Company Reports Record First Quarter Television Home Shopping Sales Highlights: -- Television home shopping operations net sales increase 52% to $44.4 million from $29.1 million in year-ago quarter, while improving gross profit margins 5% -- First quarter operating profit of $342,000, compared with operating loss of $2,289,000 in year-ago quarter -- First quarter net income (excluding unusual items) of $0.02 per common share, compared with net loss of $0.04 per common share in year-ago quarter -- Company maintains strong consolidated gross profit margins of 42% -- Consolidated operating expenses 42% of net sales compared to 48% in year-ago quarter -- Completes first stage of NBC and GE Equity strategic alliance -- Agreement entered into to sell Houston television stations for $28 million Consolidated Financial Summary *** (in 000's, except for per share numbers) Three Months Ended 4/30/99 4/30/98 Net sales $53,142 $43,676 Operating income (loss) $342 $(2,289) Net income (loss), excluding unusual gains and charges $558 $(964) Net income (loss) per common share, excluding unusual gains and charges $0.02 $(0.04) Net income $6,368* $11,280** Net income per diluted common share $0.22* $0.42** * Includes a pre-tax gain of $10.0 million related to the final payment on the sale of broadcast television station KBGE-TV (Seattle, WA) and a pre-tax loss of $452,000 related to trading investment holdings. ** Includes a pre-tax gain of $19.8 million related to the sale of broadcast television station KBGE-TV. *** Includes ongoing and discontinued catalog operations. MINNEAPOLIS, May 24 /PRNewswire/ -- ValueVision International, Inc. (Nasdaq: VVTV), an integrated electronic and print media direct marketing company, today reported record first quarter television home shopping sales, its second largest quarter in the Company's history, and positive earnings for its first quarter ended April 30, 1999. "Our business units are performing at or above our expectations, particularly our television home shopping and Internet operations, which are continuing to demonstrate strong sales and earnings gains," said Gene McCaffery, Chairman, Chief Executive Officer and President of ValueVision International, Inc. "Following the planned completion of our alliance in June, ValueVision will have more than $100 million in cash and no long-term debt. With these resources, we expect to quickly and effectively continue to grow ValueVision's operations and financial results. We look forward to working with NBC to substantially increase our subscriber base and along with General Electric to tap into our new partners' expansive global resources. We are in a number of significant discussions which have the potential to dramatically affect traditional ways that e-commerce and home shopping are conducted. ValueVision's size, attitude and balance sheet provide us with the ingredients to lead," continued Mr. McCaffery. Record Quarterly Television Home Shopping Revenues Net sales for the first quarter ended April 30, 1999 were $53,142,000, compared with net sales of $43,676,000 for the first quarter of fiscal 1999, an increase of 22%. The increase in net sales is primarily attributable to continued improvements in the Company's television home shopping operations, which have reported greater than 30% sales increases for the past four quarters in a row and reported its second largest revenue quarter in the Company's history. Net sales for the Company's television home shopping operations for the first quarter of fiscal 2000 increased 52% to $44,375,000 from $29,140,000 for the comparable prior year-period, on a 29% increase in average full-time equivalent cable homes. The Company's mail order operations contributed $8,766,000, or 16% of net sales for the first quarter, compared with $14,537,000, or 33% of net sales for the same period last year, a decrease of $5,771,000, or approximately 40%. The decrease in catalog revenues is a result of the fiscal 1999 divestiture of the Company's unprofitable HomeVisions (formerly known as Montgomery Ward Direct) mail order catalog operations. First Quarter Net Income The Company reported net income of $6,368,000, or $0.22 per share on 28,615,000 diluted weighted average shares outstanding ($0.24 per share on 26,016,000 basic shares) for the quarter ended April 30, 1999, compared with net income of $11,280,000, or $0.42 per basic and diluted share on 26,877,000 diluted weighted average shares outstanding (26,781,000 basic shares) for the quarter ended April 30, 1998. Net income for the quarter ended April 30, 1999 includes a pre-tax gain of approximately $10,000,000 relating to the receipt of a contingent payment in connection with the Company's sale of a television station and two low-power television stations to Paxson Communications Corporation in March 1998 and a pre-tax loss of $452,000 recorded on the holdings of the Company's trading security investments. Net income for the first quarter ended April 30, 1998 included a pre-tax gain of approximately $19,750,000 relating to the sale of its television broadcast station, KBGE-TV and two low-power television stations. Excluding the net gains recorded on