SOURCE: ShopNBC

ShopNBC

November 16, 2011 08:03 ET

ValueVision Q3 Net Sales Rose 2% to $135M and Adjusted EBITDA Loss of $0.5M

MINNEAPOLIS, MN--(Marketwire - Nov 16, 2011) -

Q3 '11 Highlights:

  • Net sales increased 2% to $135M
  • Gross profit rose 6.8% to $50M
  • Gross margin rose 160 basis points to 37.2%
  • Internet sales penetration rose 360 basis points to 44.1%
  • Average homes rose 5% to 80.7M

ValueVision Media, Inc. (NASDAQ: VVTV), a multichannel electronic retailer operating as ShopNBC (www.shopnbc.com), today announced operating results for its fiscal third quarter and nine months ended October 29, 2011, having previewed Q3 results earlier this month. ValueVision will host an investor conference call and webcast today at 11am ET, details below.

SUMMARY RESULTS AND KEY OPERATING METRICS
($ Millions, except average price points)
Three months ended Nine months ended
10/29/2011 10/30/2010 10/29/2011 10/30/2010
Q3 '11 Q3 '10 Change YTD YTD Change
Net Sales $ 135.2 $ 132.3 2.2 % $ 410.9 $ 383.4 7.2 %
Gross Profit $ 50.2 $ 47.0 6.8 % $ 154.9 $ 139.9 10.7 %
EBITDA, as adjusted $ (0.5 ) $ 0.6 $ (1.1 ) $ 3.7 $ (5.7 ) $ 9.4
Loss Before Debt Extinguishment $ (6.3 ) $ (5.8 ) $ (0.5 ) $ (14.1 ) $ (24.5 ) $ 10.4
Debt Extinguishment* $ - $ - $ - $ (25.7 ) $ - n/a
Net Loss $ (6.3 ) $ (5.8 ) $ (0.5 ) $ (39.7 ) $ (24.5 ) $ (15.3 )
Homes (Average 000s) 80,728 76,768 5.2 % 79,366 76,032 4.4 %
Net Shipped Units (000s) 1,188 1,317 -9.8 % 3,480 3,590 -3.1 %
Average Price Point $ 105 $ 93 12.9 % $ 108 $ 99 9.1 %
Return Rate % 24.6 % 20.8 % +380 bps 22.8 % 20.2 % +260 bps
Gross Margin % 37.2 % 35.6 % +160 bps 37.7 % 36.5 % +120 bps
Internet Sales as a % of Total Sales 44.1 % 40.5 % +360 bps 45.0 % 39.8 % +520 bps
*Debt Extinguishment expense was a one-time, non-cash charge attributed to early redemption of the GE Series B Preferred Stock in F11 Q1

ValueVision CEO Keith Stewart, commented, "As previously reported, lower than expected Q3 net sales and adjusted EBITDA is a disappointing setback in our progress toward rebuilding the business. Third quarter sales were principally impacted by a sales shortfall of 20% in consumer electronics along with a greater than anticipated decline of 13% in sales of watches, which off-set double-digit sales gains and strong margins in our jewelry, home, health and beauty and fashion and accessories categories."

Mr. Stewart added, "We are focused on improving the consumer electronics business with specific action plans underway. This includes recruiting new talent and expanding its merchandising team as well as improving product and brand assortment. The number of new vendors across our other categories continues to grow, as our multichannel retail business presents an attractive sales platform to expand their business and brand visibility. We expect to further reinforce that trend with additional prominent brands, such as Brooks Brothers and Hartmann luggage, that will delight the customer and further differentiate ShopNBC."

ValueVision reported an Adjusted EBITDA loss of $0.5 million on lower than anticipated sales. In addition, Adjusted EBITDA was impacted by additional TV distribution costs related to a 5% increase in average homes and improved channel position in certain markets. It is important to note that investments in distribution help drive increased customer penetration and can take several quarters before they become fully productive.

ValueVision EVP & CFO William McGrath stated, "Our balance sheet remains solid with cash and cash equivalents, including restricted cash, of $32.7 million in Q3 '11 versus $42.5 million in Q2 '11. The decrease in cash reflects planned increases in inventories in advance of the holiday season, continued use of ValuePay as a cost-effective promotional tool, and normal IT-related investments in capital expenditures."

Conference Call / Webcast Today, Wednesday, November 16 at 11am ET:

Webcast/Replay: http://www.media-server.com/m/p/d86zj5dm
Telephone: 866-510-0705; Passcode: 57151307

Adjusted EBITDA
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 debt extinguishment, non-operating gains (losses); non-cash impairment charges and write-downs; restructuring; 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), net 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. The company has included a reconciliation of Adjusted EBITDA to net loss, its most directly comparable GAAP financial measure, in this release.

About ValueVision Media/ShopNBC
ValueVision Media, Inc. operates ShopNBC, a multichannel electronic retailer that enables customers to interact and shop via TV, Internet, mobile devices, Facebook, Twitter and YouTube. The ShopNBC television network reaches over 80 million cable and satellite homes, in addition to live nationwide streaming at www.shopnbc.com and iPhone and Android devices. ShopNBC merchandise is focused on Home & Consumer Electronics, Health & Beauty, Fashion & Accessories, and Jewelry & Watches. Net sales for the past 12 months were approximately $590 million, 45% of which was via the Internet or mobile. Please visit the company's investor relations website at www.shopnbc.com/ir for this and other company information.

