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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-20243
VALUEVISION INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1673770
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6740 Shady Oak Road, Minneapolis, MN 55344
(Address of principal executive offices)
612-947-5200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
-------------- ----------------
As of September 8, 1999, there were 37,017,684 shares of the Registrant's
common stock, $.01 par value, outstanding.
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VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES
FORM 10-Q TABLE OF CONTENTS
JULY 31, 1999
Page of
Form 10-Q
-----------
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
- Condensed Consolidated Balance Sheets as of July 31, 1999 and 3
January 31, 1999
- Condensed Consolidated Statements of Operations for the Three and Six 4
Months Ended July 31, 1999 and 1998
- Condensed Consolidated Statement of Shareholders' Equity for the Six 5
Months Ended July 31, 1999
- Condensed Consolidated Statements of Cash Flows for the Six Months 6
Ended July 31, 1999 and 1998
- Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of 13
Operations
Part II OTHER INFORMATION
Item 2. Changes in Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 23
SIGNATURES 25
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VALUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share data)
July 31, January 31,
1999 1999
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 211,797 $ 44,264
Short-term investments 54,368 2,606
Accounts receivable, net 28,922 19,466
Inventories, net 23,421 21,101
Prepaid expenses and other 8,614 8,576
Income taxes receivable 4,237 500
Deferred income taxes 1,703 1,807
--------- ---------
Total current assets 333,062 98,320
Property and equipment, net 13,252 14,069
Federal Communications Commission licenses, net 1,969 2,019
Cable distribution and marketing agreement, net 6,740 --
Montgomery Ward operating agreement and licenses, net 1,778 1,876
Investment in Paxson Communications Corporation 11,937 9,713
Goodwill and other intangible assets, net 5,751 5,962
Investments and other assets, net 11,082 9,160
Deferred income taxes 49 651
--------- ---------
$ 385,620 $ 141,770
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations $ 181 $ 393
Accounts payable 25,606 20,736
Accrued liabilities 12,719 11,555
--------- ---------
Total current liabilities 38,506 32,684
Long-term obligations -- 675
Series A Redeemable Convertible Preferred Stock, $.01 par value, 5,339,500
shares authorized; 5,339,500
and 0 shares issued and outstanding 41,484 --
Shareholders' equity:
Common stock, $.01 par value, 100,000,000 shares authorized;
36,992,684 and 25,865,466 shares issued and outstanding 370 259
Common stock purchase warrants;
1,450,000 and 0 shares 6,931 --
Additional paid-in capital 253,108 72,715
Accumulated other comprehensive losses (1,463) (2,841)
Notes receivable from shareholders -- (1,059)
Retained earnings 46,684 39,337
--------- ---------
Total shareholders' equity 305,630 108,411
--------- ---------
$ 385,620 $ 141,770
========= =========
The accompanying notes are an integral part of these
condensed consolidated balance sheets.
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VALUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share and per share data)
For the Three Months Ended For the Six Months Ended
July 31, July 31,
-------------------------------- --------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
Net sales $ 57,875 $ 44,082 $ 111,016 $ 87,758
Cost of sales 35,361 25,952 66,023 50,974
------------ ------------ ------------ ------------
Gross profit 22,514 18,130 44,993 36,784
------------ ------------ ------------ ------------
Margin % 38.9% 41.1% 40.5% 41.9%
Operating expenses:
Distribution and selling 18,161 16,856 36,392 33,674
General and administrative 2,738 3,136 5,493 5,990
Depreciation and amortization 1,304 1,275 2,455 2,546
------------ ------------ ------------ ------------
Total operating expenses 22,203 21,267 44,340 42,210
------------ ------------ ------------ ------------
Operating income (loss) 311 (3,137) 653 (5,426)
------------ ------------ ------------ ------------
Other income (expense):
Gain on sale of broadcast stations -- -- 9,980 19,750
Gain on sale of property and investments 136 3,653 136 3,639
Unrealized loss on trading securities (342) -- (794) --
National Media Corporation
terminated acquisition costs -- (2,350) -- (2,350)
Interest income 1,638 782 2,227 1,565
Other, net (14) (110) (31) (145)
------------ ------------ ------------ ------------
Total other income 1,418 1,975 11,518 22,459
------------ ------------ ------------ ------------
Income (loss) before income taxes 1,729 (1,162) 12,171 17,033
Income tax provision (benefit) 681 (441) 4,755 6,474
------------ ------------ ------------ ------------
Net income (loss) 1,048 (721) 7,416 10,559
Accretion of redeemable
preferred stock (69) -- (69) --
------------ ------------ ------------ ------------
Net income (loss) available to
common shareholders $ 979 $ (721) $ 7,347 $ 10,559
============ ============ ============ ============
Net income (loss) per common share $ 0.03 $ (0.03) $ 0.26 $ 0.40
============ ============ ============ ============
Net income (loss) per common share
---assuming dilution $ 0.03 $ (0.03) $ 0.22 $ 0.40
============ ============ ============ ============
Weighted average number of common shares outstanding:
Basic 29,650,710 25,979,193 27,833,139 26,379,986
============ ============ ============ ============
Diluted 38,908,296 25,979,193 33,761,760 26,488,418
============ ============ ============ ============
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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5
VALUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the Six Months Ended July 31, 1999
(Unaudited)
(In thousands, except share data)
Common Stock Common
------------------------------ Stock Additional
Comprehensive Number Par Purchase Paid-In
Income of Shares Value Warrants Capital
--------------- ---------------- ------------ ------------ --------------
BALANCE, January 31, 1999 25,865,466 $ 259 $ - $ 72,715
Comprehensive income:
Net income $ 7,416 - - - -
Other comprehensive income, net of tax:
Unrealized gains on securities, net
of tax of $ 846 1,378 - - - -
=======
Comprehensive income $ 8,794
=======
Value assigned to common stock
purchase warrants - - 6,931 -
Proceeds received on officer notes - - - -
Exercise of stock warrants 10,674,418 107 - 178,263
Exercise of stock options 452,800 4 - 2,130
Accretion of redeemable preferred stock - - - -
---------- ----- ------- ----------
BALANCE, July 31, 1999 36,992,684 $ 370 $ 6,931 $ 253,108
========== ===== ======= ==========
Accumulated Notes
Other Receivable Total
Comprehensive From Retained Shareholders'
Income (Losses) Officers Earnings Equity
---------------- ------------- -------------- -------------
BALANCE, January 31, 1999 $ (2,841) $ (1,059) $ 39,337 $ 108,411
Comprehensive income:
Net income - - 7,416 7,416
Other comprehensive income, net of tax:
Unrealized gains on securities, net
of tax of $ 846 1,378 - - 1,378
Comprehensive income
Value assigned to common stock
purchase warrants - - - 6,931
Proceeds received on officer notes - 1,059 - 1,059
Exercise of stock warrants - - - 178,370
Exercise of stock options - - - 2,134
Accretion of redeemable preferred stock - - (69) (69)
-------- -------- -------- ---------
BALANCE, July 31, 1999 $ (1,463) $ - $ 46,684 $ 305,630
======== ======== ======== =========
The accompanying notes are an integral part of this condensed
consolidated financial statement.
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VALUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands, except share data)
For the Six Months Ended July 31,
---------------------------------
1999 1998
--------------- ----------------
OPERATING ACTIVITIES:
Net income $ 7,416 $ 10,559
Adjustments to reconcile net income to net cash
provided by (used for) operating activities-
Depreciation and amortization 2,455 2,546
Deferred taxes (140) (4)
Gain on sale of broadcast stations (9,980) (19,750)
Gain on sale of property and investments (136) (3,639)
Unrealized loss on trading securities 794 --
Equity in losses of affiliates 5 139
National Media Corporation terminated acquisition costs -- 2,350
Changes in operating assets and liabilities:
Accounts receivable, net (9,456) (6,250)
Inventories, net (2,320) 198
Prepaid expenses and other 20 789
Accounts payable and accrued liabilities 2,496 600
Income taxes payable (receivable), net (3,737) 2,687
--------- ---------
Net cash used for operating activities (12,583) (9,775)
--------- ---------
INVESTING ACTIVITIES:
Property and equipment additions, net of retirements (589) (638)
Proceeds from sale of investments and property 10 9,427
Proceeds from sale of broadcast stations 10,000 24,483
Loan to National Media Corporation -- (3,000)
Purchase of short-term investments (60,449) (3,449)
Proceeds from sale of short-term investments 8,038 11,227
Payment for investments and other assets (2,814) (2,386)
Proceeds from notes receivable 1,254 --
--------- ---------
Net cash provided by (used for) investing activities (44,550) 35,664
--------- ---------
FINANCING ACTIVITIES:
Proceeds from issuance of Series A Preferred Stock 44,265 --
Proceeds from exercise of stock options and warrants 180,504 8
Payment of long-term obligations (103) (313)
Payments for repurchases of common stock -- (5,324)
--------- ---------
Net cash provided by (used for) financing activities 224,666 (5,629)
--------- ---------
Net increase in cash and cash equivalents 167,533 20,260
BEGINNING CASH AND CASH EQUIVALENTS 44,264 17,198
--------- ---------
ENDING CASH AND CASH EQUIVALENTS $ 211,797 $ 37,458
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 32 $ 71
========= =========
Income taxes paid $ 8,375 $ 3,826
========= =========
SUPPLEMENTAL NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Issuance of 1,450,000 warrants in connection with the
signing of a Distribution and Marketing Agreement
with NBC $ 6,931 $ --
========= =========
Accretion on redeemable preferred stock $ 69 $ --
========= =========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1999
(Unaudited)
(1) GENERAL
ValueVision International, Inc. and Subsidiaries ("ValueVision" or the
"Company") is an integrated direct marketing company which markets its products
directly to consumers through electronic and print media.
