EXHIBIT 99
VALUEVISION MEDIA REPORTS RECORD TV AND INTERNET SALES FOR FISCAL FOURTH
QUARTER 2002 AND FULL YEAR
Monday March 17, 7:00 pm ET
COMPANY EXPECTS CONTINUED DOUBLE DIGIT SALES GROWTH IN 2003
MINNEAPOLIS, March 17 /PRNewswire-FirstCall/ -- ValueVision Media (Nasdaq: VVTV
- - News) today announced financial results for the fourth quarter and fiscal year
ended January 31, 2003.
Fourth Quarter Ended January 31, 2003
-- Consolidated net sales a record $158 million, up 16% over prior year
period
-- Internet net sales a record $26 million, up 30% over previous year
quarter
-- EBITDA (as defined below) was $5.6 million vs. $2.9 million in the
year-ago quarter
-- Full-time equivalent (FTE) homes of 50.5 million, up 2.4 million from
last quarter
Fiscal Year Ended January 31, 2003
-- Consolidated net sales a record $555 million, a 20% increase over the
previous year
-- Internet net sales a record $94 million, up 52% over last year
-- EBITDA for the full year of $5.4 million
-- FTE growth of 6.5 million homes versus prior year-end
"In 2002, we achieved strong topline growth in spite of a period impacted by a
challenging economy, uncertain times created by the threat of war, and a heavy
promotional retail environment," said Gene McCaffery, ValueVision Media Chairman
and CEO. "We also experienced another year of record success at ShopNBC.com. And
we exceeded 50 million FTEs in our program distribution. Overall, through the
difficulties of the past year, we continued to focus on putting the building
blocks in place for long-term success: expanded program distribution,
diversification of merchandise categories, and further development of e-commerce
as a platform for growth.
"2003 should be a year of consolidation and stabilization for the company. Since
1998, our home growth has more than tripled and our revenue has nearly
quadrupled."
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Continued McCaffery, "And yet over these same years, we experienced some
disappointments: the scrapped SnapTV partnership, a handful of failed Internet
investments, and significant challenges arising from our mid-year systems
conversion. Moreover, we witnessed in the past three years a Nasdaq market
decline of approximately 75% influenced by difficult economic conditions and
international uncertainties. Today, the management team is committed to
continued double digit growth in revenue and solid, dependable profitability in
2003 and beyond.
"With that said, our company priorities will be to make greater strides in
diversifying our merchandise mix on both the TV and Internet channels,
particularly in home, cosmetics, and consumer electronics. For instance, last
year we grew our home category from 7% to 12% of total merchandise sales. This
expansion will continue. Equally important, our endeavors will be supported by
strengthened merchandise and IT organizations, which we have invested in over
the past six months by appointing senior level managers and buyers in the
aforementioned product areas. As we diversify our merchandising mix, I want to
assure you we will not diminish our jewelry sales. Rather, we intend to make
more productive our jewelry sales per hour and at the same time judiciously
scale back the number of hours, thus allowing room to build new categories. This
will be done carefully by closely monitoring our progress in the development of
diversified categories, to ensure that the testing and ultimate introduction of
these categories provide incremental sales and margin. This testing is well
under way and will be a more defined goal and measurement going forward. It is
imperative to the growth strategies of the company that the introduction of more
popular price points and broader selections are achieved to more effectively
take advantage of the rapid growth of our homes passed, and address broader
interests to maximize our commerce penetration. The high-quality jewelry
business we have developed over the years will be supported and further expanded
going forward as well."
Added McCaffery, "The significant growth of our FTEs over the past few years has
had significant costs attendant to those homes. While we will continue to pursue
this aggressive distribution with our NBC partners, it is now time to invest in
our business from a merchandise development and productivity per home as we
focus in on maximizing these investments and providing steady growth in revenue
and profitability going forward.
"It is probably true, on reflection, that our aggressive stance on revenue and
profitability over the last few years did not adequately consider the challenges
of such dramatic growth, its attendant cost, as well as operational and
organizational challenges. The self-funding of these incremental distribution
costs, totaling some $180 million over the past four years, while a challenging
achievement, was done at some expense of funding a more expansive and in-depth
merchandising organization to better address the needs of productivity per home
and diversified offers appealing to more consumers. This has been identified as
a key goal for 2003 and beyond, and is receiving the appropriate amount of
funding and attention.
