HSN, Inc. Reports First Quarter 2013 Results

HSN, Inc. Reports First Quarter 2013 Results

Highlights for the First Quarter 2013:

  oNet sales increased 5%
  oDigital sales up 10% with sales penetration reaching nearly 45%
  oDiluted EPS from continuing operations increased 24% to $0.56 per share
  oRepurchased approximately 1.2 million shares of stock

ST. PETERSBURG, Fla., May 2, 2013 (GLOBE NEWSWIRE) -- HSN, Inc. (Nasdaq:HSNI)
reported results for the first quarter ended March 31, 2013 for HSN, Inc.
("HSNi" or "Company") and its two operating segments, HSN and Cornerstone.

Table 1
SUMMARY RESULTS AND KEY OPERATING METRICS (a)
($ in millions, except per share and average price point amounts)
                               
                               Q1 2013     Q1 2012     Change
                                                         
Net Sales                       $772.7      $737.9      5%
Adjusted EBITDA (Non-GAAP)      $66.8       $66.3       1%
GAAP:                                                     
Operating Income               $52.5       $51.3       2%
Income from continuing          $31.6       $27.3       16%
operations
Diluted EPS from continuing     $0.56       $0.45       24%
operations
HSNi:                                                     
Average price point             $61.04      $64.96      (6%)
Units shipped (millions)        14.6         13.0         12%
Gross margin                    36.3 %       36.2 %       10 bps
Return rate                    18.3 %       18.0 %       (30 bps)
Digital sales penetration      44.6 %       42.6 %       200 bps
                                                         
(a) HSNi's two operating segments, HSN and Cornerstone, are presented      
separately in Tables 2 and 3 of this release.
                                                         
See reconciliation of Non-GAAP to GAAP measures in Table 4.                

First Quarter 2013 Results vs First Quarter 2012 Results

  *HSNi's net sales grew 5% over the prior year to $772.7 million.HSN's net
    sales increased 2% to $550.1 million, including 4% growth in digital
    sales.Cornerstone's net sales increased 14% to $222.5 million, including
    19% growth in digital sales.
    
  *HSNi's Adjusted EBITDA increased 1% to $66.8 million.These results were
    driven by a 5% increase in net sales and a 10 basis point increase in
    gross margin, offset by a 6% increase in operating expenses (excluding
    non-cash charges).Operating income increased 2% to $52.5 million.
    
  *GAAP diluted EPS from continuing operations increased 24% to $0.56
    compared to $0.45 in the prior year.
    
  *During the first quarter, HSNi repurchased approximately 1.2 million
    shares of its common stock at a cost of $65.3 million, or an average cost
    of $53.80 per share.From inception of the share repurchase program in
    September 2011 through May 1, 2013, HSNi repurchased a total of 8.2
    million shares at a cost of $353.5 million, or an average cost of $43.03
    per share.

"I'm pleased with HSNi's first quarter performance and the progress we made in
creating a powerful and differentiated retail experience. Across HSNi, we
continue to reach and engage customers through content-rich, immersive
experiences on multiple digital platforms. These efforts contributed to sales
growth of 5% and digital sales growth of 10%," said Mindy Grossman, CEO of
HSN, Inc. "We also had EPS growth of 24% and returned value to shareholders
through our share repurchase and cash dividend programs that included
purchasing approximately 1.2 million shares during the quarter."

Table 2                                                     
SEGMENT RESULTS
($ in millions)
                                                           
                                  Three Months Ended March 31,
                                  2013          2012         Change
Net Sales                                                   
HSN (a)                            $550.1      $541.9     2%
Cornerstone                       222.5        196.0       14%
Total HSNi                         $772.7      $737.9     5%
Gross Profit                                               
HSN (a)                            $192.4      $188.4     2%
Cornerstone                        87.8         78.5        12%
Total HSNi                        $280.1      $266.9     5%
Adjusted EBITDA (Non-GAAP measure)                          
HSN (a)                            $58.9       $57.3      3%
Cornerstone                       7.9          8.9         (12%)
Total HSNi                         $66.8       $66.3      1%
Operating Income                                           
HSN (a)                            $48.6       $47.5      2%
Cornerstone                        3.9          3.8         2%
Total HSNi                         $52.5       $51.3      2%
                                                           
(a) Results for the prior period included one extra day versus the         
current period because of leap year.
                                                                          
See reconciliation of Non-GAAP to GAAP measures in Table 4.                


