iMedia Brands Inc (IMBI) 2002 Q1 法說會逐字稿

Thank you and welcome to ValueVision Media's first-quarter 2002 conference call. All lines have been placed on a listen-only mode for today's call. Today's conference is also being recorded. Before we begin and Tony Giambetti, director of corporate communications will read a brief statement.

Today's conference call may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Listeners are cautioned that such forward-looking statements may involve risks and uncertainties that could significantly affect actual results from those expressed in any such forward-looking statements. For additional information about these risks and uncertainties, they are contained in ValueVision Media's filings with the SEC.

I'd now like to turn the call over to ValueVision Media's chairman and CEO, Gene McCaffrey. Thank you, sir. You may begin.

Okay. Thank you for your interest. I'm sitting here with Dick Barnes, our chief operating officer and CFO, and Nathan Fagre, our chief legal counsel. And let me go some of the highlights of the release that many of you already have and provide some background to some of the other information enclosed in these releases. Sales were up 19%, and internet sales were up just over 70% over last year. Merchandise margins came in at approximately 39%, which reflects a positive mix if you - many times when we discuss some of our shortfalls, we talk about a margin mix with computers that has somewhat of a negative effect on the margin. If you were to take a look at our mix for this quarter, the computer as a percentage of total was down about 6%, and some of our other more profitable categories, like gemstones and things of that nature, were up as much as 10%. So we were able to have a pretty good revenue quarter, as well as have a shift in our big-ticket computers, which was less than - for example, in quarter 1, when I talked about some of the negative impact it might have had, computers were I guess almost 20% of our sales in quarter 4. If you look at distribution costs, they're up about $8 million. Those distribution costs reflect the new home growth, and we continue to, when we need to, improve our productivity for home, and I'll talk about that a little bit later. You see that there is a gain and loss offset which somebody called me this morning on. These have to do with a very old investment. Actually, before our time. In a company that has went bankrupt and some gains that we also received on some investments we made in the last few years, so that's that 1 million offset that you see that someone made an inquiry about this morning. Our general and administrative expense continues to be managed pretty well. We continue to manage our G and A below last year in conjunction with some of the increases that we've been experiencing. It does point towards the scalability of where we are today, as well as the leverage that we have in sales and margin going forward. As you saw in our release, our EBITDA improved to 5.3 million from 4 million last year. Let me take a little time and talk about some of the releases that we made with regard to, number one, a little bit about daytime programming with NBC daytime and NBC enterprise. You know, many have tried this whole issue of daytime television because the consumer in many cases matches up pretty well, and that's including us. We've had a few forays into daytime television in the last few years and they've been somewhat lackluster because probably the immature or noncomprehensive way we enter into these agreements. We've been - we've spent, oh, I don't know, six, seven, eight months working on this agreement with NBC, and this is a very comprehensive, cross-channel agreement. It does deal with product placement, which lots of folks do. It also deals with story line development with - with the - with the soap operas in the afternoon which many people do. However, it starts to differentiate itself when you start dealing in the cross-marketing spots between channels. The fact that we're going to have a soap-style commerce programming shows on shop NBC that daytime celebrities will be visiting shop NBC and participate in the programming shows that we're going to run on the weekends, that we're going to have chats and plot discussions, fan club promotions, and I think that you'll see here with this ABC daytime agreement is the beginnings of intelligently matching viewer and commerce demographics, and turning NBC viewers where they match up from a commerce standpoint into customers. These shows will be starting in July and August, and obviously we're - we're very excited about it. I mean, if you think that, you know, literally thousands of people watch - or maybe tens of thousands of people watch home shopping channels, converting that to the millions of people that watch daytime programming, and our ability to take a small percentage of that group and turn them into viewers for NBC and for shop NBC provides a big opportunity. During the May sweeps, some 20 NBC shows had some commerce availability, which was included - which where we were included, shop NBC.com, our logos were included in the credits. We might have mentioned this before, but I mean during the Olympics, you know, two 10-second swipes on NBC with regard to the availability of Olympic merchandise on shopNBC.com sold over 75,000 units and gained a similar number of new customers. So, again, if you - if you match it all up right and you talk about two 10-second swipes on a NBC network with the millions of people that are watching and you can match the merchandise to the audience, selling 75,000 units for an opportunistic dedication of two 10-second spots on NBC provides us lots of opportunity going forward. This was the - this next issue was the - we had a release on, but again, with Rebecca [Coles], who hosts a syndicated NBC enterprise show called Rebecca's Garden, you know, she now hosts a home living show on our network, and we are now cross-marketing between the syndicated television shows and shopNBC. We continue to work on a number of other initiatives with NBC. We've gone from 10 million to 46 million homes in a few years, with NBC's assistance, and we are not a household name like our competitors. And the NBC affiliation, which has really kicked in as of late, and an intelligent approach towards their viewership really can and will compensate, you know, for our rapid expansion. So we're very pleased with, you know, what we've been able to set up with NBC so far, and we do have a number of discussions going on with NBC for programming for the balance of the year, and special events going forward. We have enabled or commerce-enabled the NBC-owned and operated station group across the country and we're now working with a number of affiliate groups to provide similar commerce and customer services. Our acquisition of fan buzz in March will also provide some opportunities to expand commerce initiatives to additional third-party companies in a much more diverse merchandise area. We mentioned this morning, in another release, that we have a new relationship with America Online. This really does provide us an opportunity which is actually difficult to quantify from an up-side potential. I mean, providing key item merchandise in a number of categories, as well as AOL programming on shopNBC, and the cross-promotion between our media, is really a great opportunity for the development of our dot com business, which is going pretty well, and to further expand on interesting programming in the areas of television programming. Our business looking forward, as mentioned in the release, we should meet or exceed the current expectations. My sense is that during the current quarter that we are now in, that we will see us posting high single, low double-digit comparable increases, as many of our homes acquired last year start to improve our productivity. I have had a number of discussions with some of you over the past month or so with regard to some reports that have come out that have said that in some cases our productivity for home have actually decreased, but that's true. I mean, as you bring in lots of new homes, as we did, you know, the 20 so or million that we brought in over the last two years, as you add those new homes into the productivity numbers, cable and satellite, our productive for home did go down because those homes were not very productive. Actually, April saw us actually coming close to a break-even, and as I said, I think you'll see comp store increases in the high single and low double-digit increases in the quarter we're in. So that's pretty much an overview of the numbers, and some color on the releases on NBC daytime and AOL, and I would now open it up to questions.

