-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FpZMHsu0OoXdK5BwM2Et7wfaBdy+g5LeHNx1Z3p/LUWyNj9pDGwEGktCve+/vhM/ F8ipSqqXzNKh9EMjtYv0Pg== 0000950124-98-001303.txt : 19980317 0000950124-98-001303.hdr.sgml : 19980317 ACCESSION NUMBER: 0000950124-98-001303 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971031 FILED AS OF DATE: 19980313 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: VALUEVISION INTERNATIONAL INC CENTRAL INDEX KEY: 0000870826 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 411673770 STATE OF INCORPORATION: MN FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 000-20243 FILM NUMBER: 98565321 BUSINESS ADDRESS: STREET 1: 6740 SHADY OAK RD CITY: EDEN PRAIRIE STATE: MN ZIP: 55344-3433 BUSINESS PHONE: 6129475200 MAIL ADDRESS: STREET 1: 6740 SHADY OAK RAOD CITY: EDEN PRAIRIE STATE: MN ZIP: 55344-3433 10-Q/A 1 10-Q/A 1 ===================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 31, 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 February 17, 1998, there were 26,780,778 shares of the Registrant's common stock, $.01 par value, outstanding. ======================================================================== 2 PART I - FINANCIAL INFORMATION Item 1 of the Form 10-Q for the quarterly period ended October 31, 1997 previously filed by ValueVision International, Inc. (the "10-Q") is hereby amended and restated in its entirety as follows. Except as set forth herein, all other items of the 10-Q remain in full force and effect. ITEM 1. FINANCIAL STATEMENTS VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
ASSETS OCTOBER 31, JANUARY 31, 1997 1997 -------------- ------------- CURRENT ASSETS: Cash and cash equivalents $ 18,189,366 $ 28,618,943 Short-term investments 27,529,673 24,239,840 Accounts receivable, net 11,713,784 6,488,094 Inventories, net 27,286,121 28,109,081 Prepaid expenses and other 15,899,879 11,483,394 Deferred taxes 392,000 416,000 ------------- ------------ Total current assets 101,010,823 99,355,352 PROPERTY AND EQUIPMENT, NET 21,851,045 24,283,108 FEDERAL COMMUNICATIONS COMMISSION LICENSES, NET 5,706,239 6,934,546 MONTGOMERY WARD OPERATING AGREEMENT AND LICENSES, NET 14,085,016 15,052,935 INVESTMENT IN PAXSON COMMUNICATIONS CORPORATION 9,448,373 - GOODWILL AND OTHER INTANGIBLE ASSETS, NET 12,297,802 10,764,011 INVESTMENTS AND OTHER ASSETS, NET 8,928,066 10,022,718 ------------- ------------ $ 173,327,364 $166,412,670 ============= ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term obligations $ 415,915 $ 392,921 Accounts payable 22,336,546 24,887,904 Accrued liabilities 13,928,325 12,398,041 Income taxes payable 2,875,291 45,008 ------------- ------------ Total current liabilities 39,556,077 37,723,874 LONG-TERM OBLIGATIONS 1,086,493 1,443,189 ------------- ------------ Total liabilities 40,642,570 39,167,063 ------------- ------------ SHAREHOLDERS' EQUITY: Common stock, $.01 par value, 100,000,000 shares authorized; 28,035,778 and 28,842,198 shares issued and outstanding 280,358 288,422 Common stock purchase warrants; 3,842,143 and 5,368,557 18,386,927 26,984,038 Additional paid-in capital 81,714,115 83,309,455 Net unrealized holding gains (losses) on investments available-for-sale (2,922,382) 69,437 Retained earnings 35,225,776 16,594,255 ------------- ------------ Total shareholders' equity 132,684,794 127,245,607 ------------- ------------ $ 173,327,364 $166,412,670 ============= ============
The accompanying notes are an integral part of these condensed consolidated balance sheets. 3 3 VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED OCTOBER 31, OCTOBER 31, --------------------------------------- ------------------------------------ 1997 1996 1997 1996 ------------------ ------------------- ------------------ ---------------- NET SALES $ 58,325,336 $ 47,118,078 $ 157,887,155 $ 94,246,499 COST OF SALES 32,599,365 28,457,339 89,542,591 56,469,049 ------------ ------------ ------------- ------------ Gross profit 25,725,971 18,660,739 68,344,564 37,777,450 ------------ ------------ ------------- ------------ Margin % 44.1% 39.6% 43.3% 40.1% OPERATING EXPENSES: Distribution and selling 23,325,866 15,953,996 64,707,697 31,048,673 General and administrative 2,251,383 1,953,837 7,611,520 