SHOP AT HOME INC /TN/
8-K, 2000-09-06
CATALOG & MAIL-ORDER HOUSES
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                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549


                                    FORM 8-K

                                 CURRENT REPORT

                       Pursuant to Section 13 or 15(d) of
                       The Securities Exchange Act of 1934

       Date of Report (Date of earliest event reported): September 6, 2000



                               SHOP AT HOME, INC.
                           --------------------------
             (Exact name of registrant as specified in its charter)




                          Tennessee 0-25596 62-1282758
        -----------------------------------------------------------------
                    (State or other (Commission (IRS Employer
                jurisdiction of File Number) Identification No.)
                                 incorporation)



              5388 Hickory Hollow Parkway, Antioch, Tennessee 37013
           ----------------------------------------------------------
          (Address, including zip code, of principal executive office)

                                                  (615) 263-8000
               --------------------------------------------------
              (Registrant's telephone number, including area code)



Item 5.  Other Events

         On September 1, 2000,  Shop At Home,  Inc. held a conference  call with
certain  financial  analysts to announce  and  discuss the  Company's  financial
results for its fiscal year ending June 30, 2000.  These results were filed with
the SEC on the Form 10-K filed  August 31,  2000.  The  Company  has  elected to
voluntarily  file a copy of this  transcript on this Form 8-K to ensure that the
contents of such conference call are fully disseminated and that any investor of
Shop At Home,  Inc.  has full access to such  transcript.  A  transcript  of the
September 1, 2000, Financial Conference Call is attached hereto as Exhibit 99.1.

                                    SIGNATURE

         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 hereunto duly authorized.

                                             SHOP AT HOME, INC.
                                  (Registrant)



                                             By: /s/ George J. Phillips
                                             -------------------------------
                                             George J. Phillips
                                             Vice President and General Counsel

Date: September 6, 2000




                              SHOP AT HOME NETWORK
                             Moderator: Kent Lillie
                         September 1, 2000/9:00 a.m. CDT
                                     Page 1







                              SHOP AT HOME NETWORK
                 CONFERENCE CALL TO DISCUSS FISCAL 2000 RESULTS
                                September 1, 2000
                                  9:00 a.m. CDT

"Safe Harbor"  Statement Under the Private  Securities  Litigation Reform Act of
1995 - The transcript of the foregoing conference call includes  forward-looking
statements  within  the  meaning of Section  27A of  Securities  Act of 1933 and
Section  21E of  the  Securities  Exchange  Act of  1934,  including  statements
regarding continued revenue and distribution  growth, the future performance and
projected  profitability  of Shop At Home,  Inc.  and  collectibles.com  and the
anticipated  impact of new  management  initiatives.  Actual  results may differ
materially  from those  which may be  identified  for a number of reasons as are
discussed  from time to time in Shop At Home's SEC  reports,  including  but not
limited to its  Annual  Report on the Form 10-K filed with the SEC on August 31,
2000 (Business and Management's  Discussion and Analysis of Financial  Condition
and Results of Operations), and any recently filed 8-K's.


Coordinator:               Good  morning  and  welcome to fiscal  2000  year-end
                           conference call. Following today's presentation there
                           will be a formal question and answer session. At that
                           time instructions will be given should anyone wish to
                           ask a question. Until that time, all lines will be in
                           a listen only fashion. At the request of Shop at Home
                           the conference is being recorded.  Should you object,
                           you may disconnect at this time.

                           I'd now  like to turn  the  meeting  over to  today's
                           host, Miss Ari Amiri, Director of Investor Relations.
                           Ma'am, you may begin.

A. Amiri:                  Good    morning   and   welcome  to  Shop  at  Home's
                           fiscal 2000 year-end results  conference call. On the
                           call  with me today  is Kent  Lillie,  President  and
                           Chief Executive  Officer;  Arthur Tek, Executive Vice
                           President and Chief Financial Officer; and Tim Engle,
                           President and Chief Operating  Officer of the Shop at
                           Home Network and Collectibles.com.

                           Our release was sent yesterday afternoon and our 10-K
                           is currently  available  on Edgar.  We will be taking
                           questions  after  our  presentation  of the  year-end
                           results for both the  Network  and  Collectibles.com,
                           and you may  direct  your  questions  to any of those
                           present.

                           Before  we  begin,  I  would  like  to say  that  any
                           statements  made today on behalf of Shop At Home with
                           regard  to  the   expectations  of  future  revenues,
                           earnings  coverage or other  performance  factors and
                           including  any  statements  regarding  the  plans  or
                           objectives of management for future  operations,  are
                           forward-looking  statements  for the  purposes of the
                           SEC statutes.

                           It is my pleasure now to introduce Mr. Lillie.

K. Lillie:                 Good  morning.  As  you've  no  doubt  read  in   our
                           release,  we're pleased today to announce a number of
                           outstanding  results  from the year just  ended and a
                           very  positive  outlook  for the  current  year,  but
                           tempered with less than expected performance from the
                           network side of our operations in the last quarter.

