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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------- ----------
Commission File Number 0-20243
--------------------
VALUEVISION INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1673770
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6740 Shady Oak Road, Minneapolis, MN 55344
(Address of principal executive offices)
612-947-5200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
----- -----
As of June 11, 1997, there were 27,991,112 shares of the Registrant's common
stock, $.01 par value, outstanding.
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VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES
FORM 10-Q TABLE OF CONTENTS
APRIL 30, 1997
<TABLE>
<S> <C>
PART I FINANCIAL INFORMATION PAGE OF
FORM 10-Q
---------
Item 1. Financial Statements
- Condensed Consolidated Balance Sheets as of April 30, 1997 and 3
January 31, 1997
- Condensed Consolidated Statements of Operations for the Three 4
Months Ended April 30, 1997 and 1996
- Condensed Consolidated Statement of Shareholders' Equity for 5
the Three Months Ended April 30, 1997
- Condensed Consolidated Statements of Cash Flows for the Three 6
Months Ended April 30, 1997 and 1996
- Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and 9
Results of Operations
PART II OTHER INFORMATION
Item 6.Exhibits and Reports on Form 8-K 16
SIGNATURES 17
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VALUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
APRIL 30, JANUARY 31,
1997 1997
-------------- ---------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 11,174,298 $ 28,618,943
Short-term investments 24,340,094 24,239,840
Accounts receivable, net 9,988,624 6,488,094
Inventories, net 29,899,610 28,109,081
Prepaid expenses and other 11,822,084 11,483,394
Deferred taxes 492,000 416,000
-------------- --------------
Total current assets 87,716,710 99,355,352
PROPERTY AND EQUIPMENT, NET 24,914,825 24,283,108
FEDERAL COMMUNICATIONS COMMISSION LICENSES, NET 6,859,914 6,934,546
MONTGOMERY WARD OPERATING AGREEMENT AND LICENSES, NET 14,744,634 15,052,935
GOODWILL AND OTHER INTANGIBLE ASSETS, NET 10,490,701 10,764,011
INVESTMENTS AND OTHER ASSETS, NET 10,300,691 10,022,718
-------------- --------------
$ 155,027,475 $ 166,412,670
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term obligations $ 398,178 $ 392,921
Accounts payable 26,859,027 24,887,904
Accrued liabilities 11,403,535 12,398,041
Income taxes payable - 45,008
-------------- -----------
Total current liabilities 38,660,740 37,723,874
LONG-TERM OBLIGATIONS 1,363,700 1,443,189
-------------- -----------
Total liabilities 40,024,440 39,167,063
-------------- -----------
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value, 100,000,000 shares authorized;
27,976,112 and 28,842,198 shares issued and outstanding 279,761 288,422
Common stock purchase warrants;
3,842,143 and 5,368,557 26,984,038 26,984,038
Additional paid-in capital 72,906,218 83,309,455
Net unrealized holding gains on investments available-for-sale - 69,437
Retained earnings 14,833,018 16,594,255
-------------- -----------
Total shareholders' equity 115,003,035 127,245,607
-------------- -----------
$ 155,027,475 $ 166,412,670
============== ============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated balance sheets.
