ===============  ===============



(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
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.

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