                           To begin, the company has posted its 26th consecutive
                           quarter  of year over year  revenue  growth and a new
                           record high for our fourth  quarter ending June 30th,
                           as  well as  record  household  distribution  for the
                           network  in  terms of total  households  reached  and
                           full-time equivalents.

                           I'm also delighted to announce that  collectibles.com
                           performance   was  and  is  well  above   marketplace
                           expectations in all leading metrics, including number
                           of  browsers,  page  views,  time spent per  browser,
                           revenue  per  browser  and  most   important,   gross
                           revenue, margins and earnings.  Margins, I would like
                           to  reiterate,  that are in the  mid-thirties  range,
                           among the highest on the Internet, and a testimony to
                           our  business  plan  and our  desire  to make  this a
                           profitable business as soon as possible.

                           We temper this euphoria, however, with disappointment
                           over the much less  than  satisfactory  and  expected
                           performance  from our Network  operations in the last
                           quarter.  As  disappointed  as we all are, I will say
                           that we have moved swiftly and decisively to identify
                           the  problems,  both  people  and  systems,  and have
                           implemented  an aggressive  plan to return,  not just
                           the  Network,  but also the  entire  company  back to
                           profitability.

                           First as you know, we consolidated the two management
                           groups, the Network and  collectibles.com  management
                           groups in late June,  with the surviving  group being
                           the  managers of  collectibles.com,  most of whom had
                           previous  and  very   successful   tenures  with  the
                           Network.

                           The immediate  result was not only  significant  cost
                           savings of well over a million  dollars a year, but a
                           return  to  the   fundamentals   and  basic  business
                           principles that turned this company around originally
                           seven  years  ago.  I'm  pleased  to say  that we are
                           already  seeing the  benefits of that change in early
                           improvements  in the basic  drivers of our  business:
                           revenue, margin and return rates.

                           I also want to say that this  company is committed to
                           returning  to bottom line  profitability,  and sooner
                           rather than later. For example, we've eliminated over
                           80 positions from our highest employee count in early
                           May. We've  renegotiated a substantial  number of our
                           major  contracts  to achieve more cost  savings,  and
                           we've  attacked  our 2001  budget  to  eliminate  all
                           non-essential expenses. As you will learn from Arthur
                           in a moment and should  observe from our  performance
                           going forward, a number of additional  innovative and
                           cost saving solutions.

                           Before Arthur speaks to those  savings,  I would like
                           Tim to outline  his  initiatives  for  improving  the
                           operating   performance   of  the   Network   and  in
                           maintaining the great momentum already established at
                           Collectibles.com. Tim?

T. Engle:                  Thank you, Kent.  July 7th marked a new beginning for
                           Shop at Home.  As Kent  mentioned, not  only  did  we
                           converge our Network  and Internet  operating  units,
                           which  included  several  key  management changes, we
                           also   identified   and  adopted  new  strategies  to
                           increase sales, improve  profitability  and  maintain
                           the    momentum    that    we've   established   with
                           collectibles.com.  During  my  remarks  today  I will
                           address these three critical areas and how we  intend
                           to strengthen this business  over  the  next  several
                           quarters.

                           First and  foremost,  we will work to  improve  sales
                           through  implementing   aggressive  customer  centric
                           strategies that will increase revenue and ultimately,
                           profitability. This will be done by implementing more
                           effective  price  points,  returning  to  destination
                           based programming, move effective database marketing,
                           implementation  of a private  label  credit  card and
                           always products.

                           The first of these will be to lower our price points.
                           Over the last several months our average  transaction
                           has  increased  steadily  from our last  several year
                           average of $175 to a recent  high of as much as $360.
                           Although  impressive by some  standards,  this higher
                           price point does not optimize our  infrastructure nor
                           appeal to the largest possible customer base.

                           I've  instructed  Ron Cook  and  Marshall  Carr,  our
                           Senior  Vice  Presidents  in  charge of  Product  and
                           Merchandising,  to  immediately  work  to  bring  our
                           average transaction down to $150. This should improve
                           our  business in a number of ways,  but most  notably
                           increase  call volume,  reduce  fraud,  improve order
                           conversion  rates,  reduce returns and  cancellations
                           and limit our reliance on customer financing.

                           One of the advantages of  collectibles.com is it will
                           allow us to offer both the high end and low end price
                           point products, without negatively impacting valuable
                           Network  time.  I  believe  it  is  the  single  most
                           significant  change we will be  making  over the next
                           several months.

                           Secondly,   we  will  improve  sales  by  once  again
                           committing   our   Network   to   destination   based
                           programming.  It is important  that our existing,  as
                           well as new customers,  have  consistency  when their
                           favorite   products   will  air.   We  believe   that
                           destination  based  programming  will  strengthen our
                           current  base,   while   continuing  to  capture  new
                           customers  who  are  introduced  to  our  programming
                           through surfing or strategic advertising placements.

