iMedia Brands Inc (IMBI) 2007 Q3 法說會逐字稿

Good morning and welcome to ValueVision Media's third-quarter earnings release teleconference. Following today's presentation, there will be a formal question-and-answer session. At that time, instructions will be given. Until that time, all lines will remain in a listen-only mode. At the request of ValueVision Media, today's call will be recorded for instant replay. If anyone has any objections, you may disconnect at this time. I would now like to turn the call over to Ms. Amy Kahlow, Director of Communications. You may begin.

Good morning. 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. More detailed information about these risks and uncertainties is contained in ValueVision Media's filings with the SEC. I would now like to turn the call over to Mr. John Buck, Interim CEO.

Thank you, Amy. Good morning and thank you for joining me on this call. A lot has happened since our last call and I apologize for not being able to talk with you before today. I assumed the role of Interim CEO on October 25 and I felt I needed to spend time getting to know our employees, vendors and our operations. I also felt it was important to have our third-quarter numbers to share with you.

My prepared remarks are focused in the following areas. I will talk about third-quarter results, our guidance for the year, priorities for the fourth quarter, a little background on myself, my promise to you as the Interim CEO and finally, some thoughts about ShopNBC and its future.

I am going to give you a heads-up that my comments are probably going to run 15 to 20 minutes, so please bear with me. My goal here is to hopefully address your concerns and to give you reason for optimism going forward.

Joining me on the call is Frank Elsenbast, our CFO.

Let me now briefly comment on third quarter and then I will turn it over to Frank. You saw in our press release that our sales for the quarter matched last year's sales and our adjusted EBITDA was $800,000 versus $1.4 million last year. We are not pleased with these results.

We certainly felt the same impacts that many retailers felt from a softer retail environment, but we feel our business can perform better. We continue to be very excited about our fast-growing Internet business and the growing strength of our Watch and Gem businesses. We will talk about these opportunities later in the call. But now, I'm going to turn it over to Frank and he will give you more details on the quarter. Frank?

Thanks, John. For the third quarter, sales were $185 million, which is even with the third quarter last year. Sales in several categories showed considerable growth versus last year. These categories include Gemstones, Watches, Apparel and Notebook Computers. These gains were offset by a reduction in our LCD TV business, which peaked in the third quarter of last year and has seen considerable margin erosion this year. In response, we have shifted hours to other categories that maximize our margin dollars per hour. Our Internet business grew 18% over prior year and is now 28% of our merchandise sales.

Our gross margin for the third quarter was 35.2%, an increase of 80 basis points versus last year. The increase was driven primarily by the shift in our merchandise mix away (technical difficulty) margin electronics.

Operating expenses for the third quarter grew 1% versus prior year. This modest increase reflects the impact of our cost reduction plans implemented in May and that continued to be rolled out. This increase does not include the one-time CEO separation costs and certain severance and restructuring costs. These costs amounted to $3.2 million in the quarter.

Selling and distribution expenses were up 7% versus prior year, driven by a 5% increase in our homes and continued growth in our Internet marketing programs. G&A expenses were down $2 million versus prior year due to lower salaries and related costs. It is important to note that both of these are down sequentially versus our second quarter of this year.

EBITDA for the quarter was $800,000, down $600,000 versus last year. While these results are below our expectations, we are pleased that we can report positive EBITDA even when our sales growth is below expectations.

Let me end with a quick update on our balance sheet. We ended the quarter with a cash balance of $103 million, an increase of $1 million versus the prior quarter. The primary drivers include a change in working capital that generated $12 million, our stock buyback program used $9 million during the quarter, capital spending was $4 million, driven primarily by spending on IT projects and our warehouse consolidation project. EBITDA and interest income contributed $2.5 million. John will now give you an update on the outlook for the remainder of 2007.

Thanks, Frank. And as he said, I want to discuss our plans for the fourth quarter and I will also comment on our annual financial guidance. For the fourth quarter, we have five key events -- Thanksgiving, Must Watch, Holiday Gala and the Best of 2007 plus our big clearance event in January. We have very, very detailed plans in place and it is now dependent on our own execution. Quite frankly, that is the theme and the challenge I have given to everyone, including our vendor partners -- execution.