4,723,006 Depreciation and amortization 1,833,658 1,513,321 5,542,272 4,243,711 ------------ ------------ ------------- ------------ Total operating expenses 27,410,907 19,421,154 77,861,489 40,015,390 ------------ ------------ ------------- ------------ OPERATING LOSS (1,684,936) (760,415) (9,516,925) (2,237,940) ------------ ------------ ------------- ------------ OTHER INCOME (EXPENSE): Gain on sale of broadcast stations - - 38,850,000 27,050,000 Equity (loss) in earnings of affiliates (17,037) 763,741 (347,612) 668,617 Interest income 599,310 955,198 1,475,103 3,113,255 Other, net (34,111) 54,212 1,295 63,658 ------------ ------------ ------------- ------------ Total other income 548,162 1,773,151 39,978,786 30,895,530 ------------ ------------ ------------- ------------ INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAXES (1,136,774) 1,012,736 30,461,861 28,657,590 PROVISION (BENEFIT) FOR INCOME TAXES (471,000) 404,000 11,830,340 11,450,000 ------------ ------------ ------------- ------------ NET INCOME (LOSS) $ (665,774) $ 608,736 $ 18,631,521 $ 17,207,590 ============ ============ ============= ============ NET INCOME (LOSS) PER COMMON AND DILUTIVE COMMON EQUIVALENT SHARE $ (0.02) $ 0.02 $ 0.58 $ 0.55 ============ ============ ============= ============ Weighted average number of common and common equivalent shares outstanding 32,064,428 33,627,770 32,375,370 31,206,974 ============ ============ ============= ============
The accompanying notes are an integral part of these condensed consolidated financial statements. 4 4 VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY For the Nine Months Ended October 31, 1997 (Unaudited)
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 ------------ ----------- ------------ ------------ --------------- BALANCE, JANUARY 31, 1997 28,842,198 $ 288,422 $ 26,984,038 $ 83,309,455 $ 69,437 Exercise of stock options and warrants 1,611,080 16,111 - 241,786 - Common stock repurchases (2,417,500) (24,175) - (10,434,237) - Value transferred from common stock purchase warrants - - (8,597,111) 8,597,111 - Unrealized holding loss on investments available-for-sale - - - - (2,991,819) Net income - - - - - ----------- --------- ------------ ------------ ----------- BALANCE, OCTOBER 31, 1997 28,035,778 $ 280,358 $ 18,386,927 $ 81,714,115 $(2,922,382) =========== ========= ============ ============ =========== TOTAL RETAINED SHAREHOLDERS' EARNINGS EQUITY ----------- -------------- BALANCE, JANUARY 31, 1997 $16,594,255 $ 127,245,607 Exercise of stock options and warrants - 257,897 Common stock repurchases - (10,458,412) Value transferred from common stock purchase warrants - - Unrealized holding loss on investments available-for-sale - (2,991,819) Net income 18,631,521 18,631,521 ----------- ------------- BALANCE, OCTOBER 31, 1997 $35,225,776 $ 132,684,794 =========== =============
The accompanying notes are an integral part of this condensed consolidated finacial statement. 5 5 VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
FOR THE NINE MONTHS ENDED OCTOBER 31, ------------------------------------------ 1997 1996 ------------ ------------- OPERATING ACTIVITIES: Net income $ 18,631,521 $ 17,207,590 Adjustments to reconcile net income to net cash provided by (used for) operating activities- Depreciation and amortization 5,542,272 4,243,711 Deferred taxes 24,000 - (Equity) loss in earnings of affiliates 347,612 (668,617) Gain on sale of broadcast stations (38,850,000) (27,050,000) Changes in operating assets and liabilities: Accounts receivable, net (4,622,488) (3,099,859) Inventories, net 822,960 (5,731,221) Prepaid expenses and other (4,468,695) (2,015,553) Accounts payable and accrued liabilities (2,535,819) 7,211,981 Income taxes payable 2,830,283 2,102,992 ------------ ------------ Net cash used for operating activities (22,278,354) (7,798,976) ------------ ------------ INVESTING ACTIVITIES: Property and equipment additions, net of retirements (3,148,495) (7,718,975) Purchase of broadcast stations - (4,618,743) Proceeds from sale of broadcast stations 30,000,000 40,000,000 Acquisition of direct-mail companies, net of cash acquired - 1,789,875 Purchase of short-term investments (38,534,148) (76,667,392) Proceeds from