                           The third is database  marketing.  We are  encouraged
                           with the  opportunities  that this channel can bring,
                           especially  since we have not fully exploited this in
                           the  past.   With  the  recent   addition  of  Debbie
                           Seigenthaler  Vice  President of Database  Marketing,
                           Shop At Home will now fully  leverage our two million
                           customer  database  for the purpose of creating  more
                           sales.  In fact,  just recently  we've  implemented a
                           reactivation program for customers who had not bought
                           in 60 days, with great success in adding  incremental
                           sales.  This type of  marketing  will  continue at an
                           aggressive pace.

                           Additionally,     we    plan    to     implement    a
                           customer-financing  alternative  through  our current
                           stretch pay program.  This private  label credit card
                           will allow our customers to obtain  additional credit
                           within  six  seconds  of  our  sales  representatives
                           submitting their  information.  More importantly,  it
                           will  allow  Shop At Home to obtain  the full  retail
                           price of a product,  up front and off balance  sheet.
                           This will have a double  impact of  increasing  sales
                           and reducing our accounts receivables with customers.

                           It  is  impossible  to  talk  about  increased  sales
                           without addressing  product.  This company has always
                           prided itself on identifying and quickly capitalizing
                           on hot market  opportunities  such as Beanie  Babies,
                           the Home Run Race of  several  years  back,  Furbies,
                           Pokemon and more.  As we enter the busiest  season in
                           retailing,  we have  identified  several  significant
                           trends and product  opportunities which we feel could
                           have  a  significant  impact  on  sales.  It  is  our
                           intention   to  maintain  the   leadership   we  have
                           established in being the first to market with many of
                           these hot products.

                           Our second strategic initiative is to improve overall
                           profitability.   Arthur  will  discuss  many  of  the
                           expense  efficiencies  already  implemented.  I would
                           like to address how we are improving margins in three
                           critical areas,  programming and scheduling,  product
                           sourcing and discounting.

                           Programming  and  scheduling of our 168 hours defines
                           our store,  it controls  the mix of product  that our
                           customers  see  and  buy,  thus  there  is no  single
                           activity  that has a greater  impact  on margin  than
                           managing  the   schedule.   We  have   implemented  a
                           disciplined  approach that helps control product flow
                           on error.  For example we have triggers that kick in,
                           if during a  particular  week we  exceed an  approved
                           number of electronics hours, which traditionally have
                           much lower  margins than  jewelry or sports.  We have
                           developed a programming grid that will return results
                           in excess of 37% margin in the very short-term,  with
                           plans in place to return the company to 40+%.

                           Additionally,  we have  reexamined  all of our vendor
                           relationships  in the  last six  weeks  to  determine
                           where additional cost concessions can be obtained, or
                           in some  cases  eliminating  the  middleman  by going
                           directly to the  source.  Progress  has already  been
                           achieved in all product  categories  in improving our
                           share of the margin .

                           Next, we have significantly reduced and in some cases
                           eliminated  discounting on the Network. Our marketing
                           and sales  efforts  will  focus on more  value  added
                           promotions versus outright discounts on products.  We
                           will  utilize  both  our   database   marketing   and
                           collectibles.com  channels, as a discount vehicle; if
                           warranted,  thus  eliminating  the  impression on the
                           Network that customers  should only buy when there is
                           a deal.

                           By  combining  all  three  of these  strategies,  I'm
                           confident that we will again achieve the margins once
                           enjoyed by this company and its investors. In fact we
                           have already seen improvements each month since June.

                           Lastly, we must maintain the momentum  established by
                           collectibles.com.  In just seven months we have grown
                           collectibles.com   beyond  all  market   expectations
                           without any  significant  expenditures  on  marketing
                           other than costs already incurred in the Network. Let
                           me repeat,  virtually zero customer acquisition cost.
                           Shipping over $2 million of goods in June proves that
                           we  have  built  a  powerful  sister  channel  to the
                           Network. The benefits of ordering on collectibles.com
                           include   lower  return  rates,   improved   database
                           marketing,  opportunities  and flexibility that allow
                           our  customers  to order 24 x 7, a feature not always
                           available to them on the Network.

                           Our  efforts  have paid  off;  currently  our  unique
                           browsers are averaging  over 26,000 every day or over
                           800,000 every month.  We continue to improve on sales
                           per browsers as well, June grew to $6.76, up 26% from
                           last quarter's results.  Additionally, we continue to
                           increase  time spent on the site from 17 minutes last
                           quarter end to over 21 minutes ending June.

                           Another  major  area  of  focus  is to  increase  our
                           conversion  rates on  collectibles.com.  Currently we
                           experience  rates higher than the  industry  average,
                           but feel that we can greatly  improve on those levels
                           with  our  powerful  converged   platform.   We  will
                           accomplish    this   not   only   through    improved
                           merchandising,  but  improved  site  design  as well,
                           which is  currently  under  construction  and due for
                           implementation in early 2001.