The Company's principal electronic media activity is its television home
shopping business which uses recognized on-air television home shopping
personalities to market brand name merchandise and proprietary and private label
consumer products at competitive or discount prices. The Company's live 24-hour
per day television home shopping programming is distributed primarily through
long-term cable affiliation agreements and the purchase of month-to-month full-
and part-time block lease agreements of cable and broadcast television time. In
addition, the Company distributes its programming through a Company owned full
power Ultra-High Frequency ("UHF") broadcast television station, low power
television ("LPTV") stations and to satellite dish owners. The Company also
complements its television home shopping business by the sale of merchandise
through its Internet shopping website (www.vvtv.com).
The Company, through its wholly-owned subsidiary, ValueVision Direct
Marketing Company, Inc. ("VVDM"), is a direct-mail marketer of a broad range of
general merchandise which is sold to consumers through direct-mail catalogs and
other direct marketing solicitations. Through VVDM's wholly-owned subsidiary,
Catalog Ventures, Inc. ("CVI"), the Company sells a variety of fashion jewelry,
health and beauty aids, books, audio and video cassettes and other related
consumer merchandise through the publication of five consumer specialty
catalogs. The Company also manufactures and markets, via direct-mail, women's
foundation undergarments and other women's apparel through VVDM's wholly-owned
subsidiary Beautiful Images, Inc. ("BII").
(2) BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. The information furnished in the interim condensed
consolidated financial statements includes normal recurring adjustments and
reflects all adjustments which, in the opinion of management, are necessary for
a fair presentation of such financial statements. Although management believes
the disclosures and information presented are adequate to make the information
not misleading, it is suggested that these interim condensed consolidated
financial statements be read in conjunction with the Company's most recent
audited financial statements and notes thereto included in its fiscal 1999
Annual Report on Form 10-K. Operating results for the six-month period ended
July 31, 1999, are not necessarily indicative of the results that may be
expected for the fiscal year ending January 31, 2000.
(3) NET INCOME PER COMMON SHARE
The Company calculates earnings per share ("EPS") in accordance with the
provisions of Statement of Financial Accounting Standards No. 128, "Earnings per
Share" ("SFAS No. 128"). Basic EPS is computed by dividing reported earnings by
the weighted average number of common shares outstanding for the reported
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock of the Company during reported periods.
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VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1999
(Unaudited)
A reconciliation of EPS calculations under SFAS No. 128 is as follows:
Three Months Ended July 31, Six Months Ended July 31,
---------------------------- ----------------------------------
1999 1998 1999 1998
------------- ----------- --------------- --------------
Net income available to
common shareholders $ 979,000 $ (721,000) $ 7,347,000 $ 10,559,000
============= =========== =============== ==============
Weighted average number of common
shares outstanding - Basic 29,651,000 25,979,000 27,833,000 26,380,000
Dilutive effect of convertible preferred
stock 4,765,000 - 2,698,000 -
Dilutive effect of stock options and
warrants 4,492,000 - 3,231,000 108,000
------------- ----------- --------------- --------------
Weighted average number of common
shares outstanding - Diluted 38,908,000 25,979,000 33,762,000 26,488,000
============= =========== =============== ==============
Net income per common share $ 0.03 $ (0.03) $ 0.26 $ 0.40
============= =========== =============== ==============
Net income per common share -
assuming dilution $ 0.03 $ (0.03) $ 0.22 $ 0.40
============= =========== =============== ==============
For the quarters ended July 31, 1999 and 1998, respectively, 850,000 and
4,090,000 potentially dilutive common shares have been excluded from the
computation of diluted earnings per share as the effect of their inclusion would
be antidilutive.
(4) COMPREHENSIVE INCOME
The Company reports comprehensive income in accordance with Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
No. 130"). SFAS No. 130 establishes standards for reporting in the financial
statements all changes in equity during a period, except those resulting from
investments by and distributions to owners. For the Company, comprehensive
income includes net income and other comprehensive income (loss) which consists
of unrealized holding gains and losses from equity investments classified as
"available-for-sale". Total comprehensive income (loss) was $1,299,000 and
($3,975,000) for the three months ended July 31, 1999 and 1998, respectively.
Total comprehensive income was $8,794,000 and $10,292,000 for the six months
ended July 31, 1999 and 1998, respectively.
(5) SEGMENT DISCLOSURES
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS No. 131") requires the
disclosure of certain information about operating segments in financial
statements. The Company's reportable segments are based on the Company's method
of internal reporting, which generally segregates the strategic business units
into two segments: electronic media, consisting primarily of the Company's
television home shopping business, and print media, whereby merchandise is sold
to consumers through direct-mail catalogs and other direct marketing
solicitations. Segment information included in the accompanying consolidated
balance sheets as of July 31 and included in the consolidated statements of
operations for the three and six-month periods then ended is as follows (in
thousands):
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VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1999
(Unaudited)
Electronic Print
Media Media Corporate Total
----- ----- --------- -----
Three Months Ended July 31, 1999
Revenues $ 51,999 $ 5,876 $ - $ 57,875
Operating income (loss) 646 (335) - 311
Net income (loss) 1,404 (356) - 1,048
Identifiable assets 348,233 18,365 19,022 (a) 385,620
Three Months Ended July 31, 1998
Revenues 34,721 9,361 - 44,082
Operating loss (1,332) (1,805) - (3,137)
Net income (loss) 609 (1,330) - (721)
Six Months Ended July 31, 1999
Revenues 96,374 14,642 - 111,016
Operating income (loss) 790 (137) - 653
Net income (loss) 7,792 (376) - 7,416
Identifiable assets 348,233 18,365 19,022 (a) 385,620
Six Months Ended July 31, 1998
Revenues 63,860 23,898 - 87,758
Operating loss (3,714) (1,712) - (5,426)
Net income (loss) 12,046 (1,487) - 10,559
(a) Corporate assets consists of long-term investment assets not directly
assignable to a business segment.
(6) NBC AND GE EQUITY STRATEGIC ALLIANCE
On March 8, 1999, the Company entered into a strategic alliance with the
National Broadcasting Company, Inc. ("NBC") and G.E. Capital Equity Investments,
Inc. ("GE Equity"). Pursuant to the terms of the transaction, GE Equity acquired
5,339,500 shares of the Company's Series A Redeemable Convertible Preferred
Stock (the "Preferred Stock"), and NBC was issued a warrant to acquire 1,450,000
shares of Common Stock (the "Distribution Warrant") under a "Distribution and
Marketing Agreement" as discussed below. The Preferred Stock was sold for
aggregate consideration of approximately $44.0 million (or approximately $8.29
per share) and the Company will receive an additional approximately $12.0
million upon exercise of the Distribution Warrant. In addition, the Company
agreed to issue to GE Equity a warrant to increase its potential aggregate
equity stake (together with its affiliates, including NBC) to 39.9%. NBC also
has the exclusive right to negotiate on behalf of the Company for the
distribution of its television home shopping service.
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VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1999
(Unaudited)
INVESTMENT AGREEMENT
Pursuant to the Investment Agreement by and between the Company and GE
Equity dated March 8, 1999 (the "Investment Agreement"), the Company sold to GE
Equity 5,339,500 shares of Series A Redeemable Convertible Preferred Stock, $.01
par value (the "Preferred Stock") for an aggregate of $44,265,000. The Preferred
Stock is convertible into an equal number of shares of the Company's Common
Stock, $.01 par value ("Common Stock"), subject to customary anti-dilution
adjustments, has a mandatory redemption on the 10th anniversary of its issuance
or upon a "change of control" at its stated value ($8.29 per share),
participates in dividends on the same basis as the Common Stock and has a
liquidation preference over the Common Stock and any other junior securities. So
long as NBC or GE Equity is entitled to designate a nominee to the Board of
Directors (the "ValueVision Board") of the Company (see discussion under
"Shareholder Agreement" below), the holders of the Preferred Stock are entitled
to a separate class vote on the directors subject to nomination by NBC and GE
Equity. During such period of time, such holders will not be entitled to vote in
the election of any other directors, but will be entitled to vote on all other
matters put before shareholders of the Company. Consummation of the sale of
3,739,500 shares of the Preferred Stock was completed on April 15, 1999. Final
consummation of the transaction regarding the sale of the remaining 1,600,000
Preferred Stock shares was completed on June 2, 1999. The Preferred Stock was
recorded at fair value on the date of issuance less issuance costs of
$2,850,000. The excess of the redemption value over the carrying value is being
accreted by periodic charges to retained earnings over the ten year redemption
period.
