National Media Taps New CEO, To Post Losses
Dow Jones News Service ~ April 28, 1997 ~ 7:35 pm EST
By Lisa Brownlee
Staff Reporter of The Wall Street Journal
"Informercial" producer National Media Corp. named a new chief executive officer and said it would post
operating losses for the fiscal fourth quarter and year ended March 31, citing "slower-than-expected"
business improvement.
The Philadelphia-based company, which sells products through paid television programs, also said it hired
Lehman Brothers to explore "strategic business alternatives," the type of disclosure that typically boosts a
stock's price as investors bet on a takeover. But National Media shares slid 4.8% in New York Stock
Exchange composite trading, closing at $7.50, down 37.5 cents.
The quarterly loss would be the company's second in a row, showing how dependent the infomercial
business can be on coming out with new hit products. "There was no real strong product in the quarter to
replace the Ab Roller," said George Sutton, an analyst at Rauscher Pierce Refsnes Inc. in Dallas, referring
to a piece of abdominal excerise gear.
National Media also named Robert N. Verratti president, chief executive and a director, succeeding Mark
P. Hershhorn, who resigned. "The board and Mark disagreed as to the direction of the company,"
spokesman Bruce Boyle said. Mr. Hershhorn, a 46-year-old infomercial-industry veteran, was known for
his emphasis on developing the company's presence overseas. Mr. Hershhorn couldn't be reached for
comment.
Mr. Verratti, 53, previously was a special adviser for acquisitions to Warren V. "Pete" Musser, chairman
and chief executive of Safeguard Scientifics Inc., which holds about a 15% stake in National Media.
Viewed as a turnaround specialist, Mr. Verratti is former chief executive of Globe Ticket Co., a specialty
printing concern, and Total Care Systems, a health-care company. Mr. Verratti, who is new to the
infomercial business, couldn't be reached for comment.
National Media as recently as February told investors it was expecting to post a profit for the fiscal fourth
quarter. The global infomercial company determined "that this was not going to be the case" within the
past week, said Mr. Boyle. He added that "most of the difficulty is in the U.S.," where media costs are
relatively high and where there is constant pressure to produce new shows, which cost money to make.
In the year-earlier fiscal fourth quarter, National Media had net income of $5.9 million, or 24 cents a
share, on revenue of $101.6 million. For all of fiscal 1996, the company had profit of $16.6 million, or
74 cents a share, on revenue of $292.6 million.
National Media also said it is evaluating certain acquisitions, production costs, inventories, receivables and
restructuring costs, which could lead to charges and net losses for the quarter and year. "We're evaluating
writing off restructuring costs and other items," said Mr. Boyle, the company's spokesman. The company
will consult with its outside auditor, Ernst & Young, to evaluate the situation, he said.
National Media has made a string of acquisitions over the past two years, including infomercial companies
Positive Response Television Inc., DirectAmerica Corp., Nancy Langston & Associates, Prestige
Marketing Ltd. and Suzanne Paul Holdings Pty.
"I think they may have overvalued the assets that they bought," said Rauscher's Mr. Sutton, who is
expecting National Media to write down the value of some of its recent purchases. "I think what they want
to try to do is take all their lumps in this quarter and move forward with a cleaner balance sheet."
National Media declined to say what strategic alternatives it would consider.
But Safeguard's Mr. Musser, who is a director of National Media, said in an interview that Mr. Verratti's
mandate will be to "get the company in the black, and continue to grow in an orderly way with consistent
profits." He said Mr. Verratti will be paying attention to business fundamentals, such as inventory control
and accounts receivable. He said, "It's too early to consider a sale of the company." Possible strategic
alternatives might include joint ventures "and combinations that bring strength to the equation that National
Media doesn't have," he added.
In a news release, the company noted that Lehman's role will be in addition to an existing advisory
relationship with J.P. Morgan. The release said the company decided to get additional advice "after heavy
trading in its common stock" in late February and early March "encouraged speculation about outside
interest in the company."
(END) DOW JONES NEWS 04-28-97
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