                           Our new design will be easier to  navigate,  leverage
                           our extensive content  relationships  with Krause and
                           better reflect our converged  platform  strategy with
                           the Network. This new management team's commitment to
                           our investors,  employees and business partners is to
                           focus   on   profitability   and   execute   on  that
                           opportunity as quickly as possible. Kent?

K. Lillie:                 Arthur has some comments on cost reductions and other
                           initiatives.

A. Tek:                    Thanks, Kent.  As Kent discussed,   we   had   record
                           revenues last year and our Web Site grew rapidly.  In
                           the final quarter of our  fiscal  year,  however,  we
                           lagged  significantly in converting revenue increases
                           into bottom line results.  As a result,   we are well
                           underway   in  improving  profitability  by  reducing
                           costs, while continuing to increase our revenues. I'm
                           going to   address   four   specific   cost   cutting
                           initiatives, which   you'll   find   discussed in the
                           business strategy section of our  10-K,  as  well  as
                           our press release.

                           First, we have already reduced head count by 15% from
                           our  peak  a few  months  ago.  Apart  from  seasonal
                           variations in our workforce, we anticipate annualized
                           compensation  savings  of  over  $1.5  million.  This
                           reduction was accomplished by converging our Web site
                           and  Network  personnel  and we are also  reaping the
                           benefits of our Oracle Information System,  which has
                           improved productivity.

                           Secondly,  we are  reducing our  distribution  costs.
                           These are the  expenses we incur for  carriage of our
                           television  network  by cable and  broadcast  station
                           affiliates.  We have,  since  July 1,  canceled  over
                           300,000 full-time  equivalent  homes,  which were not
                           profitable for us, and we are renegotiating the rates
                           for several  hundred  thousand more homes.  So we are
                           making good progress in lowering our average cost per
                           home,  as  well  as  our  total  carriage  cost  as a
                           percentage of revenues.

                           Third, we are reducing  virtually every aspect of the
                           cost of shipping  merchandise  to our  customers.  We
                           have already lowered the transportation  rates we pay
                           our  major  carrier  and  we  will  soon  reduce  the
                           handling cost we incur, by outsourcing  this function
                           to a large fulfillment center. We anticipate not just
                           reducing costs but also improving  delivery times and
                           customer  service.  Annual  savings  should exceed $1
                           million when this plan is fully implemented.

                           Lastly,  our fourth cost  cutting  initiative  is the
                           renegotiation, replacement or cancellation of many of
                           our major contracts and planned expenditures. We have
                           already  identified  $500,000 in fiscal 2001  savings
                           from  this  process,   and  we  anticipate  at  least
                           doubling these annual savings by year-end.

                           These four areas of cost reductions, coupled with the
                           revenue  initiatives  which Tim Engel outlined,  will
                           turn  Shop  at Home  around.  Although  we  will  see
                           improvement in this current  September  quarter,  the
                           turnaround  is not  yet  complete,  we  anticipate  a
                           return to positive cash flow in the December  quarter
                           and we plan to become bottom line net income positive
                           by the end of the fiscal year.

                           We  believe  we  have  sufficient  cash  and  working
                           capital  to fund  the  turnaround  of our  television
                           network,   which  had  been  consistently  cash  flow
                           positive for several  years before this past quarter.
                           On June 30, the end of our fiscal year, we had a cash
                           balance of $27  million and other  current  assets of
                           over $10  million,  which we  specifically  intend to
                           turn into cash, on a permanent basis, by December 31.
                           We will  accomplish  this by monetizing  our accounts
                           receivable  through  the  introduction  of a  private
                           label credit card funded by a financial  institution,
                           and we will increase cash through the refund to us of
                           certain escrow balances.

                           So despite one quarter of disappointing  results,  we
                           are executing our  turnaround  plan with  confidence.
                           Kent?

K. Lillie:                 Thank you.  We'll open the call now to any questions.

Coordinator:               Our first question comes from Ned Armstrong.

N. Armstrong:              Good   morning,   gentlemen.   I   though   I'd   ask
                           you to comment on the  700-megahertz  auction  that's
                           been in the news quite  often  recently  and has been
                           associated with the Shop At Home name.

Mr. Lillie:                Well,   the    company    owns    three    television
                           stations  that fall into that 700  megahertz,  or the
                           channel   60's   bandwidth;   Boston,   Houston   and
                           Cleveland.   And  in  fact  the  aggregation  of  the
                           population  covered by those three makes us the third
                           largest  holders of 700 megahertz in the country,  as
                           we reach  about 12 million  people  with those  three
                           signals.

