-----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, KkkWNAoDAJQRT03L8pVxiRSe5AZW2lI7Rj2L3aYtIeoNfrKHHukgM+OmnR5ysmAf Fb0OQAtr5eeOYCeZ4UuFqA== 0000950144-97-011260.txt : 19971029 0000950144-97-011260.hdr.sgml : 19971029 ACCESSION NUMBER: 0000950144-97-011260 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19971028 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHOP AT HOME INC /TN/ CENTRAL INDEX KEY: 0000810029 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 621282758 STATE OF INCORPORATION: TN FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 000-25596 FILM NUMBER: 97702021 BUSINESS ADDRESS: STREET 1: 5210 SCHUBERT RD STREET 2: P O BOX 12600 CITY: KNOXVILLE STATE: TN ZIP: 37912 BUSINESS PHONE: 6156880300 MAIL ADDRESS: STREET 1: 5210 SCHUBERT ROAD STREET 2: P O BOX 12600 CITY: KNOXVILLE STATE: TN ZIP: 37912 10-K/A 1 SHOP AT HOME FORM 10-K/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- FORM 10-K/A Amendment No. 1 (Mark One) [x] Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended June 30, 1997 [ ] 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 0-25596 ------- SHOP AT HOME, INC. ------------------ (Exact name of registrant as specified in its charter) TENNESSEE 62-1282758 - ---------- ---------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 5210 Schubert Road P.O. Box 12600 Knoxville, Tennessee 37912 -------------------------- (Address of principal executive offices) Registrant's telephone number, including area code: (423)688-0300 ------------- Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: Title of Each Class ------------------- COMMON STOCK, $.0025 par value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) for 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 --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Aggregate market value of the Common Stock held by non-affiliates of the registrant on September 22,1997 was: $43,633,191 Number of shares of Common Stock outstanding as of October 1, 1997: 11,074,414 2 Documents Incorporated by Reference ----------------------------------- The Registrant's definitive Proxy Statement in connection with the 1997 Annual Meeting of Shareholders which will be filed with the Securities and Exchange Commission within 120 days after the end of the Registrant's fiscal year ended June 30, 1997 is incorporated by reference in Part III of this Annual Report on Form 10-K The undersigned Registrant hereby amends the Annual Report on Form 10-K for the fiscal year ended June 30, 1997 as set forth below. Item 7. - Management's Discussion and Analysis of Financial Condition and Results of Operations - of the Form 10-K for the year ended June 30, 1997 is amended and restated as follows: ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table sets forth for the periods indicated the percentage relationship to total revenue of certain items included in the Company's Statements of Operations.
Year ended June 30 1997 1996 1995 ---------------------------------------- Net Sales 100% 100% 100% Cost of goods sold 59.9 61.3 63.9 Gross profit 40.1 38.7 36.1 Other operating income 1.5 1.7 0.7 Promotion and advertising charges .7 .6 1.0 Salaries and wages 8.2 10.3 12.6 Transponder and cable charges 17.9 15.1 12.0 Other general operating and administrative expenses 9.8 14.1 13.6 Depreciation and amortization 1.5 2.2 2.0 Other expense (1.3) (1.9) (0.3) Income tax benefit .1 .3 .0 Net income (loss) 2.3 (3.5) (4.7)
RESULTS OF OPERATIONS - ---------------------- FISCAL 1997 VS. FISCAL 1996 - ---------------------------- The Company's total revenues, consisting of net sales, infomercial and miscellaneous revenues, for the year ended June 30, 1997, were $69,064,000, an increase of $28,332,000 or 70% over the prior year. The major component of this increase in revenues was net sales which increased to $67,817,000, an increase of $27,801,000 or 59% over the prior year. The increase was primarily attributable to the addition of approximately 3,200,000 full-time equivalent households (FTEs) resulting in a total of 8,600,000 full-time equivalent households (FTEs) at the end of June 1997. This increase in households is attributable mainly to the expanded coverage through greater market penetration of approximately 2,200,000 full power television station FTEs and approximately 600,000 FTEs through the agreement with TCI. The sales increase was principally the result of increased sales volume rather than an increase in price points. 