Table 3
SEGMENT KEY OPERATING METRICS
                                              
                              Three Months Ended
                               March 31,
                              2013     2012     Change
HSN:                                           
Average price point            $57.83 $63.28 (9%)
Units shipped (millions)       11.4    10.2    12%
Gross margin                   35.0 %  34.8 %  20 bps
Return rate                   20.0 %  19.3 %  (70 bps)
Digital sales penetration     35.7 %  34.9 %  80 bps
Cornerstone:                                   
Average price point            $71.98 $70.62 2%
Units shipped (millions)       3.2     2.9     11%
Gross margin                   39.5 %  40.1 %  (60 bps)
Return rate                   13.7 %  14.2 %  50 bps
Digital sales penetration     66.8 %  63.8 %  300 bps
Catalog circulation (millions) 75.7    68.5    11%

HSN Segment Results for the First Quarter 2013

HSN's net sales were $550.1 million, an increase of 2% from the prior
year.Digital sales grew 4% with penetration increasing 80 basis points to
35.7%. Digital sales were tempered by the launch of the digital site redesign
across all HSN digital platforms that occurred early in the quarter.In
addition, last year's results included one extra day versus the current year
because of leap year.Sales grew in apparel & accessories, beauty and home
design, offset by lower sales in jewelry and electronics. The average price
point decreased 9%, the units shipped increased 12% and the return rate
increased 70 basis points to 20.0% primarily due to changes in product mix.

Gross profit increased 2% to $192.4 million and gross margin increased 20
basis points to 35.0%.The margin was favorably impacted by the product mix
shift, partially offset by an increase in shipping and handling promotions. 

Adjusted EBITDA increased 3% to $58.9 million compared to $57.3 million in the
prior year.Operating income increased 2% to $48.6 million compared to $47.5
million in the prior year.

Cornerstone Segment Results for the First Quarter 2013

Cornerstone's net sales were $222.5 million, an increase of 14% from the prior
year.The increase in net sales was driven primarily by sales growth in the
home brands and the addition of Chasing Fireflies to the portfolio.Digital
sales grew 19% with penetration increasing 300 basis points to 66.8%.

The gross margin decreased 60 basis points to 39.5% due primarily to increased
shipping and handling promotions.Gross profit increased 12% to $87.8
million.Operating expenses increased 40 basis points to 35.9% of net sales,
primarily due to the addition of Chasing Fireflies to the portfolio.

As a result, Adjusted EBITDA decreased 12% to $7.9 million.Operating income,
which was positively impacted by a decrease in stock-based compensation
expense, increased 2% to $3.9 million.

Liquidity and Capital Resources

As of March 31, 2013, HSNi had cash and cash equivalents of $150.9 million
compared to $222.1 million at December 31, 2012. Net cash provided by
operating activities in the quarter ended March 31, 2013 was $17.3 million
compared to $20.3 million used in the prior year, an improvement of $37.5
million, primarily due to changes in working capital.

Effective May 2, 2013, HSNi's board of directors approved a quarterly cash
dividend of $0.18 per share payable June 19, 2013 to shareholders of record as
of June 5, 2013. 

During the first quarter, HSNi repurchased approximately 1.2 million shares of
its common stock at a cost of $65.3 million, or an average cost of $53.80 per
share.From inception of the share repurchase program in September 2011
through May 1, 2013, HSNi repurchased a total of 8.2 million shares at a cost
of $353.5 million, or an average cost of $43.03 per share.HSNi is authorized
to purchase up to 10 million shares under the repurchase program authorized in
September 2011.

                              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.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.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.Factors that could cause or contribute to such
differences include but are not limited to:the influence of the macroeconomic
environment and its impact on consumer confidence and spending levels; 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; any technological or regulatory developments that could
negatively impact the way we do business, including developments requiring us
to collect and remit state and local sales and use taxes; risks associated
with possible systems failures and/or security breaches, including any
security breach that results in the theft, transfer or unauthorized disclosure
of customer, employee or company information, or the failure to comply with
various laws applicable to HSNi in the event of such a breach; HSNi's business
prospects and strategy, including whether HSNi's initiatives and investments
will be effective; our ability to offer new or alternative products and
services through various platforms in a cost effective manner and consumer
acceptance of these products and services; and the loss of any key member of
our senior management team. 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. 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. In
light of these risks and uncertainties, any forward-looking statements may not
prove to be accurate.All written or oral forward-looking statements that are
made or attributable to us are expressly qualified in their entirety by this
cautionary notice.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.Such statements speak only to the date such
statements are made and HSNi does not undertake to update any forward-looking
statements.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
Thursday, May 2, 2013 at 9:00 a.m., Eastern Time, to discuss these
results.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.There
will also be a simultaneous audio webcast available via HSNi's website at
http://www.hsni.com.