"We also intend to significantly improve our customers' shopping experience by
rolling out a company-wide customer care initiative. This effort along with the
expansion into new product categories should drive comparable store increases in
the low to mid single digits as the 35 million homes added over the past four
years continue to improve performance. We also expect to see continued strong
sales increases in ShopNBC.com, a growth engine for the company, of 25% to 35%.
"Dick Barnes, ValueVision Media COO & CFO, said: "During the past year, we
continued to make strategic investments in our company's future by significantly
expanding our program distribution and implementing a company- wide systems
conversion. Unfortunately, we encountered some unforeseen difficulties during
the final stages of the systems conversion, which disrupted our business
primarily from June through September. In the fourth quarter, we continued to
make progress in stabilizing the system and I'm happy to say that we comfortably
handled our highest volume quarter without any disruptions in the flow of our
business."
EBITDA for the quarter was $5.6 million, including a $2.5 million benefit
associated with the amendment of the Ralph Lauren Media services agreement
described below. The Company defines EBITDA as its operating income (loss) for
respective periods being reported excluding depreciation and amortization
expense. EBITDA was adversely impacted in the fourth quarter by a slightly lower
sales volume than expected. EBITDA was also adversely impacted by a lower gross
margin rate than expected driven primarily by a heavier than expected retail
promotional environment around the holidays. This higher level of promotional
activity impacted the Company's gross margin rate for the fourth quarter, which
improved to 38% before approximately 2% of promotional mark downs as the Company
returned to a more normalized sales mix. Net fourth quarter gross margin was
36%, which compares to third quarter gross margin of 31% and fourth quarter
prior year of 35%.
Ending cash and short-term investment balance for the quarter was $169 million,
up $16 million from the previous quarter. In the first quarter of fiscal 2003,
the Company used $11 million of cash to purchase its leased headquarters in Eden
Prairie, Minnesota, which includes its TV production studios and jewelry
distribution center. In addition, the Company will invest approximately $32
million in the previously announced agreement with Norwell Television LLC to
acquire full power television station WWDP TV-46 in Boston, which reaches
approximately 1.8 million cable households. Partly off-setting the investments
will be the receipt of cash proceeds from the divestiture of 10 low power
television stations for approximately $5 million, and the receipt of $11 million
from the RLM services amendment described below.
"Both the headquarters and Boston Station purchases represent financially sound
uses of cash to support the long-term growth of our business," said Barnes.
"Also, considering our rapid growth in cable and satellite homes over the past
few years, the low powered television stations no longer made strategic sense to
the company, and as a result, were monetized."
In the fourth quarter, the Company wrote down its investment in the Ralph Lauren
Media joint venture with NBC and Polo Ralph Lauren from $31 million to zero.
This one-time investment write-down reflects the Company's significantly lowered
expectations of the RLM joint venture, which operates Polo.com. In addition, the
Company has agreed to amend, effective February 1, 2003, its existing customer
care and fulfillment services agreement with RLM in exchange for an $11 million
cash payment, which broadly covers the capital investment ValueVision made to
provide these services and for early termination of the original services
agreement. As part of the accounting for the $11 million payment, the Company
wrote off $5.9 million of dedicated fixed assets associated with the fulfillment
services arrangement that were deemed impaired, recorded $2.6 million as
deferred revenue against the on-going services obligation through December 2003,
and recorded the balance of the $2.5 million as services revenue in the fourth
quarter as a contract termination payment. The Company
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still retains its 12.5% ownership stake in RLM, but will no longer be required
to record any further equity losses against the RLM investment, which totaled
$5.7 million in 2002.
"While the new management team has made good progress, we've obviously been
disappointed with the financial success of RLM relative to original
expectations. We feel that this amendment reflects a good decision for our
shareholders," said Barnes. "Besides the $11 million cash payment, we will
retain the right of first refusal to continue servicing RLM after December 31,
2003. We also gain the flexibility to devote our Bowling Green facility to more
strategically support ValueVision and FanBuzz's growing business beyond 2003."
The RLM investment write-off, combined with the operating losses of the prior
three years, has resulted in the decision to establish a full valuation reserve
against the Company's net deferred tax assets in fiscal 2002. Based on the
guidance outlined below for fiscal 2003 profitability, the Company therefore
expects its effective income tax rate in 2003 to be approximately zero as it
utilizes existing loss carryforwards.