3
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VALUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
APRIL 30,
----------------------------------------
1997 1996
--------------- --------------
<S> <C> <C>
NET SALES $ 51,061,796 $ 22,787,667
COST OF SALES 28,366,858 13,399,331
--------------- --------------
Gross profit 22,694,938 9,388,336
--------------- --------------
Margin 44.4% 41.2%
OPERATING EXPENSES:
Distribution and selling 21,102,834 7,403,954
General and administrative 2,914,699 1,308,506
Depreciation and amortization 1,801,240 1,358,717
--------------- --------------
Total operating expenses 25,818,773 10,071,177
--------------- ---------------
OPERATING LOSS (3,123,835) (682,841)
--------------- --------------
OTHER INCOME (EXPENSE):
Gain on sale of broadcast stations - 27,050,000
Loss in earnings of affiliates (369,996) -
Interest income 527,270 1,076,866
Other, net 54,324 (40,615)
--------------- ---------------
Total other income 211,598 28,086,251
--------------- ---------------
INCOME (LOSS) BEFORE INCOME TAXES (2,912,237) 27,403,410
INCOME TAX PROVISION (BENEFIT) (1,151,000) 10,950,000
--------------- ---------------
NET INCOME (LOSS) $ (1,761,237) $ 16,453,410
NET INCOME (LOSS) PER COMMON AND DILUTIVE =============== ===============
COMMON EQUIVALENT SHARE $ (0.05) $ 0.54
=============== ===============
Weighted average number of common and
common equivalent shares outstanding 33,108,970 30,416,427
=============== ===============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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VALUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the Three Months Ended April 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
NET
UNREALIZED
HOLDING
COMMON STOCK COMMON GAINS (LOSSES)
-------------------------- STOCK ADDITIONAL ON INVESTMENTS
NUMBER PAR PURCHASE PAID-IN AVAILABLE-
OF SHARES VALUE WARRANTS CAPITAL FOR-SALE
--------- --------- --------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
BALANCE, January 31, 1997 28,842,198 $ 288,422 $ 26,984,038 $ 83,309,455 $ 69,437
Exercise of stock options and warrants 1,551,414 15,514 - 31,000 -
Common stock repurchases (2,417,500) (24,175) - (10,434,237) -
Unrealized holding loss on
investments available-for-sale - - - - (69,437)
Net loss - - - - -
---------- ---------- ------------ ------------ ------------
BALANCE, April 30, 1997 27,976,112 $ 279,761 $ 26,984,038 $ 72,906,218 $ -
========== ========== ============ ============ ============
TOTAL
RETAINED SHAREHOLDERS'
EARNINGS EQUITY
----------- ------------
<S> <C> <C>
BALANCE, January 31, 1997 $ 16,594,255 $ 127,245,607
Exercise of stock options and warrants - 46,514
Common stock repurchases - (10,458,412)
Unrealized holding loss on
investments available-for-sale - (69,437)
Net loss (1,761,237) (1,761,237)
------------- --------------
BALANCE, APRIL 30, 1997 $ 14,833,018 $ 115,003,035
============= ==============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5
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VALUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED APRIL 30,
------------------------------------------------------
1997 1996
----------------------- ------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (1,761,237) $ 16,453,410
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities-
Depreciation and amortization 1,801,240 1,358,717
Deferred taxes (76,000) -
Loss in earnings of affiliates 369,996 -
Gain on sale of investments (100,075) -
Gain on sale of broadcast stations - (27,050,000)
Changes in operating assets and liabilities:
Accounts receivable, net (2,897,329) (1,100,939)
Inventories, net (1,790,529) (647,557)
Prepaid expenses and other (382,568) 212,252
Accounts payable and accrued liabilities 963,873 2,033,359
Income taxes payable (45,008) 10,532,000
-------------- --------------
Net cash provided by (used for) operating activities (3,917,637) 1,791,242
-------------- --------------
INVESTING ACTIVITIES:
Property and equipment additions, net of retirements (1,479,917) (993,265)
Purchase of broadcast stations - (4,618,743)
Proceeds from sale of investments 280,638 -
Proceeds from sale of broadcast stations - 40,000,000
Purchase of short-term investments (13,547,228) (47,610,783)
Proceeds from sale of short-term investments 12,843,773 22,488,464
Payment for investments and other assets (1,150,891) (2,246,642)
-------------- --------------
Net cash provided by (used for) investing activities (3,053,625) 7,019,031
-------------- --------------
FINANCING ACTIVITIES:
Proceeds from exercise of stock options and warrants 46,514 78,126
Payments for repurchases of common stock (10,458,412) -
Payment of long-term obligations (61,485) (141,685)
-------------- --------------
Net cash used for financing activities (10,473,383) (63,559)
-------------- --------------
Net increase (decrease) in cash and cash equivalents (17,444,645) 8,746,714
BEGINNING CASH AND CASH EQUIVALENTS 28,618,943 20,063,901
-------------- --------------
ENDING CASH AND CASH EQUIVALENTS $ 11,174,298 $ 28,810,615
============== ==============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 21,000 $ 58,000
============== ==============
Income taxes paid $ 75,000 $ 418,000
============== ==============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
6
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VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997
(Unaudited)
(1) GENERAL
ValueVision International, Inc. and its subsidiaries ("ValueVision" or the
"Company") is an integrated direct marketing company which markets its products
directly to consumers through electronic and print media.
