UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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þ
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Quarterly report pursuant to section 13 or 15(d) of the securities exchange act of 1934
for the quarterly period ended May 3, 2008
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Commission File Number 0-20243
VALUEVISION MEDIA, INC.
(Exact name of registrant as specified in its charter)
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Minnesota
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41-1673770
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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6740 Shady Oak Road, Eden Prairie, MN 55344
(Address of Principal Executive Offices, including Zip Code)
952-943-6000
(Registrants 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 Exchange Act during the past 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
þ
No
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes
o
No
þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
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Large accelerated filer
o
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Accelerated filer
þ
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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As of June 9, 2008, there were 33,550,834 shares of the registrants common stock, $.01 par value
per share, outstanding.
VALUEVISION MEDIA, INC. AND SUBSIDIARIES
FORM 10-Q TABLE OF CONTENTS
May 3, 2008
2
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
VALUEVISION MEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
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May 3,
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February 2,
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2008
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2008
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(Unaudited)
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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44,367
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$
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25,605
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Short-term investments
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17,886
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33,473
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Accounts receivable, net
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71,820
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109,489
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Inventories
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69,254
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79,444
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Prepaid expenses and other
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4,912
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4,172
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Total current assets
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208,239
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252,183
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Long-term investments
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23,802
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26,306
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Property & equipment, net
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35,818
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36,627
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FCC broadcasting license
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31,943
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31,943
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NBC trademark license agreement, net
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9,801
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10,608
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Cable distribution and marketing agreement, net
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676
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872
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Other assets
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526
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541
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$
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310,805
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$
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359,080
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LIABILITIES AND SHAREHOLDERS EQUITY
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Current liabilities:
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Accounts payable
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$
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52,895
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$
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73,093
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Accrued liabilities
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36,936
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44,609
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Deferred revenue
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678
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648
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Total current liabilities
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90,509
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118,350
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Deferred revenue
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2,258
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2,322
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Series A Redeemable Convertible Preferred Stock, $.01
per share par value, 5,339,500 shares authorized;
5,339,500 shares issued and outstanding
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43,971
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43,898
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Shareholders equity:
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Common stock, $.01 per share par value, 100,000,000
shares authorized; 33,550,834 and 34,070,422 shares
issued and outstanding
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336
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341
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Warrants to purchase 2,036,858 shares of common stock
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12,041
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12,041
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Additional paid-in capital
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271,856
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274,172
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Accumulated other comprehensive losses
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(2,998
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)
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(2,454
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)
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Accumulated deficit
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(107,168
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)
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(89,590
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)
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Total shareholders equity
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174,067
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194,510
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$
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310,805
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$
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359,080
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
VALUEVISION MEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share and per share data)
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For the Three-Month Periods Ended
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May 3, 2008
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May 5, 2007
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Net sales
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$
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156,288
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$
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188,109
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Cost of sales
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106,332
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121,996
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(exclusive of depreciation and
amortization shown below)
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Operating expense:
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Distribution and selling
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57,083
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60,460
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General and administrative
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6,335
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7,495
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Depreciation and amortization
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4,319
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5,586
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Restructuring costs
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330
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CEO transition costs
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277
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Total operating expense
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68,344
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73,541
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Operating loss
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(18,388
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)
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(7,428
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)
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Other income:
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Interest income
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825
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1,240
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Total other income
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825
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1,240
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Loss before income taxes and
equity in income of affiliates
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(17,563
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)
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(6,188
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Gain on sale of RLM investment
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40,240
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Equity in income of affiliates
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609
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Income tax provision
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(15
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(281
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)
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Net income (loss)
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(17,578
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)
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34,380
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Accretion of redeemable preferred stock
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(73
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)
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(72
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)
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Net income (loss) available to common
shareholders
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$
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(17,651
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)
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$
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34,308
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Net income (loss) per common share
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$
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(0.53
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)
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$
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0.80
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Net income (loss) per common share
assuming dilution
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$
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(0.53
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)
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$
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0.80
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Weighted average number of common shares
outstanding:
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Basic
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33,577,899
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42,938,624
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Diluted
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33,577,899
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42,938,684
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4
VALUEVISION MEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
FOR THE THREE-MONTH PERIOD ENDED MAY 3, 2008
(Unaudited)
(In thousands, except share data)
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Common
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Accumulated
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Common Stock
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Stock
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Additional
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Other
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Total
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Comprehensive
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Number
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Par
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Purchase
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Paid-In
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Comprehensive
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Shareholders
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Shareholders
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Loss
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of Shares
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Value
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Warrants
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Capital
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Losses
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Equity
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Equity
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BALANCE,
February
2, 2008
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34,070,422
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$
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341
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$
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12,041
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$
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274,172
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$
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(2,454
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)
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$
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194,510
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$
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194,510
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Net loss
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$
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(17,578
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)
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(17,578
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)
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(17,578
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)
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Other
comprehensive
loss, net of tax:
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Unrealized loss on
securities
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(544
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)
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(544
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)
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(544
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)
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(544
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)
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Comprehensive loss
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$
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(18,122
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)
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|
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Repurchase of
common stock
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(556,330
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)
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(6
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)
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(3,311
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)
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(3,317
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)
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(3,317
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)
|
Exercise of stock
options and common
stock issuances
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36,742
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1
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1
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|
1
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Share-based payment
compensation
|
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1,068
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|
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1,068
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|
1,068
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|
Accretion on
redeemable
preferred stock
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
(73
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)
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|
|
|
|
|
|
(73
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)
|
|
|
(73
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)
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|
|
|
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|
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BALANCE,
May 3, 2008
|
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33,550,834
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$
|
336
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$
|
12,041
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$
|
271,856
|
|
|
$
|
(2,998
|
)
|
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$
|
174,067
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|
|
$
|
174,067
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|
|
|
|
|
|
|
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|
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|
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
VALUEVISION MEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
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For the Three Month
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Periods Ended
|
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May 3,
|
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|
May 5,
|
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|
2008
|
|
|
2007
|
|
OPERATING ACTIVITIES:
|
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|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(17,578
|
)
|
|
$
|
34,380
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|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
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|
|
|
|
|
|
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Depreciation and amortization
|
|
|
4,319
|
|
|
|
5,586
|
|
Share-based payment compensation
|
|
|
1,068
|
|
|
|
592
|
|
Common stock issued to employees
|
|
|
|
|
|
|
6
|
|
Equity in earnings of affiliates
|
|
|
|
|
|
|
(609
|
)
|
Amortization of deferred revenue
|
|
|
(72
|
)
|
|
|
(72
|
)
|
Gain on sale of investments
|
|
|
|
|
|
|
(40,240
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
37,669
|
|
|
|
8,088
|
|
Inventories
|
|
|
10,190
|
|
|
|
(5,834
|
)
|
Prepaid expenses and other
|
|
|
(879
|
)
|
|
|
(4
|
)
|
Deferred revenue
|
|
|
37
|
|
|
|
502
|
|
Accounts payable and accrued liabilities
|
|
|
(27,825
|
)
|
|
|
386
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
6,929
|
|
|
|
2,781
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Property and equipment additions
|
|
|
(2,399
|
)
|
|
|
(2,176
|
)
|
Purchase of investments
|
|
|
|
|
|
|
(30,525
|
)
|
Proceeds from sale of investments
|
|
|
17,549
|
|
|
|
4,877
|
|
Proceeds from sale of Ralph Lauren Media, Inc.
|
|
|
|
|
|
|
43,750
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities
|
|
|
15,150
|
|
|
|
15,926
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Payments for repurchases of common stock
|
|
|
(3,317
|
)
|
|
|
|
|
Proceeds from exercise of stock options
|
|
|
|
|
|
|
361
|
|
|
|
|
|
|
|
|
Net cash provided by (used for) financing activities
|
|
|
(3,317
|
)
|
|
|
361
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
18,762
|
|
|
|
19,068
|
|
BEGINNING CASH AND CASH EQUIVALENTS
|
|
|
25,605
|
|
|
|
41,496
|
|
|
|
|
|
|
|
|
ENDING CASH AND CASH EQUIVALENTS
|
|
$
|
44,367
|
|
|
$
|
60,564
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
$
|
181
|
|
|
$
|
370
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Property and equipment purchases included in accounts payable
|
|
$
|
478
|
|
|
$
|
32
|
|
|
|
|
|
|
|
|
Accretion of redeemable preferred stock
|
|
$
|
73
|
|
|
$
|
72
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
VALUEVISION MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
May 3, 2008
(Unaudited)
(1) General
ValueVision Media, Inc. and subsidiaries (the Company) is an integrated direct marketing
company that markets, sells and distributes its products directly to consumers through various
forms of electronic media and direct-to-consumer mailings otherwise known as multi-channel
retailing. The Companys operating strategy incorporates television home shopping, internet
e-commerce, direct mail and on-line marketing.
The Companys television home shopping business uses on-air spokespersons to market brand name
and private label consumer products at competitive prices. The Companys live 24-hour per day
television home shopping programming is distributed primarily through cable and satellite
affiliation agreements and the purchase of month-to-month full and part-time lease agreements of
cable and broadcast television time. In addition, the Company distributes its programming through
one Company-owned full power television station in Boston, Massachusetts. The Company also markets
a broad array of merchandise through its internet shopping websites, www.shopnbc.com and
www.shopnbc.tv.
The Company has an exclusive license agreement with NBC Universal, Inc. (NBCU), for the
worldwide use of an NBC-branded name and the peacock image through May 2011. Pursuant to the
license, the Company operates its television home shopping network under the ShopNBC brand name and
operates its internet website under the ShopNBC.com brand name.
The Company, through its wholly owned subsidiary, VVI Fulfillment Center, Inc. provides
fulfillment and warehousing services for the fulfillment of merchandise sold by the Company.
(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 in the United States of America have been
condensed or omitted in accordance with these rules and regulations. The information furnished in
the interim condensed consolidated financial statements includes normal recurring accruals and
reflects all adjustments which, in the opinion of management, are necessary for a fair presentation
of these financial statements. Although management believes the disclosures and information
presented are adequate, it is suggested that these interim condensed consolidated financial
statements be read in conjunction with the Companys most recent audited financial statements and
notes thereto included in its annual report on Form 10-K for the fiscal year ended February 2,
2008. Operating results for the three-month period ended May 3, 2008 are not necessarily indicative
of the results that may be expected for the fiscal year ending January 31, 2009.
The accompanying condensed consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. Intercompany accounts and transactions have been
eliminated in consolidation.
Fiscal Year
The Companys most recently completed fiscal year ended on February 2, 2008 and is designated
fiscal 2007. The Companys fiscal year ending January 31, 2009 is designated fiscal 2008. The
Company reports on a 52/53 week fiscal year which ends on the Saturday nearest to January 31. The
52/53 week fiscal year allows for the weekly and monthly comparability of sales results relating to
the Companys television home-shopping business.