sale of short-term investments 36,555,220 56,137,858 Payment for investments and other assets (5,474,773) (1,518,767) Proceeds from sale of investments 1,369,006 - Proceeds from long-term notes receivable 1,603,439 - ------------ ------------ Net cash provided by investing activities 22,370,249 7,403,856 ------------ ------------ FINANCING ACTIVITIES: Proceeds from exercise of stock options and warrants 257,897 1,150,395 Payments for repurchases of common stock (10,458,412) (1,576,595) Payment of long-term obligations (320,957) (141,685) ------------ ------------ Net cash used for financing activities (10,521,472) (567,885) ------------ ------------ Net decrease in cash and cash equivalents (10,429,577) (963,005) BEGINNING CASH AND CASH EQUIVALENTS 28,618,943 20,063,901 ------------ ------------ ENDING CASH AND CASH EQUIVALENTS $ 18,189,366 $ 19,100,896 ============ ============ SUPPLEMENTAL CASH FLOW INFORMATION: Interest paid $ 68,000 $ 58,000 ============ ============ Income taxes paid $ 8,993,000 $ 9,598,000 ============ ============ SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES: The Company received 1,197,892 shares of Paxson Communications Corporation common stock as partial consideration from the sale of a broadcast television station $ 14,284,862 $ - ============ ============ The Company issued 1,484,993 warrants with a fair market value of $8,353,000 in connection with the acquisition of substantially all assets of Montgomery Ward Direct, L.P. $ - $ 8,353,000 ============ ============ The Company issued 199,097 warrants with a fair market value of $963,000 as part of a long-term investment contribution $ - $ 963,000 ============ ============
The accompanying notes are an integral part of these condensed consolidated financial statements. 6 6 VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 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 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 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 and nine months ended October 31, 1997 include the direct- mail operations of VVDM, BII, and CVI, 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 included in its fiscal 1997 Annual Report on Form 10-K. Operating results for the nine-month period 7 7 VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 1997 (Unaudited) ended October 31, 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 (loss) 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) SALE OF BROADCAST STATIONS On July 31, 1997, the Company completed the sale of its television broadcast station, WVVI (TV) Channel 66, which serves the Washington, D.C. market, to Paxson Communications Corporation ("Paxson"). The station was sold for approximately $30 million in cash and 1,197,892 shares of Paxson Communications Corporation common stock valued at $11.92 per share as determined pursuant to an independent financial appraisal. WVVI (TV) was acquired by the Company in March 1994 for approximately $4,850,000. The pre-tax gain recorded on the sale of this television station was $38,850,000 and was recognized in the second quarter ended July 31, 1997. On November 17, 1997, the Company signed a definitive agreement to sell to Paxson Communications Corporation its television broadcast station, KBGE-TV, Channel 33, which serves the Seattle, Washington market along with two of ValueVision's non-cable, low-power stations in Portland, Oregon and Indianapolis, Indiana and minority interests in entities which have applied for two new full-power stations for a total of $35 million in cash. Under the terms of the agreement, Paxson will pay the Company $25 million upon closing and the remaining $10 million is to be paid when KBGE, which is currently operating at reduced power from downtown Seattle, is able to relocate and increase its transmitter/antenna power to a level at or near its licensed full power. The transaction is anticipated to close in the Spring of 1998 and is subject to obtaining certain consents and regulatory approval. ValueVision will retain and continue to serve the Seattle market via its recently-launched low-power station K58DP-TV, which transmits from downtown Seattle. The effects of the disposition will be reflected in the financial statements at the date of closing. Management believes that the sale will not have a significant impact on the operations of the Company. The Company has filed applications for seven additional full-power stations, all of which include multiple applicants, and expects to participate in FCC-permitted private auctions to determine the grantee. 