We are off to a very strong start in the fourth quarter with an outstanding all-star event last week that resulted in an 8% increase over last year. As many of you know, this is our biggest event of the year, bringing our top vendors together with our best products, best prices, best values and we are very, very pleased with the results. It also gave me a chance to speak to our 60 top vendors and to talk to them about our business and our future. I received a very warm reception and there is a strong desire to work with us in finding ways to improve our performance and profitability.

I am also excited to tell you that, month-to-date, we are up double-digit over last year in sales. We are coming off a wonderful weekend where, in all categories, we had just a great sales increase over last year.

We will continue to drive our business through focus on key categories -- gemstone jewelry and watches, which are up 9% and 13% respectively on a year-to-date basis. Our ready-to-wear and laptop computer businesses are also up nicely for the quarter as well as year to date.

The momentum of our Internet business continues as we have recently rolled out our PayPal as a new payment option on our website. This is quickly contributing incremental sales and attracting new customers.

In addition, ShopNBC.com was just named to Internet Retailer's Hot 100 for 2008. This is an honor bestowed upon retail websites that constantly innovate and set the standard for online retailing.

With regard to our guidance, it remains unchanged and we are reaffirming low single digit sales growth and adjusted EBITDA of $5 million to $10 million.

Now I want to talk about being Interim CEO during this transition period while we are searching for a permanent CEO. First, as I don't know most of you, I thought maybe just a quick background on myself might be helpful. I have an undergraduate degree from Minnesota State University, an MBA from Purdue's Krannert School and I have over 30 years in business, primarily with Honeywell, that included living in Brussels, Belgium for four years. I was a member of the senior management team that ran a $1.5 billion business, operating in over 12 countries, employing over 12,000 employees.

My last corporate assignment was a five-year stint with Fingerhut where I was President and I led their direct-to-consumer retail business. I also helped launch Fingerhut's business services, which provided infrastructure to companies who were interested in developing a direct-to-consumer business. As many of you know, we sold Fingerhut and made our shareholders very, very happy.

I joined the ValueVision Board three years ago and along with my fellow Board members have great enthusiasm for this Company, its employees and customers. As Interim CEO, I promise -- my promise to you is to protect the assets of this Company, our great employees, our on-air hosts, our vendors, our carriage and our customers. At the same time, I want to reassure you that we will not sit still during this period.

I think it can best be summarized that we will be aggressive on a tactical level, but there will not be strategic changes until a permanent CEO is named. We will position this Company for improved performance and profitability and give to our new CEO a company prepared to deliver consistent earnings.

Let me explain it a little bit further. We continue to -- we will continue to manage this business aggressively on the top line with an increasing focus on the bottom line. For our consumers, there will not be a significant change in the appearance of our network or Internet site. We will continue to bring our customers unique products at great values. We will continue to work with our vendors to provide the most compelling products that maximize gross margin dollars and our hosts will continue to build trusting relationships with our customers. In short, the customer-facing portion of our business will continue to look largely the same.

Our focus for '08 is improving the earning power of our Company and the identification of profitable revenue growth opportunities. We are in the middle of developing operating budgets for '08. All of our business leaders are being asked to come forward with ideas, action plans to grow profitable revenue, reduce costs and improve our efficiency.

Assisting me and the management team in this process is Alvarez & Marsal. Their specific task is to do a complete business assessment and provide recommendations that result in improved performance and profitability. They are scheduled to report to the Board in mid-December. I must say I am very encouraged by my weekly meetings with them. Partnering with management, they have developed some big ideas that we will validate and test. I believe the net improvement to our financial results will be significant.

We will also be focusing on improving our gross margins. As many of you know, currently, we trail the industry and this is unacceptable. Part of this difference is scale, but there are other differences that we are very able to go after. The biggest opportunity is our merchandise margin. As our business has grown, we have expanded the amount of direct sourcing that we do from Asia. This trend will continue.

We are also working with our vendors to identify opportunities to differentiate product, increase value and reduce costs, all across our merchandise categories. Another area we feel good about is improving the economics of our shipping and handling operation. We took the first step of this process by consolidating our distribution centers into our state-of-the-art facility in Bowling Green, Kentucky. This facility is ideally located along major transit lines and has allowed us to reduce our delivery times to our major East Coast customer base. We are beginning to realize the labor savings from this efficient operation. We look forward to additional freight and transportation savings as we optimize our carrier network.