The Company's principal electronic media activity is its television home
shopping network which uses recognized on-air television home shopping
personalities to market brand name merchandise and proprietary and private
label consumer products at competitive or discount prices. The Company's
24-hour per day television home shopping programming is distributed primarily
through long-term cable affiliation agreements and the purchase of
month-to-month full- and part-time block lease agreements of cable and
broadcast television time. In addition, the Company distributes its
programming through Company owned or affiliated full power Ultra-High Frequency
("UHF") broadcast television stations, low power television ("LPTV") stations
and to satellite dish owners.
The Company, through its wholly-owned subsidiary, ValueVision Direct
Marketing Company, Inc. d.b.a. Montogomery Ward Direct ("VVDM"), is also a
direct-mail marketer of a broad range of quality general merchandise which is
sold to consumers through direct-mail catalogs and other direct marketing
solicitations. Products offered include domestics, housewares, home accessories
and electronics. Through its wholly-owned subsidiary, Catalog Ventures, Inc.
("CVI"), the Company sells a variety of fashion jewelry, health and beauty
aids, books, audio and video cassettes and other related consumer
merchandise through the publication of five consumer specialty catalogs. The
Company also manufactures and markets, via direct-mail, women's foundation
undergarments through its wholly-owned subsidiary Beautiful Images, Inc.
("BII").
Results of operations for the three months ended April 30, 1997 include
the direct-mail operations of Montgomery Ward Direct, Beautiful Images, Inc.,
and Catalog Ventures, Inc., which were acquired by the Company effective July
27, 1996, October 22, 1996 and November 1, 1996, respectively.
(2) BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. The information furnished in the
interim condensed consolidated financial statements includes normal recurring
adjustments and reflects all adjustments which, in the opinion of management,
are necessary for a fair presentation of such financial statements. Although
management believes the disclosures and information presented are adequate to
make the information not misleading, it is suggested that these interim
condensed consolidated financial statements be read in conjunction with the
Company's most recent audited financial statements and notes thereto
7
<PAGE> 8
included in its fiscal 1997 Annual Report on Form 10-K. Operating results for
the three month period ended April 30, 1997, are not necessarily indicative of
the results that may be expected for the fiscal year ending January 31, 1998.
Certain amounts in the fiscal 1997 financial statements have been
reclassified to conform to the fiscal 1998 presentation with no impact on
previously reported net income or shareholders' equity.
(3) NET INCOME (LOSS) PER SHARE
The Company computes net income (loss) per share based on the weighted
average number of shares of common stock and dilutive common stock equivalents
outstanding, if any, during the period. The difference between primary and
fully diluted net income (loss) per share and weighted average number of shares
outstanding was not material or was antidilutive, and therefore not presented
separately.
(4) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, " Earnings per Share" ("SFAS No. 128") in February
1997. SFAS No. 128 establishes accounting standards for computing and
presenting earnings per share ("EPS") and is effective for reporting periods
ending after December 15, 1997. Management believes that the adoption of SFAS
No. 128 will not have a material impact on the Company's calculation of EPS.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
The following discussion and analysis of financial condition and results
of operations should be read in conjunction with the Company's accompanying
unaudited condensed consolidated financial statements and notes thereto
included elsewhere herein and the audited consolidated financial statements and
notes thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended January 31, 1997.
SELECTED CONDENSED CONSOLIDATED FINANCIAL DATA
DOLLAR AMOUNTS AS A
PERCENTAGE OF NET SALES
FOR THE THREE MONTHS
ENDED APRIL 30,
-----------------------
1997 1996
----- -----
Net sales 100.0% 100.0%
====== =====
Gross margin 44.4% 41.2%
----- -----
Operating expenses:
Distribution and selling 41.3% 32.5%
General and administrative 5.7% 5.7%
Depreciation and amortization 3.5% 6.0%
----- -----
50.5% 44.2%
----- -----
Operating loss (6.1%) (3.0%)
====== =====
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
ValueVision International, Inc. and its subsidiaries ("ValueVision" or
the "Company") is an integrated direct marketing company which markets its
products directly to consumers through electronic and print media. Prior to
July, 1996, the Company's business operations consisted primarily of its 24
hour per day television home-shopping program. Through a series of strategic
acquisitions in the second half of fiscal 1997, the Company has expanded its
business operations to include direct-mail catalog business and other forms of
direct marketing solicitation. The Company, through its wholly-owned
subsidiary, ValueVision Direct Marketing Company, Inc. d.b.a. Montgomery Ward
Direct ("VVDM"), is a direct-mail marketer of a broad range of quality general
merchandise which is sold to consumers through direct-mail catalogs. Through
its wholly-owned subsidiary, Catalog Ventures, Inc. ("CVI"), the Company sells
a variety of fashion jewelry and other consumer merchandise through the
publication of five consumer specialty catalogs. The Company also
manufactures and markets, via direct-mail, woman's foundation undergarments
through its wholly-owned subsidiary, Beautiful Images, Inc. ("BII").
