HSN, Inc. Reports First Quarter 2011 Results
For the First Quarter 2011:
HSNi net sales increased 6% with e-commerce sales up 13% HSNi Adjusted EBITDA improved 11% to $57.3 million Adjusted EPS increased 14% to $0.41
ST. PETERSBURG, Fla., May 4, 2011 (GLOBE NEWSWIRE) -- HSN, Inc. (Nasdaq:HSNI) reported results for the first quarter ended March 31, 2011 for HSN, Inc. ("HSNi") and its two operating segments, HSN and Cornerstone.
Table 1 听 听 听
SUMMARY RESULTS AND KEY OPERATING METRICS (a)
($ in millions, except per share and average price point amounts)
听 听 听 听
听 听 听 听
听 听Q1 2011听 听Q1 2010听 听Change听
听 听 听 听
Net Sales 听$听724.0 听$听683.2 6%
Non-GAAP: 听 听 听
Adjusted EBITDA 听$听57.3 听$听51.8 11%
Adjusted Net Income听 听$听24.4 听$听21.5 14%
Adjusted EPS 听$听0.41 听$听0.36 14%
GAAP: 听 听 听
Operating Income 听$听41.3 听$听37.5 10%
Net Income听 听$听20.3 听$听17.7 15%
Diluted EPS听 听$听0.34 听$听0.30 13%
听 听 听 听
HSNi: 听 听 听
Average price point 听$听62.43 听$听59.79 4%
Units shipped (millions) 听13.2 听12.7 4%
Gross profit margin 35.1% 34.6% 50 bps
Return rate听 19.2% 17.4% (180 bps)
E-commerce net sales % (b) 40.0% 37.6% 240 bps听
听 听 听 听
(a) Segment results for HSNi's two operating segments, HSN and Cornerstone, are presented separately in Tables 2 and 3 of this release.
(b) E-commerce net sales as a percent of total HSNi net sales.
听 听 听 听
See reconciliation of Non-GAAP to GAAP measures in Table 4.
听
First Quarter 2011 Results vs First Quarter 2010 Results
HSNi's net sales grew 6% over the prior year to $724.0 million.听HSN's net sales increased 1% to $526.2 million which included 7% sales growth at HSN.com.听Cornerstone's net sales increased 20% to $197.8 million with e-commerce sales growth of 23%. 听 HSNi's Adjusted EBITDA increased 11% to $57.3 million compared to $51.8 million in the prior year.听These results were driven by a 6% increase in net sales and a 50 basis point increase in gross profit margin, partially offset by a 6% increase in operating expenses, excluding non-cash charges.听Operating income increased 10% to $41.3 million compared to $37.5 million in the prior year.听听听 听 Adjusted EPS increased 14% to $0.41 compared to $0.36 in the prior year.听GAAP diluted EPS increased 13% to $0.34 compared to $0.30 in the prior year.听听
"Our focus on maximizing performance through innovative product launches and events, strategic partnerships and increased digital efforts led to HSNi sales growth of 6%, e-commerce sales penetration of 40% and an Adjusted EPS gain of 14%," said Mindy Grossman, CEO of HSN, Inc.听"We are committed to positioning our business for long-term success by delivering on our strategy of offering unique products and experiences, deepening customer engagement and accelerating e-commerce growth across the portfolio."
Table 2 听 听 听
SEGMENT RESULTS
($ in millions)
听 听 听 听
听 Three Months Ended
听 March 31,
听 2011 2010 Change
Net Sales 听 听 听
HSN听 听$听526.2 听$518.9 1%
Cornerstone听 听197.8 听164.3 20%
Total HSNi 听$听724.0 听$683.2 6%
听 听 听 听
Gross Profit听 听 听 听
HSN 听$听177.2 听$171.6 3%
Cornerstone 听76.8 听64.9 18%
Total HSNi听 听$听254.0 听$236.5 7%
听 听 听 听
Adjusted EBITDA (Non-GAAP measure) 听 听 听
HSN听 听$听52.2 听$听50.3 4%
Cornerstone听 听5.1 听1.5 244%
Total HSNi 听$听57.3 听$听51.8 11%
听 听 听 听
Operating Income (Loss) 听 听 听
HSN听 听$听40.8 听$听39.3 4%
Cornerstone听 听0.5 听(1.8) 129%
Total HSNi 听$听41.3 听$听37.5 10%
听 听 听 听
See reconciliation of non-GAAP to GAAP measures in Table 4. 听 听 听
听
Table 3 听 听 听
SEGMENT KEY OPERATING METRICS
听 听 听 听
听 Three Months Ended
听 March 31,
听 2011 2010 听Change听
HSN: 听 听 听
Average price point 听$听61.85 听$听59.36 4%
Units shipped (millions) 听9.9 听9.9 1%
Gross profit margin 33.7% 33.1% 60 bps
Return rate听 20.7% 18.2% (250 bps)
E-commerce net sales % (a) 33.2% 31.6% 160 bps
Cornerstone: 听 听 听
Average price point 听$听64.20 听$听61.28 5%
Units shipped (millions) 听3.2 听2.8 15%
Gross profit margin 38.8% 39.5% (70 bps)
Return rate听 14.9% 14.7% (20 bps)
E-commerce net sales % (a) 57.9% 56.6% 130 bps
Catalog circulation (millions) 听66.1 听58.7 13%
听 听 听 听
(a) E-commerce net sales as a percent of segment net sales.
