ShopNBC Announces Second Quarter Fiscal 2008 Financial Results
SOURCE:
ShopNBC
2008-08-22 12:05:00
MINNEAPOLIS, MN–(EMWNews – August 22, 2008) – ShopNBC (
shopping network, today announced financial results for its second fiscal
quarter ended August 2, 2008.
Second Quarter Results
Second quarter revenues were $142 million, a 26% decrease from the same
period last year. EBITDA, as adjusted, was ($10.7) million compared with
$1.8 million in the year-ago period. Net Loss for the second quarter was
($15.7) million compared with a net loss of ($5.4) million for the same
quarter last year.
“Revenues in the second quarter were very disappointing,” said John Buck,
ShopNBC’s CEO. “The Board fully recognizes these performance issues, and we
are taking decisive action to address these trends.”
Leadership Changes
As announced in a separate press release the Company issued earlier today,
ShopNBC’s Board of Directors concluded it was necessary to make
organizational leadership changes that are effective immediately. The
Board appointed John D. Buck to serve as Chief Executive Officer replacing
Rene Aiu, who joined the Company as President and CEO in March 2008 and is
leaving ShopNBC and its Board. Mr. Buck is currently Executive Chairman
and was previously ShopNBC’s Interim CEO from November 2007 to March 2008.
The Company also announced the departures of Glenn Leidahl, COO, Terry
Curtis, SVP of Customer Analytics and Sales Planning, and John Gunder, SVP
of Media & On-air Sales, who were named to their positions in April 2008.
The Board also appointed Keith R. Stewart, with 20 years of executive
retail experience, as President and Chief Operating Officer of the Company.
Buck commented, “Keith has excellent leadership skills, a deep
understanding of retail operations domestically and internationally and,
importantly, nearly 15 years of experience in home shopping as an executive
at QVC. He possesses a strong understanding of multi-channel retailing and
has a proven history of delivering growth and profitability spanning
markets in the United States and Germany.”
Second Quarter Highlights
The Company noted that in the second quarter:
-- ShopNBC.com launched several live Webcasts to aggressively reach new customers and drive incremental sales by capitalizing on its strong niche categories, such as watches and coins. -- It appointed Kris Kulesza, a retail executive with 23 years of experience and nearly a decade in home shopping, as Senior Vice President and Chief Merchant; and Jeff Lewis, a customer service executive with 25 years of leadership experience in retail and direct marketing, as Vice President of Customer Experience. -- It continued disciplined control of operating expenses, which were down year-over-year by 11% in the quarter, driven by headcount and other fixed overhead reductions. -- It maintained a strong balance sheet with over $80 million in cash and securities. -- It recently signed an extended carriage agreement with one of the top five cable providers and continues to work on preserving its cable distribution base while lowering distribution costs.
Business Outlook
“ShopNBC has undergone significant changes this past year,” said Buck. “We
greatly appreciate the support and patience of our shareholders. Despite
these challenging times, ShopNBC made progress in the second quarter in its
cable negotiations, diversifying its merchandise mix with newness, and
continued success of our e-commerce business. ShopNBC is a great company
with strong underlying assets supported by a talented and dedicated
employee base and excellent growth potential.
“We are encouraged by these signs of progress. I look forward to working
with Keith and the rest of our talented management team to improve
performance that will enable us to deliver long-term shareholder value.
Given the changes being implemented at the Company, we have decided not to
provide guidance at this time.”
Conference Call Information
The Company has re-scheduled its conference call for 11 a.m. EDT / 10 a.m.
CDT on Monday, August 25, 2008, to discuss the results for the fiscal
second quarter. To participate, please dial 1-800-857-9866 (pass code
SHOPNBC) five to ten minutes prior to the start time. A replay of the call
will be available for 30 days. To access the replay, please dial
1-866-455-0459 (pass code SHOPNBC). You may also participate via live audio
stream by logging on to https://e-meetings.verizonbusiness.com. To access
the audio stream, please use conference number 6203440 (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 direct-to-consumer, multi-media shopping destination for
little luxuries and fashion must-haves. 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 (
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.