The Investment Agreement also provided that the Company issue GE Equity a
common stock purchase warrant (the "Investment Warrant") to acquire the number
of shares of the Common Stock that would result in the combined beneficial
ownership by GE Equity and NBC of 39.9% of the Common Stock outstanding from
time to time subject to certain limitations as set forth in the Investment
Warrant. On July 6, 1999, GE Equity exercised the Investment Warrant allowing
them to acquire an additional 10,674,000 shares of the Company's Common Stock
for an aggregate of $178,370,000, or $16.71 per share, representing the 45- day
average closing price of the underlying Common Stock ending on the trading day
prior to exercise. Following the exercise of the Investment Warrant, the
combined ownership of the Company by GE Equity and NBC was approximately 39.9%.
SHAREHOLDER AGREEMENT
Pursuant to the Investment Agreement, the Company and GE Equity entered
into a Shareholder Agreement (the "Shareholder Agreement") which provides for
certain corporate governance and standstill matters. The Shareholder Agreement
(together with the Certificate of Designation of the Preferred Stock) provides
that GE Equity and NBC will be entitled to designate nominees for an aggregate
of 2 out of 7 board seats so long as their aggregate beneficial ownership is at
least equal to 50% of their initial beneficial ownership, and 1 out of 7 board
seats so long as their aggregate beneficial ownership is at least 10% of the
"adjusted outstanding shares of Common Stock". GE Equity and NBC have also
agreed to vote their shares of Common Stock in favor of the Company's nominees
to the ValueVision Board in certain circumstances.
All committees of the ValueVision Board will include a proportional number
of directors nominated by GE Equity and NBC. The Shareholder Agreement also
requires the consent of GE Equity prior to the Company entering into any
substantial agreements with certain restricted parties (broadcast networks and
internet portals in certain limited circumstances, as defined), as well as
taking any of the following actions: (i) issuance of more than 15% of the total
voting shares of the Company in any 12-month period (25% in any 24-month
period), (ii) payment of quarterly dividends in excess of 5% of the Company's
market capitalization (or repurchases and redemption of Common Stock with
certain exceptions), (iii) entry by the Company into any business not ancillary,
complementary or reasonably related to the Company's current business, (iv)
acquisitions (including investments and joint ventures) or dispositions
exceeding the greater of $35.0 million or 10% of the Company's total market
capitalization, or (v) incurrence of debt exceeding the greater of $40.0 million
or 30% of the Company's total capitalization.
Pursuant to the Shareholder Agreement, so long as GE Equity and NBC have the
right to name at least one nominee to the ValueVision Board, the Company will
provide them with certain monthly, quarterly and annual financial reports and
budgets. In addition, the Company has agreed not to take actions which would
cause the Company to be in breach of or default under any of its material
contracts (or otherwise require a consent thereunder) as a result of
acquisitions of the Common Stock by GE Equity or NBC. The Company is also
prohibited from taking any action that would cause any ownership interest of
certain FCC regulated entities from being attributable to GE Equity, NBC or
their affiliates.
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VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1999
(Unaudited)
The Shareholder Agreement provides that during the Standstill Period (as
defined in the Shareholder Agreement), and with certain limited exceptions, GE
Equity and NBC shall be prohibited from: (i) any asset/business purchases from
the Company in excess of 10% of the total fair market value of the Company's
assets, (ii) increasing their beneficial ownership above 39.9% of the Company's
shares, (iii) making or in any way participating in any solicitation of proxies,
(iv) depositing any securities of the Company in a voting trust, (v) forming,
joining, or in any way becoming a member of a 13D Group with respect to any
voting securities of the Company, (vi) arranging any financing for, or providing
any financing commitment specifically for, the purchase of any voting securities
of the Company, (vii) otherwise acting, whether alone or in concert with others,
to seek to propose to the Company any tender or exchange offer, merger, business
combination, restructuring, liquidation, recapitalization or similar transaction
involving the Company, or nominating any person as a director of the Company who
is not nominated by the then incumbent directors, or proposing any matter to be
voted upon by the shareholders of the Company. If during the Standstill Period
any inquiry has been made regarding a "takeover transaction" or "change in
control" which has not been rejected by the ValueVision Board, or the
ValueVision Board pursues such a transaction, or engages in negotiations or
provides information to a third party and the ValueVision Board has not resolved
to terminate such discussions, then GE Equity or NBC may propose to the Company
a tender offer or business combination proposal.
In addition, unless GE Equity and NBC beneficially own less than 5% or more
than 90% of the adjusted outstanding shares of Common Stock, GE Equity and NBC
shall not sell, transfer or otherwise dispose of any securities of the Company
except for transfers: (i) to certain affiliates who agree to be bound by the
provisions of the Shareholder Agreement, (ii) which have been consented to by
the Company, (iii) pursuant to a third party tender offer, provided that no
shares of Common Stock may be transferred pursuant to this clause (iv) to the
extent such shares were acquired upon exercise of the Investment Warrant on or
after the date of commencement of such third party tender offer or the public
announcement by the offeror thereof or that such offeror intends to commence
such third party tender offer, (v) pursuant to a merger, consolidation or
reorganization to which the Company is a party, (vi) in a bona fide public
distribution or bona fide underwritten public offering, (vii) pursuant to Rule
144 of the Securities Act, or (viii) in a private sale or pursuant to Rule 144A
of the Securities Act; provided that, in the case of any transfer pursuant to
clause (vi) or (viii), such transfer does not result in, to the knowledge of the
transferor after reasonable inquiry, any other person acquiring, after giving
effect to such transfer, beneficial ownership, individually or in the aggregate
with such person's affiliates, of more than 10% of the adjusted outstanding
shares of the Common Stock.
The Standstill Period will terminate on the earliest to occur of (i) the 10
year anniversary of the Shareholder Agreement, (ii) the entering into by the
Company of an agreement that would result in a "change in control" (subject to
reinstatement), (iii) an actual "change in control," (iv) a third party tender
offer (subject to reinstatement), and (v) six months after GE Equity and NBC can
no longer designate any nominees to the ValueVision Board. Following the
expiration of the Standstill Period pursuant to clause (i) or (v) above
(indefinitely in the case of clause (i) and two years in the case of clause
(v)), GE Equity and NBC's beneficial ownership position may not exceed 39.9% of
the Company on fully-diluted outstanding stock, except pursuant to issuance or
exercise of any warrants or pursuant to a 100% tender offer for the Company.
REGISTRATION RIGHTS AGREEMENT
Pursuant to the Investment Agreement, ValueVision and GE Equity entered into
a Registration Rights Agreement providing GE Equity, NBC and their affiliates
and any transferees and assigns, an aggregate of four demand registrations and
unlimited piggyback registration rights.
DISTRIBUTION AND MARKETING AGREEMENT
NBC and the Company have entered into the Distribution and Marketing
Agreement dated March 8, 1999 (the "Distribution Agreement") which provides that
NBC shall have the exclusive right to negotiate on behalf of the Company for the
distribution of its home shopping television programming service. The agreement
has a 10-year term and NBC has committed to delivering an additional 10 million
full-time equivalent ("FTE") subscribers over the first 42 months of the term.
In compensation for such services, the Company will pay NBC an annual fee of
$1.5 million (increasing no more than 5% annually) and issue NBC the
Distribution Warrant. The exercise price of the Distribution Warrant is
approximately $8.29 per share and vests 200,000 shares immediately, with the
remainder of the Distribution Warrant vesting 125,000 shares annually over the
10-year term of the Distribution Agreement. The Distribution Warrant is
exercisable for five years after vesting. The value assigned to the Distribution
11
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VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1999
(Unaudited)
and Marketing Agreement and Distribution Warrant of $6,931,000 was determined
pursuant to an independent appraisal and is being amortized on a straight-line
basis over the term of the agreement. Assuming certain performance criteria
above the 10 million FTE homes are met, NBC will be entitled to additional
warrants to acquire Common Stock at the then current market price. The Company
has a right to terminate the Distribution Agreement after the twenty-fourth,
thirty-sixth and forty-second month anniversary if NBC is unable to meet the
performance targets. If terminated by the Company in such circumstance, the
unvested portion of the Distribution Warrant will expire. In addition, the
Company will be entitled to a $2.5 million payment from NBC if the Company
terminates the Distribution Agreement as a result of NBC's failure to meet the
24 month performance target.