Thank you. At this time, we are ready to begin the question and answer session. If you would like to ask a question, please press star 1 on your touch-tone phone. You will be announced prior to asking your question. To withdraw your question, you ma I press star 2. Once again, if you'd like to ask a question, please press star 1 on your touch-tone phone. And our first question comes from Richard [Belotti]. You may ask your question and please state your company name.

Hi. Rich [Belotti]. Morgan Stanley. Gene and Dick, I guess you left off from a topic that I'm most interested in, sales per FTE. If we look back at last year, sales per FTE declined through the four quarters. Now that we have a normal economy, how much pop-back is there in that number from the economy? In other words, how much of the deterioration last year was economic, and how much of it is just seasoning your subscribers and in the - and when you describe the, you know, the seasoning process, perhaps you could give us some thoughts about some of the stuff that you added in the early part of last year, what you're seeing for productivity from them this year, so that we can think about how that compares to the overall average.

Okay. When you look at the - you know, we've put a number of 25 million, which is a difficult number to quantify, but we put a number of $25 million in that September/October period from the difficulties that were experienced business-wise from the situation on the tragedies on September 11th. When you look at the decline - for example, if you look at the sales last quarter, as you look at sales per FTE last quarter, we actually had sales per FTE that were just over 10% less productive last quarter than they were the previous year, so that would answer your - or address your issue of sales per FTE continued decline. Now, that decline happens to come from - aside from the 25 million in the economic hardship after September 11th, I don't attribute - I don't attribute a lot of the losses in sales product per home to economic conditions, because I think it's a merchandising issue with a company like ours that is growing as quickly as we are. So the economic conditions is - is very difficult for me to address, Rich. I would tell you that in - in this quarter, our sales per FTE went from a minus/plus 10% to just almost a break-even. So I'm not sure I'm going to be able to answer your question as to how many millions of homes in what month are doing exactly what, because they definitely get mixed into the overall either Direct TV, echo star, and different cable companies. But I would tell you that in the quarter that we are in, as I mentioned in my closing comments, that our sales per FTE in this quarter will actually start to run comp store, as we would know it, increases, which is a direct result of the homes that were brought on two years ago at the end of the quarter, at the end of the year, and the homes that were brought on at the beginning of last year, starting to becoming a heck of a lot more productive. So when you look at the guidance that we've put out that run anywhere from, you know, 15 to 27%, you know, we feel that as you look at a comp store, we should be running better than double-digit comp store increases in the quarter we're in, and then going forward.