HSN Segment Results for the First Quarter 2011
HSN's net sales increased 1% to $526.2 million following strong comparable sales growth the prior year of 9%.听The sales growth was driven by electronics and fashion, partially offset by lower sales in fitness and housewares.听HSN.com sales increased 7% over the prior year's increase of 15% and represent 33.2% of HSN's net sales, up from 31.6% in the prior year.听Average price point and units shipped increased 4% and 1%, respectively. 听The return rate increased 250 basis points primarily due to higher than anticipated returns of certain electronics sold in the fourth quarter of 2010 and changes in product mix.
Gross profit increased 3% to $177.2 million.听Gross profit margin improved 60 basis points to 33.7% from 33.1%.听The increase was primarily attributable to decreased shipping costs due to a new outbound shipping contract.听听听听听
Adjusted EBITDA increased 4% to $52.2 million compared to $50.3 million in the prior year. 听The increase was due to the 3% increase in gross profit, partially offset by a 3% increase in operating expenses, excluding non-cash charges.听Operating income was $40.8 million compared to $39.3 million in the prior year.
Cornerstone Segment Results for the First Quarter 2011
Net sales for Cornerstone increased 20% to $197.8 million due to strength at Cornerstone's three largest brands, Frontgate, Ballard Designs and Garnet Hill; as well as investment in catalog circulation and digital marketing.听E-commerce sales penetration increased 130 basis points to 57.9%.
Gross profit increased 18% to $76.8 million.听Gross profit margin declined 70 basis points to 38.8% from 39.5% in the prior year.听The margin decline was primarily attributable to increased promotional activity to drive additional demand and higher inbound freight costs, partially offset by leverage over fixed warehousing costs and the favorable impact of a new outbound shipping contract.听听听听听
Adjusted EBITDA increased to $5.1 million from $1.5 million.听The increase was primarily due to the growth in net sales, partially offset by the decline in the gross profit margin and an increase in selling and marketing costs, particularly catalog production and distribution costs.听Operating income was $0.5 million compared to an operating loss of $1.8 million in the prior year.
Liquidity and Capital Resources
As of March 31, 2011, HSNi had cash and cash equivalents of $344.2 million, down from $354.3 million at December 31, 2010.听Net cash used in operating activities in the quarter ended March 31, 2011 was $8.3 million compared to $10.0 million in the prior year.听
OTHER INFORMATION
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
This press release may contain forward-looking statements relating to the future performance of HSNi, its operating segments and its consolidated subsidiaries that are based on current expectations, forecasts and assumptions. These statements relate to expectations concerning matters that are not historical fact.听These forward-looking statements are based largely on information currently available to our management and on our current expectations, assumptions, plans, estimates, judgments and projections about our business and our industry, and such statements involve inherent risks and uncertainties.听Although we believe our expectations are based on reasonable estimates and assumptions, they are not guarantees of performance and there are a number of known and unknown risks, uncertainties, contingencies and other factors (many of which are outside our control) that could cause actual results to differ materially from those expressed or implied by such forward-looking statements.听Factors that could cause or contribute to such differences include but are not limited to:听the continued impact of the current macroeconomic environment on consumer confidence and spending levels; whether national economic stimulus initiatives and measures to improve the economy will be successful in achieving their objectives within the expected timeframes; other changes in political, business and economic conditions, particularly those that affect consumer confidence, consumer spending or e-commerce growth; changes in our relationships with pay television operators, vendors, manufacturers and other third parties; changes in product delivery costs, particularly if we are unable to offset them; our ability to offer new or alternative products and services in a cost effective manner and consumer acceptance of these products and services; any technological or regulatory developments that could negatively impact the way we do business, including regulations regarding state and local sales and use taxes; HSNi's business prospects and strategy, including whether HSNi's initiatives will be effective; and the loss of any key member of our senior management team. 听More information about potential factors that could affect HSNi's business and financial results is included in our filings with the U.S. Securities and Exchange Commission ("SEC"). 听Other unknown or unpredictable factors that could also adversely affect HSNi's business, financial condition and results of operations may arise from time to time. 听In light of these risks and uncertainties, any forward-looking statements may not prove to be accurate.听All written or oral forward-looking statements that are made or attributable to us are expressly qualified in their entirety by this cautionary notice.听Accordingly, you should not place undue reliance on any forward-looking statements, which only reflect the views of HSNi management as of the date of this press release.听Such statements speak only to the date such statements are made and HSNi does not undertake to update any forward-looking statements.听Historical results should not be considered as an indication of future performance.