                           We filed  comments at the FCC,  we believe  that it's
                           important  for the FCC to have this  auction to clear
                           the space,  for not only the  development of wireless
                           broadband,  but to help  clarify  all of the  digital
                           carriage  issues.  We believe  that there should be a
                           simultaneous auction for band clearance,  we would be
                           a willing  participant and there is the potential for
                           some  financial  benefits to the  company,  for us to
                           leave  that  bandwidth   before  the  required  date,
                           presently,  which  is  December  31,  2006,  or later
                           actually.

                           So there  could be some  benefits  to  accrue  to the
                           company, we would it looks like, certainly be able to
                           maintain our cable carriage on our digital signals if
                           we should  make  that  change or that move off of the
                           700 megahertz band. But there certainly could be some
                           benefits accrued.

N. Armstrong:              Approximately how much  in  revenue  do  you generate
                           from the three stations that fall in  that channel 60
                           to 69 range?

Mr. Lillie:                Well  as  you know, our stations account for close to
                           30%   of  our   total  revenue  and those three would
                           account for close to half of that.

N. Armstrong:              Okay.  Thank you.

Mr. Lillie:                You're welcome Ned, thank you.

Coordinator:               Our next question comes from, John Ray.

J. Ray:                    Good morning, gentlemen.

Mr. Lillie:                Good morning, John.

J. Ray:                    I wondered if you could comment and  maybe   separate
                           the facts from the rumors and the  things that aren't
                           true about  the   financing   that   you   did   with
                           Promethean.  And specifically, I guess the background
                           of it, why you felt that you needed to do it, as  you
                           did, maybe the due  diligence   that   you   did   on
                           Promethean itself, because there's   some controversy
                           about them and the terms.  And I guess maybe clear up
                           some of the    issues that seem to be out there about
                           where Promethean is shorting your stock, etc.

A. Tek:                    John, Promethean has not shorted our  stock,  and  we
                           are protected by covenants within our preferred stock
                           agreement, in terms  of  shorting  or  actually  even
                           protecting us  from their converting until the end of
                           this year.  But going beyond that, our due  diligence
                           at Promethean has shown us that  they  are  honorable
                           folks that have the same goal as us, which is to have
                           a higher stock price, in that  they  have  six  price
                           warrants.  And those warrants become more valuable as
                           our stock goes up, not down.

                           So the  whole  idea of  shorting  the  stock for some
                           inexplicable  reason  doesn't  ring true for us.  And
                           maybe  unlike  other   companies  in  which   they've
                           invested,  we have a very firm  asset  base,  so that
                           shorting the stock would be a dangerous  thing to do,
                           in that we  believe  our asset base is well in excess
                           of where the market price is right now for our stock.

                           In any case, we feel confident that Promethean stands
                           there  as our  partners.  We have  checked  them  out
                           personally; we've also done research into some of the
                           articles that are out there.  And I can only say that
                           those   articles   are   incomplete   and   sometimes
                           inaccurate and not totally  responsible,  in terms of
                           addressing all of the economic  implications of doing
                           a deal like this.

                           It is a bit complicated,  but basically, the variable
                           convert gives  Promethean a neutral risk profile,  in
                           terms of their preferred.  They make money by getting
                           a coupon,  and by over time,  getting a discount when
                           they  convert.  So it  behooves  them to hold  longer
                           rather than shorter, because the longer they hold the
                           preferred,  the greater the discount they get and the
                           more they accumulate a coupon.

                           And of course  they would want their  warrants  to be
                           worth more rather than less as well. And that's based
                           on our stock price going up, so if they were shorting
                           the stock price, that would make their warrants worth
                           less.  All in all,  they  really see the  warrants as
                           their  primary   means  of  making  money,   and  the
                           preferred  is  something  where  they  try to take as
                           neutral  a risk  posture  as  possible,  by making it
                           variable with our common stock price. But they're not
                           betting  on the  preferred  itself  that our stock is
                           going  up  or  down  and  therefore   would  have  no
                           incentive to short the stock.

J. Ray:                    Just  one  follow-up   Arthur,   I assume  that these
                           funds  that  you've  received  take  you out into the
                           foreseeable   future,   in  terms  of  your   capital
                           requirements,  that plus the other cash raising items
                           that you mentioned in terms of working capital?

A. Tek:                    That's right.  And as you know,  John,  you  wouldn't
                           want to go try to do a public   offering for only $20
                           million and we didn't  want  to  sell  stock  at  our
                           prices back in      June when we closed the deal with
                           Promethean.   We  didn't  want  to  sell stock at the
                           price that it was then, which  was  a  little  higher
                           than it is now.  We thought the   stock was way under
                           valued then.  And we saw this really  as  a  form  of
                           bridge equity,  to allow us until the end of the year
                           before they  convert,  to  get  our  stock  price  up
                           to reflect what we feel is the underlying asset value
                           and reflect the future potential of our company.

J. Ray:                    Right.  Thank you.

Coordinator:               Our next question comes from Dan Jackson.

D. Jackson:                Kent,  I  represent   some   50   investors  of  Shop
                           At Home, and based on the last quarter's  results,  I
                           guess  this  would  mean  that  you did not  meet the
                           analysts expectations. Is that correct?