If I could ask one quick follow-up with that. Historically, I think probably most analysts have assumed that we think that the FTEs come in one year, but about 12 months after they come in, they've reached sort of normal level of productivity compared to your other FTEs.

I think that's correct.

[inaudible] sales concept. Is that still a valid way to think about it?

Yeah, it is a valid way to think about it and, you know, it's starting to prove itself out as we look at last quarter performance, last year performance and this quarter performance that we're in, that we'll actually run comp store increases and then, you know, the reason that we put the swing, if you will, into our guidance going forward is, you know, we just - it's just difficult to meld all of these new homes into what kind of sales increases they're going to project. But this quarter we should run, probably for the first time, some significant comp store increases total, regardless of when the homes came on.

Okay. Thank you very much.

Our next question comes from Stacy Forbes. You may ask your question, and please state your company name.

Hi. [Onco] Partners. Congratulations on a nice quarter.

Thanks, Stacy.

I just had a couple of questions. One, regarding the NBC ownership position in the company, can we get an update on - you know, I know there are some warrants that are exercisable, I think about 2 million now - that are currently in the money. Have you gotten any sense from them if they plan to increase their ownership at this point?

The - there is no ability in the agreement for NBC/GE to increase their ownership without board approval. I'm not sure I'm answering your question correctly. You know, they have - they have their preferred stock, and then they have the warrant issues, and then they have some performance warrants that come on with regard to cable and satellite acquisition. But the - the ownership is pretty much at a standstill within those confines.

Right. But I mean I thought that they could own up to 44% but they were actually below 40 right now because they haven't exercised those warrants.

Stacy, it's Dick. Even if they exercise all the warns they currently have outstanding, and I mean all of them, they'd be above 42%, give or take a half a point.

Okay.

That would be pretty much where it would be.

Okay. Can we get an update on vendor programming and where that stands, in terms of maybe what it represented during the quarter and what kind of progress you're making there.

Well, I mentioned that we did - we have some - we signed a deal with AOL that includes vendor programming, and we've expanded our catalog operation with - we expanded the Bose agreement out over a year. We've expanded the solutions. We have about four or five others that we'll probably announce in the next - well, we have 3 particularly that we'll announce in the next few days. Vendor programming. I would tell you that the vendor programming side that we have slanted - that we have slated has not been as aggressively received as we had originally thought, and I don't know if that has to do with the advertising slump that's been out there in general terms. You know, we've pretty much made our vendor programming numbers for the first quarter and for the last quarter, but I mean the big vendor programming numbers come in the third and fourth quarter. As you probably know, we've discounted by approximately 50% the vendor programming income opportunity by taking the sales out of those hours, so I don't think that we have any financial risk at all from the standpoint of our pro forma, but it's difficult for me to tell you exactly how that's going to pan out going forward.

Okay. And then lastly, you probably can't comment on this because I know you guys don't comment on rumors but there's a lot of rumors flying around lately regarding Liberty, [Vivendi], you know, HSN under the old USAI, and potentially being interested in ValueVision. Is there any commentary you could comment on that?

We can't comment on that.

Okay. That's it. Thanks so much.

Okay. Thanks, Stacy.

As a reminder, if you'd like to ask a question, please press star 1 on your touch tone phone. Our next question comes from Bob Evans. You may ask your question and please state your company name.

Bob Evans, think equity partners. Good morning, Gene and Dick, and congratulations on a nice quarter.

Thank you.

Thanks, Bob.

First, can you comment on the gross margin. It was better than I had modeled. What do you think is a sustainable gross margin kind of going forward for the year.