Results of operations for the three months ended April 30, 1997 include
the direct-mail operations of VVDM, BII and CVI, which were acquired by the
Company effective July 22, 1996, October 22, 1996 and November 1, 1996,
respectively.
RESULTS OF OPERATIONS
NET SALES
Net sales for the three months ended April 30, 1997 (fiscal 1998), were
$51,062,000 compared with net sales of $22,788,000 for the three months ended
April 30, 1996 (fiscal 1997), a 124% increase. The increase in total net
sales is primarily attributed to net sales associated with the Company's newly
acquired direct marketing businesses, primarily VVDM. Sales attributed to
direct marketing operations totaled $26,691,000 or 52.3% of total net sales
for the quarter ended April 30, 1997. The increase in net sales is also
attributable to the increase in full-time equivalent cable homes able to
receive the Company's television home-shopping programming, which increased
approximately 1.3 million or 12% from 10.7 million at April 30, 1996 to 12.0
million at April 30, 1997. During the 12-month period ended April 30, 1997
the Company added approximately 800,000 full-time cable homes, an 11%
increase. In addition to new homes, television home-shopping sales increased
due to the continued addition of new customers from households already
receiving the Company's television home shopping programming, as well as a
slight increase in repeat sales to existing customers. The slight increase in
repeat sales to existing customers experienced during the first three months
of fiscal 1998 was due, in part, to the effects of continued testing of
certain merchandising and programming strategies during the first quarter of
fiscal 1998. Certain changes were made to the Company's merchandising and
programming strategies in the fourth quarter of fiscal 1997 and the first
quarter of fiscal 1998 which contributed to an improvement in sales. The
Company intends to continue to test and change its merchandising and
programming strategies with the intent of improving its television
home-shopping sales results. However, while the Company is optimistic that
results will continue to improve, there can be no assurance that such changes
in strategy will achieve intended results. As a result of the increased number
of households able to receive the Company's programming, as well as
seasonality factors, the Company anticipates net sales and operating expenses
will continue to increase for the balance of fiscal 1998.
10
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GROSS PROFIT
Gross profits for the first quarter ended April 30, 1997 and 1996 were
$22,695,000 and $9,388,000, respectively, an increase of $13,307,000 or 142%.
Gross margins for the three months ended April 30, 1997 were 44.4% compared to
41.2% for the same period last year. The principal reason for the increase in
gross profits was increased sales volume primarily as a result of the direct
mail-order operations included in the fiscal 1998 first quarter results.
Television gross margins for the first quarter ended April 30, 1997 were 41.3%
and gross margins for the Company's direct mail-order operations were 47.3%
for the same period. Television gross margins between comparable periods
remained relatively consistent, primarily as a result of an increase in gross
margin percentages in the jewelry and houseware product categories and a
greater proportion of higher margin non-jewelry products such as giftware and
houseware products, offset by a decline in volume of higher margin jewelry
products. During the first quarter of fiscal 1998, the Company continued to
broaden its merchandise mix as compared to the same period last year by
expanding the range and quantity of non-jewelry items. As part of the ongoing
shift in merchandise mix, the Company continued to devote additional program
air time to non-jewelry merchandise. Jewelry products accounted for
approximately 64% of air time during the first quarter of fiscal 1998,
compared with 70% for the same period last year.
