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 email@example.com Gigi Ganatra Duff (Media) 727-872-4808 firstname.lastname@example.org HSN, Inc. Logo
HSN, Inc. Reports First Quarter 2013 Results
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