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RCOT
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Recoton Corporation Announces Third Quarter Results
LAKE MARY, Fla.--(BUSINESS WIRE)--Nov. 11, 1999--Recoton Corporation (Nasdaq National Market: RCOT - news), a leading global consumer electronic accessory, loudspeaker and car audio company, today announced financial results for the third quarter ended September 30, 1999.
As previously announced, Recoton has commenced the implementation of a comprehensive business plan designed to improve operating efficiencies, increase future profitability, improve cash flow and increase return on assets. The actions initiated under this plan, which include worldwide staff reductions, the consolidation of certain businesses, the reduction and/or discontinuation of certain products and the sale of certain assets, have resulted in charges of approximately $27,548,000, or $2.35 per share, in the 1999 third quarter. These charges include:
Approximate
Charges Per Share Related to
------- --------- ----------
$ 3,400,000 $.29 Severance payments and lease termination
costs.
$ 8,300,000 $.71 Inventory write downs applicable to
products which are being reduced or
eliminated.
$ 5,800,000 $.50 The value of assets to be sold and the
valuation of related receivables and
other assets, and the costs of
developing the plan.
$10,000,000 $.85 Debt restructuring including
----------- ---- approximately $8,800,000, or $.75 per
share, for costs of restructuring Senior
Notes considered as a debt
extinguishment which is recorded as an
extraordinary item and $1,200,000, or
$.10 per share, for costs primarily
related to restructuring bank debt and
costs of seeking alternative financing,
which are included in selling general
and administrative expenses.
$27,500,000 $2.35
=========== =====
Management reiterated its commitment to the continued implementation of the business plan and believes that this process should allow the Company to regain earnings momentum beginning in the current fourth quarter. In addition, as previously announced, under a debt restructuring concluded in September the Company obtained financing through June 2001 to meet its working capital requirements and support its initiatives. The Company is in negotiations with other financial institutions that, if consummated, would result in longer term financing, increased liquidity and reduced interest expense.
Net sales for the 1999 third quarter were $174,172,000 as compared to $177,092,000 in the third quarter of 1998. Net sales for the nine months ended September 30, 1999 rose to $459,876,000 from $455,913,000 for the comparable period in the prior year. Although dollar sales increased in the Company's accessories and audio segments, they were offset by dollar sales decreases in the video and computer game segment. While unit sales increased in the video and computer game segment, the decrease in dollar sales in this segment was primarily attributable to the current transition phase of the video game business to new advanced game platforms and the increased competitive climate.
The loss before income taxes and the extraordinary item for the 1999 third quarter was $16,760,000. Included in this loss were charges aggregating $18,783,000 resulting from the implementation of the strategic business plan and certain charges in connection with the debt restructuring. Before the charges and extraordinary item, income before income taxes was $2,023,000 compared to income before income taxes of $4,619,000 for the same period last year. For the nine months ended September 1999, the loss before income taxes and extraordinary item was $26,015,000, due primarily to the charges and extraordinary item. Before these charges and the extraordinary item, the pre-tax loss was $7,232,000 compared to income before income taxes of $12,591,000 for the comparable period in 1998.
The net loss for the 1999 third quarter was $26,673,000, or $2.27 per share, versus net income of $3,738,000, or $.32 per diluted share, for the 1998 third quarter. The net loss for the 1999 nine month period was $35,928,000, or $3.07 per share, versus net income of $10,514,000, or $.86 per diluted share, for the same period one year ago.
Robert L. Borchardt, President and CEO of Recoton, stated, ''We are implementing the previously announced business plan, the full benefits of which are expected to be realized in the year 2000 and beyond. We remain optimistic that this plan will continue to contribute to improving the dynamics of our business.''
He continued, ''We are in the important holiday selling season, traditionally Recoton's strongest sales period. We have introduced new innovative products and accessories and continue our strong presence at America's major retailers. Having now restructured our finances, we can focus on our future with products, distribution and service to benefit from the digital evolution. Recoton's InterAct® subsidiary continues to build on its position as the industry's leading third-party supplier of video and PC game accessories. Late in the 1999 third quarter, InterAct began shipping a line of compatible accessories and products to coincide with the September 1999 launch of the Sega Dreamcast® system. InterAct plans to ship a similar line of compatible joysticks, controllers and accessories to coordinate with the new, advanced video game systems to be launched by Sony®, Nintendo® and Microsoft®.
''Through our agreement with CD Radio, Inc. (NASDAQ National Market: CDRD - news), we are developing plug-and-play and wireless systems to receive the new 100 station digital satellite-to-vehicle subscription radio service. While the acceptance of digital television has been slower than expected, sales momentum is building. With this growing momentum, we believe that Recoton will benefit from increased sales of our branded lines of home theater speakers, antennas, connectors and accessories. With the development of in-vehicle entertainment systems, which include televisions, digital versatile disc (DVD) systems, VCRs and video games, Recoton, using its patented 900 MHz technology, is in the forefront of developing wireless stereo headphones, speakers and other accessories for retail outlets and car manufacturers on an OEM basis.''
Mr. Borchardt concluded, ''As new digital products are introduced, the price of more established digital products is decreasing, making them more accessible to the consumer. This confluence of events broadens consumer appeal for digital devices and heightens the need for and attractiveness of Recoton's family of complementary product offerings. Supported by an impressive history of sales and industry growth, product breadth and innovation and marketing and distribution strengths, we expect that Recoton will thrive as an active participant in the convergence and digital growth of the consumer electronics industry.''