OPERATING EXPENSES
Total operating expenses for the three months ended April 30, 1997 were
$25,819,000 versus $10,071,000 representing an increase of $15,748,000 or 156%
for the three months ended April 30, 1997. Distribution and selling expenses
increased $13,699,000 or 185% to $21,103,000 or 41.3% of net sales during the
first quarter of fiscal 1998 compared to $7,404,000 or 32.5% of net sales for
the comparable prior-year period. Distribution and selling costs increased
primarily as a result of additional distribution and selling expenses
associated with the Company's recently acquired direct-mail marketing
businesses, primarily VVDM, increases in cable access fees resulting from the
growth in the number of cable homes receiving the company's programming,
additional personnel costs associated with increased staffing levels and labor
rates and increased costs associated with handling increased sales volume.
Distribution and selling expenses increased as a percentage of net sales over
prior year primarily as a result of additional unusual costs incurred by the
Company during the first quarter of fiscal 1998 in connection with converting
and integrating the Company's newly acquired direct-mail operations and
start-up costs associated with the Company's new fulfillment and warehouse
facility located in Bowling Green, Kentucky.
General and administrative expenses for the three months ended April 30,
1997 increased $1,606,000 or 123% to $2,915,000 or 5.7% of net sales compared
to $1,309,000 or 5.7% of net sales for the three month period ended April 30,
1996. General and administrative costs increased as a result of increased
costs associated with the Company's newly acquired direct-mail operations,
increased personnel in support of expanded operations, additional travel and
related costs associated with evaluating potential acquisition opportunities
and additional legal and consulting costs incurred relative to clarification
of certain cable regulations.
11
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Depreciation and amortization costs for the three months ended April 30,
1997 were $1,801,000 versus $1,359,000 representing an increase of $442,000
or 32.5% from the comparable prior-year period. Depreciation and amortization
costs as a percentage of net sales were 3.5% for the three months ended April
30, 1997 versus 6.0% for the comparable prior-year period. The dollar
increase is primarily due to additional depreciation and amortization of
approximately $410,000 relating to assets associated with the Company's
recently acquired direct-mail operations, depreciation on property and
equipment additions offset by a reduction in amortization associated with the
Montgomery Ward operating agreement and licenses entered into in August 1995.
OPERATING LOSS
For the three months ended April 30, 1997, the Company incurred an
operating loss of $3,124,000 compared to an operating loss of $683,000 for the
three months ended April 30, 1996. The increase in operating loss resulted
primarily from increases in distribution and selling costs over prior year due
to expansion of operations and certain unusual costs incurred by the Company
in connection with the conversion and integration of the Company's recently
acquired direct-mail operations, as well as start-up costs incurred associated
with the Company's new fulfillment and warehouse facility located in Bowling
Green, Kentucky. These increases were offset by increased sales volumes,
margins and a corresponding increase in gross profits.
NET INCOME (LOSS)
For the three months ended April 30, 1997, the Company reported a net
loss of $1,761,000 or $.05 per share on 33,109,000 weighted average common and
common-equivalent shares outstanding compared with net income of $16,453,000,
or $.54 per share on 30,416,000 weighted average common and common-equivalent
shares outstanding for the first quarter of fiscal 1997. Results for the
first quarter of fiscal 1997 include a pre-tax gain of $27,050,000 from the
sale of television stations WAKC and WHAI in February 1996. For the three
months ended April 30, 1996, excluding the gain on the sale of the two
television stations, the Company had net income of $212,000, or $.01 per
share. For the quarter ended April 30, 1997, the net loss reflects an income
tax benefit of $1,151,000.
12
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PROGRAM DISTRIBUTION
The Company's television home-shopping programming was available to
approximately 18.1 million cable homes as of April 30, 1997, as compared to
16.4 million cable homes as of January 31, 1997 and to 13.9 million cable
homes as of April 30, 1996. The Company's programming is currently available
through affiliation and time-block purchase agreements with approximately 270
cable systems and three wholly-owned full power television broadcast stations.
In addition, the Company's programming is broadcast full-time over eleven
owned or affiliated low power television stations in major markets, and is
available unscrambled to homes equipped with satellite dishes. As of April
30, 1997 and 1996, the Company's programming was available to approximately
12.0 million and 10.7 million full-time equivalent cable homes ("FTE"),
respectively, an approximate 12% increase. As of January 31, 1997, the
Company's programming was available to 11.4 million FTE cable homes.
Approximately 8.1 million and 7.3 million cable homes at April 30, 1997 and
1996, respectively, received the Company's programming on a full-time basis.