How much do these opportunities add up to? We are currently working through that process. Some of the cost saving measures were taken this May. Others will be implemented over the next three to six months. When we are done, we expect to have a cost basis that is significantly lower than it is today.

In the longer run, another significant cost savings opportunity is to reduce our program distribution costs. Many of these contracts expire at the end of '08. There are many opportunities for us as we work with our partners on our new carriage deals -- digital cable, video on demand, interactive TV and reduced leased access rates. All of these represent opportunities for ValueVision to provide additional services to their customers and potentially reduce our significant carriage costs.

Now let me give you a quick update on our CEO search process. We have retained Spencer Stuart. Spencer Stuart has worked very closely with our Board over the last -- over the past year. They know us well. They know the type of CEO we are looking for and we are very excited to be working with them on this process. Having said that, the search will not be a four-week process. We expect the process will most likely take four to six months.

Now I want to turn to the future of ShopNBC. Your Board of Directors is very bullish about this company. We feel ValueVision has a unique combination of wonderful assets. We have a network that reaches nearly 70 million households, an Internet business over $200 million in revenue and continues it's rapid growth and we have over 300 vendors who are experts in product development and are essential partners in this business. Our hosts are some of the best salespeople in the business who build strong and trusting relationships with our loyal customers. It is really this unique set of assets that give ValueVision such a strong platform for growth into the future.

I hope my enthusiasm is coming across in this call for our unique assets and growth opportunities for this Company. But I also realize this Company has its challenges. We are approaching $800 million in annual sales and we do not deliver any net income to our shareholders. This has got to change. Our shareholders demand it, our employees and vendors demand it. All of our stakeholders understand that the long-term health and viability of our business is dependent upon growing this business into a dynamic and profitable enterprise.

Earlier, I discussed in detail our focus on cost. But this is not the long-term solution for adding shareholder value. We need to grow this business. How will we do this? There are several opportunities that we are well-positioned to go after. First, our Internet business will continue to be the engine of our sales growth. Our online business has been very successful in both supporting our TV business, while also extending our retail reach through aggressively marketing to e-commerce buyers, expanded assortment of products and engaging site features.

We find more and more of our TV customers are opting to order online. This conversion has several benefits to our Company and most of you are aware of them, but again it's cost order capture is very low when compared to a phone call process. Our customers are able to browse our entire selection and frequently find incremental items to purchase from their favorite designer, etc. and third, the Internet allows them to shop when it is convenient for them. We also expect our core TV business to continue to grow and be a source of new customers. Our distribution footprint continues its 5% growth rate. These are new homes representing new customers for us. These customers are increasingly interacting with us through the Internet channel, as well as ordering on the phone.

We will expand our online business beyond ShopNBC.com. First, our ShopNBC.TV video commerce site that launched in the first quarter of this year rolled out the next generation of Internet video functionality last week.

I have to ask, if you haven't checked this site out, please, please do. It is a wonderful site. It is easy to maneuver through. The clarity is incredible and I think you are going to -- if you haven't again, I think you will see why I am so enthused about this opportunity for us. And again, you will find that we lead the industry in the quality and search functionality of Internet video.

In addition to our video commerce initiative, we will be launching our first category-specific site in the fourth quarter. Watchorbit.com will leverage our deep watch assortment, along with a focused website to deliver an exclusive e-commerce experience for serious watch buyers.

So now let me summarize. Again, I apologize for my lengthy comments, but I felt it was important to give you a full story and lay out the opportunities that the Board and management continue to see.

To recap the key priorities for ValueVision going forward; one, deliver great execution in the fourth quarter; two, continue to grow our Internet business; three, strengthen the core of our TV home shopping business; four, partner with Alvarez & Marsal to develop a great operating plan for '08; five, work with our distribution partners to extend our carriage agreements on mutually beneficial terms and finally find a world-class CEO for ValueVision Media. My promise to you is I will do my best for our owners and will focus on improving the experience for our customers and helping our employees be successful.

