WAKE UP CALL
Emerson Radio Announces Fourth Quarter & Fiscal 2002 Year-End Results; Net Income Rises 53% - Earnings per Share Improves by 58% Continued Strength in Consumer Electronics Segment Sporting Goods Segment Improves
PARSIPPANY, N.J., Jul 15, 2002 (BUSINESS WIRE) -- Emerson Radio Corp.
(AMEX: MSN) today reported consolidated results for the fiscal fourth quarter and
year ended March 31, 2002 (fiscal 2002).
Consolidated Year-End Results
-- Continued Cash Flow Improvement to 3.5% of Net Revenues,
-- License Income Growth,
-- Gross Margins expand to 20.3%,
-- General and Administrative Expenses Reduced 7.6%,
-- Net Income Increases 53% to $19.4 Million.
For the year ended March 31, 2002, net revenues totaled $318.5 million, a
decrease of 15.6% or $59 million from the prior year, associated primarily with
the consumer electronics segment and to a lesser extent the sporting goods
segment. Gross profit margins climbed to 20.3% from 18.9% in the prior fiscal
year, due to higher margins in the consumer electronics segment. Similarly, SG&A
expenses declined by 7.6% or $4.0 million from fiscal 2001 as a result of
reductions in both operating segments.
Consolidated net income for the year reached $19.4 million or $.52 per diluted
share. In fiscal 2001, net income amounted to $12.7 million, or $.33 per diluted
share. The substantial improvement in profitability and in earnings per share
performance is attributable to continued solid performance in the consumer
electronics segment which included the benefit of a tax net operating loss carry
forward as well as narrowed losses at SSG combined with the full year effect of
share repurchases that occurred in fiscal 2001.
Consumer Electronics -- Net Income improves by 53.1% to 10.1% of Net Revenues
Net Income improved to $21.6 million in fiscal 2002 from $14.1 million reported
in the prior year due to improved gross margins, a reduction in SG&A expenses, a
one time litigation settlement and the first time recording of a portion of the
Company's tax benefit associated with its net operating loss carry forwards.
Net revenues of the consumer electronics segment for fiscal 2002 declined to
$214.9 million from $264.3 million reported in the prior year primarily due to a
slowdown in the economy and decreased unit sales of audio products and microwave
ovens partially offset by an increase in licensing revenues. The Company reports
royalty and commission revenues earned from its licensing arrangements, covering
various product categories and territories, in lieu of reporting the full dollar
value of such sales and associated costs.
Emerson Radio's multi-tiered formula, designed to counter competitive pressures,
continues to achieve positive results at our gross margin levels. As a
percentage of sales, fiscal 2002 gross margin rose to 16.3% from 14.8% one year
earlier. Among the features of this business model are direct import programs;
multiple outward license agreements; sourcing and inspection services for
licensees and 3rd parties; introductions of higher margin products and use of
inward license agreements for various themed logos directed at multiple
distribution channels. Operating income was 6.3% of revenues as compared to 6.6%
reported in fiscal 2001 primarily due to a decline in revenues.
In the fourth quarter, which is seasonally the weakest, net revenues of $28.8
million increased from $23.7 million reported for the same period in the prior
fiscal year.
Net cash flow totaled $11.2 million (3.5% of net revenues) in fiscal 2002
reflecting Emerson's stringent control over its cash and affording it the
opportunity to repurchase a portion of its outstanding shares and reduce its
overall debt levels.
Management Comments
Geoffrey P. Jurick, Emerson's Chairman & Chief Executive Officer, stated, "The
economic slowdown, beginning in the early part of calendar 2001, adversely
affected our top line performance. Inspite of the difficulties presented by
softened product demand, we are pleased with the performance of the consumer
electronics business in several key areas. Gross margins continued expanding
through the introduction of new models and the use of several inward license
agreements. Additionally, outward licensing revenues continue to grow
significantly primarily attributable to the success of new license agreements
and the expansion of existing arrangements as these ramp up and impact Emerson
favorably. Global sales of Emerson(R) branded product sold directly by the
Company and by various licensees through licensing agreements are approaching
$600 million annually."
"Continued strong cash flow provided Emerson with the means, as previously
disclosed, to repurchase an additional 4.4 million common shares thus providing
shareholders with further accretive earnings per share potential. Since a
majority of these shares were repurchased subsequent to the close of Emerson's
fiscal 2002 results, the earnings per share benefit will start to be realized in
the quarter ending June 30, 2002. Furthermore, as announced on July 1, 2002,
Emerson refinanced all of its outstanding debt on more favorable terms while at
the same time reducing such debt by $5.8 million. This provides Emerson with a
substantial reduction in its leverage and cost of borrowed funds that will
favorably impact the Company during the upcoming fiscal year and thereafter.
Retiring Emerson's debentures will remove the dilutive effect of 5.2 million
shares that potentially could have been converted into common shares upon
election by the debenture holders."
"Emerson's brand presence is being further established through entry into new
distribution channels both here and abroad thus providing optimism as we look
towards fiscal 2003. This is further confirmed by the growth in net revenues
recorded in Emerson's fourth quarter compared to the same period in the prior
year. We view the current year revenue decline as temporary and fully expect a
solid increase in the upcoming fiscal year. Additionally, we continue to seek
suitable acquisitions that will compliment our growth strategy."
Mr. Jurick continued, "SSG's progress during the fiscal year has been
substantial. Through a series of strategic actions implemented in the current
and prior year, SSG's financial performance improved as its losses narrowed
primarily through reductions in overhead expenses and debt levels. We are
confident that the additional benefit of initiatives not yet fully operational
will further enhance SSG's upcoming year. SSG sales were down 8.4% to $104
million in fiscal 2002. During the same period gross margins, as a percentage of
sales, remained relatively unchanged and SG&A expenses declined by $3.6 million.