Conference Call
Mindy Grossman, Chief Executive Officer, and Judy Schmeling, Executive Vice President and Chief Financial Officer, will hold a conference call on May 4, 2011 at 9:00 a.m., Eastern Time, to discuss these results.听Those interested in participating in the conference call should dial 877-307-0246 or 224-357-2394 at least five minutes prior to the call.听There will also be a simultaneous audio webcast available via HSNi's website at .听
A replay of the conference call can be accessed until Wednesday, May 18, 2011, by dialing 800-642-1687 or 706-645-9291, plus the passcode 59499214 and will also be hosted on HSNi's website for a limited time.听
jvid视频 HSN, Inc.
HSN, Inc. (Nasdaq:HSNI) is a $3 billion interactive multi-channel retailer with strong direct-to-consumer expertise among its two operating segments, HSN and Cornerstone. HSNi offers innovative, differentiated retail experiences on TV, online, via mobile devices, in catalogs, and in brick and mortar stores. HSN, a leading interactive multi-channel retailer which offers a curated assortment of exclusive products combined with top brand names, now reaches approximately 96 million homes (24 hours a day, seven days a week, live 364 days a year). HSN.com is a top 10 trafficked e-commerce site that offers a differentiated e-commerce experience by leveraging content, community and commerce. In addition to its existing media platforms, HSN is the industry leader in transactional innovation, including services such as HSN Shop by Remote庐, the only service of its kind in the U.S., the HSN Shopping App for mobile handheld devices and HSN on Demand庐. Cornerstone comprises leading home and apparel lifestyle brands including 听Ballard Designs庐, Frontgate庐, Garnet Hill庐, Improvements庐, Smith + Noble庐, The Territory Ahead庐 and TravelSmith庐. Cornerstone distributes more than 275 million catalogs annually, operates seven separate e-commerce sites and operates 18 retail and outlet stores.听
The HSN, Inc. logo is available at
GAAP FINANCIAL STATEMENTS
HSN, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in thousands except per share amounts)
听 听 听
听 Three Months Ended
听 March 31,
听 2011 2010
听 听 听
Net sales听 听$听723,982 听$听683,213
Cost of sales听 听470,028 听446,729
Gross profit 听253,954 听236,484
Operating expenses:听 听 听
Selling and marketing 听129,817 听120,499
General and administrative 听58,160 听54,439
Production and programming 听15,283 听14,100
Depreciation and amortization听 听9,404 听9,951
Total operating expenses 听212,664 听198,989
Operating income 听41,290 听37,495
Interest expense, net 听(7,959) 听(8,309)
Income before income taxes 听33,331 听29,186
Income tax provision 听(13,050) 听(11,533)
Net income 听$听20,281 听$听17,653
听 听 听
Net income per share: 听 听
Basic 听$听0.35 听$听0.31
Diluted听 听$听0.34 听$听0.30
听 听 听
Shares used in computing earnings per share: 听
Basic 听58,214 听56,800
Diluted听 听60,338 听59,045
HSN, INC. CONSOLIDATED BALANCE SHEETS 听 听 听
(unaudited; in thousands) 听 听 听
听 March 31, December 31, March 31,
听 2011 2010 2010
ASSETS 听 听 听
Current assets: 听 听 听
Cash and cash equivalents 听$听344,187 听$听354,259 听$听261,080
Accounts receivable, net 听160,700 听195,748 听143,449
Inventories 听307,790 听296,390 听271,773
Deferred income taxes 听27,465 听28,801 听22,059
Prepaid expenses and other current assets 听51,411 听42,443 听42,231
Total current assets 听891,553 听917,641 听740,592
Property and equipment, net 听150,567 听154,987 听152,045
Intangible assets, net 听260,482 听260,623 听261,045
Other non-current assets 听10,872 听12,492 听16,686
TOTAL ASSETS 听$听1,313,474 听$听1,345,743 听$听1,170,368
LIABILITIES AND SHAREHOLDERS' EQUITY 听 听 听
Current liabilities: 听 听 听
Accounts payable, trade 听$听204,916 听$听244,301 听$听听听听听 186,462
Current maturities of long-term debt 听11,640 听5,820 听6,349
Accrued expenses and other current liabilities 听195,886 听216,114 听181,843
