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ValueVision Media Announces 5% Revenue Growth in the First Quarter
Cost Reduction Plan Underway
$25 Million Stock Buyback Authorized
MINNEAPOLIS, May 21 /PRNewswire-FirstCall/ -- ValueVision Media, Inc.
(Nasdaq: VVTV) today announced results for the first quarter ended May 5,
2007.
First Quarter Performance
ValueVision's first quarter revenues were $188 million, an increase of
5% over last year. First quarter EBITDA (defined below) was a loss of
($1.4) million, excluding stock option expense, versus EBITDA of $1.9
million in the same quarter last year. The gain on the sale of
ValueVision's 12.5% equity stake in Polo.com was $40.2 million in the
quarter, which is not included in the above EBITDA. Net income for the
quarter was $34.4 million compared to a net loss of ($2.1) million for the
same quarter last year.
"Our sales growth slowed to less than 10% for the first time in several
quarters," said William J. Lansing, President and Chief Executive Officer
of ValueVision Media, Inc. "The quarter had a strong start, but slowed in
the last six weeks, driven by across-the-board softness in consumer demand.
With the high fixed-cost nature of our business, we were unable to reduce
spending quickly enough to ensure EBITDA profitability for the quarter. Our
focus is to grow this business profitably and we have taken steps to reduce
our cost base and simplify our operations."
"Despite the first quarter financial results, we are pleased that many
of our initiatives continued to accelerate this quarter," Lansing
continued. "Sales through our ShopNBC.com website increased 28% in the
first quarter and now represent 28% of total merchandise sales. Continued
growth in our search and affiliate programs drove these results."
First Quarter Events
Polo.com. The Company reached an agreement with Polo Ralph Lauren Corp.
to sell our 12.5% equity stake in Ralph Lauren Media, LLC (Polo.com) for
cash proceeds of $43.75 million. The gain on the sale of this non-strategic
asset was $40.2 million.
ShopNBC License Agreement. The Company and NBC Universal came to an
agreement to extend the ShopNBC brand license through May 2011.
Vendor relationship. During the first quarter, one of our major
electronics vendors, Viscom Technology Group, informed us of their decision
to discontinue operations. We are working with them on an orderly wind-down
of their business. We continue to grow our overall electronics business
with other vendors and new product offerings. We also expect to retain
relationships with key manufacturers that Viscom previously represented.
Outlook for Fiscal 2007
"In light of our first quarter results, we have taken decisive steps to
improve the financial performance of our company and maximize long-term
shareholder value," continued Lansing. "We are restructuring our business
operations to improve profitability and we have authorized an incremental
$25 million stock buyback to improve return on capital."
Restructuring Impact
The Company has initiated a restructuring of its operations that
includes a 12% reduction in the salaried workforce, a consolidation of our
distribution operations into a single warehouse facility, the closure of
our two outlet stores and other cost saving and margin-enhancing measures.
The Company expects these changes to generate on-going, annualized savings
of over $10 million. These reductions, which were announced today at the
company's Eden Prairie headquarters, are being implemented immediately.
ValueVision expects to incur restructuring charges of $2 - $3 million
during fiscal 2007 as a result of the actions announced today.
$25 Million Stock Buyback
ValueVision is also announcing today the authorization of a $25 million
stock buyback program. The program permits the Company to buy back up to
$25 million of common stock over the next 12 months. The timing and amount
of any repurchase will be determined by Company management based on its
evaluation of market conditions and other factors. The buyback will be
funded through existing cash balances.
"This buyback program reflects our belief in the positive long-term
trends of our Company and our industry," said Mr. Lansing. "This will
enable us to repurchase shares at attractive prices while still preserving
a strong balance sheet."
Financial Guidance
At this time we are adjusting our fiscal 2007 guidance. Annual sales
are projected to grow in the 6% - 8% range. EBITDA is expected to be $15 to
$20 million, excluding the impact of the one-time restructuring charge,
stock option expense and equity income from Ralph Lauren Media, LLC
(Polo.com). This is comparable to last year's EBITDA of $14.3 million on
the same basis.
Conference Call Information
Management has scheduled a conference call at 11:00 a.m. EDT/10:00 a.m.
CDT on Tuesday, May 22, 2007 to discuss first quarter results.
To participate in the conference call, please dial 1-888-469-0883 (Pass
code: VALUEVISION) five to ten minutes prior to call time. If you are
unable to participate live, a replay will be available for 30 days after
the conference call. To access the replay, please dial 1-866-395-4250.
You also may participate via live audio stream by logging on to
https://e-meetings.mci.com.
To access the audio stream, please use conference number 7192187 with
pass code 'VALUEVISION'. A rebroadcast of the audio stream will be
available using the same access information for 30 days after the initial
broadcast.
To be placed on the Company's e-mail notification list for press
releases, SEC filings, certain analytical information, and/or upcoming
events, please go to http://www.valuevisionmedia.com and click on "Investor
Relations." Click on "E-mail Alerts" and complete the requested
information.
EBITDA Defined
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.
Management views EBITDA as an important alternative operating performance
measure because it is commonly used by analysts and institutional investors
in analyzing the financial performance of companies in the broadcast and
television home shopping sectors. However, 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. EBITDA, as presented, may not be comparable to similarly
entitled measures reported by other companies. Management uses EBITDA to
evaluate operating performance and as a measure of performance for
incentive compensation purposes and as a way to evaluate its core business
operations. Management has excluded non-cash stock option expense and
earnings and gains from non-operating investments from its EBITDA
presentation in order to maintain comparability of previously issued
financial guidance of its ongoing core business operations.