VALUE VISION MEDIA, INC. Key Performance Metrics* (Unaudited) Q2 YTD For the three months ending For the six months ending ------------------------- ------------------------- 8/2/2008 8/4/2007 % 8/2/2008 8/4/2007 % -------- -------- ----- -------- -------- ----- Program Distribution Cable FTEs 42,988 41,446 4% 42,673 40,901 4% Satellite FTEs 28,676 27,486 4% 28,528 27,292 5% -------- -------- ----- -------- -------- ----- Total FTEs (Average 000s) 71,664 68,932 4% 71,201 68,193 4% Net Sales per FTE (Annualized) $ 7.92 $ 10.85 -27% $ 8.32 $ 10.92 -24% Product Mix Jewelry 39% 40% 41% 40% Apparel, Fashion Accessories, Health & Beauty 9% 8% 10% 8% Computers & Electronics 18% 23% 17% 23% Watches, Coins & Collectibles 26% 17% 23% 16% Home & All Other 8% 12% 9% 13% Shipped Units (000s) 870 1,132 -23% 1,874 2,281 -18% Average Price Point - shipped units $ 224 $ 233 -4% $ 226 $ 229 -1% -------- -------- ----- -------- -------- ----- *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 2, August 4, August 2, August 4, 2008 2007 2008 2007 ---------- ---------- ---------- ---------- Net sales $ 141,927 $ 190,613 $ 298,215 $ 378,722 Cost of sales 94,046 123,291 200,378 245,287 (exclusive of depreciation and amortization shown below) Operating expense: Distribution and selling 53,827 60,033 110,910 120,493 General and administrative 5,682 6,210 12,017 13,705 Depreciation and amortization 4,246 5,261 8,565 10,847 Restructuring costs - 2,043 330 2,043 CEO transition costs 553 - 830 - ---------- ---------- ---------- ---------- Total operating expense 64,308 73,547 132,652 147,088 ---------- ---------- ---------- ---------- Operating loss (16,427) (6,225) (34,815) (13,653) ---------- ---------- ---------- ---------- Other income (loss): Other loss - (119) - (119) Interest income 761 1,575 1,586 2,815 ---------- ---------- ---------- ---------- Total other income 761 1,456 1,586 2,696 ---------- ---------- ---------- ---------- Loss before income taxes and equity in net income of affiliates (15,666) (4,769) (33,229) (10,957) Gain on sale of RLM investment - - - 40,240 Equity in income of affiliates - - - 609 Income tax provision (18) (640) (33) (921) ---------- ---------- ---------- ---------- Net income (loss) (15,684) (5,409) (33,262) 28,971 Accretion of redeemable preferred stock (73) (73) (146) (145) ---------- ---------- ---------- ---------- Net income (loss) available to common shareholders $ (15,757) $ (5,482) $ (33,408) $ 28,826 ========== ========== ========== ========== Net income (loss) per common share $ (0.47) $ (0.15) $ (0.99) $ 0.67 ========== ========== ========== ========== Net income (loss) per common share ---assuming dilution $ (0.47) $ (0.15) $ (0.99) $ 0.68 ========== ========== ========== ========== Weighted average number of common shares outstanding: Basic 33,574,131 37,366,541 33,576,015 42,822,333 ========== ========== ========== ========== Diluted 33,574,131 37,366,541 33,576,015 42,846,686 ========== ========== ========== ========== VALUEVISION MEDIA, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands except share and per share data) August 2, February 2, 2008 2008 ----------- ----------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 48,829 $ 25,605 Short-term investments 10,892 33,473 Accounts receivable, net 55,730 109,489 Inventories 55,634 79,444 Prepaid expenses and other 5,646 4,172 ----------- ----------- Total current assets 176,731 252,183 Long term investments 20,487 26,306 Property and equipment, net 34,694 36,627 FCC broadcasting license 31,943 31,943 NBC Trademark License Agreement, net 8,994 10,608 Cable distribution and marketing agreement, net 502 872 Other assets 615 541 ----------- ----------- $ 273,966 $ 359,080 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 36,543 $ 73,093 Accrued liabilities 34,598 44,609 Deferred revenue 692 648 ----------- ----------- Total current liabilities 71,833 118,350 Deferred revenue 2,132 2,322 Series A Redeemable Convertible Preferred Stock, $.01 par value, 5,339,500 shares authorized; 5,339,500 shares issued and outstanding 44,045 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 272,745 274,172 Accumulated other comprehensive losses (6,314) (2,454) Accumulated deficit (122,852) (89,590) ----------- ----------- Total shareholders' equity 155,956 194,510 ----------- ----------- $ 273,966 $ 359,080 =========== =========== VALUEVISION MEDIA, INC. AND SUBSIDIARIES Reconciliation of EBITDA, as adjusted, to Net Income (Loss): Six-Month Six-Month Second Second Period Period Quarter Quarter Ended Ended 2-Aug-08 4-Aug-07 2-Aug-08 4-Aug-07 --------- --------- --------- --------- EBITDA, as adjusted (000's) $ (10,666) $ 1,764 $ (23,059) $ 515 Less: Non-operating gains (losses) and equity in income of RLM - (119) - 40,730 Restructuring costs - (2,043) (330) (2,043) CEO transition costs (553) - (830) - Non-cash share-based compensation (962) (685) (2,031) (1,278) --------- --------- --------- --------- EBITDA (as defined) (a) (12,181) (1,083) (26,250) 37,924 --------- --------- --------- --------- A reconciliation of EBITDA to net income (loss) is as follows: EBITDA, as defined (12,181) (1,083) (26,250) 37,924 Adjustments: Depreciation and amortization (4,246) (5,261) (8,565) (10,847) Interest income 761 1,575 1,586 2,815 Income taxes (18) (640) (33) (921) --------- --------- --------- --------- Net income (loss) $ (15,684) $ (5,409) $ (33,262) $ 28,971 ========= ========= ========= ========= (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.
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