Well, that's difficult. I mean, you know, you got to take a look at our guidance because, I mean, we ran from a penetration standpoint in the first quarter - we ran about 6 percentage points less computer penetration than we did in fourth quarter. You know, and I'll give you just one category of goods. In gemstones, which is a 43% margin category, you know, we ran on net sales, 10% better from a penetration standpoint from the fourth quarter to the first quarter. You know, we - we've pretty much stabilized our jewelry margins into the low 40s and we've pretty much stabilized our computer margins in the 22, 23 percent. So, you know, we will certainly attempt to maintain the higher-margin mixes, but it's just very difficult to forecast.

Okay. Can we get the product mix for this quarter between jewelry, computers, and whatever, health, beauty, other.

Bob, it's Dick. There was an attachment to the press release that has that, but for the quarter, jewelry was up 71% [inaudible] 16.

Okay. Sorry. I'm out of the office.

That's okay.

No problem.

Okay.

And what's encouraging is that, you know, there's been - if you look at the quarters, as you go, you know, historically over the last three to four quarters, you know, this is a pretty solid margin quarter, and it would certainly be our intention to maintain these kinds of mixes.

Okay. Good. And can you comment a little bit more on at least the general economics that you're seeing on the vendor programming? You know, you've got a deal with AOL, you did the soap style deal now, and you're - and the gardening show as well. I mean, what - is it purely fee-based or are you getting a percentage of revenue or how are the two -

Well, it's a combination of all of that. I - you know, I think most of them, at the moment, are all fee-based. We are looking at margin and customer acquisition models that we think may be more palatable from the standpoint of when you look at companies that do customer acquisitions, there is a - you know, there is a present value and a customer acquisition cost model that we already have. And, you know, if we think that we can acquire customers at something less than what their model calls for, that is something we'd consider with them and then of course as we look at the margin capability and then the merchandise opportunity, we may consider margin splits. But we're probably talking to between 10 and 15 people today, I mean actively talking to that many people, which is not unique, and we're looking at all the different ways to structure that.

Is the price on the hourly fee, has it gone up, given the growth in distribution over, say, the past year?

This is Dick. We probably don't want to comment on what we're charging.

Okay.

I mean, it's a good number for us relative to with what we make without it.

Okay. So the economic - I mean -

The economics are a positive. Otherwise, we don't do the deal.

Okay, okay. And final question. On same-store sales, can you give us a sense of what same-store sales were for this quarter.

The same-store sales for this quarter were just probably slightly less than flat. And the reason - and I think next - the quarter that we're in, same-store sales will probably run, you know, as I said, double digit up.

Okay.

And all of that has to do with the maturing of those 10 million homes that came on last year.

Okay. Great. Thank you.

I would - you know, I would answer - it's always a complicated - I always seem to answer it in such a complicated way. You know, same-store - I would expect that same-store sales from this day forward, this quarter forward, will always be significantly better than the previous year, based on the incredible growth that we had for two years in the past. Now, that might change if we did a major cable deal that lumped a lot of cable homes into us immediately which might bring same-store sales down again. But, again, that would be a positive happening.

Okay. Thanks.

Our next question comes from Jeff [Kleinfelter]. You may ask your question and please state your company name.

Yes. U.S. Bankcorp Piper Jaffray. Great job on the quarter. Two quick questions for you. First of all, on e-commerce, with the success you're having with your internet channel, any thoughts on strategy there, what you might attempt to do with that beyond what you're currently doing, and some more connections with some of these acquisitions you've made? And then I have a follow-up on the sensitivity of the home shopping to some of these media events that are happening.

Okay. On the - on the opportunities on the dot com side, yeah, there's a lot. I mean fan buzz, you know, which is a great company, provides us technology and a multiplatform viability to provide customer care and merchandise services to - you know, to any of the new dot com companies like ESPN and provide their background commerce and merchandise development and customer care. You know, we believe that there's an opportunity to look at retail as well, and to provide those back-end merchandise and customer care services. You know, we are, as we mentioned - or I mentioned maybe or - we did mention in the release that, you know, the owned and operated and the affiliate - and eventually the affiliates, or a number of the affiliates, you know, we're kind of doing a fan buzz kind of operation for them, in that, you know, if you go to an affiliate - excuse me, if you go to an O and O NBC station dot com site and you want to buy NBC merchandise, you basically are buying it, you know, from us, even though it's - you know, you wouldn't know that, obviously, on that site. You know, we also have done a few things that, you know, we haven't made a big deal of, but I mean, you know, if you look on our site today, you know, we host some other companies like the museum store. You know, we provide all the customer care services and distribution, you know, for the museum store. So we're actively pursuing - and of course, you know, there's the AOL announcement. We're actively pursuing opportunities to develop the dot com side of the business, and what makes us unique is that, you know, we have - we get to throw television into the mix from a marketing capability of improving the sales in these areas.

