William
VVTV earnings out....Beat street..
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Wednesday March 24, 5:54 pm Eastern Time
Company Press Release
SOURCE: ValueVision International, Inc.
ValueVision International, Inc. Announces Record
Profitable Fourth Quarter And Year-End Financial
Results
Company Reports Record Quarterly Television Home Shopping Sales
Company Reports Record Quarterly Operating Income
Highlights: -- Record sales from television home shopping operations increase 65% to $47.7
million from $29.0 million in year-ago quarter -- Record quarterly consolidated operating profit of
$2.1 million -- Record fourth quarter net income (excluding unusual items) of $0.06 per common
share, compared with net loss of $0.02 per common share in year-ago quarter -- Company
maintains strong gross profit margins of 44% -- Total subscriber base increases to 21.8 million
from year-ago base of 17.4 million -- Company enters into strategic alliance with NBC and GE
Capital in first quarter FY 2000
Financial Summary (in 000's, except for per share numbers)
Three Months Ended Twelve Months Ended 1/31/99 1/31/98 1/31/99 1/31/98
Net sales $65,943 $60,095 $203,728 $217,982 Operating income (loss) $2,080 $(1,458) $(8,569)*
$(10,975) Net income (loss), excluding unusual gains and charges $1,601 $(537) $(1,783) $(5,508)
Net income (loss) per common share, excluding unusual gains and charges $0.06 $(0.02) $(0.07)
$(0.17)
Net income (loss) $422 + $(528) $4,639** + $18,104***
Net income (loss) per common share $0.02 + $(0.02) $0.18** + $0.57***
+ Includes a pretax loss of $7.1 million related to the Time Warner Cable litigation settlement and
pretax gains of $9.1 million related to sales and holdings of property and investments ($5.2 million
in 4Q) * Includes a restructuring and asset impairment write-off of $2.9 million related to the
HomeVisions' catalog operations ** Includes a pretax gain of $19.8 million related to sale of a
broadcast television station, a pretax loss of $6.1 million related to the write down of investment in
CML Group, Inc. and a $2.3 million write-off related to terminated acquisition costs *** Includes
a pretax gain of $38.9 million related to sale of a broadcast television station
MINNEAPOLIS, March 24 /PRNewswire/ -- ValueVision International, Inc. (Nasdaq: VVTV - news), an integrated
electronic and print media direct marketing company, today reported its financial results and a return to profitability for its fourth
quarter and fiscal year ended January 31, 1999.
''Our record fourth quarter financial results mark an extraordinary end to a breakthrough year for ValueVision. We have
returned the Company to profitability. Our core television home shopping business, which has achieved sales increases in excess
of 30% for three consecutive quarters under the leadership of our new management team, is continuing its impressive
performance as we enter our new fiscal year,'' said Gene McCaffery, Chairman, President and Chief Executive Officer.
''We have embarked on a series of new commerce initiatives with NBC and GE that will take our core competencies and
position the Company to become a principal player in the evolving convergence and development of electronic commerce. As
well, this move positions the Company for the future as transactional abilities become increasingly important in the world of
convergence. As the TV and PC converge, access to electronic revenue streams like home shopping through cable and the
internet become extremely valuable.''
''We expect our new cable distribution agreement with NBC to significantly increase ValueVision's subscriber base and
improve our sales per household. We are also aggressively pursuing programming, merchandising and e-commerce initiatives
and opportunities and expect to continue building sales and profits in the current fiscal year and beyond,'' continued Mr.
McCaffery.
Improved Fourth Quarter Operating Results
Net sales for the fourth quarter ended January 31, 1999 were $65,943,000, compared with net sales of $60,095,000 for the
fourth quarter of fiscal 1998, an increase of 10%. The increase in net sales is primarily attributable to continued improvements in
the Company's television home shopping operations, which have reported greater than 30% sales increases for the past three
quarters in a row. The quarterly increase in net sales was offset by a decrease in catalog revenues as a result of the divestiture of
the Company's unprofitable HomeVisions (formerly known as Montgomery Ward Direct) mail order catalog operations. Net
sales for the Company's television home shopping operations for the fourth quarter of fiscal 1999 increased 65% to
$47,744,000 from $29,008,000 for the comparable prior year-period, on a 22% increase in average full-time equivalent cable
homes. The Company's mail order operations contributed $18,199,000, or 28% of net sales for the fourth quarter, compared
with $31,087,000, or 52% of net sales for the same period last year, a decrease of $12,888,000, or approximately 41%.