NBC may terminate the Distribution Agreement if the Company enters into
certain "significant affiliation" agreements or a transaction resulting in a
"change of control."
LETTER AGREEMENT
The Company, GE Equity and NBC have also entered into a non-binding letter
of intent dated March 8, 1999 providing for certain cooperative business
activities which the parties contemplate pursuing, including but not limited to,
development of a private label credit card, development of electronic commerce
and other internet strategies, development of programming concepts for the
Company and cross channel promotion.
(7) GAIN ON SALE OF BROADCAST STATIONS
On April 12, 1999, the Company received a contingent payment of $10 million
relating to the sale of its KBGE-TV, Channel 33, television station in Seattle,
Washington, and two low-power television stations to Paxson Communications in
March 1998. As a result, the Company recognized a $10 million pre-tax gain, net
of applicable closing fees, in the quarter ended April 30, 1999. The $10 million
contingent payment finalizes the agreement between the two companies.
(8) SALE OF BROADCAST STATION
On May 3, 1999, the Company signed a definitive agreement to sell its
KVVV-TV full-power television broadcast station, Channel 33, and K53 FV low
power station, serving the Houston, Texas market, for a total of $28 million to
Visalia, California- based Pappas Telecasting Companies. The transaction is
anticipated to close in the third quarter of fiscal 2000 and is subject to
obtaining certain consents and regulatory approval. The effects of the
disposition will be reflected in the financial statements at the date of
closing. Management believes that the sale will not have a significant impact on
the operations of the Company.
(9) SUBSEQUENT EVENT
On September 13, 1999, the Company entered into a new strategic alliance
with Snap! LLC and Xoom.com, Inc. whereby the parties entered into major
re-branding and electronic commerce agreements, spanning television home
shopping, Internet shopping and direct e-commerce initiatives. Under the terms
of the agreements, ValueVision International Inc.'s television home shopping
network, currently called ValueVision, will be re-branded as SnapTV ("Snap TV").
The re-branding will be phased in during late 1999 and in the first half of
2000. The network, which will continue to be owned and operated by ValueVision,
will continue to feature its present product line as well as offer new
categories of products and brands. The Company along with Snap.com, NBC's
Internet portal services company, will roll-out a new companion Internet
shopping service, SnapTV.com -- featuring online purchasing opportunities that
spotlight products offered on-air along with online-only e-commerce
opportunities offered by Snap TV and its merchant partners. The new SnapTV.com
online store will be owned and operated by ValueVision and be featured
prominently within SnapTV.com's shopping area. Xoom.com, a leading direct
e-commerce services company, will become the exclusive direct electronic
commerce partner for SnapTV, managing all such initiatives, including database
management, e-mail marketing and other sales endeavors. Direct online shopping
offers will include SnapTV merchandise, as well as Xoom.com products and
services. See Item 5. "Other Information" for further discussion of this
strategic alliance and the agreements entered into by the Company, Snap LLC and
Xoom.com, Inc.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The following discussion and analysis of financial condition and results of
operations should be read in conjunction with the Company's accompanying
unaudited condensed consolidated financial statements and notes thereto included
elsewhere herein and the audited consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the fiscal year
ended January 31, 1999.
SELECTED CONDENSED CONSOLIDATED FINANCIAL DATA
Dollar Amounts as a Dollar Amounts as a
Percentage of Net Sales For the Percentage of Net Sales For the
Three Months Six Months
Ended July 31, Ended July 31,
1999 1998 1999 1998
------- ------- ------- -------
Net sales 100.0% 100.0% 100.0% 100.0%
======= ======= ======= =======
Gross margin 38.9% 41.1% 40.5% 41.9%
------- ------- ------- -------
Operating expenses:
Distribution and selling 31.4% 38.2% 32.8% 38.4%
General and administrative 4.7% 7.1% 4.9% 6.8%
Depreciation and amortization 2.3% 2.9% 2.2% 2.9%
------- ------- ------- -------
38.4% 48.2% 39.9% 48.1%
------- ------- ------- -------
Operating income (loss) 0.5% (7.1%) 0.6% (6.2)%
======= ======= ======= =======
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
ValueVision International, Inc. and Subsidiaries ("ValueVision" or the
"Company") is an integrated direct marketing company which markets its products
directly to consumers through electronic and print media.
The Company's principal electronic media activity is its television home
shopping business which uses recognized on-air television home shopping
personalities to market brand name and proprietary and private label consumer
products at competitive or discount prices. The Company's live 24-hour per day
television home shopping programming is distributed primarily through long-term
cable affiliation agreements and the purchase of month-to-month full- and
part-time block lease agreements of cable and broadcast television time. In
addition, the Company distributes its programming through a Company owned full
power Ultra-High Frequency ("UHF") broadcast television station, Company owned
low power television ("LPTV") stations and to satellite dish owners. The Company
also complements its television home shopping business by the sale of
merchandise through its Internet shopping website (www.vvtv.com).
The Company, through its wholly-owned subsidiary, ValueVision Direct
Marketing Company, Inc. ("VVDM"), is a direct-mail marketer of a broad range of
general merchandise which is sold to consumers through direct-mail catalogs and
other direct marketing solicitations. Through VVDM's wholly-owned subsidiary,
Catalog Ventures, Inc. ("CVI"), the Company sells a variety of fashion jewelry
and other related consumer merchandise through the publication of five consumer
specialty catalogs. The Company also manufactures and markets, via direct-mail,
women's foundation undergarments and other women's apparel through its
wholly-owned subsidiary, Beautiful Images, Inc. ("BII").
NBC AND GE EQUITY STRATEGIC ALLIANCE
On March 8, 1999 the Company entered into a strategic alliance with the
National Broadcasting Company, Inc. ("NBC") and G.E. Capital Equity Investments,
Inc. ("GE Equity"). Pursuant to the terms of the transaction, GE Equity acquired
5,339,500 shares of Series A Redeemable Convertible Preferred Stock (the
"Preferred Stock"), and NBC was issued a warrant to acquire 1,450,000 shares of
common stock (the "Distribution Warrant") under a Distribution and Marketing
Agreement. The Preferred Stock was sold for aggregate consideration of
approximately $44.0 million and the Company will receive an additional
approximately $12.0 million upon exercise of the Distribution Warrant. In
addition, the Company issued to GE Equity a warrant to increase its potential
aggregate equity stake (together with the Distribution Warrant issued to NBC) to
39.9% (the "Investment Warrant"). NBC has the exclusive right to negotiate on
behalf of ValueVision for the distribution of its television home shopping
service. Consummation of the sale of 3,739,500 shares of the Preferred Stock was
completed on April 15, 1999. Final consummation of the transaction regarding the
sale of the remaining 1,600,000 Preferred Stock shares and the exercisability of
the Investment Warrant was completed on June 2, 1999. On July 6, 1999, GE Equity
exercised the Investment Warrant allowing them to acquire an additional
10,674,000 shares of the Company's Common Stock for an aggregate of
$178,370,000, or $16.71 per share, representing the 45-day average closing price
of the underlying Common Stock ending on the trading day prior to exercise.
Proceeds received from the issuance of the Preferred Stock and the Investment
Warrant (and to be received from the exercise of the Distribution Warrant) are
for general corporate purposes. Following the exercise of the Investment
Warrant, the combined ownership of the Company by GE Equity and NBC was
approximately 39.9%. See Note 6 of Notes to Condensed Consolidated Financial
Statements for further discussion of the Company's strategic alliance with NBC
and GE Equity.
SNAP.COM, XOOM. COM RE-BRANDING AND ELECTRONIC COMMERCE ALLIANCE
Effective September 13, 1999, the Company entered into a new strategic
alliance with Snap! LLC and Xoom.com, Inc. whereby the parties entered into
major re-branding and electronic commerce agreements, spanning television home
shopping, Internet shopping and direct e-commerce initiatives. Under the terms
of the agreements, ValueVision International Inc.'s television home shopping
network, currently called ValueVision, will be re-branded as SnapTV ("Snap TV").
The re-branding will be phased in during late 1999 and in the first half of
2000. The network, which will continue to be owned and operated by ValueVision,
will continue to feature its present product line as well as offer new
categories of products and brands. The Company along with Snap.com, NBC's
Internet portal services company, will roll-out a new companion Internet
shopping service, SnapTV.com -- featuring online purchasing opportunities that
spotlight products offered on-air along with online-only e-commerce
opportunities offered by Snap TV and its merchant partners. The new SnapTV.com
online store will be owned and operated by ValueVision and be featured
prominently within
14
15
SnapTV.com's shopping area. Xoom.com, a leading direct e-commerce services
company, will become the exclusive direct electronic commerce partner for
SnapTV, managing all such initiatives, including database management, e-mail
marketing and other sales endeavors. Direct online shopping offers will include
SnapTV merchandise, as well as Xoom.com products and services. See Item 5.
"Other Information" for further discussion of this strategic alliance and the
agreements entered into by the Company, Snap LLC and Xoom.com, Inc.