7
(3) Stock-Based Compensation
The Company accounts for stock-based compensation arrangements in accordance with Statement of
Financial Accounting Standards No. 123(R) (revised 2004), Share-Based Payment. Compensation is
recognized for all stock-based compensation arrangements by the Company, including employee and
non-employee stock options granted after February 2, 2006 and all unvested stock-based compensation
arrangements granted prior to February 2, 2006 as of such date, commencing with the quarter ended
May 6, 2006. Stock-based compensation expense in the first quarter of fiscal 2008 and the first
quarter of fiscal 2007 related to stock option awards was $732,000 and $459,000, respectively. The
Company has not recorded any income tax benefit from the exercise of stock options due to the
uncertainty of realizing income tax benefits in the future.
As of May 3, 2008, the Company had two active omnibus stock plans for which stock awards can
be currently granted: the 2004 Omnibus Stock Plan (as amended and restated in fiscal 2006) which
provides for the issuance of up to 4,000,000 shares of the Companys common stock; and the 2001
Omnibus Stock Plan which provides for the issuance of up to 3,000,000 shares of the Companys
stock. These plans are administered by the human resources and compensation committee of the board
of directors (Compensation Committee) and provide for awards for employees, directors and
consultants. All employees and directors of the Company and its affiliates are eligible to receive
awards under the plans. The types of awards that may be granted under these plans include
restricted and unrestricted stock, incentive and nonstatutory stock options, stock appreciation
rights, performance units, and other stock-based awards. Incentive stock options may be granted to
employees at such exercise prices as the Compensation Committee may determine but not less than
100% of the fair market value of the underlying stock as of the date of grant. No incentive stock
option may be granted more than ten years after the effective date of the respective plans
inception or be exercisable more than ten years after the date of grant. Options granted to outside
directors are nonstatutory stock options with an exercise price equal to 100% of the fair market
value of the underlying stock as of the date of grant. Options granted under these plans are
exercisable and generally vest over three years in the case of employee stock options and vest
immediately on the date of grant in the case of director options, and generally have contractual
terms of either five years from the date of vesting or ten years from the date of grant. Prior to
the adoption of the 2004 and 2001 plans, the Company had other incentive stock option plans in
place in which stock options were granted to employees under similar vesting terms. The Company has
also granted non-qualified stock options to current and former directors and certain employees with
similar vesting terms.
The fair value of each option award is estimated on the date of grant using the Black-Scholes
option pricing model that uses assumptions noted in the following table. Expected volatilities are
based on the historical volatility of the Companys stock. Expected term is calculated using the
simplified method taking into consideration the options contractual life and vesting terms. The
risk-free interest rate for periods within the contractual life of the option is based on the U.S.
Treasury yield curve in effect at the time of grant. Expected dividend yields were not used in the
fair value computations as the Company has never declared or paid dividends on its common stock and
currently intends to retain earnings for use in operations.
|
|
|
|
|
|
|
Fiscal 2008
|
|
Fiscal 2007
|
Expected volatility
|
|
41%
|
|
33% - 40%
|
Expected term (in years)
|
|
6 years
|
|
6 years
|
Risk-free interest rate
|
|
3.0% - 3.3%
|
|
3.2% - 5.1%
|
A summary of the status of the Companys stock option activity as of May 3, 2008 and changes
during the three months then ended is as follows:
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
|
|
|
|
2001
|
|
|
|
|
|
|
1990
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Weighted
|
|
|
Incentive
|
|
|
Weighted
|
|
|
Incentive
|
|
|
Weighted
|
|
|
Other Non-
|
|
|
Weighted
|
|
|
|
Stock
|
|
|
Average
|
|
|
Stock
|
|
|
Average
|
|
|
Stock
|
|
|
Average
|
|
|
Qualified
|
|
|
Average
|
|
|
|
Option
|
|
|
Exercise
|
|
|
Option
|
|
|
Exercise
|
|
|
Option
|
|
|
Exercise
|
|
|
Stock
|
|
|
Exercise
|
|
|
|
Plan
|
|
|
Price
|
|
|
Plan
|
|
|
Price
|
|
|
Plan
|
|
|
Price
|
|
|
Options
|
|
|
Price
|
|
Balance outstanding,
February 2, 2008
|
|
|
2,941,000
|
|
|
$
|
8.86
|
|
|
|
1,461,000
|
|
|
$
|
13.14
|
|
|
|
36,000
|
|
|
$
|
13.83
|
|
|
|
1,437,000
|
|
|
$
|
15.35
|
|
Granted
|
|
|
750,000
|
|
|
|
5.19
|
|
|
|
525,000
|
|
|
|
5.74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited or
canceled
|
|
|
(372,000
|
)
|
|
|
10.86
|
|
|
|
(351,000
|
)
|
|
|
13.22
|
|
|
|
(20,000
|
)
|
|
|
14.38
|
|
|
|
(3,000
|
)
|
|
|
14.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance outstanding,
May 3, 2008
|
|
|
3,319,000
|
|
|
$
|
7.80
|
|
|
|
1,635,000
|
|
|
$
|
10.73
|
|
|
|
16,000
|
|
|
$
|
14.62
|
|
|
|
1,434,000
|
|
|
$
|
15.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable
at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 3, 2008
|
|
|
1,013,000
|
|
|
$
|
11.77
|
|
|
|
647,000
|
|
|
$
|
14.58
|
|
|
|
16,000
|
|
|
$
|
14.62
|
|
|
|
1,400,000
|
|
|
$
|
15.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes information regarding stock options outstanding at May 3, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
Vested or
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Options
|
|
|
Exercise
|
|
|
Contractual Life
|
|
|
Intrinsic
|
|
|
Expected to
|
|
|
Exercise
|
|
|
Contractual Life
|
|
|
Intrinsic
|
|
Option Type
|
|
Outstanding
|
|
|
Price
|
|
|
(Years)
|
|
|
Value
|
|
|
Vest
|
|
|
Price
|
|
|
(Years)
|
|
|
Value
|
|
2004 Incentive:
|
|
|
3,319,000
|
|
|
$
|
7.80
|
|
|
|
8.8
|
|
|
$
|
437,000
|
|
|
|
3,088,000
|
|
|
$
|
7.94
|
|
|
|
8.7
|
|
|
$
|
394,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2001 Incentive:
|
|
|
1,635,000
|
|
|
$
|
10.73
|
|
|
|
7.4
|
|
|
$
|
|
|
|
|
1,537,000
|
|
|
$
|
10.89
|
|
|
|
5.8
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1990 Incentive:
|
|
|
16,000
|
|
|
$
|
14.62
|
|
|
|
0.9
|
|
|
$
|
|
|
|
|
16,000
|
|
|
$
|
14.62
|
|
|
|
0.9
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Non-qualified:
|
|
|
1,434,000
|
|
|
$
|
15.35
|
|
|
|
0.5
|
|
|
$
|
|
|
|
|
1,400,000
|
|
|
$
|
15.46
|
|
|
|
0.5
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted average grant-date fair value of options granted in the three months of fiscal
2008 and 2007 was $2.38 and $4.89, respectively. The total intrinsic value of options exercised
during the first quarters of fiscal 2008 and 2007 was $-0- and $37,000, respectively. As of May 3,
2008, total unrecognized compensation cost related to stock options was $8,399,000 and is expected
to be recognized over a weighted average period of approximately 1.6 years.
(4) Short and Long-Term Investments
Short and long-term investments include the following available-for-sale securities at May 3,
2008 and February 2, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 3, 2008
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Estimated
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
Short-term:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
$
|
4,058,000
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
4,058,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction-rate securities
|
|
$
|
26,800,000
|
|
|
$
|
|
|
|
$
|
2,998,000
|
|
|
$
|
23,802,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 2, 2008
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Estimated
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
Short-term:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction-rate securities
|
|
$
|
6,502,000
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
6,502,000
|
|
Corporate bonds
|
|
|
4,088,000
|
|
|
|
|
|
|
|
|
|
|
|
4,088,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10,590,000
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
10,590,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction-rate securities
|
|
$
|
26,800,000
|
|
|
$
|
|
|
|
$
|
2,454,000
|
|
|
$
|
24,346,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short and long-term investments include the following held-to-maturity securities at May 3,
2008 and February 2, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 3, 2008
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Carrying
|
|
|
Unrecognized
|
|
|
Unrecognized
|
|
|
Estimated
|
|
|
|
Amount
|
|
|
Holding Gains
|
|
|
Holding Losses
|
|
|
Fair Value
|
|
Short-term:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
$
|
13,828,000
|
|
|
$
|
56,000
|
|
|
$
|
154,000
|
|
|
$
|
13,730,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 2, 2008
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Carrying
|
|
|
Unrecognized
|
|
|
Unrecognized
|
|
|
Estimated
|
|
|
|
Amount
|
|
|
Holding Gains
|
|
|
Holding Losses
|
|
|
Fair Value
|
|
Short-term:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
$
|
22,883,000
|
|
|
$
|
122,000
|
|
|
$
|
87,000
|
|
|
$
|
22,918,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
$
|
1,960,000
|
|
|
$
|
|
|
|
$
|
28,000
|
|
|
$
|
1,932,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the contractual maturities of the Companys short and long-term
debt securities as of May 3, 2008:
|
|
|
|
|
Less than one year
|
|
$
|
17,886,000
|
|
Mature in 1-2 years
|
|
|
|
|
Mature after 5 years
|
|
|
23,802,000
|
|
|
|
|
|
|
|
$
|
41,688,000
|
|
|
|
|
|
Proceeds from sales of available-for-sale and held-to-maturity securities were $17,549,000 and
$4,877,000 during the three months ended May 3, 2008 and May 5, 2007, respectively. Sales of
available-for-sale securities for the three months ended May 3, 2008 and May 5, 2007 resulted in no
gains or losses recorded. The cost of all securities sold is based on the specific identification
method. In the first quarter of fiscal 2008, the Company sold one of its held-to-maturity
securities with a net carrying amount of $2,910,000 due to the significant deterioration at the
time of sale of the issuers creditworthiness. The Company accrued and recorded a $72,000 loss on
the sale in the fourth quarter of fiscal 2007. As of May 3, 2008, all gross unrealized losses on
the Companys auction rate security investments deemed to be temporarily impaired have been in an
unrealized position for less than twelve months.
At May 3, 2008, the Companys investment portfolio included auction rate securities with an
estimated fair value of $23,802,000 ($26,800,000 cost basis). The Companys auction rate securities
are variable rate debt instruments that have underlying securities with contractual maturities
greater than ten years. Holders of auction rate securities can either sell through the auction or
bid based on a desired interest rate or hold and accept the reset rate. If there are insufficient
buyers, then the auction fails and holders are unable to liquidate their investment through the
auction. A failed auction is not a default of the debt instrument, but does set a new interest rate
in accordance with the original terms of the debt instrument. The result of a failed auction is
that the auction rate security continues to pay interest in accordance with its terms. Auctions
continue to be held as scheduled until the auction rate security matures or until it is called.