In addition to the financial and program distribution results, other recent
highlights included:
-- Company to Acquire Full Power Television Station WWDP in Boston
-- New Executives Hired to Strengthen Merchandise Team, Support Continued
Growth
-- FanBuzz and National Hockey League Enter Into Commerce Agreement
-- ShopNBC Continues to Add New Brands and Shows
-- Company Redesigns ShopNBC.com
Company to Acquire Full Power Television Station WWDP in Boston
ValueVision entered into an agreement with Norwell Television LLC to acquire
full power television station WWDP TV-46 in Boston, which reaches approximately
1.8 million cable households. The Company entered into the agreement to build a
long-term and cost effective distribution strategy in the attractive Boston
area. The deal is expected to close after FCC approval, which is anticipated in
the first quarter of 2003.
New Executives Hired to Strengthen Merchandise Organization, Support Continued
Growth
Over the past six months, the Company has strengthened its merchandise and IT
organizations. In addition to the additional buyers in products areas of
jewelry, home, cosmetics, and consumer electronics, the Company appointed a
number of senior level executives.
Liz Byerly Haesler joined the Company as Executive Vice President of TV and
Internet Sales. For the past two years, Haesler was Senior Vice President of
Merchandising at Marshall Field's, a $3 billion upscale department store
retailer of 64 stores across the Midwest and a division of Target Corporation,
based in Minneapolis. At ShopNBC, she has overall responsibility for
merchandising across TV and Internet as well as marketing and production. In
addition, Mrs. Haesler serves on the Executive Committee.
Additionally, Lynn Hempe joined the Company as Vice President of Merchandising,
Home, Cosmetics & Ready to Wear. With a proven track record of success spanning
20 years in retail, Lynn will be responsible for profitably growing TV/Internet
sales in these merchandise areas by continuing to expand existing product
offerings as well as develop new product lines within. Lynn has been with
Marshall Field's for the majority of her retail career, serving most recently as
Divisional Merchandise Manager (DMM) of Textiles, Stationary, Trim, Books, &
Confections.
Steve Danker joined the Company as Senior Vice President and Chief Information
Officer, reporting to Dick Barnes, EVP, COO, & CFO. Danker brings an extensive
retail IT background including CIO roles at Boston Chicken and The Musicland
Group. Prior to Boston Chicken, Danker worked at IBM and NCR in sales, account
management and product management roles. Most recently, he provided systems
consulting to retail enterprises.
FanBuzz and NHL Enter Into Commerce Agreement
FanBuzz, a wholly owned subsidiary of ValueVision and a leading provider of
commerce solutions to sports and media brands, and the National Hockey League,
entered into an alliance to develop and operate the NHL catalog and online
stores for the League and its 30 member clubs. As part of the agreement, fans
have access to a broad selection of NHL licensed products, including the
traditionally popular team jerseys, which can be personalized with the name and
number of any NHL player or the customer's own name and number. FanBuzz is
responsible for all facets of operation including web site development,
merchandising, catalog production, customer service, order processing, garment
decoration and product fulfillment. The new online store is located at
www.shop.nhl.com .
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In addition, FanBuzz recently entered e-commerce agreements with The Weather
Channel and the American Museum of National History to power their respective
online stores at www.weather.com and www.amnh.org. Building off its success at
last years winter Olympics, where FanBuzz powered the e-commerce success of the
Salt Lake Olympic Committee, FanBuzz also entered into agreements with national
governing bodies, such as USA Basketball, and Olympic Bid Committees, such as
NYC2012. FanBuzz's goal for 2003 is to provide premier media properties with a
transactional revenue strategy that includes improved e-commerce capabilities,
promotion and sale of branded merchandise on the ShopNBC television network, and
additional product sales and distribution through ShopNBC.com.
ShopNBC Continues to Add New Brands and Shows to Its Programming Line-up
The Company continued to add new brands and shows to its programming line- up.
Most recently, TV personality Rebecca Kolls extended an agreement to continue
her home and garden show, "Home Living With Rebecca Kolls," on the shopping
network. The Company also entered into a commerce and programming agreement with
leading cataloguer Crossing Pointe/Blair, which debuted actress Jane Seymour
along with her signature apparel collection. These developments are the latest
addition to an on-going list of brand names including Bose, Solutions, AOL, and
Gevalia.
