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HSN, Inc. Reports Fourth Quarter And Full Year 2013 Results

Stocks in this article: HSNI

Highlights for the Fourth Quarter 2013:

  • Adjusted EPS increased 11% to $1.11 per share
  • Net sales increased 4% with digital sales up 8%
  • Adjusted EBITDA increased 4%

ST. PETERSBURG, Fla., Feb. 20, 2014 (GLOBE NEWSWIRE) -- HSN, Inc . (Nasdaq:HSNI) reported results for the fourth quarter and full year ended December 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)
             
  Q4 2013 Q4 2012  Change FY 2013 FY 2012  Change
             
Net Sales  $ 1,019.8  $ 982.9 4%  $ 3,404.0  $ 3,266.7 4%
             
Adjusted EBITDA (Non-GAAP)  $ 111.3  $ 106.6 4%  $ 337.9  $ 324.3 4%
Operating Income (GAAP) (b)(c)  $ 97.8  $ 92.8 5%  $ 282.7  $ 258.7 9%
             
Adjusted Net Income (Non-GAAP)  $ 59.9  $ 56.0 7%  $ 173.0  $ 153.0 13%
Income from continuing operations (GAAP) (b)(c)(d)(e)  $ 61.6  $ 56.0 10%  $ 178.4  $ 136.5 31%
             
Adjusted EPS (Non-GAAP)  $ 1.11  $ 1.00 11%  $ 3.15  $ 2.64 19%
Diluted EPS from continuing operations (b)(c)(d)(e)  $ 1.14  $ 1.00 14%  $ 3.25  $ 2.36 38%
             
HSNi:            
Average price point  $ 63.63  $ 62.22 2%  $ 62.37  $ 62.92 (1)%
Units shipped (millions) 18.2 18.1 1% 62.0 59.6 4%
Gross margin 34.5% 34.4% 10 bps 36.1% 36.2% (10 bps)
Return rate 15.9% 16.9% 100 bps 17.0% 17.8% 80 bps
Digital sales penetration 48.9% 46.9% 200 bps 46.5% 44.5% 200 bps
             
(a) HSNi's two operating segments, HSN and Cornerstone, are presented separately in Tables 2 and 3 of this release.
(b) Q4 2013 and FY 2013 results include a $3.6 million reduction in a contingent consideration obligation and a $3.0 million impairment charge of intangible assets related to a 2012 acquisition resulting in a net expense reduction of $0.6 million, or $1.7 million net of taxes, or $0.03 per diluted share.
(c) FY 2012 results include an unfavorable sales tax settlement of $7.8 million, or $4.8 million net of taxes, or $0.08 per diluted share.
(d) FY 2013 results include discrete tax benefits of $3.7 million, or $0.07 per diluted share.
(e) FY 2012 results include costs associated with the redemption of Senior Notes of $18.6 million, or $11.6 million net of taxes, or $0.20 per diluted share.
 
See reconciliation of Non-GAAP to GAAP measures in Table 4.

Fourth Quarter 2013 Results vs Fourth Quarter 2012 Results

  • HSNi's net sales grew 4% over the prior year to $1.0 billion. HSN's net sales increased 2% to $697.4 million, including 7% growth in digital sales. Cornerstone's net sales increased 8% to $322.4 million, including 9% growth in digital sales.  
  • HSNi's Adjusted EBITDA increased 4% to $111.3 million. GAAP operating income increased 5% to $97.8 million.   
  • Diluted EPS from continuing operations increased 14% to $1.14 compared to $1.00 in the prior year. Adjusted EPS (which excludes a net expense reduction in the fourth quarter of 2013 from fair value adjustments related to an acquisition in 2012) increased 11% to $1.11 compared to $1.00 in the prior year.

Full Year 2013 Results vs Full Year 2012 Results

  • HSNi's annual net sales grew 4% over the prior year to $3.4 billion. HSN's net sales increased 2% to $2.3 billion, including 7% growth in digital sales. Cornerstone's net sales increased 9% to $1.1 billion, including 11% growth in digital sales.  
  • HSNi's annual Adjusted EBITDA increased 4% to $337.9 million. HSNi's GAAP operating income increased 9% to $282.7 million.   
  • Diluted EPS from continuing operations for the year increased 38% to $3.25 compared to $2.36 in the prior year. Adjusted EPS for the year (which excludes certain significant items identified in Table 4) increased 19% to $3.15 compared to $2.64 in the prior year.   
  • HSNi announced a 39% increase in its quarterly dividend in November from $0.18 to $0.25 per share and repurchased a total of 2.7 million shares during 2013 at a cost of $146.9 million, or an average cost of $53.67 per share.  Since initiation of the capital return plan in September 2011 through February 19, 2014, HSNi has returned more than $478 million to shareholders through share repurchases and dividends.

