Well, ShopNBC was full of news today. Some was good, but a lot was bad.
The No. 3 home shopping network expects to report fourth-quarter sales of about $148 million, a decline of some 18 percent versus the prior-year quarter. That’s a big drop, folks.
The net sales decline “primarily reflects challenges in consumer electronics, which are expected to continue in the near-term,” ShopNBC said in a press release.
The company expects fiscal 2011 net sales of about $558 million, a decrease of about 1 percent versus the prior year. That’s not as bad as the 18 percent, but it is a decline.
ShopNBC ended fiscal 2011 with $35.1 million in cash and restricted cash, which is an increase of $2.4 million during the quarter, reflecting positive operating cash flow in the quarter.
“I am disappointed with our fourth-quarter sales, which were principally impacted by a sales shortfall in consumer electronics,” ShopNBC CEO Keith Stewart said in a canned statement.
“Despite this shortfall, we were able to carefully manage our working capital components during the quarter to improve our cash position,” he stated. “The successful completion of our debt refinancing, as well as the anticipated operational savings and improved channel positioning from renewing our TV distribution agreements, puts the company in a stronger position to support future growth.”
Stewart was referring to some of ShopNBC’s good news: It has renewed three distribution deals.
To translate that to English for non-cable folk, that means ShopNBC has nailed deals to remain on the channel lineup of three unnamed cable or satellite companies.
ShopNBC did not say who these deals are with, but it could be with companies such as Comcast or DirecTV, for example. Those three renewals cover about 54 percent of ShopNBC’s 81 million households.
The early renewal of the company’s largest TV distribution agreement covers 18 million homes. ‘The terms of this agreement better reflect rates in today’s competitive distribution environment,’ according to ShopNBC, which anticipates a reduction in annual TV distribution costs by about $15 million beginning next January.
As part of the agreement with one cable company or satellite provider, ShopNBC “will receive a second channel on this distribution provider beginning January 2013,” according to the press release.
We don’t understand what that means, and it’s not explained.
The renewals of the other two TV distribution agreements cover a total of 26 million ShopNBC homes. These agreements were effective in January and will improve ShopNBC’s channel positioning in more than 20 percent of the homes served by these two distributors.
In addition, ShopNBC has secured a $40 million revolving credit facility with PNC Bank, National Association, a member of PNC Financial Services Group Inc.
Loans under the new revolving credit facility will bear an interest rate of LIBOR plus 3 percent per annum. Proceeds will be used to fund the retirement of the ShopNBC’s existing 11 percent per annum, $25 million term loan and the payment of a roughly $12.4 million deferred payment obligation to a distributor during the first quarter this year.
ShopNBC will report fourth-quarter and fiscal 2011 results March 15 and will hold a conference call and webcast the same day at 11 a.m.