K. Lillie:                 Well, we've got kind  of  mixed  emotions  about that
                           too, Dan.  We did  miss   fourth    quarter   updated
                           projections, but what I think is an important part of
                           this story is    that when we went to the market last
                           June to raise capital,  in  the  public  markets,  to
                           raise capital to build out  collectibles.com  and  to
                           buy our Bridgeport station, we     obviously had made
                           certain forecasts then to fund managers. And analysts
                           had  forecasted year-end results for the company, and
                           we sold stock into the market at $8 a share, which we
                           closed last July.

                           And when we look back on those  numbers we beat every
                           number,   in  fact  we're  ahead,   particularly   in
                           collectibles.com,  we beat every number.  We beat the
                           analysts  forecast for year on earnings per share and
                           revenue,  and again used those  numbers to help raise
                           that close to $50 million at $8 a share.

                           And today,  a year later after hitting those numbers,
                           we're at $3.75 a share, so it's  disappointing to us.
                           But as you indicate,  we did miss  analysts'  revised
                           forecast for the fourth quarter,  which had something
                           to do, we were off to a very good start  early in the
                           year  last  year  and  it  slowed  down,   but  we're
                           regaining  that  momentum  right now with Tim and his
                           staff.

D. Jackson:                Thank you.

K. Lillie:                 Thank you.

Coordinator:               Our next question comes from Scott Jensen.

S. Jensen:                 Good   morning,  I  have  a  question.  Who  is  your
                           third party fulfillment  partner? And as a percentage
                           of revenue, how much would it cost you to employ them
                           to do that for you?

A. Tek:                    The  third  party  fulfillment   partner  is going to
                           be, it's not yet implemented, this will be a December
                           quarter implementation, but it's a subsidiary of UPS.
                           And they have a huge fulfillment operation.

                           And in terms  of  detailing  the cost of this,  I'm a
                           little concerned about proprietary information there.
                           We negotiated  what we think is a very good deal with
                           them  and they  might  not  want me  disclosing  that
                           information. But on a per package basis, what we will
                           pay them will be significantly  less than what we pay
                           per  package  for  handling  fees  to our  drop  ship
                           vendors, most of what we send now is via drop ship.

S. Jensen:                 Hence the million dollar savings?

A. Tek:                    Excuse me?

S. Jensen:                 Hence the million dollar savings?

A. Tek:                    Yes, sir.

S. Jensen:                 Okay, thank you.

A. Tek:                    And   not   only  that,  but   much  faster  delivery
                           times to our customers.  So obviously that results in
                           more satisfied customers,  faster repeat business and
                           less  calls  and  trauma  into our  customer  service
                           department.

S. Jensen:                 Great, thanks.

Coordinator:               Our next question comes from John Lawrence.

J. Lawrence:               Good morning, guys.

Mr. Lillie:                Good morning, John.

J. Lawrence:               Arthur, I assume the  covenants  restrict any type of
                           stock buy back on the part of the  company, correct?

A. Tek:                    Yes, it would be difficult  under  our bond covenants
                           and also under the preferred stock covenants as well.

J. Lawrence:               What about insiders, as far as senior  management, as
                           far as this turnaround is  concerned?

A. Tek:                    Well,   I    think   the   stock    price   is   very
                           inexpensive  now, and I have been a buyer,  John,  at
                           levels  significantly  higher than the current  stock
                           price  and  once  we're  past  this  release  and the
                           lawyers say we're no longer restricted, at this price
                           I'm still a buyer.  You will see me buying  again,  I
                           don't know about the rest of management.

K. Lillie:                 I'd    rather    not   announce   my   plans  to  the
                           market.  We think the stock is really under priced. I
                           mean it's back to levels of two or three  years  ago,
                           when the company is so much  stronger and has so many
                           more fundamental assets and so much great opportunity
                           right   now,   so  you   could  put  me  in  a  buyer
                           classification.

J. Lawrence:               Okay.  Tim, could I have a follow up here?

T. Engle:                  Fine.

J. Lawrence:               Yes,  Tim,  could   you   comment   a   little bit on
                           the  database  marketing,  is that more of a critical
                           issue, obviously those are customers that have bought
                           from you than actually some of the other initiatives.

T. Engle:                  It's critical, one reason is because we've not really
                           leveraged that before, so it's a  totally new revenue
                           stream to us.  What we're trying to accomplish is  to
                           increase our    repeat buying from our customer base.
                           And that obviously leverages our fixed cost much more
                           effectively than not.

                           So if we could increase repeat buying, which  we have
                           shown that if we go out  and  solicit  our  customers
                           more aggressively through direct marketing campaigns,
                           we've had  a lot success with that,  through  e-mail,
                           through direct mail, through package stuffers  and up
                           sale programs, even in our call centers.