I am going to open it up for questions in just a moment, but I thought I might as well answer a few that I know are at the top of the list. Number one, what is the status of your stock buyback program? The facts are in the third quarter, we repurchased 1.1 million shares at an average cost of $8.08 for a total spend of $9.2 million. We currently have $14.3 million remaining on our buyback authorization. The Company feels the stock is trading at a significant discount. We will reenter the market when our blackout period ends this Thursday, the 22nd of November.

I am sure the second question is will you expand the authorization and the answer there is the Board will reevaluate further future authorizations when needed. I will also say the Board also feels it is very important to maintain a strong balance sheet for our future CEO.

Is the Board seeking to sell the Company at this time? The answer is no. We are focused on improving the profitability of ValueVision and finding the best possible CEO to increase shareholder value.

The next question I hear a lot is do you believe ValueVision can be a standalone business or must it be merged? ValueVision can absolutely remain a standalone company. With our scale approaching $1 billion a year in sales and our strong balance sheet and all the opportunities I discussed earlier, we have the resources we need to be successful.

Another question I hear a lot is do you have any plans to monetize any of the assets currently on your books, including the Boston TV station, ValuePay receivables, the commercial real estate owned by the Company? While we currently do not have any plans to monetize these assets, we will explore all ideas with our Board that will contribute to growing shareholder value. With that, I will be happy to take your questions.

(OPERATOR INSTRUCTIONS). Barton Crockett.

Barton Crockett from JPMorgan and thank you for taking the question. I think I would like to ask -- first, I think a question that is really foremost in everyone's minds that I didn't hear you answer in the script and that is can you talk about why basically the Board asked Will Lansing to leave and what you believe was the reason for that and what do you believe a successor could do better than Will was doing in that position?

Barton, thank you for the question. I think as some of you know that I have talked to, Will is a very close personal friend, a business colleague for many years and so I am sure you can appreciate just how difficult this was for everyone involved.

This was a decision that was done in a very careful, thoughtful way and I think rather than getting into Board discussion and discussion with Will, I think it is just suffice to say that we were not pleased with the overall performance of the Company and we just felt now was the best time to make a change. And again, Barton, I can appreciate the interest, but I just don't think it really helps to go back in time. I am really focused on today and going forward.

In terms of the new CEO, we are obviously looking for somebody that has got a proven track record, somebody that has that experience in the retail business, direct-to-consumers. Someone that has Internet retailing, home shopping and I have to tell you, based on my conversations with Spencer Stuart on a weekly basis, I am pretty excited about at least the initial work that they have done and I am excited about our future prospects.

Okay, great. If I can follow up, the second part of my question was really what could someone else do better in terms of improvements and can you elaborate a bit? I mean where is ValueVision executing at a subpar level and what could someone else do? What the opportunities for improvement?

Yes, thank you, again. Well, the bottom line is we have got an $800 million business that has not delivered $1.00 of net income. We have had a lot of -- we have had some fairly nice growth, maybe even significant growth over the last three or four years, but there has to be a balance between that growth and also being profitable.

I think what we are looking for going forward is a CEO that has that balanced view if you will of continuing the growth path that we have been on and I think we have got such wonderful platforms that I referenced earlier, but at the same time, being sensitive to the cost structure of the business. And so it's I think finding more of that balance if you will.

All right. And then if I could switch gears here a little bit, your commentary that the fourth quarter has started off so strong is obviously very interesting. And I was wondering if you could elaborate on a little bit more on what has changed because the third-quarter trend was flat year to year. Yet in the fourth quarter, you say you are starting off -- I think the number was 8% up on the all-star event. Was it mainly an issue of comps? In other words, LCD, maybe that comp has eased as you have gone into the fourth quarter or was it just momentum on some of the new initiatives or was it just despite a bad retail environment, for some reason you guys just had a great all-star event?

Well, you know what, I wish I knew that question or knew the answer to that. I will give you a few thoughts and then I will let Frank chime in. We did have just an outstanding all-star event and a lot of it has to go to the credit of the organization, its planning, its preparation. I mean we had this thing really down pat.