Fourth Quarter Operating Income
The company reported operating income of $2,080,000 for the fourth quarter of fiscal 1999 compared with an operating loss of
$1,458,000 for the fourth quarter of the prior year. The increase in quarterly operating income over prior year's quarterly
operating loss was directly attributed to the operating income reported by the company's television home shopping division as
well as a modest increase in operating income over the prior year from the company's catalog operations.
Fourth Quarter Net Income
The company reported net income of $422,000, or $0.02 per basic and diluted share on 26,491,000 diluted weighted average
shares outstanding (25,626,000 basic shares) for the quarter ended January 31, 1999, compared with a net loss of $528,000,
or $0.02 per basic and diluted share on 30,330,000 weighted average shares outstanding for the quarter ended January 31,
1998. Net income for the quarter ended January 31, 1999 includes a one-time pretax charge of $7.1 million in connection with
a litigation settlement with Time Warner Cable and pretax net gains of $5.2 million recorded on the sale and holdings of the
company's property and investments. Excluding the one-time litigation charge and the net gains recorded on the sale and
holdings of property and investments, the company achieved net income of $1,601,000 or $0.06 per basic and diluted share.
Fourth Quarter Operating Expenses
''New marketing and cost-cutting initiatives by our management team have resulted in sales growth at our core business while at
the same time reduced operating expenses,'' concluded Mr. McCaffery. Total operating expenses were $26,610,000 for the
fourth quarter of fiscal 1999, compared with $28,288,000 in fiscal 1998, a decrease of 6%. As a percentage of net sales, total
operating expenses were 40% for the fourth quarter of fiscal 1999 and 47% for the year-ago period.
Improved Twelve Month Operating Results
Net sales for the year ended January 31, 1999 were $203,728,000, a 7% decrease over fiscal 1998 net sales of
$217,982,000. The decrease in net sales is directly attributable to the decline in catalog sales resulting from the downsizing and
eventual divestiture of HomeVisions. Net sales for television home shopping operations increased 39% to $148,198,000 for the
year ended January 31, 1999 on a 7% increase in average full-time equivalent cable homes from the year-ago period. Direct
mail operations contributed $55,530,000 in net sales for the year ended January 31, 1999, or 27% of net sales, compared with
$111,410,000, or 51% of net sales in the comparable prior year period.
Decrease in Twelve Month Operating Loss
The operating loss for the year ended January 31, 1999 was $8,569,000, compared with an operating loss of $10,975,000 for
the comparable prior year period. The operating loss for the year ended January 31, 1999 includes a one-time restructuring and
asset impairment charge of approximately $2.9 million, recorded in the third quarter, relating to the company's decision to shut
down its HomeVisions catalog operations. Excluding the one-time HomeVisions' restructuring charge of $2.9 million, the
operating loss was $5,619,000 for the year ended January 31, 1999, an improvement of 49% over the prior year.
Twelve Month Net Income
The company reported net income of $4,639,000, or $0.18 per basic and diluted share on 26,267,000 diluted weighted
average shares outstanding (25,963,000 basic shares) for the year ended January 31, 1999, compared with net income of
$18,104,000, or $0.57 per share on 31,888,000 diluted weighted average shares outstanding (31,745,000 basic shares) for
the year ended January 31, 1998. Net income for the year ended January 31, 1999 includes the following pretax items: a gain
of $19,750,000 from the sale of a broadcast television station; a one-time charge of $7,100,000 in connection with a litigation
settlement with Time Warner Cable; a $6,113,000 write down of the company's investment in CML Group, Inc.; the write-off
of $2,350,000 of acquisition related costs; net gains of $9,129,000 recorded on the sale and holdings of the company's
property and investments and the HomeVisions' restructuring and asset impairment charge of $2,950,000. Excluding these
one-time pretax gains and charges, the company had a net loss of $1,783,000 or $0.07 per basic and diluted share. Net
income for the year ended January 31, 1998 includes a pretax gain of $38,850,000 related to the sale of a broadcast television
station. Excluding the gain on the sale of the television station, the company had a net loss of $5,508,000 or $0.17 per basic
and diluted share for the year ended January 31, 1998, an improvement of 36% over the prior year.