Forward-Looking Information
This release contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements contained herein that are not statements of historical fact may be deemed forward-looking statements. 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 preferences, 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 company's ability to successfully execute the rebuilding strategy; the ability to achieve the most effective product category mixes to maximize sales and margin objectives; 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; working capital levels; the ability of the company to successfully manage the ValuePay program; 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, and to successfully manage key vendor 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. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this announcement. 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 29, January 29,
2011 2011
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 27,742 $ 46,471
Restricted cash and investments 4,961 4,961
Accounts receivable, net 87,520 90,183
Inventories 55,681 39,800
Prepaid expenses and other 4,787 3,942
Total current assets 180,691 185,357
Property and equipment, net 28,700 25,775
FCC broadcasting license 23,111 23,111
NBC Trademark License Agreement, net 2,256 928
Other Assets 2,778 3,188
$ 237,536 $ 238,359
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 56,201 $ 58,310
Accrued liabilities 47,198 43,405
Current portion of accrued dividends - 1,355
Deferred revenue 606 728
Total current liabilities 104,005 103,798
Deferred revenue - 425
Long Term Payable - 4,894
Term Loan 25,000 25,000
Accrued Dividends - Series B Preferred Stock - 6,491
Series B Mandatorily Redeemable Preferred Stock $.01 par value; 0 and 4,929,266 shares issued and outstanding - 14,599
Total liabilities 129,005 155,207
Commitments and Contingencies
Shareholders' equity:
Common stock, $.01 par value, 100,000,000 shares authorized; 48,472,205 and 37,781,688 shares issued and outstanding 485 378
Warrants to purchase 6,014,744 shares of common stock 602 602
Additional paid-in capital 402,429 337,421
Accumulated deficit (294,985 ) (255,249 )
Total shareholders' equity 108,531 83,152
$ 237,536 $ 238,359

VALUEVISION MEDIA, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
For the Three Month Periods Ended For the Nine Month Periods Ended
October 29, October 30, October 29, October 30,
2011 2010 2011 2010
Net sales 135,187 $ 132,283 $ 410,857 $ 383,437
Cost of sales 84,945 85,234 255,955 243,495
Gross profit 50,242 47,049 154,902 139,942
Margin % 37.2 % 35.6 % 37.7 % 36.5 %
Operating expense:
Distribution and selling 47,577 42,752 140,366 133,815
General and administrative 4,824 4,445 14,796 14,007
Depreciation and amortization 3,210 2,997 9,278 10,215
Restructuring costs - 451 - 877
Total operating expense 55,611 50,645 164,440 158,914
Operating loss (5,369 ) (3,596 ) (9,538 ) (18,972 )
Other income (expense):
Interest income 17 - 61 51
Interest expense (982 ) (2,203 ) (4,528 ) (6,148 )
Debt extinguishment - - (25,679 ) -
Total other expense (965 ) (2,203 ) (30,146 ) (6,097 )
Loss before income taxes (6,334 ) (5,799 ) (39,684 ) (25,069 )
Income tax (provision) benefit (16 ) (15 ) (52 ) 591
Net loss $ (6,350 ) $ (5,814 ) $ (39,736 ) $ (24,478 )
Net loss per common share $ (0.13 ) $ (0.18 ) $ (0.87 ) $ (0.75 )
Net loss per common share
---assuming dilution $ (0.13 ) $ (0.18 ) $ (0.87 ) $ (0.75 )
Weighted average number of common shares outstanding:
Basic 48,472,205 32,781,462 45,752,867 32,721,377
Diluted 48,472,205 32,781,462 45,752,867 32,721,377

VALUEVISION MEDIA, INC.
AND SUBSIDIARIES
Reconciliation of Adjusted EBITDA to Net Loss:
For the Three Month Periods Ended For the Nine Month Periods Ended
October 29, October 30, October 29, October 30,
2011 2010 2011 2010
Adjusted EBITDA (000's) $ (537 ) $ 578 $ 3,677 $ (5,656 )
Less:
Debt extinguishment - - (25,679 ) -
Restructuring costs - (451 ) - (877 )
Non-cash share-based compensation (1,561 ) (616 ) (3,737 ) (2,114 )
EBITDA (as defined) (a) (2,098 ) (489 ) (25,739 ) (8,647 )
A reconciliation of EBITDA to net loss is as follows:
EBITDA (as defined) (a) (2,098 ) (489 ) (25,739 ) (8,647 )
Adjustments:
Depreciation and amortization (3,271 ) (3,107 ) (9,478 ) (10,325 )
Interest income 17 - 61 51
Interest expense (982 ) (2,203 ) (4,528 ) (6,148 )
Income taxes (16 ) (15 ) (52 ) 591
Net loss $ (6,350 ) $ (5,814 ) $ (39,736 ) $ (24,478 )

(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 Adjusted EBITDA as EBITDA excluding debt extinguishment, non-operating gains (losses); non-cash impairment charges and writedowns, restructuring costs; and non-cash share-based compensation expense.

Management has included the term Adjusted EBITDA 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 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), net 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. Adjusted EBITDA may not be comparable to similarly entitled measures reported by other companies.

Contact Information

  • Contact:
    Investor / Media Relations:
    Anthony Giombetti
    ValueVision Media, Inc.
    agiombetti@shopnbc.com
    (612) 308-1190

    Investors:
    Norberto Aja, David Collins, Jennifer Neuman
    Jaffoni & Collins
    vvtv@jcir.com
    (212) 835-8500