RESULTS OF OPERATIONS
NET SALES
Net sales for the three months ended July 31, 1999 (fiscal 2000), were
$57,875,000 compared with net sales of $44,082,000 for the three months ended
July 31, 1998 (fiscal 1999), a 31% increase. Net sales for the six months ended
July 31, 1999 were $111,016,000 compared with $87,758,000 for the six months
ended July 31, 1998, a 27% increase. The increase in net sales is directly
attributable to the continued improvement and increased sales from the Company's
television home shopping operations, which have reported greater than 30% sales
increases for the past five quarters in a row and reported its largest revenue
quarter in the Company's history. Sales attributed to the Company's television
home shopping business increased 50% to a record $51,999,000 for the quarter
ended July 31, 1999 from $34,721,000 for the comparable prior year period on a
36% increase in average full-time equivalent homes able to receive the Company's
television home shopping programming. On a year-to-date basis, sales attributed
to the Company's television home shopping programming increased 51% to
$96,374,000 for the six months ended July 31, 1999 from $63,860,000 for the
comparable prior year period on a 33% increase in average full-time equivalent
subscriber homes. The growth in home shopping net sales is also the result of a
strengthened merchandising effort under the leadership of ValueVision - TV's new
general management. The improvement in television home shopping net sales is
also due, in part, to various sales initiatives that emphasized, among other
things, the increased use of the Company's ValuePay installment payment program.
During the 12-month period ended July 31, 1999 the Company added approximately
6.4 million full-time equivalent subscriber homes, a 53% increase. In addition
to new full-time equivalent homes, television home shopping sales increased due
to the continued addition of new customers from households already receiving the
Company's television home shopping programming, as well as an increase in repeat
sales to existing customers. The increase in repeat sales to existing customers
experienced during the first six months of fiscal 2000 was due, in part, to the
effects of continued testing of certain merchandising and programming
strategies. Certain changes were made to the Company's merchandising and
programming strategies in the first half of fiscal 2000 that contributed to an
improvement in television home shopping sales. The Company intends to continue
to test and change its merchandising and programming strategies with the intent
of improving its television home shopping sales results. However, while the
Company is optimistic that results will continue to improve, there can be no
assurance that such changes in strategy will achieve the intended results. Sales
attributed to direct-mail marketing operations totaled $5,876,000 or 10% of
total net sales for the quarter ended July 31, 1999 and totaled $9,361,000 or
21% of total net sales for the quarter ended July 31, 1998. On a year-to-date
basis, sales attributed to direct-mail marketing operations totaled $14,642,000
or 13% of total net sales for the six months ended July 31, 1999 and totaled
$23,898,000, or 27% of total net sales for the six months ended July 31, 1998.
The decrease in catalog revenues is a result of the fiscal 1999 divestiture of
the Company's unprofitable HomeVisions (formerly known as Montgomery Ward
Direct) mail order catalog operations.
GROSS PROFITS
Gross profits for the second quarter ended July 31, 1999 and 1998 were
$22,514,000 and $18,130,000, respectively, an increase of $4,384,000 or 24%.
Gross margins for the three months ended July 31, 1999 and 1998 were 38.9% and
41.1%, respectively. Gross profits for the six months ended July 31, 1999 and
1998 were $44,993,000 and $36,784,000, respectively, an increase of $8,209,000
or 22%. Gross margins for the six months ended July 31, 1999 were 40.5% compared
to 41.9% for the same period last year. The principal reason for the increase in
gross profits was the increased sales volume from the Company's television home
shopping business offset by a decrease in direct mail-order gross profits
resulting from the fiscal 1999 divestiture of the HomeVisions catalog
operations. Television gross margins for the three and six months ended July 31,
1999 were 36.8% and 38.0%, respectively. Gross margins for the Company's direct
mail-order operations were 57.9% and 57.0% for the same respective periods.
Television gross margins for the three and six months ended July 31, 1998 was
38.2% and 38.1%, respectively. Gross margins for the Company's direct mail-order
operations were 52.1% and 52.0% for the same respective periods. Television home
shopping gross margin percentages decreased as a direct result of changes in the
Company's merchandising mix. Specifically, television home shopping gross
margins between comparable periods decreased from prior year primarily as a
result of an increase in the sales volume of lower margin electronics
merchandise along with decreased gross margin percentages in the electronic and
jewelry product categories offset by an increase in the mix of jewelry and
slight increases
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16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
in the overall gross margin percentages for giftware and seasonal merchandise.
Also, and as a result of the mix change, additional inventory reserves were
established during the second quarter, which further reduced television home
shopping margins. During the first six months of fiscal 2000, the Company has
attempted to balance its merchandise mix between jewelry and non-jewelry items
as compared to the same period last year in order to increase television home
shopping sales while at the same time maintaining margins and increasing
inventory turns. Jewelry products accounted for approximately 79% of airtime
during the first six months of fiscal 2000 compared with 66% for the same period
last year. Gross margins for the Company's direct mail-order operations
increased primarily as a result of the decrease in HomeVisions sales due to the
fiscal 1999 divestiture of the Company's HomeVisions catalog operations which
had considerably lower margins than CVI or BII.
OPERATING EXPENSES
Total operating expenses for the three and six months ended July 31, 1999
were $22,203,000 and $44,340,000, respectively, versus $21,267,000 and
$42,210,000 for the comparable prior year periods. Distribution and selling
expense increased $1,305,000 or 8% to $18,161,000 or 31% of net sales during the
second quarter of fiscal 2000 compared to $16,856,000 or 38% for the comparable
prior-year period. Distribution and selling expense increased $2,718,000 or 8%
to $36,392,000 or 33% of net sales for the six months ended July 31, 1999
compared to $33,674,000 or 38% for the comparable prior-year period.
Distribution and selling costs increased primarily as a result of increases in
net cable access fees due to a 33% year-to-date increase in the number of
average FTE's over prior year, an increase in the rate per full-time equivalent
cable home, increased marketing and advertising fees, and increased costs
associated with credit card processing, telemarketing and the Company's ValuePay
program, offset by decreases in distribution and selling expenses associated
with the divestiture of the HomeVisions catalog operations. Distribution and
selling expenses decreased as a percentage of net sales over prior year
primarily due to the Company's focus on cost efficiencies and the increase in
television home shopping net sales over prior year.
General and administrative expenses for the three months ended July 31, 1999
decreased $398,000 or 13% to $2,738,000 compared to $3,136,000 for the three
months ended July 31, 1998. For the six months ended July 31, 1999 general and
administrative expenses decreased $497,000 or 8% to $5,493,000 compared to
$5,990,000 for the comparable prior year period. General and administrative
expenses as a percentage of net sales were 5% versus 7% for the three and six
months ended July 31, 1999 and 1998, respectively. General and administrative
costs decreased from prior year as a result of general cost containment and
decreased as a percentage of net sales as a result of the increase in net sales
from period to period.
Depreciation and amortization costs for the three months ended July 31, 1999
was $1,304,000 versus $1,275,000 representing a increase of $29,000 or 2% from
the comparable prior-year period. Depreciation and amortization expense for the
six months ended July 31, 1999 was $2,455,000 versus $2,546,000 representing a
decrease of $91,000 or 4% from the comparable prior-year period. Depreciation
and amortization costs as a percentage of net sales were 2% for the three and
six months ended July 31, 1999 versus 3% for the comparable prior-year periods.
The year-to-date dollar decrease is primarily due to a reduction in depreciation
expense in connection with the divestiture of the Company's HomeVisions catalog
operations and reduced amortization with respect to cable launch fees and FCC
licenses offset by increased amortization associated with the Company's NBC
cable distribution and marketing agreement.
OPERATING INCOME (LOSS)
For the three months ended July 31, 1999, the Company reported operating
income of $311,000 compared to an operating loss of $3,137,000 for the three
months ended July 31, 1998, an improvement of $3,448,000. For the six months
ended July 31, 1999, the Company reported operating income of $653,000 compared
to an operating loss of $5,426,000 for the six months ended July 31, 1998, an
improvement of $6,079,000. The improvement in quarterly and year-to-date
operating income over prior year is directly attributed to the overall operating
improvements of the Company's television home shopping business which improved
by approximately $1,978,000 and $4,504,000 for the three and six months ended
July 31, 1999, respectively. The Company also experienced a modest improvement
in operating income over prior year from its catalog operations primarily
resulting from the fiscal 1999 divestiture of its unprofitable HomeVisions
catalog operations. Overall, operating income increased as a result of increased
sales volumes and gross profits, decreases in general and administrative costs
resulting from general cost containment and a reduction in year-to-date
depreciation and amortization expense over prior year offset by increases in
distributing and selling costs and increased amortization associated with the
Company's NBC cable distribution and marketing agreement.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NET INCOME
For the three months ended July 31, 1999, the Company reported net income
available to common shareholders of $979,000 or $.03 per share on 38,908,000
diluted weighted average common shares outstanding ($.03 per share on 29,651,000
basic shares) compared with a net loss of $721,000 or $.03 per basic and diluted
share on 25,979,000 weighted average common shares outstanding for the quarter
ended July 31, 1998. Net income available to common shareholders for the quarter
ended July 31, 1999 includes a net pre-tax loss of approximately $206,000
relating primarily to the sale and holdings of the Company's trading security
investments. Results for the quarter ended July 31, 1998 included a $2,350,000
write-off related to terminated acquisition costs and included pre-tax gains on
the sale of property of $3,653,000. Excluding the net gains/losses recorded on
the sale and holdings of property and investments and other one-time charges,
the Company achieved net income available to common shareholders of $1,111,000,
or $.03 per diluted share ($.04 per basic share) for the quarter ended July 31,
1999, compared with a net loss of $1,529,000, or $.06 per basic and diluted
share for the quarter ended July 31, 1998, an increase of approximately
$2,640,000 over fiscal 1999.
