ST. PETERSBURG, Fla., Aug. 5, 2009 (GLOBE NEWSWIRE) -- HSN, Inc. (Nasdaq:HSNI) reported results for the second quarter ended June 30, 2009 for HSN, Inc. ("HSNi" or the "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)
Q2 2009 Q2 2008 Change
-------- -------- --------
Net Sales $ 640.1 $ 695.8 (8%)
Non-GAAP:
Adjusted EBITDA $ 43.3 $ 38.8 12%
Adjusted Net Income $ 15.4 $ 18.4 (16%)
Adjusted EPS $ 0.27 $ 0.32 (17%)
GAAP:
Operating Income (Loss) $ 30.7 $ (277.6) NM
Net Income (Loss) $ 13.6 $ (249.8) NM
Diluted EPS $ 0.24 $ (4.44) NM
HSNi:
Average price point $ 59.82 $ 62.09 (4%)
Units shipped (millions) 11.9 12.5 (5%)
Gross profit % 36.2% 35.7% 50 bps
Return rate % 18.0% 18.3% (30 bps)
Internet net sales %(b) 35.8% 35.4% 40 bps
NM = Not meaningful
(a) Segment results for HSNi's two business segments, HSN and
Cornerstone, are presented separately in Tables 2 and 3 of this
release.
(b) Internet net sales as a percent of total HSNi net sales.
See reconciliation of GAAP to non-GAAP measures in Table 4.
Second Quarter 2009 Results vs Second Quarter 2008
* HSNi's Adjusted EBITDA increased 12% to $43.3 million and Adjusted
EBITDA margins improved to 6.8% from 5.6%. Although HSNi's net
sales declined 8%, Adjusted EBITDA improved as a result of an
increase in gross profit margin of 50 basis points and a reduction
in operating expenses, excluding non-cash charges, of 10%, or
$21.5 million.
* HSNi's Adjusted Net Income in the second quarter of 2009 was
$15.4 million, decreasing $3.0 million from the prior year.
Adjusted Net Income for 2009 included interest expense, net of
taxes, of $5.5 million related to indebtedness incurred in
connection with the spin-off from IAC/InterActiveCorp in the third
quarter of 2008.
* HSNi reported operating income of $30.7 million in the second
quarter of 2009 compared to an operating loss of ($277.6) million
in the prior year. Net income was $13.6 million, or $0.24 per
diluted share, for the current quarter compared to a net loss of
($249.8) million, or ($4.44) per diluted share, in the prior year.
The prior year results include $300 million ($263.4 million net of
taxes, or ($4.69) per share) of goodwill and intangible asset
impairment charges related to HSNi's Cornerstone segment.
* HSNi ended the quarter with $205.9 million in cash and cash
equivalents. Cash from operating activities during the first half
of 2009 was $74.0 million compared to $6.2 million in the same
period last year. Cash flow improved by effectively managing
working capital.
"Our performance in the second quarter clearly demonstrates HSNi's unique ability to leverage our differentiated brand and business model to maximize operating results," stated Mindy Grossman, Chief Executive Officer of HSNi. "We believe that our strategy of creating a great customer experience while exerting strict financial discipline and effective working capital management will allow us to gain share and deliver long term value to our shareholders."
Table 2
SEGMENT RESULTS
($ in millions)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ --------------------------
2009 2008 Change 2009 2008 Change
------- ------- ------ -------- -------- ------
Net Sales
HSN $ 454.2 $ 460.9 (1%) 929.2 $ 939.9 (1%)
Cornerstone 185.9 234.9 (21%) 340.5 432.8 (21%)
------- ------- ------ -------- -------- ------
Total HSNi $ 640.1 $ 695.8 (8%) $1,269.7 $1,372.7 (8%)
======= ======= ====== ======== ======== ======
Gross Profit
HSN $ 152.8 $ 149.2 2% $ 304.7 $ 304.1 0%
Cornerstone 79.1 99.4 (20%) 138.4 179.9 (23%)
------- ------- ------ -------- -------- ------
Total HSNi $ 231.9 $ 248.6 (7%) $ 443.1 $ 484.0 (8%)
======= ======= ====== ======== ======== ======
Adjusted EBITDA
(Non-GAAP
measure)
HSN $ 38.4 $ 33.5 14% $ 73.6 $ 70.1 5%
Cornerstone 4.9 5.3 (7%) (4.3) 1.8 (335%)
------- ------- ------ -------- -------- ------
Total HSNi $ 43.3 $ 38.8 12% $ 69.3 $ 71.9 (4%)
======= ======= ====== ======== ======== ======
Operating
Income (Loss)
HSN $ 28.7 $ 22.4 28% $ 54.9 $ 46.9 17%
Cornerstone 2.0 (300.0) NM (10.3) (309.5) NM
------- ------- ------ -------- -------- ------
Total HSNi $ 30.7 $(277.6) NM $ 44.6 $ (262.6) NM
======= ======= ====== ======== ======== ======
NM = Not meaningful
See reconciliation of GAAP to non-GAAP measures in Table 4.