Twelve Month Operating Expenses
Total operating expenses for the year ended January 31, 1999 were $94,540,000, compared with $106,149,000 for the year
ended January 31, 1998. As a percentage of sales, total operating expenses were 45% (excluding the HomeVisions
restructuring charge) for the year ended January 31, 1999 and 49% for the year-ago period.
Company Maintains Strong Gross Profit Margins
Gross profit margins were 44% for the fourth quarter of fiscal 1999 compared with 45% for fiscal 1998. Gross profit margins
for the year ended January 31, 1999 were 42% compared with 44% for the year ended January 31, 1998. Gross margins for
the company's television home shopping operations were 38% for fiscal 1999 compared with 40% for fiscal 1998. Gross
margin percentages decreased slightly for television home shopping as a result of changes in merchandise mix and on-air
promotions to enhance net gross margin contributions. Gross margins for mail order operations were 54% for fiscal 1999
compared with 47% for fiscal 1998. The increase in mail order gross margins was due primarily to the change in the mix
between HomeVisions and the company's other catalogs.
Strong Balance Sheet
As of January 31, 1999, ValueVision had cash and short-term investments of $46,870,000, total assets of $141,770,000,
current liabilities of $32,684,000, long-term obligations of $675,000 and shareholders' equity of $108,411,000.
Expanded Cable Distribution
ValueVision's full-time equivalent cable homes were approximately 14.9 million at January 31, 1999 compared with 11.7 million
at January 31, 1998, an increase of approximately 27%. At January 31, 1999, the company's programming was carried
full-time on approximately 10.6 million homes, a 23% increase over 8.6 million full-time homes at January 31, 1998. The total
number of homes able to receive ValueVision's programming increased approximately 25% from 17.4 million at January 31,
1998 to 21.8 million at January 31, 1999. The increase in the total number of subscribers over prior year is primarily the result
of the company's October programming launch to Denver-based Primestar, Inc.'s 2.2 million subscriber base on a part-time
basis (875,000 FTE's) and the addition of 1.3 million full-time subscribers from New York-based CableVision Systems
Corporation.
NBC/GE Capital Strategic Alliance
On March 9, 1999, ValueVision, NBC and GE Capital announced they have entered into a strategic alliance designed to help
increase the cable distribution of ValueVision's television home-shopping network and to jointly explore the development of
future Internet and Electronic Commerce opportunities. As part of the agreement, NBC and GE Capital will initially acquire a
19.9% equity stake in ValueVision in the form of preferred stock and common stock purchase warrants. In addition,
ValueVision has granted NBC and GE Capital an option to increase their shared equity stake to 39.9%, subject to shareholder
approval.
ValueVision International, Inc. is an integrated electronic and print media direct marketing company, and operates a television
home-shopping network and multi-book catalog operation. The Company offers live programming 24 hours per day, 7 days a
week. Approximately 21.8 million homes are able to receive ValueVision's programming of which approximately 10.6 million
homes on a full-time basis and another 11.2 million on a part-time basis. In addition, the Company operates several direct mail
operations and an Internet shopping website (www.vvtv.com). The Company's shares are traded on the Nasdaq Stock Market
under the symbol VVTV. For additional information on ValueVision please visit the Company's web site at
vvtv.com or by fax, at no cost, dial 1-800-PRO-INFO, and enter code VVTV.
(Note: The Private Securities Litigation Reform Act of 1995 provides a ''safe harbor'' for forward-looking statements. Certain
information included in this news release contains statements that are forward-looking, such as statements relating to increased
revenue and cable home distribution, maintenance of gross profit margins, the company's future profitability, entrance into
e-commerce and the continuing success in developing new strategic alliances (including the GE Capital and NBC alliance).
There are certain important factors, such as consumer spending and debt levels, interest rates, competitive pressure on sales and
pricing and the maintenance of cable home distribution that could cause results to differ materially from those forward-looking
statements. Investors are cautioned that all forward-looking statements involve risks and uncertainty, including the possibility that
revenues and cable distribution will not increase, that gross profit margins will decrease, that e-commerce will not be successful
and that other strategic alliances (including the GE Capital and NBC alliance) may not result in increased revenues or earnings.