                           So we've got a lot initiatives  that Debbie's working
                           on  that  we  feel  is  going  to  be a  significant,
                           positive  addition  to not  only  revenue,  but  also
                           bottom line.

J. Lawrence:               And from a competitive standpoint, are you willing to
                           comment on some of the new  products for the fall?

T. Engle:                  I will just say, watch our network.

J. Lawrence:               Okay.  I understand.  Thanks, guys.

T. Engle:                  Thank you, John.  Watch and buy.

Coordinator:               Our next question comes from Ned Armstrong.

N. Armstrong:              Yes,   I   would   like   to,  in   view  of  you and
                           Value  Vision  being  the two  similarly  sized  home
                           shopping entities, could you contrast your model with
                           Value Vision,  your business  model,  and explain why
                           you think it's better?

Mr. Lillie:                Well  we've  for  some  years  targeted   more   male
                           customers.  And I think Value Vision is     much more
                           comparable to QVC and Home Shopping Network and their
                           percentage of female   customers is much higher, it's
                           my understanding is  that  it's  close  to  80%.  And
                           Value Vision over the years has had as much as 70% of
                           their sales as jewelry.  At times   almost 60% of our
                           customers   have   been   male  and  we're  the  only
                           competitor in that  space, selling to men.  So that's
                           the primary difference.

                           We have higher price points,  as Tim indicated,  they
                           got too high. And we narrowed our customer  prospects
                           and so we're  bringing  that down  quickly and it's a
                           major  focus  of Tim  and his  group's  merchandising
                           strategy going forward.

                           It's hard for me to comment on Value Vision's present
                           strategy,  I know  that  they had  planned  to launch
                           SnapTV,  I think they've  settled those plans,  which
                           was to sell  more  infomercial  kind of time,  rather
                           than live direct marketing. That doesn't work for us,
                           I'm not sure if it works for them or not, but I can't
                           speak to what they're doing.

                           But we primarily differentiate ourselves in targeting
                           men,  you know you fish when the fish are biting,  we
                           have lots of males,  particularly  overnight. We sell
                           as  much  sports  collectible  products  as  probably
                           anybody in the world.  But we're also  improving  our
                           jewelry  business,  and  jewelry is growing  now as a
                           percentage  of our  total  revenues,  we've  got some
                           excellent merchandising and lower price points there.
                           So  we're  seeing  growth  out of  that  female  base
                           customer as well.

N. Armstrong:              Just  as   a   follow    up,    it   seems    they've
                           achieved   some   success  with  the  addition  of  a
                           strategic partner.  Would you pursue the same type of
                           arrangement, do you think it could be very successful
                           for Shop at Home as well?

Mr. Lillie:                We're  open   to    any    discussion    that    will
                           enhance  shareholder  value, and clearly that appears
                           to have been a very smart move for Value  Vision,  we
                           applaud them on that,  NBC looks to have been a great
                           partner  for  them.  We  have  capabilities,  we have
                           infrastructure,  we have the experience that not many
                           media companies have.

                           We  think  that we  could  be a great  asset  and our
                           stations could be a great asset and our merchandising
                           could  be  great  assets,  particularly  as  we  look
                           forward  into  change  that  enhanced   broadcast  in
                           contextual   commerce   and  the   opportunities   of
                           overlaying  commerce over entertainment  programming.
                           We see the  networks  doing  it more  and more and we
                           think  we're  very  well  positioned  to be  able  to
                           compete in that environment in the future. And that's
                           forecasted  to be a much  larger  business  than  the
                           business that we're competing in today.

                           And it speaks a lot to what  we're  accomplishing  in
                           the   convergence   of  our  network   and   Internet
                           operations, in the interactivity there. And that will
                           serve us very well into that t-commerce era.
N. Armstrong:              Okay, thank you.

Mr. Lillie:                Thank you, Ned.

Coordinator:               Our next question comes from John Ray.

J. Ray:                    Just a question for Tim.   You've  done  obviously  a
                           terrific job in assembling a pretty strong collection
                           of     exclusive     vendor      relationships     on
                           collectibles.com.  And I'm wondering, now that you're
                           really  running  both sides,  the extent to which you
                           can   migrate   some  of   these   exclusive   vendor
                           relationships over to the broadcasting side.

T. Engle:                  Yes,  actually  it  makes it a lot easier, and that's
                           part of what the convergence  platform was all about.
                           In that now that all of programming and those  vendor
                           relationships fall under my group.

                           What we're doing now is we are testing  more of those
                           products and those  manufacturers on the network,  to
                           try  and  create  that  awareness  with  our  current
                           customer base, that hey we do sell a lot of different
                           products  other  than  what  you  used  to see on the
                           Network.  And that's one of the things where you have
                           success with some manufacturers and brands and not as
                           much with the others.  So what we're  trying to do is
                           efficiently  and  effectively  find out  where  those
                           hotspots are, and that's one thing  Marshall has been
                           working  on since he  brought  that  group over about
                           eight weeks ago.