Jeff, it's Dick. I just want to add one thing, just so it's abundantly clear. In the press release, we talk about internet sales of 22.7 million, up 72%. That's purely our sales. That does not include fan buzz, so that's our own business.

Okay. Thank you. And then a quick follow-up is: With respect to the home shopping business, as we continue to be plagued with potential media events on CNN and others with the developments overseas, have you found now, given the number of months that have passed since September, have you found it's stabilized, have you found you can predict with better accuracy what's going to happen to that business when things happen in the news?

Well, I think that, you know, we don't see - you know, we really control, for the most part, you know, what happens in our business with the exception of, you know, catastrophic or news events that take over networks. And what I mean by that is the unfortunate, you know, plane crash of John Kennedy, Jr., obviously September 11th. I mean, it really does take those kinds of monumental either issues or coverages to seriously affect our business. We are - we feel very predictable. I mean, as you look at the difficulties that we're going through in the country, that the world is going through in the Middle East, the crisis of the day-to-day problems in the Middle East, as those kinds of happenings, they are not such that affect our business. So I guess you could say that, you know, short of something that re- - that takes worldwide coverage of a particular event, you know, we are fairly normalized.

Okay. Thank you.

Our next question comes from Steve [Bierenberg]. You may ask your question and please state your company name.

Hi. Steve [Bierenberg] at [Goffin and Glossberg]. A series of short questions. Do you have a breakdown of the sales categories for the other category? There was quite a large increase in other as a percentage year over year.

Okay. On the other categories, within the sales of - Dick will refer to them.

Yeah. Your other category which is up about 7 points, in terms of the major contributors to that were basically a lamp business which we have developed as well as domestic, which is mattresses and begged. Those account for about 80% of that increase.

Yeah. Home and cosmetics has started to grow for us.

Okay. Excellent. Were there any fan buzz sales on the quarter at all anywhere?

Yeah, there were fan buzz sales on the quarter. A little less than 3 million bucks recorded in the quarter.

Okay. But you said those all appeared in the - none of that showed up in where you were quoting internet sales.

That's correct.

That's correct.

Okay. When you talk about same-store sales, just to be clear, so that I know what you're saying, is that the same as sales per FTE?

That's correct.

Okay. Just wanted to make sure. So you're seeing growth year over year in sales for traditional customers, people who have been with you for years and years?

Yes.

Okay. Any comments on any new trends forming between productivity of satellite homes versus cable homes?

No. I think that it's fair to say that, you know, a good rule of thumb is that the satellite homes operate at, you know, something in the neighborhood of 50% of cable homes on a - on a maturing scale that, you know, is somewhat similar. You know, I mean, it - I mean, they all go up, but they all go up relative.

Okay. I - so presumably, the - obviously, the satellite homes are growing quite rapidly, relative to the cable homes, since Direct TV and dish added over a million subscribers between them, I think, in the first -

Well, I mean, look -

- in the quarter, so . . .

- the numbers, if you were to look at - if you were to look at the year over year numbers, you know, you're looking at about two-and-a-half to 3 million more satellite homes this year than last year, and you're looking at, you know, 5 to 6 million more cable homes this year over last year. I mean, that's pretty much the mix.

Okay.

And, you know, what I was stating earlier is, you know, the good news is that a lot of them have been on for a while and we will start to run, this quarter, sales per FTE that are comparable.

But as - in general, if satellite homes grow in the mix, then that serves to depress sales per FTE somewhat, since they're just less productive homes even at maturity.

Oh, yeah. If they grow faster as a number. I believe it's true that, you know, one or two of our competitors - one particularly - might actually use satellite homes as a half a home to eliminate that, and, you know, we'll look at that going forward.