For the six months ended July 31, 1999, the Company reported net income
available to common shareholders of $7,347,000 or $.22 per share on 33,762,000
diluted weighted average common shares outstanding ($.26 per share on 27,833,000
basic shares) compared with net income of $10,559,000 or $.40 per share on
26,488,000 diluted weighted average common shares outstanding ($.40 per share on
26,380,000 basic shares) for the six months ended July 31, 1998. Net income for
the six months ended July 31, 1999 includes a pre-tax gain of approximately
$10,000,000 relating to the receipt of a contingent payment in connection with
the Company's sale of a television broadcast station and two low-power
television stations to Paxson Communications Corporation in March 1998 and a net
pre-tax loss of $658,000 recorded on the sale and holdings of the Company's
trading security investments. Net income for the six months ended July 31, 1998
included a pre-tax gain of $19,750,000 relating to the sale of its television
broadcast station, KBGE-TV and two low-power television stations, a pre-tax gain
of $3,639,000 relating to the sale of property and a $2.4 million write-off
related to terminated acquisition costs. Excluding the net gains/losses recorded
on the sale and holdings of property and investments and other one-time charges,
the Company achieved net income available to common shareholders of $1,669,000,
or $.05 per diluted share ($.06 per basic share) for the six months ended July
31, 1999, compared to a net loss of $2,483,000, or $.09 per basic and diluted
share for the six months ended July 31, 1998, an improvement of approximately
$4,152,000 over fiscal 1999. For the three and six months ended July 31, 1999,
net income reflects an income tax provision at an effective tax rate of 39%.
PROGRAM DISTRIBUTION
The Company's television home-shopping programming was available to
approximately 25.7 million homes as of July 31, 1999, as compared to 21.8
million homes as of January 31, 1999 and to 17.3 million homes as of July 31,
1998. The Company's programming is currently available through affiliation and
time-block purchase agreements with approximately 350 cable systems and one
wholly-owned full power television broadcast station. In addition, the Company's
programming is broadcast full-time over twelve owned low power television
stations in major markets, and is available unscrambled to homes equipped with
satellite dishes. As of July 31, 1999 and 1998, the Company's programming was
available to approximately 18.4 million and 12.0 million full-time equivalent
("FTE") households, respectively. As of January 31, 1999, the Company's
programming was available to 14.9 million FTE households. Approximately 11.5
million and 9.3 million households at July 31, 1999 and 1998, respectively,
received the Company's programming on a full-time basis. Homes that receive the
Company's television home shopping programming 24 hours per day are counted as
one FTE each and homes that receive the Company's programming for any period
less than 24 hours are counted based upon an analysis of time of day and day of
week.
CIRCULATION
With respect to the Company's direct-mail marketing operations,
approximately 6.9 million CVI catalogs were mailed in the second quarter of
fiscal 2000. At July 31, 1999, CVI had approximately 566,000 "active" customers
(defined as individuals that have purchased from the Company within the
preceding 12 months) and combined customer and prospect files that totaled
approximately 4.1 million names. During the second quarter of fiscal 2000, BII
had approximately 129.1 million space advertisements or "impressions" circulated
in national and regional newspapers and magazines and at July 31, 1999, BII had
approximately 210,000 active customers and approximately 750,000 customer names
in its customer list database.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
YEAR 2000 CONSIDERATIONS
The Year 2000 issue is the result of computer programs using only the last
two digits to indicate the calendar year. If uncorrected, such computer programs
may be unable to interpret dates correctly beyond the year 1999, which in turn,
may cause computer system failure or other computer errors disrupting
operations. The Company has reviewed the implications of its Year 2000
compliance issues and has formed a Year 2000 Compliance Project team to
establish and take steps to ensure that the Company's information systems and
software applications will manage dates beyond 1999. The scope of the Company's
Year 2000 readiness effort includes the review of and taking remedial action as
necessary, regarding (i) information technology ("IT") such as software and
hardware; (ii) non-IT systems or embedded technology; and (iii) readiness of key
third parties, including significant vendors and service providers and the
electronic data interchange (EDI) with third parties.
With respect to information systems, management presently believes that a
combination of software modification, upgrades and replacements will be
necessary to mitigate the Company's Year 2000 issues. However, if such
modifications are not made, or not completed on a timely basis, the Year 2000
issue could have a materially adverse effect on the Company's business,
financial condition and results of operations. The Company expects to implement
successfully the systems and programming changes necessary to be Year 2000
compliant in a timely manner. The target month for final remediation of its
information systems is December 1999. The Company does not expect the cost of
addressing its Year 2000 issues to have a material effect on the Company's
results of operations, financial position or liquidity and is funding such costs
with operating cash flows. Total costs are expected to be less than $500,000.
In addition to internal Year 2000 remediation activities, the Company has
also implemented a plan to communicate to its key suppliers, vendors and service
providers the expectation that they attain Year 2000 compliance in a timely
manner. While the Company expects its internal IT and non-IT systems to be Year
2000 compliant by the date specified, the Company is working on a contingency
plan specifying what the Company will do if it or important third parties are
not Year 2000 compliant by the required dates. The Company expects to have such
a contingency plan finalized in 1999.
The Company believes that it has allocated adequate resources to address and
achieve Year 2000 compliance in a timely manner, however, no assurances can be
given that these efforts or the efforts of key third parties will be successful.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
As of July 31, 1999, cash and cash equivalents and short-term investments
were $266,165,000, compared to $46,870,000 as of January 31, 1999, a
$219,295,000 increase. For the six months ended July 31, 1999, working capital
increased $228,920,000 to $294,556,000. The current ratio was 8.6 at July 31,
1999 compared to 3.0 at January 31, 1999. At July 31, 1999 all short-term
investments and cash equivalents classified as trading securities were invested
in commercial paper with original maturity dates of less than two hundred and
seventy (270) days and investment grade corporate bonds with maturity dates
ranging from two months to two years.
Total assets at July 31, 1999 were $385,620,000, compared to $141,770,000 at
January 31, 1999. Shareholders' equity was $305,630,000 at July 31, 1999,
compared to $108,411,000 at January 31, 1999, a $197,219,000 increase. The
increase in shareholders' equity for the six month period ended July 31, 1999
resulted primarily from the issuance of approximately 10,674,000 shares of
common stock at $16.71 per share, or $178,370,000, to GE Equity upon the
exercise of their Investment Warrant, net income of $7,416,000 for the six-month
period, the issuance of 1,450,000 common stock purchase warrants valued at
$6,931,000 in connection with the NBC and GE Equity strategic alliance, other
comprehensive income on investments available-for-sale of $1,378,000, proceeds
received of $2,134,000 related to the exercise of stock options and proceeds
received of $1,059,000 on the pay down of shareholder notes.
For the six-month period ended July 31, 1999, net cash used for operating
activities totaled $12,583,000 compared to net cash used for operating
activities of $9,775,000 for the six-month period ended July 31, 1998. Cash
flows from operations before consideration of changes in working capital items
and investing and financing activities was a positive $3,108,000 for the six
months ended July 31 1999, compared to a negative $2,880,000 for the same
prior-year period. Net cash used for operating activities for the six months
ended July 31, 1999 reflects net income, as adjusted for depreciation and
amortization, equity in losses of affiliates, unrealized losses on trading
securities, gains on the sale of property and investments and gains on the sale
of
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
broadcast television stations. In addition, net cash used for operating
activities for the six months ended July 31, 1999 reflects increases in accounts
receivable, inventories and income taxes receivable, offset by increases in
accounts payable and accrued liabilities. Accounts receivable increased
primarily due to increased receivables due from customers for merchandise sales
made pursuant to the "ValuePay" installment program, the timing of credit card
receivable payments and increased interest receivable resulting from higher cash
balances. Inventories increased from year end to support increased sales volume,
offset by decreases resulting from the divestiture of the HomeVisions catalog
operations. Income taxes receivable increased as a result of making estimated
tax payments for fiscal 2000. The increase in accounts payable and accrued
liabilities is a direct result of the increase in inventory levels and the
timing of vendor payments.