About ValueVision Media, Inc
Founded in 1990, ValueVision Media is an integrated direct marketing
company that sells general merchandise directly to consumers through
television, the Internet, and direct mail. It operates ShopNBC, one of the
top three television shopping networks in the United States. For more
information, please visit http://www.valuevisionmedia.com or
http://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.
VALUE VISION MEDIA, INC.
Key Performance Metrics*
(Unaudited)
Q1
For the three months ending
5/5/2007 5/6/2006 %
Program Distribution
Cable FTEs 40,379 38,329 5%
Satellite FTEs 27,136 25,211 8%
Total FTEs (Average 000s) 67,515 63,540 6%
Net Sales per FTE (Annualized) $10.98 $11.10 -1%
Active Customers - 12 month rolling 850,700 804,044 6%
% New Customers - 12 month rolling 53% 56%
% Retained - 12 month rolling 47% 44%
Customer Penetration - 12 month
rolling 1.3% 1.3%
Product Mix
Jewelry 40% 45%
Watches, Apparel and Health & Beauty 23% 22%
Home & All Other 37% 33%
Shipped Units (000s) 1,149 1,291 -11%
Average Price Point - shipped units $225 $193 17%
*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 Periods Ended
May 5, May 6,
2007 2006
Net sales $188,109 $178,724
Cost of sales 121,996 115,522
(exclusive of depreciation and
amortization shown below)
Operating expense:
Distribution and selling 60,460 54,909
General and administrative 7,495 6,806
Depreciation and amortization 5,586 5,376
Asset impairments and write offs - 29
Total operating expense 73,541 67,120
Operating loss (7,428) (3,918)
Other income:
Gain on sale of investments 40,240 -
Other income - 350
Interest income 1,240 946
Total other income 41,480 1,296
Income (loss) before income taxes
and equity in net income of affiliates 34,052 (2,622)
Equity in income of affiliates 609 546
Income tax provision (281) (15)
Net income (loss) 34,380 (2,091)
Accretion of redeemable
preferred stock (72) (72)
Net income (loss) available to
common shareholders $34,308 $(2,163)
Net income (loss) per common share $0.80 $0.06
Net income (loss) per common share
-- assuming dilution $0.80 $0.06
Weighted average number of common
shares outstanding:
Basic 37,599,124 37,679,102
Diluted 42,938,684 37,679,102
VALUEVISION MEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share data)
May 5, February 3,
2007 2007
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $60,564 $41,496
Short-term investments 55,447 29,798
Accounts receivable, net 109,081 117,169
Inventories 72,456 66,622
Prepaid expenses and other 5,443 5,360
Total current assets 302,991 260,445
Property and equipment, net 37,816 40,107
FCC broadcasting license 31,943 31,943
NBC Trademark License Agreement, net 13,028 12,234
Cable distribution and marketing
agreement, net 1,535 1,759
Other assets 1,119 5,492
$388,432 $351,980
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $61,707 $57,196
Accrued liabilities 46,433 47,709
Deferred revenue 468 369
Total current liabilities 108,608 105,274
Other long-term obligations - 2,553
Deferred revenue 2,030 1,699
Series A Redeemable Convertible
Preferred Stock, $.01 par value,
5,339,500 shares authorized;
5,339,500 shares issued
and outstanding 43,680 43,607
Shareholders' equity:
Common stock, $.01 par value,
100,000,000 shares authorized;
37,628,342 and 37,593,768 shares
issued and outstanding 376 376
Warrants to purchase 4,036,858
shares of common stock 22,972 22,972
Additional paid-in capital 288,428 287,541
Accumulated deficit (77,662) (112,042)
Total shareholders' equity 234,114 198,847
$388,432 $351,980
VALUEVISION MEDIA, INC.
Reconciliation of EBITDA to net income (loss):
First Quarter First Quarter
5-May-07 6-May-06
EBITDA, before non-cash stock option
expense (000's) $(1,383) $1,858
Less: non-cash stock option expense (459) (400)
EBITDA (as defined) (a) (1,842) 1,458
A reconciliation of EBITDA to net
income (loss) is as follows:
EBITDA, as defined (1,842) 1,458
Adjustments:
Depreciation and amortization (5,586) (5,376)
Interest income 1,240 946
Income taxes (281) (15)
Gain on sale of RLM 40,240 -
Equity in income of RLM and other
investment income 609 896
Net income (loss) $34,380 $(2,091)
(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.
Management views EBITDA as an important alternative operating
performance measure because it is commonly used by analysts and
institutional investors in analyzing the financial performance of
companies in the broadcast and television home shopping sectors.
However, EBITDA should not be construed as an alternative to operating
income 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. EBITDA, as presented, may
not be comparable to similarly entitled measures reported by other
companies. Management uses EBITDA to evaluate operating performance
and as a measure of performance for incentive compensation purposes
and as a way to evaluate its core business operations.
Management has excluded non-cash stock option expense and earnings and
gains form its non-operating investments from its EBITDA presentation
in order to maintain comparability to our analyst's coverage and
guidance of our ongoing core business operations.