SOURCE: Emerson Radio Corp

November 14, 2005 09:00 ET

Emerson Radio Announces Fiscal 2006 Second Quarter Financial Results

PARSIPPANY, NJ -- (MARKET WIRE) -- November 14, 2005 -- Emerson Radio Corp. (AMEX: MSN)

--  Consolidated Revenues Increase 29.6% and 7.9% for Three and Six Month
    Periods
    
--  Earnings per Share for September Quarter From Continuing and
    Discontinued  Operations  Were  $.52 Per Share
    
--  (Continued Operations $.05 and Discontinued Operations $.47 Per Share)
    
Emerson Radio Corp. today reported consolidated financial results for the quarter ended September 30, 2005 (second quarter of fiscal 2006).

Earnings per share for the September 2005 quarter from continuing and discontinued operations totaled $.52 per share. A gain on the sale of Emerson's interest in Sport Supply Group, Inc ("SSG") of $12.6 million, which closed on July 1, 2005 and was recorded in the September quarter, resulted in $.47 per share (basic and diluted) being recorded from discontinued operations. In addition $.05 per share (basic and diluted) was recorded from continuing operations in the September quarter.

Net Revenues for the second quarter of fiscal 2006 rebounded 29.6% to $77.6 million from $59.9 million for the second quarter of fiscal 2005 and to $116.2 million for the six month period ended September 30, 2005 from $107.7 million, a 7.9% increase from the prior six month period. The increase in net revenues was primarily the result of an increase in themed products which generated sales of $24.6 million for the September quarter, partially offset by a decrease in the audio products and a decrease in licensing income.

Gross margins decreased to 12.2% from 14.8% and to 13.1% from 16.1% for the three and six months ended September 2005 as compared to the same periods in the prior year. Decreased margins in both periods were the result of sales of lower margin products partially due to a special holiday promotion and decreased licensing revenues of $689,000. Licensing revenues for the September quarter of fiscal 2006 were $2.0 million as compared to $2.7 million for the September fiscal 2005 results, and on a year to date basis licensing revenues were $4.5 million for fiscal 2006 as compared to the prior year's revenues of $6.7 million.

During this September quarter stockholders' equity improved by $13,880,000, or $.51 per diluted share, primarily as a result of the gain on the sale of SSG.

Geoffrey P. Jurick, Chairman & Chief Executive Officer of Emerson Radio, stated, "Sales in the September quarter rebounded nicely from the June quarter. Our revenue increases were the result of strong product placement of our Nickelodeon brand of products. While we experienced weakness in our audio category of Emerson® branded products, we expect this trend to reverse with the introduction of our iPod line of products for which we have strong expectations in the upcoming quarters. Our microwave category continues to be well received by our retailers and is experiencing strong sales for the first six months of fiscal 2006. We expect this trend to continue through the remainder of our fiscal year. While the number of products that are placed under our video license remained the same as that placed in prior years, our licensing income from our video license was less than that of the prior year's quarter due to the transition from analog to digital products which has affected the video license sales."

Mr. Jurick concluded, "We continue to be optimistic about this holiday season, and are expecting revenues for the December quarter to approximate that of the prior year of $80 million."

Geoffrey Jurick Transaction

On August 22, 2005, we announced that our Chairman and Chief Executive Officer, Geoffrey P. Jurick, entered into an agreement to sell 10 million of his shares of Emerson stock, at $5.20 per share, to a subsidiary of The Grande Holdings Limited, a Hong Kong-based group of companies engaged in a number of businesses including the manufacture, sale and distribution of audio, video and other consumer electronics and digital products. The purchase price will be paid partly in cash and partly by a convertible debenture of Grande. The transaction involves approximately 37% of Emerson's outstanding shares and is subject to various conditions to closing. We have been informed that the parties continue to work towards concluding this transaction, while no definitive date has been set for the closing.

This release also contains "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, such as the Company's outlook for third quarter revenues. Forward-looking statements reflect management's current knowledge, assumptions, judgment and expectations regarding future performance or events. Although management believes that the expectations reflected in such statements are reasonable, they give no assurance that such expectations will prove to be correct and you should be aware that actual results could differ materially from those contained in the forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, including the risk factors detailed in the Company's reports as filed with the Securities and Exchange Commission. The Company assumes no obligation to update the information contained in this news release.

iPod is a trademark of Apple Computer, Inc. registered in the U.S. and other countries.