Launch of Redesigned ShopNBC.com
ShopNBC's companion Internet site, ShopNBC.com, continued to experience strong
growth throughout the fourth quarter, achieving $26 million in sales, up 30%
over the year-ago period. Recently, the Company made significant strides in
improving ShopNBC.com's performance and appearance through a web site redesign
that added enhancements to online customer service, expanded merchandise
assortment to over 10,000 items, and premiered a first-of-its-kind online media
center, which will allow online customers to watch the ShopNBC shows being
broadcast at that time, view past shows broadcast on ShopNBC, and enjoy new
shows and materials created specially for ShopNBC.com.
Outlook for Fiscal Year Ended January 31, 2004
-- Consolidated net sales expected to be $630 million to $650 million, an
increase of 14% to 17%
-- EBITDA expected to be $25 million to $30 million, a 5-fold increase over
the prior year
-- Full-time equivalent household growth is expected to be 54 million to
56 million at year-end
-- Comparable net sales per FTE expected in the low to mid single digits
Outlook for the First Quarter Ended April 30, 2003
-- Consolidated net sales expected to be $135 million to $140 million, up 2%
to 5% over the prior year period
-- EBITDA for the quarter expected to be breakeven to $2 million
"Our financial outlook for 2003 is based on the presumption that economic and
geopolitical uncertainties, including the possible threat of war, will lead to a
slow start to the year," said Barnes. "As a result of operating in an uncertain
environment with possible secondary implications impacting consumer confidence,
consumer spending, and disruptions in TV viewership patterns, it is difficult to
predict how these unforeseen implications will affect our company's performance.
That said, however, we expect growth for the company to accelerate toward the
end of the second quarter and continue through the year as we begin to lap the
difficulties experienced in 2002 relating to the implementation of the
company-wide ERP system as well as what we expect will be an improving economy.
Additionally, our first quarter 2003 estimates compare to our strongest quarter
of a year ago, which benefited from one-time sales of Olympic-related product."
This release contains certain "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements are based
on management's current expectations and are accordingly subject to uncertainty
and changes in circumstances. Actual results may vary materially from the
expectations contained herein due to various important factors, including (but
not limited to): consumer spending and debt levels; interest rates; competitive
pressures on sales, pricing and gross profit margins; the level of cable
distribution for the Company's programming and the fees associated therewith;
the success of the Company's e-commerce and rebranding initiatives; the
performance of its equity investments; the success of its strategic alliances
and relationships; the performance of the Ralph Lauren Media venture; the
ability of the Company to manage its operating expenses successfully; risks
associated with acquisitions; changes in governmental or regulatory
requirements; litigation or governmental proceedings affecting the Company's
operations; and the ability of the Company to obtain and retain key executives
and employees. More detailed information about those factors is set forth in the
Company's 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. The Company is under no obligation (and expressly
disclaims any such obligation
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to) update or alter its forward-looking statements whether as a result of new
information, future events or otherwise.
ValueVision Media operates in the rapidly growing converged world of television,
the Internet, and e-commerce. In an effort to capitalize on this industry,
ValueVision Media owns and operates a number of assets and is organized into
five synergistic entities: ShopNBC, ShopNBC Interactive, Enhanced Broadcast
Technologies, ValueVision Direct, and FanBuzz. GE Equity and NBC own
approximately 40% of ValueVision Media. For more information, please see the
Company's website at www.valuevisionmedia.com .