These mostly AAA-rated auction rate securities, which met the Companys investment guidelines at
the time the investments were made,
10
have failed to settle in auctions during fiscal 2007 and the first quarter of fiscal 2008. At
this time, these investments are not liquid, and in the event the Company needs to access these
funds, the Company will not be able to do so without a loss of principle.
The Company has reduced the carrying value of these investments by $2,998,000 through other
comprehensive income (loss) to reflect a temporary impairment on these securities. Currently, the
Company believes these investments are temporarily impaired, but it is not clear in what period of
time they will be settled. Due to the current lack of liquidity of these investments, they are
classified as long-term investments on the Companys balance sheet.
(5) Fair Value Measurements
In the first quarter of fiscal 2008, the Company adopted Statement of Financial Accounting
Standards No. 157.
Fair Value Measurements
(SFAS No. 157) with respect to the fair value
measurements of (a) nonfinancial assets and liabilities that are recognized or disclosed at fair
value in the Companys financial statements on a recurring basis and (b) all financial assets and
liabilities. SFAS No. 157 establishes a single definition of fair value. It also provides a
framework for measuring fair value and expands the disclosures of assets and liabilities measured
at fair value. The standard applies whenever other standards require (or permit) assets or
liabilities to be measured at fair value.
SFAS No. 157 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques
used to measure fair value into three broad levels. The fair value hierarchy gives the highest
priority to observable quoted prices (unadjusted) in active markets for identical assets and
liabilities and the lowest priority to unobservable inputs. The following is a brief description
of those three levels:
|
|
|
Level 1Inputs based on quoted prices (unadjusted) in active markets for identical
assets or liabilities that the Company has the ability to access.
|
|
|
|
|
Level 2Inputs based on quoted prices for similar assets or liabilities in active
markets; quoted prices for identical or similar assets or liabilities in markets that are
not active; and inputs (other than quoted prices) that are observable for the asset or
liability, either directly or indirectly.
|
|
|
|
|
Level 3Unobservable inputs for the asset or liability that are significant to the
fair value measurement.
|
Assets Measured at Fair Value Recurring Basis
The Company holds available-for-sale marketable securities that are subject to fair valuation
under SFAS No. 157. The Company does not have any liabilities subject to fair valuation under this
statement. These investments were previously and will continue to be marked-to-market at each
reporting period, however, the definition of fair value used for these investments are now applied
using SFAS No. 157. The information in the following tables primarily addresses matters relative
to these financial assets. The Company uses various valuation techniques, which are primarily
based upon the market and income approaches, with respect to its financial assets.
Available-for-sale marketable securities except auction rate securities are valued utilizing
quoted prices in active markets. Investments in available-for-sale auction rate securities are
valued utilizing a discounted cash flow analysis. The assumptions used in preparing the discounted
cash flow model include estimates for interest rates, timing and amount of cash flows and expected
holding periods of auction rate securities. The Company concluded that the inputs used in its
auction rate securities fair valuation model are Level 3 inputs.
The following table provides information by level for assets that are measured at fair value, as
defined by SFAS No. 157, on a recurring basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements
|
|
|
Fair Value at
|
|
Using Inputs Considered as
|
Description
|
|
May 3, 2008
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable
securities
except auction
rate securities
|
|
$
|
4,058,000
|
|
|
$
|
4,058,000
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable
securities
auction rate
securities only
|
|
|
23,802,000
|
|
|
|
|
|
|
|
|
|
|
|
23,802,000
|
|
11
The following table provides a reconciliation of the beginning and ending balances of items
measured at fair value on a recurring basis in the table above that used significant unobservable
inputs (Level 3).
|
|
|
|
|
|
|
Marketable
|
|
|
securities
|
|
|
auction rate
|
|
|
securities only
|
Beginning balance (February 2, 2008)
|
|
$
|
24,346,000
|
|
Total gains or losses:
|
|
|
|
|
Included in earnings
|
|
|
|
|
Included in other comprehensive income
|
|
|
544,000
|
|
Purchases, issuances, and settlements
|
|
|
|
|
Transfers in and/or out of Level 3
|
|
|
|
|
Ending balance (May 3, 2008)
|
|
$
|
23,802,000
|
|
Assets Measured at Fair Value Nonrecurring Basis
During the quarter ended May 3, 2008, the Company had no significant measurements of assets at
fair value as defined in SFAS No. 157 on a nonrecurring basis subsequent to their initial
recognition. The aspects of SFAS No. 157 for which the effective date for the Company was deferred
under FASB Staff Position (FSP) No. FAS 157-2,
Effective Date of FASB Statement No. 157
, until
January, 2009 relate to non financial assets and liabilities initially measured at fair value in a
business combination (but not measured at fair value in subsequent periods) or non financial
long-lived asset groups measured at fair value for an impairment assessment.
(6) Net Income (Loss) Per Common Share
Basic earnings per share is computed by dividing reported earnings by the weighted average
number of common shares outstanding for the reported period following the two-class method. The
effect of the Companys participating convertible preferred stock is included in basic earnings per
share under the two-class method if dilutive. Diluted earnings per share 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.
A reconciliation of earnings per share calculations and the number of shares used in the
calculation of basic earnings per share under the two-class method and diluted earnings per share
is as follows:
|
|
|
|
|
|
|
|
|
|
|
Three-Month Periods Ended
|
|
|
|
May 3, 2008
|
|
|
May 5, 2007
|
|
Net income (loss) available to common shareholders
|
|
$
|
(17,651,000
|
)
|
|
$
|
34,308,000
|
|
|
|
|
|
|
|
|
Weighted average number of common shares
outstanding using two-class method
|
|
|
33,578,000
|
|
|
|
37,599,000
|
|
Effect of participating convertible preferred stock
|
|
|
|
|
|
|
5,340,000
|
|
|
|
|
|
|
|
|
Weighted average number of common shares
outstanding using two-class method Basic
|
|
|
33,578,000
|
|
|
|
42,939,000
|
|
Dilutive effect of stock options, non-vested shares
and warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares
outstanding Diluted
|
|
|
33,578,000
|
|
|
|
42,939,000
|
|
|
|
|
|
|
|
|
Net income (loss) per common share
|
|
$
|
(0.53
|
)
|
|
$
|
0.80
|
|
|
|
|
|
|
|
|
Net income (loss) per common share-assuming dilution
|
|
$
|
(0.53
|
)
|
|
$
|
0.80
|
|
|
|
|
|
|
|
|
For the three-month period ended May 3, 2008, approximately 114,000 in-the-money potentially
dilutive common share stock options and warrants and 5,340,000 shares of convertible preferred
stock have been excluded from the computation of diluted earnings per share, as the effect of their
inclusion would be antidilutive.
12
(7) Comprehensive Income (Loss)
For the Company, comprehensive income (loss) is computed as net earnings plus other items that
are recorded directly to shareholders equity. Total comprehensive income (loss) was $(18,122,000)
and $34,380,000 for the three-month periods ended May 3, 2008 and May 5, 2007, respectively.
(8) Segment Disclosures
The Companys reportable segments are based on the Companys method of internal reporting. The
Companys primary business segment is its electronic media segment, which consists of the Companys
television home shopping business and internet shopping website business. Management has determined
that the Companys television and internet home shopping businesses meet the aggregation criteria
since these two businesses have similar customers, products, economic characteristics and sales
processes. Products sold through the Companys electronic media segment primarily include jewelry,
watches, computers and other electronics, housewares, apparel, health and beauty aids, fitness
products, giftware, collectibles, seasonal items and other merchandise. The Companys segments
currently operate in the United States and no one customer represents more than 5% of the Companys
overall revenue. There are no material intersegment product sales. Segment information as of and
for the three-month periods ended May 3, 2008 and May 5, 2007 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ShopNBC &
|
|
|
Fulfillment
|
|
|
Equity
|
|
|
|
|
Three-Month Periods Ended (in thousands)
|
|
ShopNBC.com
|
|
|
Services (a)
|
|
|
Investments (b)
|
|
|
Total
|
|
May 3, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
154,261
|
|
|
$
|
2,027
|
|
|
$
|
|
|
|
$
|
156,288
|
|
Operating (loss) income
|
|
|
(18,530
|
)
|
|
|
142
|
|
|
|
|
|
|
|
(18,388
|
)
|
Depreciation and amortization
|
|
|
4,199
|
|
|
|
120
|
|
|
|
|
|
|
|
4,319
|
|
Interest income
|
|
|
825
|
|
|
|
|
|
|
|
|
|
|
|
825
|
|
Income taxes
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
(15
|
)
|
Net income (loss)
|
|
|
(17,630
|
)
|
|
|
52
|
|
|
|
|
|
|
|
(17,578
|
)
|
Identifiable assets
|
|
|
305,543
|
|
|
|
5,262
|
|
|
|
|
|
|
|
310,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 5, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
185,382
|
|
|
$
|
2,727
|
|
|
$
|
|
|
|
$
|
188,109
|
|
Operating (loss) income
|
|
|
(7,663
|
)
|
|
|
235
|
|
|
|
|
|
|
|
(7,428
|
)
|
Depreciation and amortization
|
|
|
5,416
|
|
|
|
170
|
|
|
|
|
|
|
|
5,586
|
|
Interest income
|
|
|
1,240
|
|
|
|
|
|
|
|
|
|
|
|
1,240
|
|
Income taxes
|
|
|
491
|
|
|
|
(12
|
)
|
|
|
(760
|
)
|
|
|
(281
|
)
|
Net income (loss)
|
|
|
(5,842
|
)
|
|
|
133
|
|
|
|
40,089
|
|
|
|
34,380
|
|
Identifiable assets, February 2, 2008
|
|
|
352,745
|
|
|
|
6,335
|
|
|
|
|
|
|
|
359,080
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Revenues from segments below quantitative thresholds are attributable to VVI Fulfillment
Center, Inc., which provides fulfillment, warehousing and telemarketing services primarily
to Ralph Lauren Media, Inc. (RLM) and the Company. The services agreement with RLM ended
in the first quarter of fiscal 2008 as RLM migrated to its own customer service, warehousing
and fulfillment facilities.
|
|
(b)
|
|
Equity investment assets and net income and gains from equity investments consist of
long-term investments and earnings from equity investments accounted for under the equity
method of accounting and are not directly assignable to a business unit.
|
13
Information on net sales from continuing operations by significant product groups are as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three-Month Periods Ended
|
|
|
|
May 3, 2008
|
|
|
May 5, 2007
|
|
Jewelry
|
|
$
|
66,296
|
|
|
$
|
76,467
|
|
Watches, coins & collectibles
|
|
|
30,686
|
|
|
|
25,273
|
|
Computers and electronics
|
|
|
22,238
|
|
|
|
35,239
|
|
Apparel and health & beauty
|
|
|
13,579
|
|
|
|
13,383
|
|
Home and all other merchandise
categories
|
|
|
13,482
|
|
|
|
26,480
|
|
All other revenue, less than 10%
each
|
|
|
10,007
|
|
|
|
11,267
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
156,288
|
|
|
$
|
188,109
|
|
|
|
|
|
|
|
|
(9) Related Party Transactions
The Company entered into a Private Label Credit Card and Co-Brand Credit Card Consumer Program
Agreement with GE Money Bank for the financing of private label credit card purchases from ShopNBC
and for the financing of co-brand credit card purchases of products and services from other
non-ShopNBC retailers. GE Money Bank, the issuing bank for the program, is indirectly wholly-owned
by the General Electric Company (GE), which is also the parent company of NBC and GE Commercial
Finance Equity. NBCU and GE Commercial Finance Equity have a substantial percentage ownership
in the Company and together have the right to select three members of the Companys board of
directors.