the sale and holdings of property and investments, the Company achieved net income of $558,000 or $0.02 per basic and diluted share for the quarter ended April 30, 1999 compared to a net loss of $964,000 or $0.04 per basic and diluted share for the quarter ended April 30, 1998, an increase of approximately $1,600,000 over fiscal 1999. Record First Quarter Operating Profit The Company reported record operating income of $342,000 for the first quarter of fiscal 2000 compared with an operating loss of $2,289,000 for the first quarter of the prior year, an improvement of over $2,600,000. The increase in quarterly operating income over prior year's quarterly operating loss is directly attributed to the turnaround of the Company's television home shopping division. Specifically, television home shopping operations improved by approximately $2,500,000 in the first quarter of fiscal 2000 over the first quarter of fiscal 1999 as a result of increased margins and a 29% increase over prior year in the average number of FTE cable homes. The Company also experienced a modest increase in operating income over the prior year from its catalog operations. "We have seen a significant turnaround of the Company's television home shopping operations over the past year as a result of the continuous improvement in home shopping sales and the implementation of certain cost containment and control measures. This quarter's operating profit marks for the first time in the Company's history the reporting of consecutive quarters of operating profitability, a true turning point for ValueVision. We are very excited about the continuation of this positive trend and the direction the Company is heading in fiscal 2000," concluded Mr. McCaffery. Company Maintains Strong Gross Profit Margins Gross profit margins were 42% for the first quarter of fiscal 2000 compared with 43% for fiscal 1999. Gross margins for the Company's television home shopping operations were 40% for fiscal 2000 compared with 38% for fiscal 1999. Gross margin percentages increased for television home shopping as a direct result of changes in the Company's programming and merchandise mix. Gross margins for mail order operations were 56% for fiscal 2000 compared with 52% for fiscal 1999. The increase in mail order gross margins was due primarily to the change in the mix between HomeVisions and the Company's other catalogs. Total operating expenses were $22,137,000 for the first quarter of fiscal 2000 compared with $20,943,000 in fiscal 1999, an increase of 6%. As a percentage of net sales, total operating expenses were 42% for the first quarter of fiscal 2000 and 48% for the year-ago period. Strong Balance Sheet As of April 30, 1999, ValueVision had cash and short-term investments of $86,156,000, total assets of $193,641,000, current liabilities of $40,581,000 and shareholders' equity of $124,909,000. Expanded Cable Distribution ValueVision's full-time equivalent cable homes were approximately 15.4 million at April 30, 1999 compared with 11.9 million at April 30, 1998, an increase of approximately 29%. At April 30, 1999, the Company's programming was carried full-time on approximately 10.6 million homes, a 13% increase over 9.4 million full-time homes at April 30, 1998. The total number of homes able to receive ValueVision's programming increased approximately 28% from 17.4 million at April 30, 1998 to 22.2 million at April 30, 1999. $10 Million Contingent Payment from Paxson Communications On April 12, 1999, ValueVision received a contingent payment of $10 million relating to the sale of its KBGE-TV, Channel 33, television station in Seattle, Washington, and two low-power television stations to Paxson Communications in March 1998. As a result, ValueVision recognized a $10 million pre-tax gain in the quarter ended April 30, 1999. The $10 million contingent payment finalizes the agreement between the two companies. First Stage of NBC / GE Equity Strategic Alliance Complete On April 16, 1999, ValueVision announced that the Company had completed the first stage of its strategic alliance with NBC and GE Equity. As a result, NBC and GE Equity have acquired an approximate 19.9% equity stake in ValueVision in the form of preferred stock and common stock purchase warrants. The second and final stage of the transaction is expected to close in June 1999, after ValueVision shareholders vote on certain aspects of the transaction at the Company's June 2, 1999 Annual Shareholders Meeting. Sale of Houston Television Stations On May 3, 1999, ValueVision announced the sale of its KVVV-TV full-power television station, Channel 57, and K53 FV low power station, serving the Houston, Texas market, for a total of $28 million to Visalia, California-based Pappas Telecasting Companies. As a result, the Company will recognize a pre-tax gain of approximately $21 million upon closing, which is expected to occur in the third quarter of 1999. The transaction is subject to obtaining certain consents and regulatory approval. ValueVision International, Inc. is an integrated electronic and print media direct marketing company, and operates a television home-shopping network and multi-book catalog