8 8 VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 1997 (Unaudited) (5) MONTGOMERY WARD RESTRUCTURING On October 23, 1997, the Company announced the restructuring of its operating agreement with Montgomery Ward & Co., Incorporated ("Montgomery Ward" or "MW"), which governs the use of the Montgomery Ward name. In exchange for Montgomery Ward's return to ValueVision of warrants covering the purchase of 3.8 million shares of ValueVision common stock, the Company will cede exclusive use of the Montgomery Ward name for catalog, mail order, catalog "syndications" and television shopping programming back to Montgomery Ward. Under the agreement, which requires the approval of the U.S. Bankruptcy court of Delaware, the Company will cease the use of the Montgomery Ward name in all outgoing catalog, syndication, and mail order communication by March 31, 1998, with a wind down of incoming orders and customer service permitted after March 31, 1998. The agreement also includes the reduction of Montgomery Ward's minimum commitment to support ValueVision's cable television spot advertising purchases. Under the new terms, Montgomery Ward's commitment is reduced from $4 million to $2 million annually, and the time period decreased from five years to three years commencing effective November 1, 1997. In addition, the agreement limits the Company to offer the Montgomery Ward credit card only in conjunction with its various television offers and subject to the normal approvals by the credit card grantor. Upon the closing of the transaction in its fiscal 1998 fourth quarter, the Company plans to account for the transaction as an exchange or disposition of assets at fair value, in accordance with the provisions of Accounting Principles Board Opinion No. 29. The return of the warrants represents consideration given by MW for the assets relinquished by the Company. The warrant return will be reflected as a reduction in shareholders' equity for the fair value of the warrants, and the intangible asset amounts reflecting the assets sold back to MW will be reduced accordingly to their remaining estimated fair values as determined through analysis of future cash flows and benefits to be received. To the extent that any difference exists between the consideration given by the Company (the assets sold back to MW) and the consideration received (the warrants returned to the Company), such difference will be reflected in the Company's statement of operations in the fourth quarter of fiscal 1998. The Company does not currently anticipate that any such difference will be material. The agreement also calls for the repurchase by the Company of 1,280,000 shares of its common stock currently owned by Montgomery Ward, at a price of $3.80 per share. Management does not anticipate that this restructuring will have any other material impact on the Company's financial condition, results of operations or liquidity. (6) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS The Financial Accounting Standards Board (FASB) 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. The FASB issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS No. 131") in June 1997. SFAS No. 131 requires that public business enterprises report information about operating segments in annual financial statements and requires selected information in interim financial reports issued to shareholders. It also establishes standards for related disclosures about products and services, geographic areas, and major customers and is effective for fiscal years beginning after December 15, 1997. 9 9 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/ Stuart R. Romenesko ------------------------------------------- Stuart R. Romenesko Senior Vice President Finance and Chief Financial Officer (Principal Financial and Accounting Officer) February 20, 1998 19 -----END PRIVACY-ENHANCED MESSAGE-----