The Company and NBCU are partners in a ten-year Distribution and Marketing Agreement dated
March 8, 1999 that 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. As compensation
for these services, the Company currently pays NBCU an annual fee of approximately $930,000.
(10) Restricted Stock
The Company granted a total of 36,742 shares of restricted stock to its chairman of the board
during the period of November 2007 through March 2008 as compensation for services he performed as
the Companys interim chief executive officer. The aggregate market value of the restricted stock
was $223,000 and was amortized as compensation expense over the service period. On June 28, 2007,
the Company granted a total of 40,000 shares of restricted stock from the Companys 2004 Omnibus
Stock Plan to its five non-management directors elected by the holders of the Companys common
stock (in contrast to the three directors elected by the holders of the Companys preferred stock)
as part of the Companys annual director compensation program. The restricted stock vests on the
first anniversary of the date of grant. The aggregate market value of the restricted stock at the
date of award was $459,000 and is being amortized as director compensation expense over the
twelve-month vesting period. In the second quarter of fiscal 2004, the Company awarded 25,000
shares of restricted stock to certain employees. This restricted stock grant vests over different
periods ranging from 17 to 53 months. The aggregate market value of the restricted stock at the
award dates was $308,000 and is being amortized as compensation expense over the respective vesting
periods. Compensation expense recorded in the first three months of fiscal 2008 and the first three
months of fiscal 2007 relating to restricted stock grants was $336,000 and $133,000, respectively.
As of May 3, 2008, there was $88,000 of total unrecognized compensation cost related to non-vested
restricted stock granted. That cost is expected to be recognized over a weighted average period of
0.3 years. The total fair value of restricted stock vested during the first three months of fiscal
2008 and 2007 was $205,000 and $-0-, respectively.
14
A summary of the status of the Companys non-vested restricted stock activity as of May 3,
2008 and changes during the three-month period then ended is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
Non-vested outstanding,
February 2, 2008
|
|
|
82,000
|
|
|
$
|
9.88
|
|
Granted
|
|
|
9,000
|
|
|
$
|
5.25
|
|
Vested
|
|
|
(39,000
|
)
|
|
$
|
6.51
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested outstanding,
May 3, 2008
|
|
|
52,000
|
|
|
$
|
11.57
|
|
|
|
|
|
|
|
|
(11) Common Stock Repurchase Program
In August 2006 the Companys board of directors authorized a common stock repurchase program.
The program authorizes the Companys management, acting through an investment banking firm selected
as the Companys agent, to repurchase up to $10 million of the Companys common stock by open
market purchases or negotiated transactions at prices and amounts as determined by the Company from
time to time. In May 2007, the Companys board of directors authorized the repurchase of an
additional $25 million of the Companys common stock under its stock repurchase program. During the
three months ended May 3, 2008, the Company repurchased a total of 556,000 shares of common stock
for a total investment of $3,317,000 at an average price of $5.96 per share. During fiscal 2007,
the Company repurchased a total of 3,618,000 shares of common stock for a total investment of
$26,985,000 at an average price of $7.46 per share. In March 2008, Companys board of directors
authorized the repurchase of an additional $10 million of the Companys common stock under its
stock repurchase program.
(12) Intangible Assets
Intangible assets have been recorded in connection with the Companys acquisition of the
ShopNBC license and with the issuance of distribution warrants to NBCU. Intangible assets have also
been recorded by the Company as a result of the acquisition of television station WWDP TV-46.
Intangible assets in the accompanying consolidated balance sheets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
May 3, 2008
|
|
|
February 2, 2008
|
|
|
|
Average
|
|
|
Gross
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
Life
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
|
(Years)
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
Amortization
|
|
Amortizable intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NBC trademark license agreement
|
|
|
10.5
|
|
|
$
|
34,437,000
|
|
|
$
|
(24,636,000
|
)
|
|
$
|
34,437,000
|
|
|
$
|
(23,829,000
|
)
|
Cable distribution and marketing agreement
|
|
|
9.5
|
|
|
|
8,278,000
|
|
|
|
(7,602,000
|
)
|
|
|
8,278,000
|
|
|
|
(7,406,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
42,715,000
|
|
|
$
|
(32,238,000
|
)
|
|
$
|
42,715,000
|
|
|
$
|
(31,235,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FCC broadcast license
|
|
|
|
|
|
$
|
31,943,000
|
|
|
|
|
|
|
$
|
31,943,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense for the NBCU intangible assets was $1,003,000 for the quarters ended May
3, 2008 and May 5, 2007. Estimated amortization expense for the next five years is as follows:
$3,943,000 in fiscal 2008, $3,383,000 in fiscal 2009, $3,227,000 in fiscal 2010 and $928,000 in
fiscal 2011.
The FCC broadcasting license, which relates to the Companys acquisition of television station
WWDP TV-46, is not subject to amortization as a result of its indefinite useful life. The Company
tests the FCC license asset for impairment annually, or more frequently if events or changes in
circumstances indicate that the asset might be impaired. There was no impairment as of February 2,
2008.
15
(13) ShopNBC Private Label and Co-Brand Credit Card Program
In the third quarter of fiscal 2006, the Company introduced and established a new private
label and co-brand revolving consumer credit card program (the Program). The Program is made
available to all qualified consumers for the financing of purchases of products from ShopNBC and
for the financing of purchases of products and services from other non-ShopNBC retailers. The
Program is intended to be used by cardholders for purchases made primarily for personal, family or
household use. The issuing bank is the sole owner of the account issued under the Program and
absorbs losses associated with non-payment by cardholders. The issuing bank pays fees to the
Company based on the number of credit card accounts activated and on card usage. Once a customer is
approved to receive a ShopNBC private label or co-branded credit card and the card is activated,
the customer is eligible to participate in the Companys credit card rewards program. Under the
original rewards program, points are earned on purchases made with the credit cards at ShopNBC and
other retailers where the co-branded card is accepted. Cardholders who accumulate the requisite
number of points are issued a $50 certificate award towards the future purchase of ShopNBC
merchandise. These certificate awards expire after twelve months if unredeemed. Beginning in the
second quarter of fiscal 2008, the rewards program was modified whereby newly activated customers
will obtain an immediate $25 statement credit upon activation and first purchase and upon the
accumulation of the requisite number of points card holders will be issued a $25 certificate award
towards the future purchase of ShopNBC merchandise. These certificate awards will expire after 90
days if unredeemed. The Company accounts for the rewards program in accordance with Emerging Issues
Task Force issue No. 00-22,
Accounting for Points and Certain Other Time-Based or Volume-Based
Sales Incentive Offers, and Offers for Free Products or Services to Be Delivered in the Future
. The
value of points earned is included in accrued liabilities and recorded as a reduction in revenue as
points are earned, based on the retail value of points that are projected to be redeemed. The
Company accounts for the Private Label and Co-Brand Credit Card Agreement in accordance with EITF
No. 00-21,
Revenue Arrangements with Multiple Deliverables
. In conjunction with the signing of the
ShopNBC Private Label and Co-Brand Credit Card Agreement, the Company received from the issuing
bank a non-refundable signing bonus as an incentive for the Company to enter into the agreement.
The bonus has been recorded as deferred revenue in the accompanying financial statements and is
being recognized as revenue over the term of the agreement.
(14) Sale of RLM Equity Investment
On March 28, 2007, the Company entered into a Membership Interest Purchase Agreement with Polo
Ralph Lauren, NBCU and certain NBCU affiliates, pursuant to which the Company sold its 12.5%
membership interest in RLM to Polo Ralph Lauren for an aggregate purchase price of $43,750,000 in
cash. As a result of this sales transaction, the Company recorded a pre-tax gain of $40,240,000 on
the sale of RLM in the first quarter of fiscal 2007.
(15) Restructuring Costs
On May 21, 2007, the Company announced the initiation of a restructuring of its operations
that includes a 12% reduction in the salaried workforce, a consolidation of its distribution
operations into a single warehouse facility, the exit and closure of a retail outlet store and
other cost saving measures. On January 14, 2008, the Company announced additional organizational
changes and cost-saving measures following a formal business review conducted by management and an
outside consulting firm. As a result of the business review, the Companys organizational structure
was simplified and streamlined to focus on profitability. As part of this restructuring, the
Company reduced its salaried workforce by an additional 10%. As a result, the Company recorded a
$5,043,000 restructuring charge for the year ended February 2, 2008 and an additional $330,000
charge for the three-month period ended May 3, 2008. Restructuring costs include employee
severance and retention costs associated with the consolidation and elimination of approximately 80
positions across the Company including four officers. In addition, restructuring costs also include
incremental charges associated with the Companys consolidation of its distribution and fulfillment
operations into a single warehouse facility, the closure of a retail outlet store, fixed asset
impairments incurred as a direct result of the operational consolidation and closures and
restructuring advisory service fees.
16
The table below sets forth for the three months ended May 3, 2008, the significant components
and activity under the restructuring program:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
Balance at
|
|
|
|
February 2, 2008
|
|
|
Charges
|
|
|
Write-offs
|
|
|
Payments
|
|
|
May 3, 2008
|
|
Severance and retention
|
|
$
|
874,000
|
|
|
$
|
310,000
|
|
|
$
|
|
|
|
$
|
(936,000
|
)
|
|
$
|
248,000
|
|
Asset impairments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incremental restructuring charges
|
|
|
294,000
|
|
|
|
20,000
|
|
|
|
|
|
|
|
(302,000
|
)
|
|
|
12,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,168,000
|
|
|
$
|
330,000
|
|
|
$
|
|
|
|
$
|
(1,238,000
|
)
|
|
$
|
260,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16) Chief Executive Officer Transition Costs
On October 26, 2007, the Company announced that William J. Lansing, at the request of the
board of directors, stepped down as president and chief executive officer and had left the
Companys board of directors. In conjunction with Mr. Lansings resignation, the Company recorded
a charge to income of $2,451,000 during fiscal 2007 and an additional $277,000 for the three-month
period ended May 3, 2008 relating primarily to severance payments which Mr. Lansing was entitled to
in accordance with the terms of his employment agreement and costs associated with the hiring of
the Companys new chief executive officer.