A replay of the conference call can be accessed until Thursday, May 16, 2013
by dialing 800-585-8367 or 404-537-3406, plus the pass code 31601678 and will
also be hosted on the company's website for a limited time.

About HSN, Inc.

HSN, Inc. (Nasdaq:HSNI) is a $3.3 billion interactive multichannel 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 multichannel retailer which offers a curated
assortment of exclusive products combined with top brand names, now reaches 95
million homes (24 hours a day, seven days a week, live 364 days a year).
HSN.com offers a differentiated digital 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^®, the only service of its kind in the U.S., the HSN
Shopping App for mobile handheld devices and HSN on Demand^®. Cornerstone
comprises leading home and apparel lifestyle brands including Ballard
Designs^®, Chasing Fireflies^®, Frontgate^®, Garnet Hill^®, Grandin Road^®,
Improvements^® and TravelSmith^®. Cornerstone distributes more than 300
million catalogs annually, operates eight separate digital sales sites and
operates 11 retail and outlet stores.

GAAP FINANCIAL STATEMENTS
HSN, INC. CONSOLIDATED STATEMENTS OF OPERATIONS                             
(unaudited; in thousands except per share amounts)                          
                                                              
                                                    Three Months Ended
                                                     March 31,
                                                    2013       2012
                                                              
Net sales                                           $772,651 $737,908
Cost of sales                                       492,504   470,994
Gross profit                                         280,147   266,914
Operating expenses:                                           
Selling and marketing                                164,542   151,716
General and administrative                           53,135    54,973
Depreciation and amortization                       9,952     8,966
Total operating expenses                             227,629   215,655
Operating income                                     52,518    51,259
Interest expense, net                                (1,640)   (7,334)
Income from continuing operations before income      50,878    43,925
taxes
Income tax provision                                 (19,325)  (16,637)
Income from continuing operations                    31,553    27,288
Loss from discontinued operations, net of tax        (9)       (1,118)
Net income                                           $31,544  $26,170
                                                              
Income from continuing operations per share                    
Basic                                                $0.58    $0.47
Diluted                                             $0.56    $0.45
                                                              
Net income per share                                           
Basic                                                $0.58    $0.45
Diluted                                             $0.56    $0.44
                                                              
Shares used in computing earnings per share                    
Basic                                                54,787    58,310
Diluted                                             56,278    60,053
                                                              
Dividends declared per common share                  $0.18    $0.125


HSN, INC. CONSOLIDATED BALANCE SHEETS
(unaudited; in thousands)
                                                               
                                       March 31,    December 31, March 31,
                                        2013         2012         2012
ASSETS                                                          
Current assets:                                                 
Cash and cash equivalents               $150,872   $222,092   $309,232
Accounts receivable, net                185,584     249,890     173,357
Inventories                             341,627     330,936     305,197
Deferred income taxes                   28,295      27,603      23,606
Prepaid expenses and other current      52,079      46,172      50,418
assets
Total current assets                    758,457     876,693     861,810
Property and equipment, net             168,643     171,303     158,352
Intangible assets, net                  266,285     266,876     258,048
Goodwill                                9,858       9,858       --
Other non-current assets                6,724       7,222       7,572
TOTAL ASSETS                            $1,209,967 $1,331,952 $1,285,782
LIABILITIES AND SHAREHOLDERS' EQUITY                            
Current liabilities:                                            
Accounts payable, trade                 $212,786   $ 267,061    $ 202,084
Current maturities of long-term debt    12,500      9,375       --
Accrued expenses and other current      179,148     215,389     165,774
liabilities
Total current liabilities               404,434     491,825     367,858
Long-term debt, less current maturities 237,500     240,625     239,160
Deferred income taxes                   80,979      79,002      76,483
Other long-term liabilities             11,703      15,986      25,299
Total liabilities                       734,616     827,438     708,800
Total shareholders' equity              475,351     504,514     576,982
TOTAL LIABILITIES AND SHAREHOLDERS'     $1,209,967 $1,331,952 $1,285,782
EQUITY


HSN, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; in thousands)
                                                        Three Months Ended
                                                         March 31,
                                                        2013       2012
                                                                  