Homes that receive the Company's television home shopping programming 24 hours
per day are counted as one FTE each and homes that receive the Company's
programming for any period less than 24 hours are counted based upon an
analysis of time-of day and day-of week.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
As of April 30, 1997, cash and cash equivalents and short-term
investments were $35,514,000, compared to $52,859,000 as of January 31, 1997,
a $17,345,000 decrease. For the three months ended April 30, 1997, working
capital decreased $12,576,000 to $49,056,000. The current ratio was 2.3 at
April 30, 1997 compared to 2.6 at January 31, 1997. At April 30, 1997 all
short-term investments and cash equivalents were invested in securities with
original maturity dates of less than two hundred and seventy (270) days.
Total assets at April 30, 1997 were $155,027,000, compared to
$166,413,000 at January 31, 1997. Shareholders' equity was $115,003,000 at
April 30, 1997, compared to $127,245,000 at January 31, 1997, a $12,242,000
decrease. The decrease in shareholders' equity for the three month period
ended April 30, 1997 resulted primarily from $10,458,000 related to the
repurchase of 2,418,000 shares of Company common stock made in connection with
the Company's authorized stock repurchase program, unrealized holding losses
of $69,000 on investments available-for-sale and the net loss of $1,761,000,
offset by proceeds received on the exercise of stock options and warrants of
$46,000.
For the three-month period ended April 30, 1997 net cash used for
operating activities totaled $3,918,000 compared to net cash provided by
operating activities of $1,791,000 for the three-month period ended April 30,
1996. Cash flows from operations before consideration of changes in working
capital items and investing and financing activities was a negative $1,323,000
for the three months ended April 30, 1997, compared to a positive $676,000 for
the same prior-year period. Net cash used for operating activities for the
three months ended April 30, 1997 reflects the net loss, as adjusted for
depreciation and amortization, loss in earnings of affiliates and gain on sale
of investments, increased prepaid expenses and funding required to support
higher levels of accounts receivable and inventories.
13
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
These uses were offset by increased accounts payable and accrued liabilities.
Accounts receivable increased primarily due to timing relative to receipt of
funds from credit card companies, increased sales volume and the recording of a
$1,100,000 income tax receivable. Inventories increased from year end to
support increased sales volume and changes in merchandise mix.
Net cash used for investing activities totaled $3,054,000 during the
first quarter of fiscal 1998 compared to net cash provided by investing
activities of $7,019,000 for the same period of fiscal 1997. For the three
months ended April 30, 1997 and 1996, expenditures for property and equipment
were $1,480,000 and $993,000, respectively. Expenditures for property and
equipment during the periods ended April 30, 1997 and 1996 include (i) the
upgrade of broadcast station and production equipment, studios and
transmission equipment and (ii) the upgrade of computer software and related
equipment. Principal future capital expenditures will be for upgrading
television production and transmission equipment, studio expansions and order
fulfillment equipment in support of expanded operations, especially with
respect to the Company's recently acquired direct-mail operations. During the
first quarter of fiscal 1998, the Company disbursed $1,151,000 relating to
certain strategic investments and other long-term assets and received $281,000
in net proceeds from the sale of certain long-term investments. During the
first quarter of fiscal 1997, the Company received $40.0 million in proceeds
from the sale of two television stations; Akron ABC affiliate WAKC-TV and
independent station WHAI-TV. In addition, during the first quarter of fiscal
1997, the Company paid approximately $3.8 million toward the acquisition of
independent television station KBGE (TV), including acquisition costs and paid
$800,000 at a second closing relative to broadcast station WVVI (TV). The
Company also disbursed $2,247,000 for investments and other long-term
investments.
Net cash used for financing activities totaled $10,473,000 for the three
months ended April 30, 1997 and primarily related to repurchases of the
Company's common stock under its stock repurchase program and capital lease
obligation payments offset by proceeds received from the exercise of stock
options and warrants. Net cash used for financing activities totaled $64,000
for the three months ended April 30, 1996, and primarily related to
installment payments made under a five year non-compete obligation entered
into upon the acquisition of a broadcast television station, partially offset
by proceeds received from the exercise of stock options.
Management believes funds currently held by the Company will be
sufficient to fund the Company's operations, the repurchase of any additional
Company common stock pursuant to an authorized repurchase plan, anticipated
capital expenditures and cable launch fees through fiscal 1998. Additional
capital may be required in the event the Company is able to identify
additional direct marketing company acquisition targets and television
stations in strategic markets at favorable prices.