17
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of operations should
be read in conjunction with our accompanying unaudited condensed consolidated financial statements
and notes included herein and the audited consolidated financial statements and notes included in
our annual report on Form 10-K for the fiscal year ended February 2, 2008.
Cautionary Statement Regarding Forward-Looking Statements
The following Managements Discussion and Analysis of Financial Condition and Results of
Operations and other materials we file with the Securities and Exchange Commission (as well as
information included in oral statements or other written statements made or to be made by us)
contain certain forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. All statements other than statements of historical fact, including statements
regarding guidance, industry prospects or future results of operations or financial position, made
in this report are forward looking. We often use words such as anticipates, believes, expects,
intends and similar expressions to identify forward-looking statements. These statements are based
on managements 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; the
general economic and credit environment; interest rates; seasonal variations in consumer purchasing
activities; changes in the mix of products sold by us; competitive pressures on sales; pricing and
sales margins; the level of cable and satellite distribution for our programming and the associated
fees; the success of our e-commerce initiatives; the success of our strategic alliances and
relationships; our ability to manage our operating expenses successfully; risks associated with
acquisitions; changes in governmental or regulatory requirements; litigation or governmental
proceedings affecting our operations; the risks identified under Risk Factors and Critical
Accounting Policies and Estimates in our Form 10-K for our fiscal year ended February 2, 2008;
significant public events that are difficult to predict, such as widespread weather catastrophes or
other significant television-covering events causing an interruption of television coverage or that
directly compete with the viewership of our programming; and our ability to obtain and retain key
executives and employees. Investors are cautioned that all forward-looking statements involve risk
and uncertainty. The facts and circumstances that 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 the forward-looking statements obsolete. We are under no obligation (and
expressly disclaims any obligation) to update or alter our forward-looking statements whether as a
result of new information, future events or otherwise.
Overview
Company Description
We are an integrated direct marketing company that markets its products to consumers through
various forms of electronic media and direct-to-consumer mailings otherwise known as multi-channel
retailing. Our operating strategy incorporates television home shopping, internet e-commerce,
direct mail and on-line marketing. Our live 24-hour per day television home shopping programming is
distributed primarily through cable and satellite affiliation agreements and on-line through
ShopNBC.TV. We have an exclusive license from NBC Universal, Inc., known as NBCU, for the worldwide
use of an NBC-branded name and the peacock image for a period ending in May 2011. Pursuant to the
license, we operate our television home shopping network under the ShopNBC brand name and operate
our internet website under the ShopNBC.com brand name.
Products and Customers
Products sold on our television home shopping network and internet shopping website include
jewelry, watches, computers and other electronics, housewares, apparel, cosmetics, seasonal items
and other merchandise. Jewelry is our largest single category of merchandise, representing 44% of
television home shopping and internet net sales for the three-month period ended May 3, 2008 and
40% of television and internet net sales for the three-month period ended May 5, 2007. Watches,
coins & collectibles represented approximately 20% of television home shopping and internet net
sales for the three-month period ended May 3, 2008 and approximately 15% of television home
shopping and internet net sales for the three-month period ended May 5, 2007. Computers &
electronics represented approximately 17% of television home shopping and internet net sales for
the three-month period ended May 3, 2008 and approximately 23% of television home shopping and
internet net sales for the three-month period ended May 5, 2007. Apparel, fashion accessories and
health & beauty represented approximately 10% of television home shopping and internet net sales
for the three-month period ended
18
May 3, 2008 and approximately 9% of television home shopping and internet net sales for the
three-month period ended May 5, 2007. Our strategy is to continue to develop new product offerings
across multiple merchandise categories as needed in response to both customer demand and in order
to maximize margin dollars per minute in our television home shopping and internet operations. Our
customers are primarily women over the ages of 35 with average annual household incomes in excess
of $70,000 who make purchases based primarily on convenience, unique product offerings, value and
quality of merchandise.
Company Strategy
We endeavor to be positioned as a profitable and innovative leader in multi-channel retailing
in the United States. The following strategies were pursued during fiscal 2007 to increase revenues
and profitability and grow our active customer base, for both television and internet sales:
(i) continue to optimize our mix of product categories offered on television and the internet in
order to appeal to a broader population of potential customers; (ii) continue the growth of our
internet business through the innovative use of technology and marketing efforts, such as advanced
search capabilities, personalization, internet video, affiliate agreements and internet-based
auction capabilities; (iii) obtain cost-effective distribution agreements for our television
programming with cable and satellite operators, as well as pursuing other means of reaching
customers such as through webcasting, internet videos and internet-based broadcasting networks;
(iv) increase the productivity of each hour of television programming, through a focus on
television offers of merchandise that maximizes margin dollars per hour and marketing efforts to
increase the number of customers within the households currently receiving our television
programming; (v) continue to enhance our television broadcast quality, programming, website
features and customer support; and (vi) leverage the strong brand recognition of the NBC brand
name.
At the beginning of fiscal 2008, a new chief executive officer and three new
industry-experienced senior executives joined our senior management team. These new executives are
reviewing our strategy for long-term growth in revenues and profits, in conjunction with the board
of directors and other members of management, and will develop a plan for improving our strategic
focus during fiscal 2008. Some of the key focus areas include: improving the customer experience;
retaining and growing the core customer base of repeat customers; shifting the merchandise mix and
price points to appeal to the core female customer; broadening the vendor base; and improving
business disciplines and execution.
Challenge
Our television home shopping business operates with a high fixed cost base, which is primarily
due to fixed contractual fees paid to cable and satellite operators to carry our programming. In
order to attain profitability, we must achieve sufficient sales volume through the acquisition of
new customers and the increased retention of existing customers to cover our high fixed costs or
reduce the fixed cost base for our cable and satellite distribution. Our growth and profitability
could be adversely impacted if sales volume does not meet expectations, as we will have limited
immediate capability to reduce our fixed cable and satellite distribution operating expenses to
mitigate any potential sales shortfall.
Our Competition
The direct marketing and retail businesses are highly competitive. In our television home
shopping and e-commerce operations, we compete for customers with other types of consumer retail
businesses, including traditional brick and mortar department stores, discount stores, warehouse
stores and specialty stores; other television home shopping and e-commerce retailers; infomercial
companies; catalog and mail order retailers and other direct sellers.
In the competitive television home shopping sector, we compete with QVC Network, Inc. and HSN,
Inc., both of whom are substantially larger than we are in terms of annual revenues and customers,
and whose programming is carried more broadly to U.S. households than is our programming. Both QVC
and HSN are owned by large, well-capitalized parent companies in the media business, who are also
expanding into related e-commerce and web-based businesses. The American Collectibles Network,
known as ACN, which operates Jewelry Television, also competes with us for television home shopping
customers in the jewelry category. In addition, there are a number of smaller niche players and
startups in the television home shopping arena who compete with our company.
The e-commerce sector is also highly competitive, and we are in direct competition with
numerous other internet retailers, many of whom are larger, more well-financed and/or have a
broader customer base. Certain of our competitors in the television home shopping sector have
acquired internet businesses complementary to their existing internet sites, which may pose new
competitive challenges for our company.
19
We anticipate continuing competition for viewers and customers, for experienced home shopping
personnel, for distribution agreements with cable and satellite systems, and for vendors and
suppliers not only from television home shopping companies, but also from other companies that
seek to enter the home shopping and internet retail industries, including telecommunications and
cable companies, television networks, and other established retailers. We believe that our success
in the TV home shopping and e-commerce sectors is dependent on a number of key factors, including
(i) obtaining more favorable terms in our cable and satellite distribution agreements,
(ii) increasing the number of households who purchase products from us, and (iii) increasing the
dollar value of sales per customer to our existing customer base.
Results for the First Quarter of Fiscal 2008 and Fiscal 2007
Consolidated net sales for the 2008 first quarter were $156,288,000 compared to $188,109,000
for the 2007 first quarter. The decrease in consolidated net sales from continuing operations is
directly attributable to the decreased net sales from our television home shopping and internet
operations. Net sales attributed to our television home shopping and internet operations decreased
to $154,261,000 for the 2008 first quarter from $185,382,000 for the 2007 first quarter. We
reported an operating loss of ($18,388,000) and a net loss of ($17,578,000) for the 2008 first
quarter. We reported an operating loss of ($7,428,000) and net income of $34,380,000 for the 2007
first quarter.
Sale of Ralph Lauren Media Equity Investment
On March 28, 2007, we entered into a membership interest purchase agreement with Polo Ralph
Lauren, NBCU and certain NBCU affiliates, pursuant to which we sold our 12.5% membership interest
in Ralph Lauren Media, LLC, known as RLM to Polo Ralph Lauren for an aggregate purchase price of
$43,750,000 in cash. As a result of this transaction, we recorded a pre-tax gain of $40,240,000 on
the sale of RLM in the first quarter of fiscal 2007.
Restructuring Costs
On May 21, 2007, we announced the initiation of a restructuring of our operations that
included a 12% reduction in the salaried workforce, a consolidation of its distribution operations
into a single warehouse facility, the exit and closure of a retail outlet store and other cost
saving measures. On January 14, 2008, we announced additional organizational changes and
cost-saving measures following a formal business review conducted by management and an outside
consulting firm. As a result of the business review, our organizational structure was simplified
and streamlined to focus on profitability. As part of this restructuring, we reduced our salaried
workforce by an additional 10%. As a result, we recorded a $5,043,000 restructuring charge for
fiscal 2007 and an additional $330,000 charge for the three-month period ended May 3, 2008.
Restructuring costs include employee severance and retention costs associated with the
consolidation and elimination of approximately 80 positions across our company including four
senior managers. In addition, restructuring costs also include incremental charges associated with
the consolidation of our distribution and fulfillment operations into a single warehouse facility,
the closure of a retail outlet store, fixed asset impairments incurred as a direct result of the
operational consolidation and closures and restructuring advisory service fees.
Chief Executive Officer Transition Costs
On October 26, 2007, we announced that William J. Lansing, at the request of the board of
directors, stepped down as president and chief executive officer and had left our board of
directors. In conjunction with Mr. Lansings resignation, we recorded a charge to income of
$2,451,000 during fiscal 2007 and an additional $277,000 for the three-month period ended May 3,
2008 relating primarily to severance payments that Mr. Lansing was entitled to in accordance with
the terms of his employment agreement and costs associated with the hiring of our new chief
executive officer.