"Throughout 2013, we successfully managed the Company to position us for long-term growth. We kept our focus on the customer, emphasized our unique content and proprietary products, strengthened our digital platform, further leveraged opportunities and synergies across the HSN and Cornerstone brands and returned value to our shareholders by delivering nearly $200M through share repurchases and cash dividends," said Mindy Grossman, CEO of HSN, Inc. "During the fourth quarter, we achieved 4% sales growth and a digital sales increase of 8%, including mobile growth of 59%. Adjusted EPS growth for the quarter and year were 11% and 19%, respectively.  We also ended 2013 with record customer levels at both HSN and Cornerstone."

Table 2            
SEGMENT RESULTS
($ in millions)
             
  Three Months Ended December 31, Year Ended December 31,
  2013 2012 Change 2013 2012 Change
Net Sales         (a)  
 HSN  $ 697.4  $ 683.8 2%  $2,312.4  $2,265.0 2%
 Cornerstone 322.4 299.1 8% 1,091.6 1,001.7 9%
 Total HSNi $ 1,019.8 $ 982.9 4% $ 3,404.0 $ 3,266.7 4%
             
Gross Profit            
 HSN  $ 230.6  $ 224.8 3%  $ 796.7  $ 786.6 1%
 Cornerstone 121.7 113.1 8% 433.1 397.1 9%
 Total HSNi $ 352.3 $ 337.8 4% $ 1,229.8 $ 1,183.7 4%
             
Adjusted EBITDA (Non-GAAP measure)            
 HSN  $ 88.1  $ 84.0 5%  $ 261.3  $ 250.8 4%
 Cornerstone 23.2 22.6 3% 76.6 73.4 4%
 Total HSNi $ 111.3 $ 106.6 4% $ 337.9 $ 324.3 4%
             
Operating Income            
 HSN  $ 77.9  $ 74.7 4%  $ 221.2  $ 212.5 4%
 Cornerstone (b) (c) 19.8 18.1 10% 61.5 46.2 33%
 Total HSNi  $ 97.8  $ 92.8 5%  $ 282.7  $ 258.7 9%
             
(a) Chasing Fireflies was acquired on April 1, 2012.
(b) Q4 2013 and FY 2013 results include a $3.6 million reduction in a contingent consideration obligation and a $3.0 million impairment charge of intangible assets related to a 2012 acquisition resulting in a net expense reduction of $0.6 million.
(c) Results for the year ended December 31, 2012 include an unfavorable sales tax settlement of $7.8 million.
 
See reconciliation of Non-GAAP to GAAP measures in Table 4.
             
Table 3            
SEGMENT KEY OPERATING METRICS
             
  Three Months Ended December 31, Year Ended December 31,
  2013 2012 Change 2013 2012  Change
HSN:            
 Average price point  $ 62.13  $ 61.51 1%  $ 58.21  $ 60.57 (4)%
 Units shipped (millions) 13.3 13.3 —% 46.9 44.7 5%
 Gross margin 33.1% 32.9% 20 bps 34.5% 34.7% (20 bps)
 Return rate 17.4% 18.6% 120 bps 18.7% 19.5% 80 bps
 Digital sales penetration 39.5% 37.6% 190 bps 37.0% 35.4% 160 bps
Cornerstone:            
 Average price point  $ 67.47  $ 64.07 5%  $ 74.77  $ 69.68 7%
 Units shipped (millions) 5.0 4.8 2% 15.1 14.9 1%
 Gross margin 37.7% 37.8% (10 bps) 39.7% 39.6% 10 bps
 Return rate 12.4% 12.8% 40 bps 12.9% 13.4% 50 bps
 Digital sales penetration 69.3% 68.2% 110 bps 66.5% 65.0% 150 bps
 Catalog circulation (millions) 81.5 76.9 6% 318.2 300.3 5%

HSN Segment Results for the Fourth Quarter 2013

HSN's net sales were $697.4 million, an increase of 2% from the prior year. Digital sales grew 7% with penetration increasing 190 basis points to 39.5%. Sales grew in health, beauty and apparel & accessories, offset by lower sales in jewelry, culinary and electronics.  Net sales were favorably impacted by lower than historical returns in many product categories. The average price point increased 1% while the units shipped remained unchanged. 

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