                 EMERSON RADIO CORP. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF OPERATIONS
                              Unaudited
                (In thousands, except per share data)

                                Three Months Ended     Six Months Ended
                              September   September   September   September
                                   30,       30,          30,        30,
                                  2005      2004        2005        2004

Net revenues                   $ 77,576   $ 59,880    $116,223    $107,706
                               --------   --------    --------    --------

Costs and expenses:
  Cost of sales                  68,108     50,994     101,022      90,403
  Other operating costs
   and expenses                   1,641      1,377       2,840       2,930
  Selling, general and
   administrative expenses        5,383      4,425       9,222       9,005
  Acquisition costs recovered         -       (104)          -        (175)
  Stock based compensation           88        100         170         100
                               --------   --------    --------    --------
                                 75,220     56,792     113,254     102,263
                               --------   --------    --------    --------

Operating  income                 2,356      3,088       2,969       5,443
Interest expense, net              (199)      (329)       (606)       (564)
                               --------   --------    --------    --------

Income before income taxes
 and discontinued operations      2,157      2,759       2,363       4,879
  Provision (benefit) for
   income taxes                     883      1,012         945       1,958
                               --------   --------    --------    --------
Income  from continuing
 operations                       1,274      1,747       1,418       2,921
Income from discontinued
 operations, net of tax               -        415         271       1,045
  Gain on sale of Sport Supply
   Group, Inc net of tax         12,646          -      12,646           -
                               --------   --------    --------    --------
Income  from discontinued
 operations                      12,646        415      12,917       1,045
                               --------   --------    --------    --------
Net income                     $ 13,920   $  2,162    $ 14,335    $  3,966
                               ========   ========    ========    ========

Basic net income (loss)
 per share
  Continuing operations        $   0.05   $   0.06    $   0.05    $   0.11
  Discontinued operations          0.47       0.02        0.48        0.04
                               --------   --------    --------    --------
                               $   0.52   $   0.08    $   0.53    $   0.15
                               ========   ========    ========    ========

Diluted net income (loss)
 per share
  Continuing operations        $   0.05   $   0.06    $   0.05    $   0.11
  Discontinued operations          0.47       0.02        0.48        0.04
                               --------   --------    --------    --------
                               $   0.52   $   0.08    $   0.53    $   0.15
                               ========   ========    ========    ========

Weighted average shares
 outstanding
  Basic                          27,048     27,076      27,109      26,855
  Diluted                        27,172     27,216      27,198      27,241




                   EMERSON RADIO CORP. AND SUBSIDIARIES
                   CONSOLIDATED SUMMARY BALANCE SHEETS
                             (In thousands)
                                                 September 30,   March 31,
                                                        2005        2005
                                                      --------    --------
                                                    (Unaudited)
Cash and cash equivalents                             $ 15,179    $  7,437
Accounts receivable                                     48,640      17,484
Inventory                                               42,592      38,156
Other current assets                                     6,394      38,938
                                                      --------    --------
  Total current assets                                 112,805     102,015
Property and equipment                                   2,446       2,292
Other assets                                             7,788      26,861
                                                      --------    --------
  Total assets                                        $123,039    $131,168
                                                      --------    --------

Current liabilities                                   $ 48,316    $ 45,899
Long-term borrowings                                     7,118      14,970
Minority interest in discontinued operations                 -      16,696
Stockholders' equity                                    67,605      53,603
                                                      --------    --------
  Total liabilities and equity                        $123,039    $131,168
                                                      --------    --------

Contact Information

  • CONTACT:

    Emerson Radio Corp.
    Guy A. Paglinco
    Vice President,
    Chief Financial Officer
    (973) 428-2085

    Investor Relations:
    Robert Maffei
    Investor Relations Manager
    (973) 428-2098

    EPOCH Financial Group, Inc.
    Victor Thompson or
    Todd Atenhan
    (888) 917-5105