I will also tell you we had a very, very enthused, energetic evening with our top vendors where we really laid out the challenge to them. There was a lot of energy and people left excited and we really talked about the all-star event not only being a five-day event, but really it is what we need to do in the fourth quarter.

So I think it is maybe a combination of a whole bunch of things. Certainly the planning preparation from everybody in the organization, all of our employees. I think our vendors and our guest vendors were really, really excited. They want to make sure we are successful. We obviously had the right products and the value that customers were looking for, so we just hit it on all cylinders. I would also tell you that that has continued as I mentioned. We are double-digit growth.

Now it is what it is today and I am excited to share that with you and we will just see if we can keep that going through the fourth quarter. We have got some very exciting events coming up, five more events. We got that big clearance sale in January, but I would also tell you the organization has really got -- the plans are very detailed and it is a matter of us executing and hoping that customer continues to buy.

Okay. And then one final question and then I'd like to get out of the way and let others ask questions. There has been a few analyses that have looked at what would ValueVision be worth if the Company were in a liquidation scenario, which I know is not what you put on the table out here. But I wanted to ask the question. Given that arguably in some type of wind-down or liquidation scenario you could extract value that is near or above where the stock is currently trading, why not look at that right now and what would have to happen to get you to consider that type of scenario?

Barton, again, thank you and first off, I want to give credit to the Soundpost. I am sure that is who you are referencing -- Soundpost Partners. Give credit for their homework and putting together a very detailed letter. I would say their position is very, very clear. I do and the Board and I, everybody agrees that this Company has some wonderful and valuable assets, but I would just say at this time, we don't agree that that is the way to realize shareholder value. We think there is more value here through unlocking the profitability of this Company.

And quite frankly, my focus right now as Interim here is I am working with this officer team, working with Alvarez. As I mentioned, I am pretty excited about having Alvarez & Marsal in here. They have come in with a fresh pair of eyes. They are looking at this and the officer team probably equally important, maybe more important, has really embraced this and we are really thinking outside of the box. I really -- I think the focus on that, the focus on executing the fourth quarter, putting the plan together for '08 and recruiting a CEO is really the direction of the Board that we have all agreed that is the best path for increasing shareholder value.

Okay, great. Thanks a lot.

Bob Evans.

Craig-Hallum Capital. Good morning, everyone. Can you comment a little bit more on the Alvarez & Marsal process in terms of maybe prioritize the potential biggest areas of savings or efficiencies? And then maybe elaborate -- I know you can't give a number necessarily at this point, but are we talking about -- from what you're seeing thus far, are we talking meaningful dollars, not a couple million, but are we talking double-digit type million opportunities or aggregate opportunities?

Thank you, Bob. We are not going through all this work for single-digit improvement and based on what I am seeing and -- by the way, I am participating in a lot of these reviews. I just spent yesterday all day going through our whole merchandising organization and our planning and programming and promotional organization. I just think there is a lot of opportunity. So there is a lot of hard work being done by the organization at large and again, we are not going to put this kind of effort into this for single-digit improvement.

The process is actually turning out to be -- it is really a nice process in that this is the time of year we normally go through our budgeting process for '08 and so we have integrated Alvarez & Marsal into that process, working with all of our budget owners, looking at specific -- their specific budgets, questioning why did we do it this way, why do we do it that way and at the same time, we are also looking at some of these big ideas I referenced and I'd just as soon not go into that at this call because I think it is just too early. And quite frankly, all of us need more time, more work, but we are on a fast track.

Alvarez -- this is a 60-day assignment, in and out and going to be reporting to the Board in the December timeframe. The buckets we are really looking at are the growing our revenue. There is top-line opportunity for us here. Obviously, a 35% gross margin is unacceptable and we think there is some real opportunity in that area and certainly in the merchandise area, working with our vendors, we think we have got some real opportunity there.

We just can't be sitting at -- you guys know this as well, where our competition is, where our competitors are and we are sitting at a 35% gross margin. And then we are continuing to really look at our operating expenses. I think there is again some more room in that area.

So to sum it all up, we are in the middle of this. It is very detailed. These are long, long days, but I have got to tell you, I leave -- like yesterday, I got out here late last night and I was full of enthusiasm because of the opportunity we see. And we are not doing it for single-digit improvement.