Okay. And then last question, I know Bob asked about vendor programming terms. Specifically on the AOL deal, I presume you're making some payments to AOL for your placement over there, and presumably they're buying the weekly hour of programming. Is that a -

That is correct.

Is that a wash, or does that come out, you know, positive or negative to you guys?

We would expect in general that it will come out positive to us.

Okay. Great. Thanks a lot. Good job on the quarter.

Thank you.

Thank you.

Our next question comes from Harvey [Isen]. You may ask your question and please state your company name.

Hi, Gene. It's Harvey [Isen].

Hey, Harvey, how are you doing?

Well, it's all relative. Had a great quarter, and your stock is down.

Some things I - you know, I don't understand and I can't control.

Okay. So after hearing all these great analytical erudite questions, I have a simple stupid question for you and I just need some bullet points. Is it possible to summarize how you differentiate yourself from the other major home shopping alternatives?

Well, I mean I think that the - there's something that exists today, and that is, you know, we are a very high-end jewelry company relative to our competitors. Not - certainly not as productive and a lot newer, but very high-end. So in the jewelry category, I would tell you that, you know, our opportunity is to remain on the high end and to layer in a more affordable, if you will, that deals with a greater number of households from an affordability standpoint categories of goods. So that's today. From a differentiating standpoint, I mean I think that as you start to look at the more we do with NBC, you'll see some things we're going to be doing with Time and Life magazine, AOL programming. You know, it's our intention not - you know, I probably - last year, I used the word - I used the word "hipper" at an employee meeting, and someone said the other day, you know, are we hip? I said, we're probably not hip but our intention is to become more entertainment oriented and more contemporary. I think we'll be able to do that because of our affiliation with an entertainment - actually, the number one entertainment company from the standpoint of television. So my hope is that, you know, we will provide more and more diverse and entertaining programming that will have unique commerce opportunity attached to it. My vendor programming opportunities is to get involved in categories that may not be as commerce oriented as something that we would do, but may have some benefit to the partner from a customer and, to some degree, a revenue standpoint. So, yeah, I mean we're trying to be a lot more contemporary and a lot more entertainment oriented.

Well, you and I have talked about this concept of using, I guess you'd call them, experts in terms of people watching and getting comfort from the use of a cosmetic or a camera or something. Where does that stand?

I'm sorry. Just give me a little color on that one.

Well, we talked about having some implied endorsement from a so-called expert.

Oh, okay. All right.

Maybe adding some stature to the show.

All right. Yeah. Well, I mean, I think that, you know, as we launched, you know, Rebecca [Coles] last month -

Right.

You know, she's someone that's around the country that does, you know, the morning shows and now she represents us. We have a lot more of that - a lot of that going on from a discussion standpoint with a lot of the people involved with NBC and some other entertainment companies, so I like to take that and multiply it, you know, much quicker and much broader. I - so what you and I have talked about, I agree with.

Being as I got it from you, it's nice to hear.

That's good. Thanks, Harvey.

Thanks.

Our next question comes from Chris Lytle. You may ask your question and please state your company name.

My question has been already answered. Thanks, guys.

Thanks, Chris.

Thanks, Chris.

Our next question comes from Rick Shay. You may ask your question, and please state your company name. Rick Shay, your line is open. Please check your mute button. Our next question comes from David Markowitz. You may ask your question and please state your company name.

David Markowitz, from SOS capital. This quarter, you generated it looks like an awful lot of cash from working capital. I was just wondering if you could provide some detail on that.

David, it's Dick. I mean, some of that is timing but probably the biggest factor that's contributing to that is we launched a private-label credit card late last year, and the acceptance of that card has been much more significant than anything that we ever expected. The implication of that as it relates to receivables is, we actually moved the receivables risk over to the card provider, and therefore, cash comes in to us quicker, as opposed to historically how we've offered credit to customers, which is through a program called value pay, which is [inaudible] extending the credit.

Gotcha. Okay.

Yeah, I might also add that, you know, of the new credit cards that have been added since October of this past year, we now have over a hundred million dollars worth of credit line availability that we'll be able to direct-market to, as we move through the balance of the quarters, which is another big opportunity for us.