Net cash used for investing activities totaled $44,550,000 for the six
months ended July 31, 1999 compared to net cash provided by investing activities
of $35,664,000 for the same period of fiscal 1999. For the six months ended July
31, 1999 and 1998, expenditures for property and equipment were $589,000 and
$638,000, respectively. Expenditures for property and equipment during the
periods ended July 31, 1999 and 1998 include (i) the upgrade of computer
software, related computer equipment and other office equipment and (ii)
expenditures on leasehold improvements for the Company's corporate offices.
Principal future capital expenditures will be for upgrading television
production and transmission equipment, the upgrade of computer software and
related technical equipment associated with e-commerce initiatives and
improvements to the Company's corporate offices. During the first half of fiscal
2000, the Company received a contingent payment of $10,000,000 relating to the
sale of its KBGE-TV, Channel 33, television station in Seattle, Washington, and
two low-power television stations to Paxson Communications in March 1998. During
the first half of fiscal 2000, the Company also invested $60,449,000 in various
short-term investments, received proceeds of $8,038,000 from the sale of
short-term investments, received $1,254,000 in connection with the repayment of
outstanding notes receivable and made disbursements of $2,814,000 for certain
investments and other long-term assets. For the six months ended July 31, 1998,
the Company received $24,483,000 in proceeds from the sale of its broadcast
television station KBGE-TV and received $9,427,000 of proceeds from the sale of
property. In addition, during the first half of fiscal 1999, the Company
invested $3,449,000 in various short-term investments, received proceeds of
$11,227,000 from the sale of short-term investments, disbursed $2,386,000
relating to certain strategic investments and other long-term assets and granted
a $3.0 million working capital loan to National Media Corporation.
Net cash provided by financing activities totaled $224,667,000 for the three
months ended July 31, 1999 and primarily related to $178,370,000 of proceeds
received from GE Equity on the issuance of 10,674,000 shares of common stock in
conjunction with the exercise of their Investment Warrant and $44,265,000 of
proceeds received from the issuance of Series A Redeemable Convertible Preferred
Stock in conjunction with the Company's new strategic alliance with GE Equity.
In addition, the Company also received proceeds of $2,134,000 from the exercise
of stock options and made payments of $102,000 in connection with its capital
lease obligations. Net cash used for financing activities totaled $5,628,000 for
the six months ended July 31, and primarily related to repurchases of the
Company's common stock under its stock repurchase program and capital lease
obligation payments.
Management believes that funds currently held by the Company will be
sufficient to fund the Company's operations, anticipated capital expenditures or
strategic acquisitions and cable launch fees through fiscal 2000.
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20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Information contained in this Form 10-Q and in other materials filed by the
Company with the Securities and Exchange Commission (as well as information
included in oral statements or other written statements made or to be made by
the Company) contain various "forward looking statements" within the meaning of
federal securities laws which represent management's expectations or beliefs
concerning future events. Such "forward looking statements" include, but are not
limited to, improved and growing television home shopping operations, general
expansion and profitability of the Company, consummation of the sale of its
Houston television station, new initiatives and the continuing success in
developing new strategic alliances (including the GE Equity and NBC alliance),
the Company's success in developing its e-commerce business, the expected target
date of the completion and the materiality of total costs associated with the
Company's Year 2000 readiness effort, capital spending requirements, potential
future acquisitions and the effects of regulation and competition. These, and
other forward looking statements made by the Company, must be evaluated in the
context of a number of important factors that may affect the Company's financial
position, results of operations and the ability to remain profitable, including:
the ability of the Company to continue improvements in its home shopping
operations, the ability to develop new initiatives or enter new strategic
relationships, the ability of the Company to meet all conditions necessary for
the Houston television sale, the rate at which customers accept solicitations
for club membership, the ability of the Company to develop a successful e-
commerce business, consumer spending and debt levels, interest rate
fluctuations, seasonal variations in consumer purchasing activities, increases
in postal, paper and outbound shipping costs, competition in the retail and
direct marketing industries, continuity of relationships with or purchases from
major vendors, product mix, competitive pressure on sales and pricing, the
ability of the Company to manage growth and expansion, changes in the regulatory
framework affecting the Company, increases in cable access fees and other costs
which cannot be recovered through improved pricing and the identification and
availability of potential acquisition targets at prices favorable to the
Company. Investors are cautioned that all forward looking statements involve
risk and uncertainty.
In addition to any specific risks and uncertainties discussed in this Form
10-Q, the risks and uncertainties discussed in detail in the Company's Form 10-K
for the fiscal year ended January 31, 1999, specifically under the caption
entitled "Risk Factors", provide information which should be considered in
evaluating any of the Company's forward looking statements. In addition, the
facts and circumstances which exist when any forward looking statements are made
and on which those forward looking statements are based, may significantly
change in the future, thereby rendering obsolete the forward looking statements
on which such facts and circumstances were based.
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VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
On June 2, 1999, the Company sold an additional 1,600,000 shares
of Series A Redeemable Convertible Preferred Stock for an
aggregate of $13,265,000. On July 6, 1999, GE Equity exercised
their Investment Warrant allowing them to acquire an additional
10,674,000 shares of the Company's Common Stock for an aggregate
of $178,370,000, or $16.71 per share, representing the 45-day
average closing price of the underlying Common Stock ending on the
trading day prior to exercise. Following the exercise of the
Investment Warrant, the combined ownership of the Company by GE
Equity and NBC was approximately 39.9%.
These securities were issued in private placements to accredited
investors and were exempt from registration pursuant to section
4(2) of The Securities Act of 1933, as amended. Proceeds from the
sale of the Preferred Stock and upon exercise of the warrants are
available for general corporate purposes.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A joint special/annual meeting of shareholders of ValueVision
International, Inc. pursuant to due call by the Board of Directors
was held on June 2, 1999. Shareholders holding 27,467,365 shares
(common and preferred shares), or approximately 92.14% of the
outstanding shares, were represented at the meeting by proxy or in
person. Matters submitted at the meeting for vote by the
shareholders were as follows:
(a) Election of Directors
On March 8, 1999, pursuant to the terms of the Shareholder
Agreement and the Certificate of Designation for the Series A
Redeemable Convertable Preferred Stock (the "Preferred Stock")
between the Company and GE Capital Equity Investments, Inc. ("GE
Equity"), the Company increased the number of directors
constituting the Board from five to seven directors and, on April
26, 1999, named two persons, namely Mr. Stuart Goldfarb and Mr.
Jeffrey H. Coats, designated by GE Equity, to fill the newly
created directorships. Effective July 27, 1999, Mr. Coats resigned
from the ValueVision Board and was replaced by Mr. John Flannery,
Managing Director of GE Equity. The Board currently has one
vacancy which will remains unfilled. Four directors were elected
at the meeting by the holders of common stock voting seperately as
a class and two were elected by the holders of the Preferred Stock
voting seperately as a class.
The following nominees were elected with the following votes to
serve as members of the Board of Directors until the next annual
meeting of shareholders in 2000 or until such time as a successor
may be elected:
Shares Shares
Voted For Withheld
--------- --------
Gene McCaffery 22,490,488 1,237,377
Robert J. Korkowski 22,490,488 1,237,377
Marshall S. Geller 22,490,388 1,237,477
Paul D. Tosetti 22,490,488 1,237,377
Stuart Goldfarb 5,339,500 --
Jeffrey H. Coats 5,339,500 --
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(b) Approval of the issuance of 1,600,000 shares of Series A
Redeemable Convertible Preferred Stock to G.E. Equity
Investments, Inc. (GE Equity)
Shareholders approved the issuance of 1,600,000 shares of Series A
Redeemable Convertible Preferred Stock to GE Equity by a vote of
18,429,940 shares in favor, 145,934 shares against, 36,156 shares
abstained, and 8,855,335 shares representing broker non-votes.
(c) Approval of the issuance to GE Equity of ValueVision
common stock issuable upon exercise of the Investment
Warrant
Shareholders approved the issuance to GE Equity of ValueVision
common stock issuable upon exercise of the Investment Warrant by a
vote of 18,439,348 shares in favor, 135,403 shares against, 37,279
shares abstained, and 8,855,335 shares representing broker
non-votes.
(d) Ratification of the issuance to NBC of 1,450,000
Performance Distributor Warrants, and the share of
ValueVision common stock issuable thereunder
Shareholders approved the ratification of the issuance to NBC of
1,450,000 Performance Distributor Warrants by a vote of 18,509,191
shares in favor, 70,334 shares against, 32,505 shares abstained,
and 8,855,335 shares representing broker non-votes.
(e) Approval of Amendment No. 6 to the Second Amended
ValueVision International, Inc. 1990 Stock Option Plan
Shareholders approved the amendment to the Second Amended
ValueVision International, Inc. 1990 Stock Option Plan by a vote
of 25,597,071 shares in favor, 1,820,836 shares against, and
49,458 shares abstained. The Amendment increased the number of
shares issuable under such plan from 2,150,000 to 3,250,000.