Table 3
SEGMENT KEY OPERATING METRICS
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
2009 2008 Change 2009 2008 Change
------ ------ -------- ------ ------ --------
HSN:
Average price
point $56.58 $59.07 (4%) $56.63 $59.58 (5%)
Units shipped
(millions) 9.1 8.9 2% 18.4 18.0 2%
Gross profit % 33.6% 32.4% 120 bps 32.8% 32.4% 40 bps
Return rate % 19.3% 19.5% (20 bps) 18.5% 19.8% (130 bps)
Internet net
sales %(a) 28.4% 27.7% 70 bps 29.2% 28.2% 100 bps
Cornerstone:
Average price
point $70.29 $69.46 1% $66.58 $66.98 (1%)
Units shipped
(millions) 2.8 3.6 (22%) 5.5 7.0 (21%)
Gross profit % 42.6% 42.3% 30 bps 40.6% 41.6% (100 bps)
Return rate % 14.8% 15.8% (100 bps) 15.5% 16.3% (80 bps)
Internet net
sales %(a) 54.0% 50.5% 350 bps 55.5% 51.2% 430 bps
Catalog
circulation
(millions) 64.0 80.8 (21%) 124.5 167.9 (26%)
(a) Internet net sales as a percent of segment net sales.
HSN Segment Results
HSN's net sales decreased 1% to $454.2 million in the second quarter of 2009 from $460.9 million in the prior year. This slight sales decline of 1% followed a strong comparable sales growth of 11% in the prior year. Shipped units increased by 2%, return rates improved by 20 basis points and the average price point decreased by 4% from the same quarter in the prior year. These results were due to product mix, sales of key items at lower price points and select promotional pricing. Strong sales increases in crafts and fitness were offset by sales declines in fashion. Jewelry sales stabilized this quarter with a shift to product lines with lower price points such as silver and fashion jewelry.
Gross profit margin improved 120 basis points to 33.6% in the second quarter compared to 32.4% in the prior year. This increase was a result of lower shipping costs and a decrease in returns, partially offset by a slight decrease in product margins. Focused efforts on aligning inventory purchases with sales demand resulted in a decrease in inventory by $38.0 million, or 15%, compared to the same period last year.
Adjusted EBITDA increased 14% to $38.4 million in the second quarter compared to the prior year driven primarily by the increase in gross profit and a reduction in operating expenses. Operating income increased 28% to $28.7 million, or $6.3 million, compared to the prior year.
Cornerstone Segment Results
Net sales for Cornerstone decreased 21% to $185.9 million in the second quarter of 2009 as compared to $234.9 million in the prior year due to lower consumer demand overall for luxury home furnishings, outdoor products and apparel.
Gross profit margin improved 30 basis points to 42.6% in the second quarter of 2009 compared to 42.3% in the prior year, primarily as a result of lower shipping costs. This gain was partially offset by selective promotional and clearance pricing to reduce inventory levels, resulting in a 25% decrease in inventories compared to the second quarter of 2008.
Operating expenses, excluding non-cash charges, during the second quarter of 2009 decreased 21%, or $19.9 million, as compared to 2008, driven by lower circulation costs and reduced headcount. Despite the decline in net sales and gross profit, Adjusted EBITDA decreased only $0.4 million, or 7%, to $4.9 million due to these expense management efforts.
Operating income in the current quarter was $2.0 million compared to an operating loss of ($300.0) million in the second quarter of 2008. Included in the prior year results were $300 million in goodwill and intangible asset impairment charges and $1.6 million of amortization of intangibles.
Effective Tax Rate
HSNi's effective tax rate from continuing operations was 38.0% for the second quarter of 2009 and 10.2% for the second quarter of 2008. Excluding the impact from the asset impairment charges and related tax effects in the prior year, the effective tax rate for the second quarter of 2008 would have been 37.4%. The annual effective tax rate for 2009 is expected to be 39%.
Liquidity and Capital Resources
As of June 30, 2009, HSNi had cash and cash equivalents of $205.9 million, up from $186.9 million at March 31, 2009 and up from $177.5 million at December 31, 2008. For the six months ended June 30, 2009, HSNi generated net cash provided by operating activities of $74.0 million compared to $6.2 million in the same period last year. Total debt was approximately $381.1 million as of June 30, 2009, resulting in a ratio of total debt to EBITDA, as defined in HSNi's credit agreement, of approximately 2.36x and net debt of $175.2 million.
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 and its consolidated subsidiaries that are based on current expectations, forecasts and assumptions. HSNi's actual results could differ materially from those predicted.