Limitation on Must-Carry Rights
The Federal Communications Commission, known as the FCC, issued a public notice on May 4, 2007
stating that it was updating the public record for a petition for reconsideration filed in 1993 and
still pending before the FCC. The petition challenges the FCCs prior determination to grant the
same mandatory cable carriage (or must-carry) rights for TV broadcast stations carrying home
shopping programming that the FCCs rules accord to other TV stations. The time period for comments
and reply comments regarding the
20
reconsideration closed in August 2007, and we submitted comments supporting the continuation
of must-carry rights for home shopping stations. If the FCC decides to change its prior
determination and withdraw must-carry rights for home shopping stations as a result of this
updating of the public record, we could lose our current carriage distribution on cable systems in
three markets: Boston, Pittsburgh and Seattle, which currently constitute approximately 3.2 million
full-time equivalent households, or FTEs, receiving our programming. We own the Boston television
station and have carriage contracts with the Pittsburg and Seattle television stations. In
addition, if must-carry rights for home shopping stations are withdrawn, it may not be possible to
replace these FTEs on commercially reasonable terms and the carrying value of our Boston
television station ($31.9 million) may become partially impaired. At this time, we cannot predict
the timing or the outcome of the FCCs action to update the public record on this issue.
Results of Operations
Selected Condensed Consolidated Financial Data
Continuing Operations
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Dollar Amount as a Percentage of Net
|
|
|
Sales for the
|
|
|
Three-Month Periods Ended
|
|
|
May 3, 2008
|
|
May 5, 2007
|
Net sales
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
Cost of sales
(exclusive of depreciation and amortization)
|
|
|
68.0
|
%
|
|
|
64.9
|
%
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Distribution and selling
|
|
|
36.5
|
%
|
|
|
32.1
|
%
|
General and administrative
|
|
|
4.1
|
%
|
|
|
4.0
|
%
|
Depreciation and amortization
|
|
|
2.8
|
%
|
|
|
3.0
|
%
|
Restructuring costs
|
|
|
0.2
|
%
|
|
|
|
%
|
CEO transition costs
|
|
|
0.2
|
%
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
43.8
|
%
|
|
|
39.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(11.8
|
)%
|
|
|
(4.0
|
)%
|
|
|
|
|
|
|
|
|
|
Key Performance Metrics*
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
|
|
|
|
|
|
|
Three-Month Periods Ended
|
|
|
|
|
|
|
May 3, 2008
|
|
|
May 5, 2007
|
|
|
Change
|
|
Program Distribution
|
|
|
|
|
|
|
|
|
|
|
|
|
Cable FTEs (Average 000s)
|
|
|
42,361
|
|
|
|
40,379
|
|
|
|
5
|
%
|
Satellite FTEs (Average 000s)
|
|
|
28,394
|
|
|
|
27,136
|
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
|
Total FTEs (Average 000s)
|
|
|
70,755
|
|
|
|
67,515
|
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales per FTE (Annualized)
|
|
$
|
8.72
|
|
|
$
|
10.98
|
|
|
|
(21
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merchandise Mix
|
|
|
|
|
|
|
|
|
|
|
|
|
Jewelry
|
|
|
44
|
%
|
|
|
40
|
%
|
|
|
|
|
Computers & Electronics
|
|
|
17
|
%
|
|
|
23
|
%
|
|
|
|
|
Watches, Coins & Collectibles
|
|
|
20
|
%
|
|
|
15
|
%
|
|
|
|
|
Apparel, Fashion Accessories and Health & Beauty
|
|
|
10
|
%
|
|
|
9
|
%
|
|
|
|
|
Home and All Other
|
|
|
9
|
%
|
|
|
13
|
%
|
|
|
|
|
Shipped Units (000s)
|
|
|
1,004
|
|
|
|
1,149
|
|
|
|
(13
|
%)
|
Average Selling Price Shipped Units
|
|
$
|
228
|
|
|
$
|
225
|
|
|
|
1
|
%
|
|
|
|
*
|
|
Includes television home shopping and Internet sales only.
|
21
Program Distribution
Our television home shopping programming was available to approximately 70.8 million average
full time equivalent, or FTE, households for the first quarter of fiscal 2008 and approximately
67.5 million average FTE households for the first quarter of fiscal 2007. Average FTE subscribers
grew 5% in the first quarter of fiscal 2008, resulting in a 3.3 million increase in average FTEs
versus the prior year comparable quarter. The increase was driven by continued strong growth in
satellite distribution of our programming and increased distribution of our programming on digital
cable. We anticipate that our cable programming distribution will increasingly shift towards a
greater mix of digital as opposed to analog cable tiers, both through growth in the number of
digital subscribers and through cable system operators moving programming that is carried on analog
channels over to digital channels. Nonetheless, because of the broader universe of programming
choices available for viewers in digital systems and the higher channel placements commonly
associated with digital tiers, the shift towards digital systems may adversely impact our ability
to compete for television viewers even if our programming is available in more homes. Our
television home shopping programming is also simulcast live 24 hours a day, 7 days a week through
our internet website,
www.shopnbc.tv
, which is not included in total FTE households.
Merchandise Mix
During the 2008 first quarter, jewelry net sales increased to 44% of total television home
shopping and internet net sales from 40% during the prior year comparable quarter. Net sales from
computers and electronics decreased to 17% of total television home shopping and internet net sales
from 23% as compared to the prior year first quarter and net sales from watches, coins &
collectibles categories increased to 20% of total television home shopping and internet net sales
from 15% as compared to the prior year first quarter. Apparel, fashion accessories and health &
beauty categories increased to 10% of total television home shopping and internet net sales from 9%
as compared to the prior year first quarter and home and other products represented 9% of total
television home shopping and internet net sales compared to 13% during the prior year comparable
quarter.
Shipped Units
The number of units shipped during the 2008 first quarter decreased 13% from the prior years
comparable quarter to 1,004,000 from 1,149,000. The decrease in shipped units was directly related
to the decrease in sales experienced during the first three months of fiscal 2008.
Average Selling Price
The average selling price, or ASP, per unit was $228 in the 2008 first quarter, a 1% increase
from the comparable prior year quarter. The year-to-date increase in the 2008 ASP was driven
primarily by selling price increases within the jewelry category.
Net Sales
Consolidated net sales for the 2008 first quarter were $156,288,000 as compared with
consolidated net sales of $188,109,000 for the 2007 first quarter, a 17% decrease. The overall
decrease in consolidated net sales from prior year is directly attributed to decreases experienced
in net sales from of our television home shopping and internet operations. Net sales attributed to
our television home shopping and internet operations decreased to $154,261,000 for the 2008 first
quarter from $185,382,000 for the 2007 first quarter, a 17% decrease. Like similar experiences of
other retailers, our television home shopping and internet net sales decreased during fiscal 2008
as a direct result of a continued slowing economy and a difficult environment with consumer
confidence dropping to a 25-year low and a slowdown in overall discretionary spending. Our high
end jewelry business, which has average selling prices of over $500, was hit especially hard during
the quarter. In addition, television home shopping and internet net sales decreased as we started
to change the way in which we operate our business to better position our company for the future.
We began reducing airtime devoted to high ticket
22
items such as consumer electronics, which drive
top-line sales but not necessarily repeat business. This mix shift accounted for approximately 4%
of the first quarters net sales decrease. Going forward we intend to devote more airtime to key
merchandise categories that may generate less top-line revenue, but more margin per hour and help
us expand our core customer base. In addition,
television and internet net sales also decreased due to decreased shipping and handling
revenue resulting from decreased sales in the 2008 period compared to 2007.
Cost of Sales (exclusive of depreciation and amortization)
Cost of sales (exclusive of depreciation and amortization) for the 2008 first quarter and 2007
first quarter was $106,332,000 and $121,996,000, respectively, a decrease of $15,664,000, or 13%.
The decreases in cost of sales is directly attributable to decreased costs associated with
decreased sales volume from our television home shopping and internet businesses and decreased
shipping costs associated with decreases in shipping and handling revenues. Net sales less cost
of sales (exclusive of depreciation and amortization) as a percentage of sales for the fiscal 2008
and fiscal 2007 quarters were 32.0% and 35.1%, respectively. The sales margin decrease from the
prior year resulted primarily from our effort during the first quarter to reduce inventory levels
of high-priced items by taking aggressive markdowns during our end of quarter clearance sale. In
addition, first quarter gross margin was also impacted by a non-cash inventory write down of $3.8
million recorded in the first quarter as a result of a strategic decision made during the quarter
to significantly reduce our products on-air life cycle going forward.
Operating Expenses
Total operating expenses for the 2008 first quarter were $68,344,000 compared to $73,541,000
for the comparable prior year period, a decrease of 7%. Distribution and selling expense decreased
$3,377
,
000, or 6%, to $57,083,000, or 37% of net sales during the 2008 first quarter compared to
$60,460,000 or 32% of net sales for the comparable prior year quarter. Distribution and selling
expense decreased over the prior year primarily due to a decrease in telemarketing and customer
service costs of $1,818,000 associated with decreased sales volume; decreases in salaries, accrued
bonuses and other related personnel costs associated with merchandising, television production and
show management personnel and on-air talent of $1,203,000; decreases in internet, direct-mail and
marketing expenses of $704,000 and decreases in net collection fees and bad debt expense of
$785,000 due to the overall decrease in net sales and due to a lower percentage of and our reduced
reliance during fiscal 2008 on net sales sold using the ValuePay installment program. These
decreases were offset by an increase in net cable and satellite access fees of $778,000 as a result
of increased subscribers over prior year and increased stock option expense of $137,000 associated
with fiscal 2008 stock option grants. Distribution and selling expense increased to 37% of net
sales during the 2008 first quarter compared to 32% of net sales for the comparable prior year
quarter.
General and administrative expense for the 2008 first quarter decreased $1,160,000, or 15%, to
$6,335,000, or 4% of net sales, compared to $7,495,000, or 4% of net sales for the 2007 first
quarter. General and administrative expense decreased on a year-to-date basis over the prior year
primarily as a result of our restructuring initiative which included reductions in salaries,
related benefits and accrued bonuses totaling $1,245,000, offset by increases associated with stock
option expense of $137,000. General and Administrative expense remained constant at 4% of net
sales in both the fiscal 2008 and fiscal 2007 first quarters.
Depreciation and amortization expense for the 2008 first quarter was $4,319,000 compared to
$5,586,000 for the 2007 quarter, representing a decrease of $1,267,000, or 23%, from the comparable
prior year period. Depreciation and amortization expense as a percentage of net sales for the 2008
and 2007 quarters was constant at 3% for each period. The quarterly decrease in depreciation and
amortization expense relates to the timing of fully depreciated assets quarter over quarter.
Operating Loss
For the 2008 first quarter, our operating loss was $18,388,000 compared to an operating loss
of $7,428,000 for the 2007 first quarter. Our operating loss increased during fiscal 2008 from the
comparable prior year period primarily as a result of our decrease in net sales due to a continued
slowing economy and a difficult environment driven by a general softness in overall consumer
demand. In addition, we experienced increases during the quarter in operating expenses,
particularly (i) increases in costs associated with our restructuring initiative and (ii)
additional expense associated with our chief executive officer departure. These operating expense
increases were offset by decreases in distribution and selling expenses due primarily to decreased
sales, decreases in general and administrative expense as a result of reduced headcount in the form
of reduced salary and bonuses and a net decrease in depreciation and amortization expense as a
result of the timing of fully depreciated assets year over year.