ITEM 5. OTHER INFORMATION
Effective September 13, 1999, the Company entered into a new
strategic alliance with Snap! LLC and Xoom.com, Inc. whereby the
parties entered into major re-branding and electronic commerce
agreements, spanning television home shopping, Internet shopping
and direct e-commerce initiatives. Under the terms of the
agreements, ValueVision International Inc.'s television home
shopping network, currently called ValueVision, will be re-branded
as SnapTV ("Snap TV"). The re-branding will be phased in during
late 1999 and in the first half of 2000. The network, which will
continue to be owned and operated by ValueVision, will continue to
feature its present product line as well as offer new categories
of products and brands. The Company along with Snap.com, NBC's
Internet portal services company, will roll-out a new companion
Internet shopping service, SnapTV.com -- featuring online
purchasing opportunities that spotlight products offered on-air
along with online-only e-commerce opportunities offered by Snap TV
and its merchant partners. The new SnapTV.com online store will be
owned and operated by ValueVision and be featured prominently
within SnapTV.com's shopping area. Xoom.com, a leading direct
e-commerce services company, will become the exclusive direct
electronic commerce partner for SnapTV, managing all such
initiatives, including database management, e-mail marketing and
other sales endeavors. Direct online shopping offers will include
SnapTV merchandise, as well as Xoom.com products and services.
Pursuant to this new strategic alliance, the following agreements
were executed:
Trademark License Agreement
Snap!LLC, a Delaware limited liability company ("Snap") and the
Company have entered into a ten-year Trademark License Agreement
dated as of September 13, 1999 (the "Trademark Agreement").
Pursuant to the agreement, Snap granted the Company an exclusive
license to Snap's "SnapTV" trademark (the "SnapTV Mark") for the
purpose of operating a television home shopping service and for
the purpose of operating an Internet website at "www.snaptv.com"
(the "SnapTV Site"). The agreement also obligates the Company to
rebrand its television home shopping service using the SnapTV
Mark. In compensation for the license, the
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Company will pay to Snap a royalty of 2% of revenues received from
Internet users in connection with commerce transactions on the
SnapTV Site.
Interactive Promotion Agreement
Snap! LLC, Xoom.com, Inc., a Delaware corporation, ("Xoom") and
the Company have entered into a ten-year Interactive Promotion
Agreement dated as of September 13, 1999 (the "interactive
Promotion Agreement"). Pursuant to the agreement: (a) the Company
will pay Snap or Xoom, as applicable, 20% of the gross revenue
received from advertising on the Company's television home
shopping service where Snap or Xoom referred the advertiser to the
Company or materially assisted the Company with respect to the
sale of such advertising; (b) the Company will pay Xoom 50% of the
gross revenue received from e-mail campaigns conducted by Xoom on
behalf of the Company for the Company's products; and (c) the
Company will pay Snap 20% of the gross revenue generated from
airtime on the Company's television home shopping service which
promotes any uniform resource locater ("URL") (excluding up to 15%
of such airtime to the extent used to promote URL's which do not
include the "www.snaptv.com" URL). Also under the agreement, Snap
and Xoom shall have an exclusive right to use the Company's user
data for the purpose of conducting e-mail marketing campaigns.
Snap or Xoom, as applicable, will pay the Company 50% of the gross
revenue generated from such campaigns. Snap will also be granted
the exclusive right to use or sell all Internet advertising on the
SnapTV Site, and Snap will pay the Company 50% of the gross
revenue generated from such use or sales. The agreement also
provides that Snap and the Company will provide certain cross
promotional activities. Specifically, commencing when the
Company's television home shopping program reaches 30 million
full-time equivalent subscribers and continuing through the fourth
anniversary of the effective date of the agreement, Snap will
spend $1 million per quarter promoting the SnapTV Mark on NBC's
television network, and the Company will spend $1 million per
quarter promoting Snap, Snap's products or "www.snaptv.com" on
cable television advertising other than on the Company's
television home shopping program.
Warrant Purchase Agreement and Warrants
Effective September 13, 1999, in connection with the transactions
contemplated under the Interactive Promotion Agreement, dated as
of September 13, 1999, between Snap, Xoom and the Company, the
Company issued a warrant (the "ValueVision Warrant") to Xoom to
acquire ten million dollars worth of the Company's common stock,
$.01 par value (the "ValueVision Common Stock"), at an exercise
price per share of $24.706, which calculated to 404,760 shares of
ValueVision Common Stock. In consideration, Xoom issued a warrant
(the "Xoom Warrant," and collectively with the ValueVision
Warrant, the "Warrants") to the Company to acquire ten million
dollars worth of Xoom's common stock, $.0001 par value ("Xoom
Common Stock"), at an exercise price per share of $40.983, which
calculated to 244,004 shares of Xoom Common Stock. Both Warrants
are subject to customary antidilution features and have a five (5)
year term.
Registration Rights Agreement
In connection with the issuance of the ValueVision Warrant to Xoom
to purchase up to 404,760 shares of ValueVision Common Stock, the
Company agreed to provide Xoom certain customary piggyback
registration rights with no demand registration rights. Xoom also
provided the Company with similar customary piggyback registration
rights with no demand registration rights with respect to the Xoom
Warrant.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Employment Agreement between the Registrant and Steve
Jackel dated June 4, 1999. (A)
10.2 Employment Agreement between the Registrant and Stuart
Goldfarb dated July 28, 1999. (A)
10.3 Option Agreement between the Registrant and Stuart
Goldfarb dated July 28, 1999. (A)
10.4 Option Agreement between the Registrant and Stuart
Goldfarb dated July 28, 1999. (A)
10.5 Interactive Promotion Agreement, between the Registrant,
Snap!LLC, a Delaware limited liability company and Xoom.com,
Inc., a Delaware corporation, dated September 13, 1999. (A)
10.6 Trademark License Agreement, between the Registrant
and Snap!LLC, a Delaware limited liability company, dated
September 13, 1999. (A)
10.7 Warrant Purchase Agreement, between the Registrant,
Snap!LLc, a Delaware limited liability company and Xoom.com,
Inc. a Delaware corporation, dated September 13, 1999. (A)
10.8 Common Stock Purchase Warrant to purchase shares of
the Registrant, held by Xoom.com, a Delaware corporation,
dated September 13, 1999. (A)
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10.9 Registration Rights Agreement, between the Registrant
and Xoom.com, Inc. a Delaware corporation, regarding
Xoom.com's warrant to purchase shares of the Registrant,
dated September 13, 1999. (A)
27 Financial Data Schedule (for SEC use only).
(A) Filed herewith
(b) Reports on Form 8-K
i. The Company filed a Form 8-K on May 7, 1999 reporting
under Item 5 that on May 3, 1999, the Company's
wholly-owned subsidiaries VVI Baytown, Inc. and VVILPTV,
Inc. entered into an agreement with an entity wholly
owned by Pappas Telecasting Companies ("Pappas"),
whereby the Company has agreed to sell its full power
television station, KVVV-TV, Channel 57, and its low
power television station, K53 FV, each serving the
Houston, Texas market to Pappas for an aggregate
purchase price of approximately $28 million.
ii. The Company filed a Form 8-K on August 3, 1999 reporting
under Item 5, that (a) on July 5, 1999, the Company
announced a multi-year agreement with EchoStar
Communications Corp. to carry ValueVision programming on
EchoStar's Digital Television Service increasing
carriage of ValueVision to an additional 3.6 million
homes, (b) on July 6, 1999, the Company announced a
multi-year agreement with Direct TV, Inc. to carry
ValueVision programming on Direct TV's Digital
Television Service increasing carriage of ValueVision to
an additional 7.0 million homes, (c) on July 7, 1999,
the Company announced that NBC and GE Equity increased
their stake in the Company to 39.9% by exercising their
warrants and purchasing approximately $175 million of
ValueVision common stock.
iii. The Company filed a Form 8-K on August 5, 1999 reporting
under Item 5, that on August 3, 1999, the Company
announced the appointment of Stuart Goldfarb as Vice
Chairman of ValueVision International, Inc., the
promotion of Cary Deacon to President of ValueVision
Interactive and the promotion of Steve Jackel to
President of ValueVision -- TV Home Shopping Operations.
On August 6, 1999 the Company filed an amendment to this
8-K to correct a typographical error in the number of
full-time equivalent homes presently reached by the
Company's home shopping channel.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES
/s/ Gene McCaffery
------------------------------------------
Gene McCaffery
Chief Executive Officer
(Principal Executive Officer)
/s/ Edwin G. Pohlmann
------------------------------------------
Edwin Pohlmann
Executive Vice President, Chief Operating
Officer and Chief Financial Officer
(Principal Financial and Accounting Officer)
September 14, 1999
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