J. Ray:                    One   other  question,  it  sounds   like  everything
                           you're  doing,  when  you add it all up,  is aimed at
                           improving  your  sales per  household  versus  really
                           growing your household much more  dramatically.  Give
                           me your  comments  on that  and then  maybe  what you
                           anticipate  your sales per  household  to be, maybe a
                           year from now.

Mr. Lillie:                Well  as  you  know  John,  seven years ago when this
                           management group took control  of  this  company,  we
                           were essentially in zero cable households,  and  over
                           those seven years  we've built  that  to  25  million
                           FTE's, we  finished  the  year  at  right  around  25
                           million.

                           And today,  right now the focus is on making those 25
                           million   more    efficient,    to   eliminate    the
                           non-productive   and  have  only  profit   generating
                           households.  So we expect  the FTE count to grow less
                           fast this year, but to continue to grow,  continue to
                           move up. And  naturally we want to convert as much of
                           our part time  carriers  to full time  carriers as we
                           can,  because  there's a lot of benefit accrued to us
                           on that.  And of course a major part of our  strategy
                           is  that  those   households   provide  a  tremendous
                           promotional platform for collectibles.com.

                           In the  meantime,  as I believe  the K points out and
                           the release  points out,  our same store sales in our
                           six owned and operated stations continue to grow, and
                           have in every quarter that we've owned them. So those
                           continue to be a more and more efficient  acquisition
                           and generate  additional  cash flow every quarter for
                           us.  But we want to first  make  that  total FTE base
                           profitable, every household.

                           So if we have an  opportunity to bring in 100,000 new
                           households, we'll eliminate or renegotiate the bottom
                           100,000 in terms of productivity  and bring the whole
                           group  up in  terms  of cash  contribution  and  then
                           margin contribution.

J. Ray:                    Okay,  so  again,   after  you've had a year of this,
                           what would you anticipate your sales per household to
                           be,  you  know on a run  rate a year  from  now?  Not
                           necessarily  for the quarter,  the fourth  quarter of
                           next year, but what's your goal for a year from now?

A. Tek:                    Well John, I had mentioned before  with  my  prepared
                           comments that I believe that we'll  get to the bottom
                           line profitability by  the  fourth  quarter  of  this
                           fiscal year.  And      that's not postulated on a big
                           increase  in   the   revenue  per  household,  that's
                           postulated  on cost cuts, that's postulated on margin
                           improvements and there's a   moderate increase in the
                           revenue per household.  But it would still  be  below
                           our nearest competitor, Value Vision.

                           I believe in the 10-K  you'll see we're in the low $9
                           range, and to become bottom/bottom line profitable by
                           the end of the fiscal year,  we're  looking at around
                           $10 per home.

J. Ray:                    So I guess getting further  improvements  in  revenue
                           per household then to what you'd  really like to have
                           on  a  long-term  basis,  are  obviously  really more
                           additive.

K. Lillie:                 That forecast we think is modest, the  benefits  that
                           accrue and the profit that accrues to us in increased
                           revenue per household is astonishing.  Just a  dollar
                           more revenue   per average household adds another $25
                           million of total sales to the company, and  should be
                           able to be additive without a corresponding  increase
                           in cost.  So it is the   most important driver in the
                           company is revenue per household, clearly. Tremendous
                           benefits accrue to us as we push that up.

J. Ray:                    Thank you.

Coordinator:               Our next question comes from John Lawrence.

J. Lawrence:               Tim,  on the  database  marketing,  are we any closer
                           to seeing  any kind of  outbound program?

T. Engle:                  Yes.  When you say outbound, what  do you  define  as
                           outbound?

J. Lawrence:               Well, just where you're making the call.

T. Engle:                  Yes, we actually are testing some  outbound  programs
                           now.  And not  necessarily  in      house,  but we're
                           looking at ways to make  that  more   effective   and
                           learn that process, but we are  doing  some of  that.
                           But  more  effectively,  we're  finding  for cost and
                           profitability,  you're more effective at doing, given
                           our hot customer database, that we can market to them
                           in direct  mail and e-mail   much  more   efficiently
                           and bring more  profit  to  the  bottom line.  That's
                           where we're focusing in a lot of our time on.

J. Lawrence:               Okay, thanks.

Coordinator:               At this time sir, I show no further questions.

K. Lillie:                 Thank  you  all  for  joining  us  then   today.   We
                           are  going  to do a  live  chat  on  collectibles.com
                           beginning at 10 o'clock Central.

A. Amiri:                  And we will also have  an  instant  replay number for
                           this  conference  call. That number is  888-566-0479.
                           I'd like to thank Mr.  Engle,  Mr. Tek and Mr. Lillie
                           and all of you     for your time.  We wish you a nice
                           weekend.

K. Lillie:                 Thank you very much.

Coordinator:               Thank you all for participating in today's conference
                           call, have a good day.



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