23
Net Income (Loss)
For the 2008 first quarter, we reported a net loss available to common shareholders of
($17,651,000) or ($.53) per share on 33,578,000 weighted average common shares outstanding compared
with net income available to common shareholders of $34,308,000 or $.80 per share on 42,939,000
weighted average common shares outstanding (42,939,000 diluted shares) for the 2007 first quarter.
Net loss available to common shareholders for the first quarter of 2008 includes interest income
totaling $825,000 earned on our cash and investments. Net income available to common shareholders
for the first quarter of 2007 includes the recording of a pre-tax gain of $40,240,000 on the sale
of RLM, the recording of $609,000 of equity in earnings from RLM and interest income totaling
$1,240,000 earned on our cash and investments.
For the first quarter of fiscal 2008, we recorded state income taxes payable on certain income
for which there is no loss carryforward benefit available. For the first quarter of 2007 we
reported a net income tax provision of $281,000, which was primarily attributable to the gain on
the sale of RLM. The income tax provision recorded for the 2007 quarter reflects a 2% effective
alternative minimum tax rate recorded on the gain recorded on the sale of RLM and state income
taxes payable on certain income for which there is no loss carryforward benefit available for the
2007 quarter. We have not recorded any income tax benefit on the loss recorded in the 2008 quarter
due to the uncertainty of realizing income tax benefits in the future as indicated by our recording
of an income tax valuation reserve. We will continue to maintain a valuation reserve against our
net deferred tax assets until we believe it is more likely than not that these assets will be
realized in the future.
Adjusted EBITDA Reconciliation
Adjusted EBITDA (as defined below) for the 2008 first quarter was a loss of $(12,394,000)
compared with an Adjusted EBITDA loss of $(1,249,000) for the 2007 first quarter.
A reconciliation of EBITDA, as adjusted, to its comparable GAAP measurement, net income (loss)
follows, in thousands:
|
|
|
|
|
|
|
|
|
|
|
Three-Month Periods Ended
|
|
|
|
May 3, 2008
|
|
|
May 5, 2007
|
|
EBITDA, as adjusted
|
|
$
|
(12,394
|
)
|
|
$
|
(1,249
|
)
|
Less:
|
|
|
|
|
|
|
|
|
Non-operating gains and equity in income of RLM
|
|
|
|
|
|
|
40,849
|
|
Restructuring costs
|
|
|
(330
|
)
|
|
|
|
|
CEO transition costs
|
|
|
(277
|
)
|
|
|
|
|
Non-cash share-based compensation
|
|
|
(1,068
|
)
|
|
|
(593
|
)
|
|
|
|
|
|
|
|
EBITDA (as defined)
|
|
|
(14,069
|
)
|
|
|
39,007
|
|
A reconciliation of EBITDA to net income (loss) is as follows:
|
|
|
|
|
|
|
|
|
EBITDA, as defined
|
|
|
(14,069
|
)
|
|
|
39,007
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
(4,319
|
)
|
|
|
(5,586
|
)
|
Interest income
|
|
|
825
|
|
|
|
1,240
|
|
Income taxes
|
|
|
(15
|
)
|
|
|
(281
|
)
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(17,578
|
)
|
|
$
|
34,380
|
|
|
|
|
|
|
|
|
EBITDA represents net income (loss) from continuing operations for the respective periods
excluding depreciation and amortization expense, interest income (expense) and income taxes. We
define EBITDA, as adjusted, as EBITDA excluding non-recurring non-operating gains (losses) and
equity in income of Ralph Lauren Media, LLC; non-recurring restructuring and chief executive
officer transition costs; and non-cash share-based compensation expense.
We have included the term EBITDA, as adjusted, in our EBITDA reconciliation in order to
adequately assess the operating performance of our core television and internet businesses and in
order to maintain comparability to our analysts coverage and financial guidance. Management
believes that EBITDA, as adjusted, allows investors to make a more meaningful comparison between
our core business operating results over different periods of time with those of other similar
companies. In addition, management uses
24
EBITDA, as adjusted, as a metric measure to evaluate
operating performance under its management and executive incentive compensation programs. EBITDA,
as adjusted, should not be construed as an alternative to operating income (loss) or to cash flows
from operating activities as determined in accordance with generally accepted accounting principles
and should not be construed as a measure of liquidity. EBITDA, as adjusted, may not be comparable
to similarly entitled measures reported by other companies.
Critical Accounting Policies, Estimates and Risk Factors
A discussion of the critical accounting policies related to accounting estimates and
assumptions and specific risks and uncertainties are discussed in detail in our fiscal 2007 annual
report on Form 10-K under the captions entitled Risk Factors and Critical Accounting Policies
and Estimates.
We have entered into affiliation agreements that represent approximately 1,400 cable systems that
require each operator to offer our television home shopping programming substantially on a
full-time basis over their systems. The stated terms of the affiliation agreements typically ranged
originally from three to twelve years. Under certain circumstances, the television operators may
cancel the agreements prior to their expiration. If these agreements are terminated, the
termination may materially or adversely affect our business. Cable and satellite distribution
agreements representing a majority of the total cable and satellite households who currently
receive our television programming are scheduled to expire at the end of 2008. While we and NBCU,
as our agent, have begun discussions with certain cable and satellite system operators regarding
extensions or renewals of these agreements, no assurance can be given that we will be successful in
negotiating renewal contracts with all the existing systems, or that the financial and other terms
of renewal will be on acceptable terms. Failure to successfully renew carriage agreements covering
a material portion of our existing cable and satellite households on acceptable financial and other
terms could adversely affect our future growth, sales revenues and earnings unless we were able to
arrange for alternative means of broadly distributing our television programming. In addition,
unless we and NBCU mutually agree on an extension of the distribution and marketing agreement under
which NBCU acts as our agent, this agreement will expire in March 2009 and this could adversely
affect our ability to increase our program distribution.
Financial Condition, Liquidity and Capital Resources
As of May 3, 2008, cash and cash equivalents and short-term investments were $62,253,000,
compared to $59,078,000 as of February 2, 2008, a $3,175,000 increase. For the quarter, working
capital decreased $16,103,000 to $117,730,000. The current ratio was 2.3 at May 3, 2008 compared to
2.1 at February 2, 2008.
Sources of Liquidity
Our principal sources of liquidity are our available cash, cash equivalents and short and
long-term investments, accrued interest earned from our short and long-term investments and our
operating cash flow, which is primarily generated from credit card receipts from sales transactions
and the collection of outstanding customer accounts receivables. The timing of customer collections
made pursuant to our ValuePay installment program and the extent to which we extend credit to our
customers is important to our short-term liquidity and cash resources. A significant increase in
our accounts receivable aging or credit losses could negatively impact our source of cash from
operations in the short term. During fiscal 2007, we experienced a $7.2 million increase in bad
debt expense over fiscal 2006 due to recent up-trends experienced in customer account
delinquencies, costs of collection and write offs during fiscal 2007, all associated with increased
exposure relating to the current consumer credit environment. While credit losses have historically
been within our estimates for these losses, there is no guarantee that we will continue to
experience the same credit loss rate that we have had in the past or that the recent increase in
bad debt losses will not continue. Historically, we have also been able to generate additional cash
sources from the proceeds of stock option exercises and from the sale of equity investments and
other properties; however, these sources of cash are neither relied upon nor controllable by us. We
have no debt other than fixed capital lease obligations and believe we have the ability to obtain
additional financing if necessary. At May 3, 2008, short and long-term investments and cash
equivalents were invested primarily in money market funds, high quality commercial paper with
original maturity dates of less than 270 days and investment grade corporate and auction rate
securities with original tender option terms ranging from one month to one year. Although we
believe our short and long-term investment policy is conservative in nature, certain short-term
investments in commercial paper can be exposed to the credit risk of the underlying companies to
which they relate and interest earned on these investments is subject to interest rate
fluctuations. The maturities and tender option terms within our investment portfolio generally
range from 30 to 180 days.
At May 3, 2008, our investment portfolio included auction rate securities with an estimated
fair value of $23,802,000 ($26,800,000 cost basis). Our auction rate securities are variable rate
debt instruments that have underlying securities with contractual maturities
25
greater than ten
years. Holders of auction rate securities can either sell through the auction or bid based on a
desired interest rate or hold and accept the reset rate. If there are insufficient buyers, then the
auction fails and holders are unable to liquidate their investment through the auction. A failed
auction is not a default of the debt instrument, but does set a new interest rate in accordance
with the original terms of the debt instrument. The result of a failed auction is that the auction
rate security continues to pay interest in accordance
with its terms. Auctions continue to be held as scheduled until the auction rate security
matures or until it is called. These mostly AAA-rated auction rate securities, which met our
investment guidelines at the time the investments were made, have failed to settle in auctions
during fiscal 2007 and fiscal 2008. At this time, these investments are not liquid, and in the
event we need to access these funds, we will not be able to do so without a loss of principle. We
have reduced the carrying value of these investments by $2,998,000 through other comprehensive
income (loss) to reflect a temporary impairment on these securities. Currently, we believe these
investments are temporarily impaired, but it is not clear in what period of time they will be
settled. Due to the current lack of liquidity of these investments, they are classified as
long-term investments on our balance sheet.
Cash Requirements
Our principal use of cash is to fund our business operations, which consist primarily of
purchasing inventory for resale, funding account receivables growth in support of sales growth and
funding operating expenses, particularly our contractual commitments for cable and satellite
programming and the funding of capital expenditures. Expenditures made for property and equipment
in fiscal 2008 and 2007 and for expected future capital expenditures include the upgrade and
replacement of computer software and front-end merchandising systems, expansion of capacity to
support our growing business, continued improvements and modifications to our owned headquarter
buildings and the upgrade and digitalization of television production and transmission equipment
and related computer equipment associated with the expansion of our home shopping business and
e-commerce initiatives. Historically, we have also used our cash resources for various strategic
investments and for the repurchase of stock under stock repurchase programs but are under no
obligation to continue doing so if protection of liquidity is desired. In March 2008, we authorized
an additional $10 million under our stock repurchase program and have the discretion to repurchase
stock under the program and make strategic investments consistent with our business strategy.
We ended May 3, 2008 with cash and cash equivalents and short-term investments of $62,253,000
and no long-term debt obligations. In addition, we have $23,802,000 of auction rate security
investments which are currently illiquid and classified as long-term. We expect future growth in
working capital as revenues grow beyond fiscal 2008 but expect cash generated from operations to
offset the expected use. We believe our existing cash balances and our ability to raise additional
financing will be sufficient to fund our obligations and commitments as they come due on a
long-term basis and sufficient to fund potential foreseeable contingencies. These estimates are
subject to business risk factors including those identified under Risk Factors in our fiscal 2007
annual report on Form 10-K. In addition to these risk factors, a significant element of uncertainty
in future cash flows arises from potential strategic investments we may make, which are inherently
opportunistic and difficult to predict.