And that credit line is solely for use on shopNBC.

Right.

All right. Thank you.

Thank you.

Our next question comes from Bob Evans. You may ask your question and please state your company name.

Think equity partners. Just a couple follow-up questions.

Did you forget something, Bob?

Yes, I did. The soap style shows -

Yep.

You said "shows." How many shows are you thinking about?

At least twice a month ad infinitum.

Okay. And also the first quarter, were you affected by the Olympics? Or could you see any meaningful drop -

I think if anything, we were actually negatively affected by the Olympics. I mean, we were positively - you know, if you look at the fact that we did a little volume, the example I quoted, I think it would be fair to say that, you know, we probably had some negative effects by the Olympics because it was such a major event.

Okay. Did you see meaningful drop-off or just a modest drop-off?

Modest drop-off.

Okay. All right. Thank you.

Thanks.

It was a meaningful drop-off.

Our next question to say from Peter icily. You may ask your question and please state your yes.

It's [inaudible] capital management.

Hi, Peter.

Hi, Gene. Hi, Dick. A couple months ago, when I was up there, you had recently installed I believe it was the Oracle database system in hopes of improving your productivity.

Right.

What results have you seen so far.

Well, our productivity, you know, our ability now to monitor our sales per article by the second in realtime with a realtime inventory declination as well as productivity from a revenue and margin per minute, certainly gives us a lot more to look at over the course of the day and to make decisions that provide - or that oracle provides us some flexibility to make decisions with regard to that. I think that's probably, from a revenue and sales standpoint, one of the most important things we've done. I think Dick could probably talk about some of the back-end operations as we look at, you know, the ability to look altogether abandon rates from the standpoint of customer service. I mean, I can - you know, I am sitting here, I can actually look at, you know, how many operators we have in Baton Rouge, how many calls we have on the line, how many people are waiting, how long they've been waiting, how many calls are coming in, and, you know, we now probably staff and look differently at the way we manage our business.

Just to add a comment, Peter, on June 1st, we're going live with the oracle front end, which is the customer facing part of the system, which is going to give us a whole heck of a lot more flexibility in terms of offers we can make to the customers and ability to respond to them quickly. It's also just going to give us a lot better information on what's going on in our customer base on a realtime basis, versus where we've been before.

Do you still think, though, that you can free up or squeeze more sales, you know, in a given hour in that you - as you see a less productive item come out, you take it out quicker?

Yes. I mean, that's the - obviously, I didn't explain myself well. That's probably, in my view, the principal benefit of the whole system. I mean, we can do this from anywhere in the country. We just tap into the - to the - into the system, and we can monitor everything that's going on and make those decisions, and not necessarily on the fly but more intelligently than we've made them in the past.

Okay. Great. Thanks.

Thank you.

Thanks, Peter.

Our next question comes from Steve [Bierenberg]. You may ask your question and please state your company name.

Thanks. [Goffin and Glossberg]. Just a quick follow-up. Could you comment on the increase in inventory since the since the fast why will year end?

Sure. Our inventory is on a cost basis about 6-and-a-half - we look at - it looks like we're going to run about 6-and-a-half turns - 6 to 7 turns at cost at our current level. Now, that's just mathematical. All of our vendor structures today - well, let me say 90% of our vendor structures today have two ingredients, and those ingredients are guaranteed returns and guaranteed margins. So we have the ability to return in almost all cases all merchandise that is returned to us, and then we have the ability to clear goods at a guaranteed margin where vendors pick up a lot of the markdown dollars. So as you look at a 20% sales increase with some projections at that or slightly greater, our current inventory position is pretty comfortable. I reviewed our inventory position as recently as yesterday, and our aged product is down significantly over last year, and in almost all cases, all the merchandise is new. In addition, to piggyback on what Peter [Eisel] asked, you know, we probably have $6 million worth of merchandise in the house that we have purchased opportunistically with a hundred percent return privileges that we keep in reserve to put on the air to - when we have unproductive shows or shows that turn out to be unproductive, for us to make changes in those shows to make our hours more productive. So our inventory management is very good.

Thanks.

Thank you. All right. I'd like to thank you all for your interest, if there's no further questions. Thank you very much.