Total current liabilities 听412,442 听466,235 听374,654
Long-term debt, net of current maturities 听297,166 听302,938 听327,660
Deferred income taxes 听77,470 听80,203 听77,934
Other long-term liabilities 听21,271 听19,904 听14,912
Total liabilities 听808,349 听869,280 听795,160
听 听 听 听
TOTAL SHAREHOLDERS' EQUITY 听505,125 听476,463 听375,208
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 听$听1,313,474 听$听1,345,743 听$听1,170,368
听
HSN, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS 听 听
(unaudited; in thousands) 听 听
听 Three Months Ended
听 March 31,
听 2011 2010
听 听 听
Cash flows from operating activities: 听 听
Net income 听$听20,281 听$听17,653
Adjustments to reconcile net income to net cash used in operating activities: 听 听
Depreciation and amortization 听9,404 听9,951
Stock-based compensation expense听 听6,327 听4,343
Amortization of cable and satellite distribution fees 听839 听840
Amortization of debt issuance costs 听642 听643
Loss on disposition of fixed assets 听258 听3
Deferred income taxes 听(1,397) 听1,422
Bad debt expense 听5,093 听听听听听 4,882
Excess tax benefits from stock-based awards 听(3,511) 听(468)
Changes in current assets and liabilities:听 听 听
Accounts receivable 听30,044 听33,669
Inventories 听(11,400) 听(10,300)
Prepaid expenses and other current assets 听(8,781) 听3,963
Accounts payable, accrued expenses and other current liabilities 听(56,106) 听(76,610)
Net cash used in operating activities 听(8,307) 听(10,009)
Cash flows from investing activities: 听 听
Capital expenditures 听(5,218) 听(4,907)
Net cash used in investing activities 听(5,218) 听(4,907)
Cash flows from financing activities: 听 听
Repayment of long-term debt 听-- 听(4,762)
Issuance of common stock, net of withholding taxes听 听(58) 听10,369
Excess tax benefits from stock-based awards 听3,511 听468
Net cash provided by financing activities 听3,453 听6,075
Net decrease in cash and cash equivalents 听(10,072) 听(8,841)
Cash and cash equivalents at beginning of period 听354,259 听269,921
Cash and cash equivalents at end of period 听$344,187 听$261,080
Table 4 听 听 听 听 听 听 听
RECONCILIATIONS OF NON-GAAP TO GAAP MEASURES
HSN, INC. RECONCILIATION OF ADJUSTED EPS TO GAAP DILUTED EPS 听 听 听 听 听 听 听
(unaudited; in thousands except per share amounts) 听 听 听 听 听 听 听
听 听 听 听 听 听 听 听
听 听 听 听 听 听 Three Months Ended
听 听 听 听 听 听 March 31,
听 听 听 听 听 听 2011 2010
Adjusted EPS听 听 听 听 听 听 听$听0.41 听$听0.36
Adjusted Net Income听 听 听 听 听 听 听$听24,444 听$21,498
Stock-based compensation expense 听 听 听 听 听 听(6,327) 听(4,343)
Amortization of intangible assets 听 听 听 听 听 听(141) 听(141)
Loss on disposition of fixed assets 听 听 听 听 听 听(258) 听(3)
Impact of income taxes 听 听 听 听 听 听2,563 听642
Net Income 听 听 听 听 听 听$听20,281 听$17,653
GAAP diluted weighted average shares outstanding听 听 听 听 听 听 听60,338 听59,045
GAAP Diluted EPS 听 听 听 听 听 听$听0.34 听$听0.30
HSN, INC. RECONCILIATION OF NON-GAAP DETAILED SEGMENT RESULTS TO GAAP 听 听 听 听 听 听 听
(unaudited; in thousands) 听 听 听 听 听 听 听
听 听 听 听 听 听 听 听
听 听 Three Months Ended Three Months Ended
听 听 March 31, 2011 March 31, 2010
听 听 听HSN听 Cornerstone 听Total听 听HSN听 Cornerstone 听Total听
听 听 听 听 听 听 听 听
Adjusted EBITDA 听 听$听52,197 听$听5,082 听$听57,279 听$听50,314 听$听1,478 听$听51,792
听Stock-based compensation expense 听 听(4,176) 听(2,151) 听(6,327) 听(3,271) 听(1,072) 听(4,343)
听Depreciation and amortization 听 听(7,198) 听(2,206) 听(9,404) 听(7,746) 听(2,205) 听(9,951)
听Loss on disposition of fixed assets 听 听(54) 听(204) 听(258) 听(2) 听(1) 听(3)
Operating income 听 听$听40,769 听$听521 听41,290 听$听39,295 听$听(1,800) 听37,495
听Interest expense, net 听 听 听 听(7,959) 听 听 听(8,309)
听Income before income taxes听 听 听 听 听33,331 听 听 听29,186
听Income tax provision 听 听 听 听(13,050) 听 听 听(11,533)
Net income 听 听 听 听$听20,281 听 听 听$听17,653
SEE IMPORTANT NOTES AT END OF THIS DOCUMENT听
HSN, INC.'S PRINCIPLES OF FINANCIAL REPORTING