operation. The Company offers live programming 24 hours per day, 7 days a week. As of April 30, 1999, approximately 22.2 million homes were able to receive ValueVision's programming, of which approximately 10.6 million homes were on a full-time basis and another 11.6 million on a part-time basis. In addition, the Company operates several direct mail operations and an Internet shopping website (www.vvtv.com). The Company's shares are traded on the Nasdaq Stock Market under the symbol VVTV. For additional information on ValueVision please visit the Company's web site at http://www.vvtv.com or by fax, at no cost, dial 1-800-PRO-INFO, and enter code VVTV. (Note: The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain information included in this news release contains statements that are forward-looking, such as statements relating to increased revenue and cable home distribution, maintenance of gross profit margins, the Company's future profitability, entrance into e-commerce, consummation of the sale of its Houston television stations and the continuing success in developing new strategic alliances (including the GE Equity and NBC alliance). There are certain important factors, such as consumer spending and debt levels, interest rates, competitive pressure on sales and pricing, the maintenance of cable home distribution, obtaining shareholder approval of the NBC and GE Equity transaction and meeting all conditions for the Houston television stations sale that could cause results to differ materially from those forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainty, including the possibility that revenues and cable distribution will not continually increase, that gross profit margins will decrease, that e-commerce will not be successful, that other strategic alliances (including the GE Equity and NBC alliance) may not result in increased revenues or earnings and that the Houston television stations sale will not be consummated. For more information on the potential factors that could affect the Company's financial results, investors should refer to the Company's recent filings with the Securities and Exchange Commission, including the Company's annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.) VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except share and per share data) For the Three Months Ended April 30, April 30, 1999 1998 Net sales $53,142 $43,676 Cost of sales 30,663 25,022 Gross profit 22,479 18,654 Margin % 42.3% 42.7% Operating expenses: Distribution and selling 18,231 16,819 General and administrative 2,755 2,854 Depreciation and amortization 1,151 1,270 Total operating expenses 22,137 20,943 Operating income (loss) 342 (2,289) Other income (expense): Gain on sale of broadcast stations 9,980 19,750 Unrealized loss on trading securities (452) -- Interest income 589 783 Other, net (17) (49) Total other income 10,100 20,484 Income before income taxes 10,442 18,195 Provision for income taxes 4,074 6,915 Net income $6,368 $11,280 Net income per common share $0.24 $0.42 Net income per common share - assuming dilution $0.22 $0.42 Weighted average number of common shares outstanding: Basic 26,015,567 26,780,778 Diluted 28,615,225 26,877,387 CABLE SUBSCRIBER INFORMATION (in millions) April 30, January 31, April 30, 1999 1999 1998 Full-time Equivalent Cable Subscribers 15.4 14.9 11.9 Total Cable Subscribers 22.2 21.8 17.4 Full-time Cable Subscribers 10.6 10.6 9.4 VALUEVISION INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS AND SUBSIDIARIES (Unaudited) April 30, January 31, 1999 1999 (In thousands, except share data) ASSETS Current assets: Cash and cash equivalents $65,003 $44,264 Short-term investments 21,153 2,606 Accounts receivable, net 23,563 19,466 Inventories, net 24,061 21,101 Prepaid expenses and other 7,547 8,576 Income taxes receivable -- 500 Deferred income taxes 1,703 1,807 Total current assets 143,030 98,320 Property and equipment, net 13,601 14,069 Federal Communications Commission licenses, net 1,994 2,019 Cable distribution and marketing agreement, net 6,914 -- Montgomery Ward operating agreement and licenses, net 1,828 1,876 Investment in Paxson Communications Corporation 11,532 9,713 Goodwill and other intangible assets, net 5,857 5,962 Investments and other assets, net 8,822 9,160 Deferred income taxes 63 651 $193,641 $141,770 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term obligations $235 $393 Accounts payable 23,890 20,736 Accrued liabilities 15,249 11,555 Income taxes payable 1,207 -- Total current liabilities 40,581 32,684 Long-term obligations -- 675 Series A Redeemable Convertible Preferred Stock, $.01 par value, 5,339,500 shares authorized; 3,739,500 and 0 shares issued and outstanding 28,151 -- Shareholders' equity: Common stock, $.01 par value, 100,000,000 shares authorized; 26,071,333 and 25,865,466 shares issued and outstanding 261 259 Common stock purchase warrants; 1,450,000 and 0 shares 6,931 -- Additional paid-in capital 73,726 72,715 Accumulated other comprehensive losses (1,714) (2,841) Notes receivable from officers -- (1,059) Retained earnings 45,705 39,337 Total shareholders' equity 124,909 108,411 $193,641 $141,770  