14
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Management's Discussion and Analysis of Financial Condition and
Results of Operations discussed above and in other materials filed by the
Company with the Securities and Exchange Commission (as well as information
included in oral statements or other written statements made or to be made by
the Company) contains various "forward looking statements" within the meaning
of federal securities laws which represent management's expectations or
beliefs concerning future events, including statements regarding anticipated
operating results, revenue growth, capital spending requirements, potential
future acquisitions and the effects of regulation and competition. These, and
other forward looking statements made by the Company, must be evaluated in the
context of a number of important factors that may affect the Company's
financial position and results of operations including: consumer spending and
debt levels, interest rate fluctuations, seasonal variations in consumer
purchasing activities, increases in postal, paper and outbound shipping costs,
competition in the retail and direct marketing industries, continuity of
relationships with or purchases from major vendors, product mix, competitive
pressure on sales and pricing, the ability of the Company to manage growth and
expansion, changes in the regulatory framework affecting the Company,
increases in cable access fees and other costs which cannot be recovered
through improved pricing and the identification and availability of potential
acquisition targets at prices favorable to the Company. Investors are
cautioned that all forward looking statements involve risk and uncertainty.
In addition to any specific risks and uncertainties discussed in this Form
10-Q, the risks and uncertainties discussed in detail in the Company's Form
10-K for the fiscal year ended January 31, 1997 provide information which
should be considered in evaluating any of the Company's forward looking
statements. In addition you should be aware that the facts and circumstances
which exist when any forward looking statements are made and on which those
forward looking statements are based, may significantly change in the future,
thereby rendering obsolete the forward looking statements on which such facts
and circumstances were based.
15
<PAGE> 16
VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Computation of Net Income (Loss) Per Share.
27 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
None
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES
/s/ Robert L. Johander
----------------------
Robert L. Johander
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
/s/ Stuart R. Romenesko
-----------------------
Stuart R. Romenesko
Senior Vice President Finance and
Chief Financial Officer
(Principal Financial and Accounting Officer)
June 13, 1997
17
<PAGE> 1
EXHIBIT 11
VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES
Computation of Net Income (Loss) Per Share
Three Months Ended April 30,
----------------------------
1997 1996
------------ ------------
Net income (loss) $ (1,761,237) $ 16,453,410
============ ============
Weighted average number of common
shares outstanding 28,781,049 29,352,137
Shares assumed to be issued upon the
exercise of common stock options and
warrants under the treasury stock method 4,327,921 1,064,290
------------ ------------
Weighted average number of common
and dilutive common equivalent shares
outstanding 33,108,970 30,416,427
============ ============
Net income (loss) per common and
dilutive common equivalent share $ (0.05) $ 0.54
============ ============
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VALUE
VISION INTERNATIONAL, INC.'S CONSOLIDATED BALANCE SHEET AS OF APRIL 30, 1997
AND CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE-MONTH PERIOD ENDED
APRIL 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
CONSOLIDATED FINANCIAL STATEMENTS AS FILED ON FORM 10-Q
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> APR-30-1997
<CASH> 11,174,298
<SECURITIES> 24,340,094
<RECEIVABLES> 9,988,624<F1>
<ALLOWANCES> 0
<INVENTORY> 29,899,610
<CURRENT-ASSETS> 87,716,710
<PP&E> 24,914,825
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 155,027,475
<CURRENT-LIABILITIES> 38,660,740
<BONDS> 0
0
0
<COMMON> 279,761
<OTHER-SE> 114,723,274
<TOTAL-LIABILITY-AND-EQUITY> 155,027,475
<SALES> 51,061,796
<TOTAL-REVENUES> 51,061,796
<CGS> 28,366,858
<TOTAL-COSTS> 25,818,773
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,912,237)
<INCOME-TAX> (1,151,000)
<INCOME-CONTINUING> (1,761,237)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,761,237)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> 0
<FN>
<F1>ACCOUNTS RECEIVABLE REPRESENTS AMOUNTS NET OF ALLOWANCE FOR DOUBTFUL ACCOUNTS.
<F2>PROPERTY AND EQUIPMENT REPRESENTS AMOUNTS NET OF ACCUMULATED DEPRECIATION.
</FN>
</TABLE>