Do you believe you can do some of the things you want to do that are meaningful, but not hurt the top line because I think that is some of the fear that was maybe first recognized when they saw that Alvarez was going through a cost-cutting initiative?

Absolutely. If I didn't, that was one of the themes I wanted to convey in my opening remarks is that with our assets, we think we have got some incredibly valuable growth opportunities. So that is a rule that we have amongst ourselves and with Alvarez & Marsal is we don't want to do anything that impacts the revenue side of this business, impacts our customers, impacts our ability to continue to grow the business.

Okay, thank you. And then a question for Frank on the G&A and D&A that were both down sequentially and year over year, is this kind of the right baseline to think about I guess for both items going forward or how should we think about it?

Bob, I think on the G&A line, the third quarter may be a little bit of a low watermark just because this is the quarter that we did reverse some of the bonus accruals that we had on a year-to-date basis. But it is not going to go up significantly. It should still be between 5.5 and 6 on a go-forward basis.

Okay. And how about depreciation? I know that number has been coming down. Is there something that happened a while ago that is rolling off?

Right. The decrease that you have seen in the D&A line is driven by some significant IT projects that were initiated five years ago, our Oracle launch. A lot of those investments are starting to be fully depreciated and I think you will continue to see that line come down and probably be closer to $4 million as we go into '08, $4 million per quarter, between $4 million and $4.5 million.

All right. Thank you.

Jamie Zimmerman.

Jamie Zimmerman, Litespeed Partners. How are you? With 70% of the carriage turning over in '08 and NBC controlling that process and NBC's contract having to be renegotiated in 2011, are they helping you or hurting you and how does that -- how do you work with that interaction?

Thank you for that question and as I noted in my comments, you are exactly right. Our carriage is coming due in '08. We do look at that as an opportunity for us. In terms of the GE/NBC, I would say they have been really, really good partners in helping us plan a go-forward negotiating strategy. But remember or keep in mind that we will be negotiating contracts that are in the best interest of ValueVision. And to be honest, most of these contracts are due the end of '08, so we are really just now getting started. It is early in the process. In fact, the priority right now is really developing a go-forward negotiating strategy, but we will be focused on doing what is right for ValueVision. And again, I think GE/NBC have been wonderful partners in these discussions currently and in fact, there is a meeting scheduled next week in New York to further these discussions. So I see it as a positive.

On what basis? I mean what have they enabled you to do that you couldn't do otherwise and what position does it put you in that they get to renegotiate in 2011?

Well, they obviously have a lot of experience in this area. They are large shareholders of this Company. We have our own internal resources and this is something that we have also developed a set of skills and experiences. So I am not -- I am very confident in our own management, in our partnering that we will be able to negotiate these contracts that will be favorable for ValueVision.

Are there any contracts that are particularly unfavorable now?

Yes, we have -- I don't know if I can name the contract, but we do have some contracts that I would say to you are unfavorable, that we are going to want to renegotiate. The opportunity -- some of these come up in '08. A lot of them come up in '08, but we have a few that are out further. But I would just as soon not get into that level of detail if you will over the phone here.

Yes, yes. No problem. But you are talking about gross margin. When you look at your competitors, QVC and HSN, they are paying for carriage, about 5% to 8% of revenue and you guys are paying around 18%. Obviously, you know that because it is a set dollar amount versus a percentage. Is there any way on a smaller revenue base that you think that we will be able to negotiate something that is more contingent?

The answer is everything is open for discussion and we need to negotiate contracts that are favorable to ValueVision, that meet our needs and quite frankly, I don't want to have -- to be going forward with that kind of anchor around me. We need to find the win-win and again, I appreciate the question. You are right on the money. This is an area of opportunity, but I don't want to go further into negotiating or outlining our approach to this at this point.

Thank you.

Randy Heck.

It's Goodnow Investment Group. My questions are basically the same thing and that is the opportunity in front of you with additional distribution costs -- I mean I assume you're going to try to go to 100% revenue share rather than be paid $2.00 a sub today. So for example -- I mean if you can cut it in half, you obviously are making more than $1.00 a share after tax. With the development of the ShopNBC.TV website, does that -- could that come into play in negotiating with the MSOs, meaning you get distribution for free rather than paying $2.00 a sub?