Our preferred stock issued to GE Equity may be redeemed upon certain changes in control of our
company and, in any event, may be redeemed on March 8, 2009 upon the ten-year anniversary of its
issuance (unless previously converted into common stock). If we are unable to generate positive
cash flow or obtain additional capital prior to any such redemption, the requirement that we pay
cash in connection with the redemption may have a material impact on our liquidity and cash
resources. The aggregate redemption cost of all the preferred stock is $44,264,000. The preferred
stock has a redemption price of $8.29 per share and is convertible on a one-for-one basis into our
common stock, and accordingly, if the market value of our stock is higher than the redemption price
immediately prior to the redemption date, GE Equity may choose to convert its shares of preferred
stock to common stock rather than exercise its right to redemption and not impact our cash
liquidity position. We believe that existing cash balances, our ability to raise financing and our
ability to structure transactions in a manner reflective of capital availability will be sufficient
to fund any investments while maintaining sufficient liquidity for our normal business operations
even if we are required to pay cash in connection with the preferred stock redemption.
Total assets at May 3, 2008 were $310,805,000, compared to $359,080,000 at February 2, 2008, a
$48,275,000 decrease. Shareholders equity was $174,067,000 at May 3, 2008, compared to
$194,510,000 at February 2, 2008, a $20,443,000 decrease. The decrease in shareholders equity for
first quarter of fiscal 2008 resulted primarily from the net loss of $17,578,000 recorded during
the period, repurchases of common stock totaling $3,317,000, the unrealized loss of $544,000
recorded on our auction rate security investments and accretion on redeemable preferred stock of
$73,000. These decreases were offset by increases in shareholders equity of $1,068,000 related to
the recording of share-based compensation.
26
For the three months ended May 3, 2008, net cash provided by operating activities totaled
$6,929,000 compared to net cash provided by operating activities of $2,781,000 for the three months
ended May 5, 2007. Net cash provided by operating activities for the 2008 and 2007 quarters
reflects net income (loss), as adjusted for depreciation and amortization, share-based payment
compensation, common stock issued to employees, equity in earnings of affiliates, amortization of
deferred revenue and gain on sale of investments. In addition,
net cash provided by operating activities for the three months ended May 3, 2008 reflects
primarily a decrease in accounts receivable, inventories and deferred revenue offset by an increase
in prepaid expenses and other and a decrease in accounts payable and accrued liabilities. Accounts
receivable decreased primarily due to a decrease from sales made during the first quarter of fiscal
2008 utilizing extended payment terms over the first quarter of fiscal 2007 as we continue to
tighten up our customer credit offerings. Inventories decreased during the first quarter as a
result of our first quarter clearance promotions and the $3,840,000 inventory write down taken
during the fiscal 2008 first quarter. The increase in prepaid expenses and other relates primarily
to increases in prepaid cable access fees and prepaid expenses incurred in connection with the
hiring of four new senior executive officers. The decrease in accounts payable and accrued
liabilities relates primarily to the timing of vendor merchandise payments following our fourth
quarter seasonal inventory purchases and the timing of our quarterly cable and satellite carriage
payments. In addition, we experienced reductions in accrued liabilities associated with accrued
cable access and marketing fees and the reserve for product returns due to lower sales.
Net cash provided by investing activities totaled $15,150,000 for the first quarter of fiscal
2008 compared to net cash provided by investing activities of $15,926,000 for the first quarter of
fiscal 2007. For the three months ended May 3, 2008 and May 5, 2007, expenditures for property and
equipment were $2,399,000 and $2,176,000, respectively. Expenditures for property and equipment
during the 2008 and 2007 periods primarily include capital expenditures made for the development,
upgrade and replacement of computer software and front-end ERP, customer care management and
merchandising systems, related computer equipment, digital broadcasting equipment and other office
equipment, warehouse equipment, production equipment and building improvements. Principal future
capital expenditures are expected to include the development, upgrade and replacement of various
enterprise software systems, continued improvements and modifications to our owned headquarter
buildings, the expansion of warehousing capacity and security in our Bowling Green distribution
facility, the upgrade and digitalization of television production and transmission equipment and
related computer equipment associated with the expansion of our home shopping business and
e-commerce initiatives. In the three months ended May 3, 2008, we received proceeds of $17,549,000
from the sale of short-term investments. In the three months ended May 5, 2007, we invested
$30,525,000 in various short-term investments, received proceeds of $4,877,000 from the sale of
short-term investments and received proceeds of $43,750,000 from the sale of our RLM investment.
Net cash used for financing activities totaled $3,317,000 for the three months ended May 3,
2008 and related to payments made in conjunction with the repurchase of 556,000 shares of our
common stock. Net cash provided by financing activities totaled $361,000 for the comparable prior
year period and related to cash proceeds received from the exercise of stock options.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not enter into financial instruments for trading or speculative purposes and do not
currently utilize derivative financial instruments as a hedge to offset market risk. In past years,
we held certain equity investments in the form of common stock purchase warrants in public
companies and accounted for these investments in accordance with the provisions of SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities
. We no longer have investments of
that nature. Our operations are conducted primarily in the United States and are not subject to
foreign currency exchange rate risk. However, some of our products are sourced internationally and
may fluctuate in cost as a result of foreign currency swings. We currently have no long-term debt,
and accordingly, are not significantly exposed to interest rate risk, although changes in market
interest rates do impact the level of interest income earned on our substantial cash and short-term
investment portfolio.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As of the end of the periods covered by this report, management conducted an evaluation, under
the supervision and with the participation of our chief executive officer and chief financial
officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on this evaluation, the
officers concluded that our disclosure controls and procedures were effective to ensure that
information required to be disclosed by us in reports that we file or submit under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods
specified in Securities and Exchange Commission rules and forms, and to ensure that information
required to be disclosed by us in the reports we
27
file or submit under the Securities Exchange Act
of 1934 is accumulated and communicated to management, including our principal executive and
principal financial officers, as appropriate to allow timely decisions regarding required
disclosures.
Changes in Internal Controls over Financial Reporting
Our management, with the participation of the chief executive officer and chief financial
officer, performed an evaluation as to whether any change in the internal controls over financial
reporting (as defined in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934)
occurred during the periods covered by this report. Based on that evaluation, the chief executive
officer and chief financial officer concluded that no change occurred in the internal controls over
financial reporting during the period covered by this report that materially affected, or were
reasonably likely to materially affect, the internal controls over financial reporting.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are involved from time to time in various claims and lawsuits in the ordinary course of
business. In the opinion of management, these claims and suits individually and in the aggregate
have not had a material adverse effect on our operations or consolidated financial statements.
ITEM 1A. RISK FACTORS
A majority of our cable and satellite distribution agreements are scheduled to expire at the end of
2008 and it may be difficult or more costly to renew these agreements.
We entered into affiliation agreements that represent approximately 1,400 cable systems that
require each operator to offer our television home shopping programming substantially on a
full-time basis over their systems. The stated terms of the affiliation agreements typically ranged
originally from three to twelve years. Under certain circumstances, the television operators may
cancel the agreements prior to their expiration. If these agreements are terminated, the
termination may materially or adversely affect our business. Cable and satellite distribution
agreements representing a majority of the households who currently receive our television
programming are scheduled to expire at the end of 2008. While we and NBCU, as our agent, have begun
discussions with certain cable and satellite system operators regarding extensions or renewals of
these agreements, no assurance can be given that we will be successful in negotiating renewal
contracts with any or all of the existing systems, or that the financial and other terms of renewal
will be acceptable. Failure to successfully renew carriage agreements covering a material portion
of our existing cable and satellite households on acceptable financial and other terms could
adversely affect our future growth, sales revenues and earnings unless we were able to arrange for
alternative means of broadly distributing our television programming. In addition, unless we and
NBCU mutually agree on an extension of the distribution and marketing agreement under which NBCU
acts as our agent, this agreement will expire in March 2009 and this could adversely affect our
ability to increase our program distribution.
28
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table presents information with respect to purchases of our common stock made
during the three months ended May 3, 2008, by our company or by any affiliated purchaser of our
company, as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximate
|
|
|
|
|
|
|
|
|
|
|
Total Number of
|
|
Dollar Value of
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Shares that May
|
|
|
|
|
|
|
|
|
|
|
Purchased as
|
|
Yet Be
|
|
|
Total Number of
|
|
Average Price
|
|
Part of a Publicly
|
|
Purchased
|
|
|
Shares
|
|
Paid per
|
|
Announced
|
|
Under the
|
Period
|
|
Purchased
|
|
Share
|
|
Program
|
|
Program (1)
|
February 3, 2008 through March 1, 2008
|
|
|
556,000
|
|
|
$
|
5.96
|
|
|
|
4,580,000
|
|
|
$
|
10,000,000
|
|
March 2, 2008 through April 5, 2008
|
|
|
|
|
|
|
|
|
|
|
4,580,000
|
|
|
$
|
10,000,000
|
|
April 6, 2008 through May 3, 2008
|
|
|
|
|
|
|
|
|
|
|
4,580,000
|
|
|
$
|
10,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
556,000
|
|
|
$
|
5.96
|
|
|
|
4,580,000
|
|
|
$
|
10,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
On March 6, 2008, our board of directors authorized an additional $10 million for stock
repurchases under its stock repurchase program.
|
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None.
ITEM 6. Exhibits
The exhibits filed with this Quarterly Report on Form 10-Q are set forth on the Exhibit Index
filed as a part of this report beginning immediately following the signatures.
29
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 MEDIA, INC. AND SUBSIDIARIES
|
|
|
|
|
June 12, 2008
|
|
|
|
|
|
|
|
|
|
|
|
/s/ RENE G. AIU
Rene G. Aiu
|
|
|
|
|
Chief Executive Officer, President and Director
|
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
June 12, 2008
|
|
|
|
|
|
|
|
|
|
|
|
/s/ FRANK P. ELSENBAST
Frank P. Elsenbast
|
|
|
|
|
Senior Vice President Finance, Chief Financial Officer
|
|
|
|
|
(Principal Financial Officer)
|
|
|
30
EXHIBIT INDEX
|
|
|
|
|
Exhibit
|
|
|
|
|
Number
|
|
Exhibit
|
|
Filed by
|
3.1
|
|
Articles of Incorporation of the Registrant
|
|
Filed Electronically
|
|
|
|
|
|
3.2
|
|
Bylaws of the Registrant
|
|
Filed Electronically
|
|
|
|
|
|
31.1
|
|
Rule 13a-14(a)/15d-14(a) Certification by Principal Executive Officer
|
|
Filed Electronically
|
|
|
|
|
|
31.2
|
|
Rule 13a-14(a)/15d-14(a) Certification of Principle Financial and
Accounting Officer
|
|
Filed Electronically
|
|
|
|
|
|
32
|
|
Section 1350 Certification of Chief Executive Officer and Chief
Financial Officer
|
|
Filed Electronically
|
31
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