VALUEVISION MEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
January 31, January 31,
2003 2002
(In thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents $ 55,109 $ 62,108
Short-term investments 113,525 165,723
Accounts receivable, net 76,734 56,760
Inventories 61,246 40,383
Prepaid expenses and other 7,449 5,189
Deferred income taxes -- 4,943
Total current assets 314,063 335,106
Property and equipment, net 39,905 35,972
NBC Trademark License Agreement, net 25,141 28,367
Cable distribution and marketing
agreement, net 5,341 6,038
Goodwill 9,442 --
Other intangible assets, net 1,242 --
Investments and other assets 11,140 42,827
$ 406,274 $ 448,310
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 56,961 $ 42,109
Accrued liabilities 30,310 18,564
Income taxes payable 226 144
Total current liabilities 87,497 60,817
Long-term capital lease obligations 1,669 395
Deferred income taxes -- 98
Series A Redeemable Convertible Preferred Stock,
$.01 par value, 5,339,500 shares
authorized; 5,339,500
shares issued and outstanding 42,462 42,180
Shareholders' equity:
Common stock, $.01 par value,
100,000,000 shares authorized;
36,171,250 and 38,061,455 shares
issued and outstanding 362 381
Common stock purchase warrants;
8,235,343 and 8,198,485 shares 47,638 47,466
Additional paid-in capital 244,134 273,505
Accumulated other comprehensive
losses (2,517) (1,045)
Note receivable from officer (4,098) (4,006)
Retained earnings (accumulated
deficit) (10,873) 28,519
Total shareholders' equity 274,646 344,820
$ 406,274 $ 448,310
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VALUEVISION MEDIA, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
For the Three Months Ended For the Twelve Months Ended
January 31, January 31,
2003 2002 2003 2002
Net sales $ 157,987 $ 136,139 $ 554,926 $ 462,322
Cost of sales 100,809 88,133 355,579 290,349
Gross profit 57,178 48,006 199,347 171,973
Operating expenses:
Distribution and
selling 47,810 42,450 177,812 150,448
General and
administrative 3,802 2,670 16,085 14,659
Depreciation and
amortization 4,314 3,164 15,937 12,341
Total operating
expenses 55,926 48,284 209,834 177,448
Operating income
(loss) 1,252 (278) (10,487) (5,475)
Other income (expense):
Gain (loss) on sale
and conversion of
investments -- 343 (533) (69)
Unrealized gain
on security
holdings -- 876 1,021 346
Write-down of
investments (31,078) -- (32,148) (7,567)
Equity in losses
of affiliates (1,203) (2,486) (5,669) (8,838)
Interest income 400 1,612 3,167 8,585
Total other
income (expense) (31,881) 345 (34,162) (7,543)
Income (loss)
before income
taxes (30,629) 67 (44,649) (13,018)
Income tax
benefit (498) (229) (5,539) (3,858)
Income (loss)
before cumulative
effect of accounting
change (30,131) 296 (39,110) (9,160)
Cumulative effect
of accounting change -- -- -- (329)
Net income (loss) (30,131) 296 (39,110) (9,489)
Accretion of
redeemable
preferred stock (71) (70) (282) (280)
Net income (loss)
available to common
shareholders $ (30,202) $ 226 $ (39,392) $ (9,769)
Net income (loss)
per common share:
Before cumulative
effect of accounting
change $ (0.84) $ 0.01 $ (1.06) $ (0.24)
Cumulative effect
of accounting
change -- -- -- (0.01)
Net income (loss) $ (0.84) $ 0.01 $ (1.06) $ (0.25)
Net income (loss)
per common share:
-- assuming dilution:
Before cumulative
effect of accounting
change $ (0.84) $ 0.01 $ (1.06) $ (0.24)
Cumulative effect of
accounting change -- -- -- (0.01)
Net income (loss) $ (0.84) $ 0.01 $ (1.06) $ (0.25)
Weighted average
number of common
shares outstanding:
Basic 36,151,676 37,878,623 37,173,453 38,336,376
Diluted 36,151,676(a) 45,451,458 37,173,453(a) 38,336,376(a)
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(a) In accordance with SFAS No. 128, for the year-to-date period ended
January 31, 2003 and 2002 and for the quarter ended January 31, 2003,
approximately 7,499,000, 7,815,000 and 6,934,000 in-the-money diluted
common shares, respectively, have been excluded from the computation
of diluted earnings per share, as the effect of their inclusion would
be antidilutive.
SUBSCRIBER INFORMATION (estimated in millions)
January 31, January 31, January 31,
2003 2002 2001
Full-time Equivalent Subscribers 50.5 44.0 34.2
Total Subscribers 55.1 51.9 42.6
Full-time Subscribers 44.1 36.0 27.6
VALUE VISION MEDIA, INC.
OPERATING STATISTICS
Twelve Twelve
Fourth Fourth Months Months
Quarter Quarter Ending Ending
31-Jan-03 31-Jan-02 31-Jan-03 31-Jan-02
Ending FTE Households:
(in millions)
Cable 32.9 28.7 NA NA
Satellite 17.6 15.3
Total 50.5 44.0
ShopNBC Merchandise Sales Mix:
Jewelry 69% 65% 69% 67%
Computers & Accessories 17% 24% 18% 23%
Others 14% 11% 13% 10%
Total 100% 100% 100% 100%
EBITDA (as defined) (000's) (a) $5,566 $2,886 $5,450 $6,866
(a) EBITDA as defined for this statistical presentation represents
operating income (loss) for the respective periods excluding
depreciation and amortization expense.
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Source: ValueVision Media
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