Very, very, very good. That's a very astute comment. The answer is we have a lot to offer. And so I am -- again, your question and the previous question, you have really focused in on an area that we really believe we have some opportunity going forward and we are going to be -- we are going to do what is right for ValueVision in positioning us for the future.

The good news is a lot of these contracts are up at the end of '08. I would also say to you, I am very, very confident that we are going to be able to negotiate contracts that are win-win for both sides and your particular comment around the .TV, I mean that is -- there is an opportunity there.

So again, I think the message here is we are all in agreement about the opportunity. It really now gets back to our own ability to execute. We are starting early in developing our own go-forward negotiation strategy. We are pulling in the experts if you will. We are going to reach out to people that have expertise in this area, along with our own people and I think we will be, at the end of the day, pleased with the results. But I would also tell you that this is out a little bit. When I say they are up for renewal, a lot of them are at the end of '08. So we will be using '08 as a negotiating time period.

Just as a follow-on. What is your estimation of what QVC and Home Shopping pay as a percentage of their sales per FTE? Or per -- yes, as a percentage of their sales per FTE?

I am going to actually pass on this one and I would just -- my only thought here is we have got to be very careful and for me in particular recognize I became Interim CEO October 25, so I think this would be one I am just going to pass over to Frank.

All right. Thank you. Good luck.

Thanks.

Jamie Lester.

Hey, guys. Soundpost Partners. Yes, I hope I didn't imply by the letter in the filing that I thought you guys should liquidate the Company and that is certainly not what I think should be done for to realize the value here. But I guess just one quick comment, which I think you guys have been great. First of all, the quarter was great and second of all, you guys have been very responsive and I think really taking your fiduciary responsibilities seriously.

I guess the question along those lines would be given where the stock is, if you agree with the analysis that it is trading below its non-core assets and you agree that the stock is cheap, at what point does it become almost a -- not in your fiduciary duty to do an aggressive stock buyback? I mean it seems like the only thing -- the only possible action that you could take would be an aggressive share buyback as long as the share stayed at this level and that can be -- the capital for that can come from any of the ways that I have suggested or another way. But I guess I can't conceive of a situation where that wouldn't be the right thing to do for shareholders.

Jamie, thank you and thank you for the nice comments in your introduction there. Well, as I indicated, as soon as we get out of this blackout period, we will be back in the market. I also indicated that the stock is at a significant discount. We are going to be back in the market. We are going to be back in a very disciplined manner. I don't want to really disclose the methodology of how we are going to be buying and when we are buying, but we will be back and, as I said, it is at a significant discount.

Once we have gone through the authorization or nearing the spending of the authorization, we will have a Board -- we will reconvene the Board and we will talk about our next steps. The balancing act that we have here is clearly this significant discounted stock price and at the same time, we have these wonderful assets, we have a nice balance sheet and we are focused on the fourth quarter, executing this plan. We are focused on getting the input from A&M and we are focused on a new CEO.

I think we have got just a lot of good stuff going on here and we would also like to be able to give our CEO a company that can achieve sustained earning power going forward and a nice balance sheet. So that is kind of the balance that we are talking through currently.

I understand that, but I think given $103 million of cash and additional what I would estimate are $100 million to $150 million of non-core assets, I guess I don't understand why those things can't be done in tandem, why you are not going to look back at this point with the stock at $5.50 a share and say that was really dumb of us, we should have bought back a lot more stock than we did when we had the opportunity. So I guess what is actually so difficult about being a more aggressive repurchaser of your stock given that, even if you took the cash balance down to $10 million or $20 million, a new CEO could easily monetize any of those assets and bring it back up over 100 if he or she saw fit.

I don't know if we are necessarily in a disagreement or debate here. I am just simply saying our stock is at a significant discount, one. Two, we will be back in the market. We have $14 point-some million remaining in that authorization and we will then reconvene on our next steps.

Have you considered an accelerated stock repurchase program?

Pardon?

Would you consider an accelerated share repurchase program?