3 The Company's product mix trended away from jewelry and more toward male related merchandise, including sports and collectibles in keeping with its predominately male audience. Gross profit increased by $11,692,000 or 75.4%, primarily as a result of increased sales related to expanded carriage throughout the United States and increased gross margins. The Company's average gross profit margin increased to 40.1% from 38.7% in the previous year as a result of improved purchasing, selection and development of more unique merchandise and product lines. Higher margins were obtained throughout most product categories, particularly in the sports product lines. The Company generated $1,051,000 in informercial revenue from WMFP in Boston and KZJL in Houston. This represented a 59.5% increase over the infomercial revenue of the prior year. The Company continued improvement in this area although future increases should be smaller. The Company develops a market by broadcasting its programming over a period of time. Consequently there is a timing difference of approximately 6 to 9 months whereby the distribution expenses outpace future revenues. In these instances, the Company's profitability in a specific new market will be initially depressed until future revenue streams exceed expenses. Operating expenses for fiscal 1997 increased $8,953,000, or 52.9% over 1996. The major items resulting in the increase were: (a) additional cable carriage and signal distribution costs of approximately $6,094,000 or 101.1%; (b) an increase in salaries of approximately $1,452,000 or 35.3% primarily related to variable labor costs associated with the higher volume of customer calls and some additions to management; (c) an increase in depreciation and amortization of approximately $179,000 or 20.4% primarily associated with the operating costs and acquisitions of fixed assets of the Boston and Houston television stations, and Collector's Edge; (d) an increase in telephone cost of $255,000 or 39.3%; and (e) credit card discounts of $490,000 or 48.2% related primarily to the higher business revenues in 1997. FISCAL 1996 VS. FISCAL 1995 - ---------------------------- The Company's total revenues, consisting of net sales, infomercial, and miscellaneous revenues, for the year ended June 30, 1996, were $40,732,000, an increase of $13,667,000 or 50% over the prior year. The major component of this increase in revenues was net sales which increased to $40,016,000 an increase of $13,229,000 or 49% over the prior year. The increase was primarily attributable to greater cable coverage which resulted from the addition of approximately 2,700,000 full time equivalent households (FTEs) resulting in a total of 5,400,000 FTE households by the end of June 1996. This two-fold increase in households is attributable mainly to the combined carriage in the Boston, Houston, and Dallas markets to which the Company did not broadcast in the prior fiscal year (approximately 60%) and the additional part-time carriage on various full power stations throughout the United States (approximately 40%). The sales increase was the result of increased sales volume and not an increase in sales prices. During fiscal 1996, the Company introduced and developed new product lines in Health & Beauty, Fitness, and Collectible Knives. In addition, there was a broadening of the Coin product line, and the Company re-introduced its "Dominator" collectible card. These new and expanded product lines helped generate new sales to broaden the customer base. Gross profit increased by $5,834,000 or 60.4%, primarily as a result of increased sales related to expanded carriage throughout the United States and increased gross margins. The Company's average gross profit margin increased to 38.7% from 36.1% in the previous year as a result of improved purchasing, selection and development of more unique merchandise and product lines. Higher margins were obtained throughout most product categories, particularly in the jewelry and sports product lines. The Company generated $659,000 in infomercial revenue from WMFP in Boston and KZJL in Houston. This represented a 248% increase over the infomercial revenue of the prior year and was the first full year of infomercial revenue. 4 The Company develops a market by broadcasting its programming over a period of time. Consequently there is a timing difference of approximately 6 to 9 months whereby the distribution expenses outpace future revenues. In these instances, the Company's profitability in a specific new market will be initially depressed until future revenue streams exceed expenses. Operating expenses for fiscal 1996 increased $5,920,000, or 53.8% over 1995. The major items resulting in the increase were: (a) additional cable carriage and signal distribution costs of approximately $2,798,000 or 86.7%; (b) an increase in salaries of approximately $756,200 or 22.5% related to variable labor costs associated with the higher volume of customer calls and some additions to management; (c) an increase of $367,900 or 162.0% in legal expenses associated with the unsuccessful Paxson merger and certain litigation; (d) an increase in depreciation, amortization, station management costs and utilities of approximately $975,000 or 22.7% primarily associated with the operating costs and acquisitions of fixed assets of the Boston and Houston television stations, which were owned for a full year in 1996; (e) the Company's operating expenses for Houston exceeded revenues by $305,000 until January 1996 when Houston became profitable; (f) an increase in telephone cost of $179,000 or 38.3%; and (g) credit card discounts of $354,000 or 53.5% related primarily to the higher business revenues in 1996. Other expenses were negatively impacted by $610,000 or 479.1% primarily due to increased interest expense on the additional $2,000,000 in debt secured in August 1995 and the full year of expense from new debt incurred in fiscal 1995. LIQUIDITY AND CAPITAL RESOURCES - --------------------------------- Fiscal 1997 was a year of dramatic growth for the Company which was mostly achieved by a 59% increase in FTEs primarily through broadcast stations, cable system and carriage agreements. Management believes the growing market value of these broadcast assets and the addition of long-term, full-time, predictable coverage will significantly and positively add long term value and revenue to the Company. The Company believes internally generated funds from operations, together with borrowings, and the sale of common stock and warrant rights, if needed, will be sufficient to meet the Company's capital requirements during the next fiscal year. Additionally, the Company believes it will be successful in raising capital necessary to fund its bid to acquire the assets of Global Shopping Network. In January 1997, the Company completed the installation of an Aspect Callcenter telephone system, which increases the Company's ability to meet the higher sales volumes while reducing operator and telephone costs. This system integrates the Company's database with caller ID capability and will reduce the time necessary to process calls. In July 1996, the Company instituted a new credit card processing system, which provides instant credit card verification at the time of sale. These capital expenditures improve the Company's operating efficiency in terms of cash flow. They are consistent with management's goal to invest in current technology to improve the ratio of costs which support sales. At June 30, 1997 the Company had a negative net working capital position of ($4,641,439), a decrease of $934,809. This decrease was attributable primarily to the $1,100,000 invested in Collector's Edge of Tennessee, Inc. Much of the growth in liabilities is reflective of the Company's increased sales volume. The Company believes that it enjoys strong, long-term relationships with its vendors. It is common in the retail business to have a low working capital ratio, and the Company believes that its ability to meet future vendor obligations will be adequate. RECENT ACCOUNTING PRONOUNCEMENTS - --------------------------------- In February 1997, the Financial Accounting Standard Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share," which changes the calculations used for earnings per share (EPS) and makes them comparable to international EPS standards. It replaces the presentation 5 of primary EPS with a presentation of basic EPS. It also requires dual presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. The effect of the change in the standard on the consolidated financial statements results in $0.15 and ($0.14) of basic EPS for the years ended June 30, 1997 and 1996. The standard would have no effect on the diluted EPS. The Statement is effective for financial statements issued for periods ending after December 15, 1997; earlier application is not permitted. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 129, "Disclosure of Information about Capital Structure." The Statement establishes standards for disclosing information about an entity's capital structure. The Statement is effective for periods ending after December 15, 1997. Management has determined that the adoption of this Statement will not have a material impact on the financial statements. In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information." This Statement establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and interim financial reports issued to shareholders. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. The Statement is effective for financial statements issued for periods beginning after December 15, 1997. Management has not yet determined the full effect of this Statement on its financial statements. In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income." The Statement establishes standards for reporting comprehensive income and its components in a full set of financial statements. The Statement is effective for fiscal years beginning after December 15, 1997. The Company currently has no items that would be classified as other comprehensive income. Thus, management has determined that the adoption of this Statement will not have a material impact on the financial statements. SIGNATURES Pursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SHOP AT HOME, INC. By: /s/ Kent E. Lillie Date: 10/28/97 ------------------------------------- ----------- Kent E. Lillie President and Chief Executive Officer (Principal Executive Officer) By: /s/ Joseph Nawy Date: 10/28/97 ------------------------------------ ----------- Joseph Nawy (Vice President -Finance) -----END PRIVACY-ENHANCED MESSAGE-----