HSNi reports Adjusted EBITDA, Adjusted Net Income and Adjusted EPS, all of which are supplemental measures to GAAP. These measures are among the primary metrics by which we evaluate the performance of our businesses, on which our internal budgets are based and by which management is compensated. We believe that investors should have access to, and we are obligated to provide, the same set of tools that we use in analyzing our results. 听These non-GAAP measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. HSNi endeavors to compensate for the limitations of the non-GAAP measures presented by providing the comparable GAAP measures with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the non-GAAP measures. We encourage investors to examine the reconciling adjustments between the GAAP and non-GAAP measures contained in this release and which we discuss below.
Definitions of Non-GAAP Measures
Adjusted EBITDA is defined as operating income excluding, if applicable: (1)听non-cash charges including: (a) stock-based compensation expense, (b)听amortization of intangibles, (c)听depreciation and gains and losses on asset dispositions, and (d)听goodwill, long-lived asset and intangible asset impairments; (2)听pro forma adjustments for significant acquisitions; and (3)听one-time items. Adjusted EBITDA is not a measure determined in accordance with GAAP, and should not be considered a substitute for operating income, net income or any other measure determined in accordance with GAAP. Adjusted EBITDA is used as a measurement of operating efficiency and overall financial performance and HSNi believes it to be a helpful measure for those evaluating companies in the retail and media industries.听Adjusted EBITDA measures the amount of income generated each period that could be used to service debt, pay taxes and fund capital expenditures. Adjusted EBITDA should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. Adjusted EBITDA has certain limitations in that it does not take into account the impact to HSNi's statement of operations of certain expenses, including stock-based compensation, amortization of intangibles, depreciation, gains and losses on asset dispositions, asset impairment charges, acquisition-related accounting and one-time items.
Adjusted Net Income generally captures all items on the statement of operations that have been, or ultimately will be, settled in cash and is defined as net income available to common shareholders excluding, net of tax effects, if applicable: (1)听stock-based compensation expense, (2)听amortization of intangible assets, (3) gains and losses on asset dispositions, (4) goodwill, long-lived asset and intangible asset impairments, (5)听pro forma adjustments for significant acquisitions, (6)听one-time items and (7) discontinued operations.听 We believe Adjusted Net Income is useful to investors because it represents HSNi's consolidated results taking into account charges which are not allocated to the operating businesses such as interest expense and taxes, but excluding the effects of identified non-cash expenses or one-time items.
Adjusted EPS is defined as Adjusted Net Income divided by diluted weighted average shares outstanding for Adjusted EPS purposes.听 We believe Adjusted EPS is useful to investors because it represents, on a per share basis, HSNi's consolidated results, taking into account charges which are not allocated to the operating businesses such as interest expense and taxes, but excluding the effects of identified non-cash expenses or one-time items.听 Adjusted Net Income and Adjusted EPS have the same limitations as Adjusted EBITDA.听Therefore, we think it is important to evaluate these measures along with our consolidated statement of operations.
CONTACT: Felise Glantz Kissell (Analysts/Investors)
727-872-7529
felise.kissell@hsn.net
Mia Carbonell (Media)
917-673-0903
mia.carbonell@hsn.net
Image: HSN, Inc. Logo
Source: HSN, Inc.Released May 4, 2011