You know what I think? Everything is on the table, Jamie. I mean we are looking at -- as I said, we have got a lot of things right now with executing this fourth quarter, A&M, a CEO search, a wonderful set of assets in the balance sheet and we will be looking at all of our options and what we think will deliver significant shareholder value.

Okay. And just to confirm, even though this isn't your focus and certainly you do have a lot on your plate, if you were approached with an offer, you would consider that seriously and is there any level at which an offer would have to be above in order to kind of meet that threshold to be an interesting or legitimate offer in your opinion?

Jamie, I can't go there with that question, but I will just say to you -- as I said in my comments, we are not interested in selling the Company at this price. We have got a lot of actions in place, which I have discussed with you and the others and we will just wait and see. I can't really comment on -- I can't really comment further on that subject.

All right. Well great job, guys, and thanks for the call. And good luck.

Thank you.

Bob Evans.

Craig-Hallum Capital. Just wanted to follow up on the previous caller. One clarification is on the -- just back to the distribution side of things. Can you elaborate a little as to why you think the different cable MSOs and those that you are going to be renegotiating with, why ShopNBC is something that they want to have on because I think some may have fear that this could create an issue for the Company in terms of the distribution being renegotiated versus an opportunity.

Okay, Bob, thank you. In terms of risk to the carriage, I mean our priority is to successfully renegotiate with our distribution partners, first point. Second point, we are a different company today than when we negotiated those contracts several, several years ago. I mean, today, we have $800 million in revenue. We have got a lot of wonderful assets with our .com and our .TV and you can imagine some of that crossover there. We are a revenue base for these companies, so I really am pretty optimistic that we can find that win-win formula that meets their needs and meets our needs.

I am certainly not interested in losing the carriage if you will. If that is a risk, I would like to somehow eliminate that as being a risk. That is not our go-forward strategy. Our go-forward strategy is to successfully negotiate and I just think we have a lot of weapons. Again, I don't want to get into our negotiating strategy in this phone call.

No, that's fine. And my understanding is that the digital cable homes are significantly at a much different pricing, discounted pricing than say the analog homes and that should have some benefit to you as it relates to decreased distribution costs going forward, is that correct?

Bob, this is Frank and yes, the digital cable rate tends to be at least 50% less than what we pay for analog and we don't see a 50% reduction in the productivity. So digital cable for us works very well and as it becomes more highly penetrated, that becomes a better and better option for us as we go into the renegotiation.

All right. Thank you.

Jamie Zimmerman.

Litespeed. And again, it is a second question like Bob's. We have experienced NBC negotiating for non-economic priorities and I asked this question, but I would like to ask it one more time. What makes you sure that NBC is negotiating for the benefit of ValueVision and not for the benefit of themselves? For their other interests aside from their stock ownership in this Company?

I can only -- again, thank you for the question. I can only tell you the people that I know, the people that I work with, members of our Board, our fiduciary responsibilities are to our shareholders, to the shareholders of ValueVision and that is the priority of our Board. And I am very, very confident that we are all in-line with that objective. So quite frankly, I would -- would say this to you. They have actually reached out as well to us in wanting to help us find ways to go forward and negotiate in these contracts.

So I don't -- again, today is a different day compared to when these contracts were negotiated some several years ago. The Company is different today. We are a significantly larger business today. Back in the days when a lot of those contracts were negotiated, as you know, we were a much different looking company. So am I being overly optimistic? I am trying to be just very objective and say this is a bucket, an area of opportunity for us. It has got our focus. I can tell you that. It has got our focus. It is on our radar. We have got people that are working on this. We will be in New York again next week and these contracts don't come up until the end of '08.

So they are not going to be easy by the way. These are not going to be easy negotiations, but I think we have a lot to offer and we are not going to go into these being shy at all. We are not going to go into these not being proud of what we have and I am confident we will negotiate good contracts for both parties. I can't say anything more.

At this time, I show no further questions.

Okay, thank you, everybody and let me just take this opportunity to wish you and your families a very, very happy Thanksgiving. I hope you get an opportunity to spend time with your loved ones and enjoy the holiday and think about us and think about us executing those big five events and the clearance in January and we look forward to talking to you early part of the year. Thanks.

Thank you. This does conclude today's conference. You may disconnect at this time. Thank you.