Recoton Corporation is a global leader in the development, manufacturing and marketing of consumer electronic accessories, loudspeakers and car audio products. Recoton's more than 4,000 products feature highly functional accessories for audio, video, car audio, camcorder, multi-media/computer, home office, cellular and standard telephone, music and video game products and 900MHz wireless technology headphones and speakers. They are sold under the AAMP®, Ambico®, Ampersand®, AR®/Acoustic Research®, Discwasher®, InterAct®, Parsec®, Peripheral®, Performance(TM), Recoton®, Rembrandt®, Ross(TM), SoleControl®, SoundQuest® and Stinger® brand names. The Company also produces and markets audio components, high fidelity loudspeakers, home theater speakers, and car audio speakers and components which are sold under the Advent®, AR®/Acoustic Research®, HECO(TM), Jensen® , MacAudio®, Magnat®, NHT® (Now Hear This), and Phase Linear® and Recoton® brand names. Sega Dreamcast is a registered mark of Sega Corporation; Sony is a registered mark of Sony Corporation; Nintendo is a registered mark of Nintendo Corp. of America; and Microsoft is a registered mark of Microsoft Corporation.
This press release may contain forward-looking information within the meaning of the Private Securities Litigation Reform Act of l995. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. Such statements speak only as of the date made. Please refer to the Company's Form 10-K and other SEC filings.
RECOTON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Income Per Share Data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
Net sales $ 174,172 $ 177,092 $ 459,876 $ 455,913
Cost of goods sold 114,151(a) 108,752 294,629(a) 278,284
---------- ---------- ---------- ----------
Gross profit 60,021 68,340 165,247 177,629
---------- ---------- ---------- ----------
Selling, general and
administrative expenses 67,415(b) 59,257 171,516(b) 153,386
Restructuring charge 3,444 3,444
Interest expense 6,236 4,581 17,002 11,974
Investment income (314) (117) (700) (322)
---------- ---------- ---------- ----------
Total 76,781 63,721 191,262 165,038
---------- ---------- ---------- ----------
Income (loss) before
income taxes and
extraordinary item (16,760) 4,619 (26,015) 12,591
Income tax provision (1,148) (881) (1,148) (2,077)
---------- ---------- ---------- ----------
Income (loss) before
extraordinary item (17,908) 3,738 (27,163) 10,514
Extraordinary loss on
senior debt restructuring (8,765)(c) -- (8,765)(c) --
---------- ---------- ---------- ----------
Net income (loss) $ (26,673) $ 3,738 $ (35,928) $ 10,514
========== ========== ========== ==========
Basic earnings per share
Income (loss) before
extraordinary item $ (1.52) $ .32 $ (2.32) $ .90
Extraordinary item $ (.75) $ -- $ (.75) $ --
---------- ---------- ---------- ----------
Net income (loss) $ (2.27) $ .32 $ (3.07) $ .90
========== ========== ========== ==========
Diluted earnings per share:
Income (loss) before
extraordinary item $ (1.52) $ .30 $ (2.32) $ .86
Extraordinary item $ (.75) $ -- $ (.75) $ --
---------- ---------- ---------- ----------
Net income (loss) $ (2.27) $ .30 $ (3.07) $ .86
========== ========== ========== ==========
Number of shares used
in computing per share
amounts:
Basic 11,732 11,697 11,714 11,642
========== ========== ========== ==========
Diluted 11,732(d) 12,420(d) 11,714(d) 12,232(d)
========== ========== ========== ==========
(a) Includes $8,328,000, or $.71 per share, of inventory write downs
applicable to products which are being reduced or eliminated.
(b) Includes $5,811,000, or $.50 per share, applicable to the value
of assets to be sold and the valuation of related receivables and
other assets, and the costs of developing the business plan and
$1,200,000, or $.10 per share, associated with the costs of
restructuring bank debt and seeking alternative financing.
(c) Includes fees and other costs in connection with restructuring of
senior notes, which is treated as a debt extinguishment for
accounting purposes.
(d) The effect of the assumed exercise of outstanding stock options
and warrants for the three and nine months ended September 30,
1999 is antidilutive and therefore is not reflected in the
diluted loss per share amounts.
RECOTON CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Amounts In Thousands)
September 30, December 31,
1999 1998
------------- ------------
(Unaudited)
ASSETS
------
Current Assets:
Cash and cash equivalents $ 14,242 $ 21,385
Accounts receivable (less allowance
for doubtful accounts) 153,965 183,230
Inventories 184,922 161,294
Prepaid, refundable and deferred income taxes 13,388 12,931
Prepaid expenses and other current assets 11,939 12,629
---------- ----------
Total current assets 378,456 391,469
Property and equipment (at cost, less
accumulated depreciation and amortization) 38,707 40,693
Goodwill and other assets 60,411 54,508
---------- ----------
TOTAL $ 477,574 $ 486,670
========== ==========
LIABILITIES
-----------
Current Liabilities:
Bank loans and drafts payable $ 95,526
Current portion of long-term debt $ 384 9,359
Accounts payable 82,422 63,848
Accrued expenses 27,314 40,418
Income taxes payable 2,011 4,023
---------- ----------
Total current liabilities 112,131 213,174
Long-term debt (less current portion above) 233,609 114,186
Other noncurrent liabilities 17,341 11,315
---------- ----------
TOTAL LIABILITIES $ 363,081 $ 338,675
---------- ----------
SHAREHOLDERS EQUITY 114,493 147,995
------------------- ----------
TOTAL $ 477,574 $ 486,670
========== ==========
--------------------------------------------------------------------------------
Contact:
Recoton, New York
Robert L. Borchardt, President, CEO
Peter M. Ildau, Vice President, Corporate Communications
Tel: 212/644-0220, 800/742-3438
Fax: 212/644-8205
E-Mail: ildau@recoton.com
or
The Equity Group, Inc., New York |