As a result, SSG's pretax losses were reduced to $3.6 million for fiscal 2002 as
compared to $5.6 million in the prior fiscal year. The continued strength of the
core consumer electronics business more than offsets SSG's performance and the
consolidation of our interest had a modest impact on consolidated results."
Mr. Jurick concluded, "Revenue enhancement initiatives being developed through
SSG's affiliate programs and the benefit of outsourcing a majority of products
it once manufactured are anticipated to provide further improvement in fiscal
2003."
Kenneth A. Corby, Executive Vice President and Chief Financial Officer stated,
"Emerson recorded a partial benefit of its $110 million in tax net operating
loss carry forwards as required by accounting principles. Absent the benefit of
the tax adjustment, net income would have been $11.5 million or $.33 per diluted
share compared to $12.7 million or $.33 per diluted share in fiscal 2001.
Looking forward, Emerson will be expected to record a non cash tax provision
each period to continue realizing the benefit of this substantial asset."
"The year over year revenue increase reported in the fourth quarter partially
relates to a recovering economy and restocking initiatives by customers. In
several situations, low inventory levels maintained by retailers prevented
consumers from purchasing product. We confidently expect strong top line growth
in the upcoming year attributable to various factors most notably the recovering
economy, favorable introduction of new models, expanding global licensing and
broadening of distribution channels. Furthermore, the expected increase in
revenues, solid gross margins and lower debt service costs combined with the
reduction in outstanding shares, both dilutive and outright, should benefit
shareholders on a per share basis. Looking towards the June 2002 quarter, we
expect solid year over year revenue growth."
Investor Conference Call
Geoffrey P. Jurick, Chairman & Chief Executive Officer and Kenneth A. Corby,
Executive Vice President & Chief Financial Officer, will host a conference call
on Tuesday, July 16, 2002, at 10:00 a.m. ET, to discuss financial results and
corporate developments. The conference call will be broadcast live over the
Internet via the Investor Relations section of the Company's web site at
www.emersonradio.com. To listen to the live call, go to the web site at least 15
minutes early to download and install any necessary audio software. If you are
unable to listen live, the conference call will be archived and can be accessed
for approximately 30 days.
This press release other than the historical information, consists of
"forward-looking statements" (as defined in the Private Securities Litigation
Reform Act of 1995) which are identified by the use of words such as "believes,"
"expects," "projects," and similar expressions. While these statements reflect
the Company's current beliefs and are based on assumptions that the Company
believes are reasonable, they are subject to uncertainties and risks that could
cause actual results to differ materially from anticipated results. These risks
and uncertainties are detailed from time to time in the Company's filings with
the Securities and Exchange Commission, including the Company's reports on Form
10-K, 10-Q and 8-K.
EMERSON RADIO CORP., founded in 1948, is headquartered in Parsippany, N.J. The
Company designs, markets and licenses, throughout the world, full lines of
televisions, and other video products, microwave ovens, clocks, radios, audio
and home theater products. Its 53.2% owned subsidiary, Sport Supply Group, Inc.
(OTC:SSPY) is a direct marketer of sports-related equipment and leisure products
to the institutional market, including schools, colleges, universities,
government agencies, military facilities, athletic clubs, athletic teams and
dealers, youth sports leagues and recreational organizations. Emerson's web site
is www.emersonradio.com.
EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Year Ended
----------
March 31, March 31,
2002 2001
--------- ---------
Net revenues $ 318,451 $ 377,410
Costs and expenses:
Cost of sales 253,883 306,101
Other operating costs and expenses 4,797 4,318
Selling, general and administrative expenses 49,457 53,498
--------- ---------
308,137 363,917
--------- ---------
Operating income 10,314 13,493
Litigation settlement, net 2,933 --
Interest expense, net (3,213) (4,068)
Minority interest in net loss of
consolidated subsidiary 1,712 2,284
--------- ---------
Income before income taxes 11,746 11,709
Benefit of income taxes (7,661) (944)
--------- ---------
Net income $ 19,407 $ 12,653
========= =========
Net income per common share
Basic $ 0.62 $ 0.36
========= =========
Diluted $ 0.52 $ 0.33
========= =========
Weighted average shares outstanding
Basic 31,298 35,066
========= =========
Diluted 40,485 38,569
========= =========
Three Months Ended
------------------
March 31, March 31,
2002 2001
--------- ---------
Net revenues $ 59,144 $ 56,075
Costs and expenses:
Cost of sales 45,578 43,471
Other operating costs and expenses 1,163 1,297
Selling, general and administrative expenses 11,420 9,829
--------- ---------
58,161 54,597
--------- ---------
Operating income 983 1,478
Litigation settlement, net -- --
Interest expense, net (506) (942)
Minority interest in net loss of
consolidated subsidiary (358) (53)
--------- ---------
Income before income taxes 119 483
Benefit of income taxes (8,225) (299)
--------- ---------
Net income $ 8,344 $ 782
========= =========
Net income per common share
Basic $ 0.27 $ 0.02
========= =========
Diluted $ 0.22 $ 0.02
========= =========
Weighted average shares outstanding
Basic 31,233 31,284
========= =========
Diluted 40,357 34,852
========= =========
CONTACT: Emerson Radio Corp.
Kenneth A. Corby, 972/884-2302
or
Investor Relations:
Laura Boorn, 972/884-2302
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KEYWORD: NEW JERSEY
INDUSTRY KEYWORD: BANKING
COMPUTERS/ELECTRONICS
TELEVISION/RADIO
EARNINGS
SOURCE:
Emerson
Radio |