Cash flows from operating activities attributable to continuing operations:
Net income                                               $31,544  $26,170
Loss from discontinued operations, net of tax            (9)       (1,118)
Income from continuing operations                        31,553    27,288
Adjustments to reconcile income from continuing
operations to net cash provided by (used in) operating             
activities attributable to continuing operations:
Depreciation and amortization                            9,952     8,966
Stock-based compensation expense                        3,709     6,000
Amortization of debt issuance costs                      280       532
Loss on disposition of fixed assets                      661       44
Deferred income taxes                                    1,251     (952)
Bad debt expense                                         5,195      5,553
Excess tax benefits from stock-based awards              (3,925)   (13,297)
Other                                                    --        42
Changes in current assets and liabilities:                        
Accounts receivable                                      58,931    43,041
Inventories                                              (10,691)  (8,714)
Prepaid expenses and other assets                        (5,690)   (4,351)
Accounts payable, accrued expenses and other liabilities (73,947)  (84,408)
Net cash provided by (used in) operating activities      17,279    (20,256)
attributable to continuing operations
Cash flows from investing activities attributable to               
continuing operations:
Capital expenditures                                     (10,659)  (8,702)
Net cash used in investing activities attributable to    (10,659)  (8,702)
continuing operations
Cash flows from financing activities attributable to               
continuing operations:
Repurchase of common stock                               (62,563)  (39,139)
Cash dividends paid                                      (9,915)   (7,326)
Proceeds from issuance of common stock                  1,863     4,140
Tax withholdings related to stock-based awards           (11,142)  (11,592)
Excess tax benefits from stock-based awards              3,925     13,297
Net cash used in financing activities attributable to    (77,832)  (40,620)
continuing operations
Total cash used in continuing operations                 (71,212)  (69,578)
Cash flows from discontinued operations:                           
Net cash used in operating activities attributable to    (8)       (2,882)
discontinued operations
Net cash used in investing activities attributable to    --        (116)
discontinued operations
Total cash used in discontinued operations               (8)       (2,998)
Net decrease in cash and cash equivalents                (71,220)  (72,576)
Cash and cash equivalents at beginning of period         222,092   381,808
Cash and cash equivalents at end of period               $150,872 $309,232

                                                             
Table 4                                                       
RECONCILIATIONS OF NON-GAAP TO GAAP MEASURES
                                                             
HSN, INC. RECONCILIATION OF NON-GAAP TO GAAP DETAILED SEGMENT RESULTS
(unaudited; in thousands)                                                         
                                                             
            Three Months Ended              Three Months Ended
             March 31, 2013                  March 31, 2012
            HSN     Cornerstone Total   HSN     Cornerstone Total

Adjusted     $58,934 $7,906    $66,840 $57,322 $8,947    $66,269
EBITDA
Stock-based
compensation (2,823)  (886)      (3,709)  (3,287)  (2,713)    (6,000)
expense
Depreciation
and          (6,821)  (3,131)    (9,952)  (6,565)  (2,401)    (8,966)
amortization
Loss on
disposition  (661)    --         (661)    (13)     (31)       (44)
of fixed
assets
Operating    $48,629 $3,889    52,518   $47,457 $3,802    51,259
income
Interest                         (1,640)                      (7,334)
expense, net
Income from
continuing
operations                       50,878                       43,925
before
income taxes
Income tax                       (19,325)                     (16,637)
provision
Income from
continuing                       31,553                       27,288
operations
Loss from
discontinued                     (9)                          (1,118)
operations,
net of tax
Net income                       $31,544                     $26,170
                                                             
SEE IMPORTANT NOTES AT END OF THIS DOCUMENT                                       

                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. 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)non-cash charges including: (a) stock-based compensation expense,
(b)amortization of intangibles, (c)depreciation and gains and losses on
asset dispositions, and (d)goodwill, long-lived asset and intangible asset
impairments; (2)pro forma adjustments for significant acquisitions; and
(3)other significant items.Significant items, while periodically affecting
our results, may vary significantly from period to period and have a
disproportionate effect in a given period, thereby affecting the comparability
of results.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.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
other significant items.

Adjusted Net Income is defined as net income available to common shareholders
excluding, net of tax effects, if applicable: (1) goodwill, long-lived asset
and intangible asset impairments, (2)pro forma adjustments for significant
acquisitions, (3) discontinued operations and (4)other significant
items.Significant items, while periodically affecting our results, may vary
significantly from period to period and have a disproportionate effect in a
given period, thereby affecting the comparability of results. 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 goodwill and asset impairments, significant acquisition-related
adjustments, discontinued operations and certain other significant items.

Adjusted EPS is defined as Adjusted Net Income divided by diluted weighted
average shares outstanding for Adjusted EPS purposes. 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 goodwill and asset impairments, significant acquisition-related
adjustments, discontinued operations and certain other significant items.
Adjusted Net Income and Adjusted EPS have certain limitations in that they do
not take into account the impact of goodwill and asset impairments,
significant acquisition-related adjustments, discontinued operations and
certain other significant items.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
        
         Gigi Ganatra Duff (Media)
         727-872-4808
         gigi.ganatraduff@hsn.net

HSN, Inc. Logo