For more information on the potential factors that could affect the Company's financial results, investors should refer to the
Company's recent filings with the Securities and Exchange Commission, including the Company's annual report on Form 10-K,
quarterly reports on Form 10-Q and current reports on Form 8-K.)
VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share and per share data)
For the Three For the Twelve
Months Ended Months Ended
January 31, January 31, January 31, January 31,
1999 1998 1999 1998
Net sales $65,943 $60,095 $203,728 $217,982
Cost of sales 37,253 33,265 117,757 122,808
Gross profit 28,690 26,830 85,971 95,174
Margin % 43.5% 44.6% 42.2% 43.7%
Operating expenses:
Distribution and
selling 22,293 24,311 74,649 89,018
General and
administrative 3,079 2,542 11,942 10,154
Depreciation and
amortization 1,238 1,435 4,999 6,977
Restructuring and
impairment of assets -- -- 2,950 --
Total operating
expenses 26,610 28,288 94,540 106,149
Operating income (loss) 2,080 (1,458) (8,569) (10,975)
Other income (expense):
Gain on sale of
broadcast stations -- -- 19,750 38,850
Gain on sale of property
and investments 4,402 105 8,102 215
Time Warner litigation
settlement (7,100) -- (7,100) --
Writedown of investment
in CML Group, Inc. (381) -- (6,113) --
National Media terminated
acquisition costs -- -- (2,350) --
Unrealized gain on
trading securities 1,350 -- 1,350 --
Equity in losses of
affiliates (166) (83) (323) (431)
Interest income 613 641 2,904 2,116
Other, net (111) (63) (160) (171)
Total other income
(expense) (1,393) 600 16,060 40,579
Income (loss) before
income taxes 687 (858) 7,491 29,604
Provision (benefit)
for income taxes 265 (330) 2,852 11,500
Net income (loss) $422 $(528) $4,639 $18,104
Net income (loss)
per common share $0.02 $(0.02) $0.18 $0.57
Net income (loss)
per common share
- assuming dilution $0.02 $(0.02) $0.18 $0.57
Weighted average
number of common
shares outstanding:
Basic 25,626,394 30,329,784 25,963,341 31,745,437
Diluted 26,490,973 30,329,784 26,266,814
31,888,229
CABLE SUBSCRIBER INFORMATION(in millions)
January 31, January 31, January 31,
1999 1998 1997
Full-time Equivalent
Cable Subscribers 14.9 11.7 11.4
Total Cable Subscribers 21.8 17.4 16.4
Full-time Cable Subscribers 10.6 8.6 7.7
VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
As of January 31,
(In thousands, except share data)
1999 1998
ASSETS
Current assets:
Cash and cash equivalents $44,264 $17,198
Short-term investments 2,606 14,668
Accounts receivable, net 19,466 8,694
Inventories, net 21,101 20,427
Prepaid expenses and other 8,576 10,479
Note receivable - National Media Corporation -- 7,000
Income taxes receivable 500 748
Deferred income taxes 1,807 447
Total current assets 98,320 79,661
Property and equipment, net 14,069 21,404
Federal Communications Commission
licenses, net 2,019 5,807
Montgomery Ward operating
agreement and licenses, net 1,876 2,073
Investment in Paxson Communications
Corporation 9,713 9,848
Goodwill, net 5,962 6,892
Investments and other assets, net 9,160 9,079
Deferred income taxes 651 515
$141,770 $135,279
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of
long-term obligations $393 $411
Accounts payable 20,736 17,644
Accrued liabilities 11,555 11,535
Total current liabilities 32,684 29,590
Long-term obligations 675 1,036
Total liabilities 33,359 30,626
Shareholders' equity:
Common stock, $.01 par value,
100,000,000 shares authorized;
25,865,466 and 26,780,778
shares issued and outstanding 259 268
Additional paid-in capital 72,715 74,538
Accumulated other
comprehensive losses (2,841) (3,891)
Notes receivable from
shareholders (1,059) (960)
Retained earnings 39,337 34,698
Total shareholders' equity108,411 104,653
$141,770 $135,279
SOURCE: ValueVision International, Inc.
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