SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
FORM 10-Q
(Mark
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
| [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30,December 31, 2003
-------------------------------------------------
| [] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____________ to ------------------------ ----------------------
____________
Commission file number 0-25226
--------------------------------------------------------
EMERSON RADIO CORP.
- --------------------------------------------------------------------------------
(Exact
| DELAWARE | 22-3285224 | |
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) | |
| 9 Entin Road Parsippany, New Jersey | 07054 | |||
| (Address of principal executive offices) | (Zip code) | |||
(973)884-5800
- --------------------------------------------------------------------------------
(Registrant's
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark whether the registrant is an accelerated Filer (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No
Indicate the number of shares outstanding of common stock as of November 10,
2003: 27,194,759.
PART I -– FINANCIAL INFORMATION
ITEM
Item 1. FINANCIAL STATEMENTS.
Financial Statements.
EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE DATA)
Three Months Ended Six Months Ended
-------------------------------- --------------------------------
September September September September
30,2003 30, 2002 30, 2003 30, 2002
------------ ------------ ------------ ------------
NET REVENUES $ 82,325 $ 115,085 $ 139,753 $ 198,300
COSTS AND EXPENSES:
Cost of sales 67,627 91,702 112,689 156,640
Other operating costs and
Expenses 1,293 896 2,549 2,193
Selling, general &
administrative expenses 11,111 13,463 22,212 24,868
------------ ------------ ------------ ------------
80,031 106,061 137, 450 183,701
------------ ------------ ------------ ------------
OPERATING INCOME 2,294 9,024 2,303 14,599
Interest expense, net (402) (788) (816) (1,575)
Minority interest in net
income (loss) of
consolidated subsidiary (136) 10 (82) 108
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES,
DISCONTINUED OPERATIONS AND
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 2,028 8,226 1,569 12,916
Provision for income taxes 1,091 2,289 1,044 4,314
------------ ------------ ------------ ------------
INCOME FROM CONTINUING
OPERATIONS 937 5,937 525 8,602
Income (loss) from
discontinued operations, net
of tax (256) 15 (289) 10
Cumulative effect of change
in accounting principle -- -- -- (5,546)
------------ ------------ ------------ ------------
NET INCOME $ 681 $ 5,952 $ 236 $ 3,066
============ ============ ============ ============
BASIC NET INCOME PER SHARE:
Income from continuing
Operations $ 0.03 $ 0.22 $ 0.02 $ 0.31
Discontinued operations (0.01) -- (0.01) --
Cumulative effect of change
in accounting principle -- -- -- (0.20)
------------ ------------ ------------ ------------
$ 0.02 $ 0.22 $ 0.01 $ 0.11
============ ============ ============ ============
DILUTED NET INCOME PER SHARE:
Income from continuing
Operations $ 0.03 $ 0.21 $ 0.02 $ 0.30
Discontinued operations (0.01) -- (0.01) --
Cumulative effect of change
in accounting principle -- -- -- (0.19)
------------ ------------ ------------ ------------
$ 0.02 $ 0.21 $ 0.01 $ 0.11
============ ============ ============ ============
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic 27,560 26,948 27,488 28,189
Diluted 28,428 27,951 28,458 28,882
(Unaudited)
(In thousands, except earnings per share data)
| Three Months Ended | Nine Months Ended | |||||||||||||||||
| December | December | December | December 31, | |||||||||||||||
| 31, 2003 | 31, 2002 | 31, 2003 | 2002 | |||||||||||||||
Net revenues | $ | 76,345 | $ | 86,553 | $ | 209,389 | $ | 276,488 | ||||||||||
Costs and expenses: | ||||||||||||||||||
| Cost of sales | 62,992 | 70,832 | 171,381 | 222,224 | ||||||||||||||
| Other operating costs and Expenses | 1,414 | 1,058 | 3,963 | 3,251 | ||||||||||||||
| Selling, general & administrative expenses | 10,545 | 10,226 | 30,571 | 32,696 | ||||||||||||||
| Stock based costs | 487 | 19 | 511 | 31 | ||||||||||||||
| 75,438 | 82,135 | 206,426 | 258,202 | |||||||||||||||
Operating income | 907 | 4,418 | 2,963 | 18,286 | ||||||||||||||
| Interest expense, net | (322 | ) | (405 | ) | (1,144 | ) | (1,977 | ) | ||||||||||
| Minority interest in net income (loss) of consolidated subsidiary | (272 | ) | 1,104 | (190 | ) | 996 | ||||||||||||
Income before income taxes, discontinued operations and cumulative effect of change in accounting principle | 313 | 5,117 | 1,629 | 17,305 | ||||||||||||||
| Provision for income taxes | 653 | 1,931 | 1,628 | 5,999 | ||||||||||||||
Income (loss) from continuing Operations | (340 | ) | 3,186 | 1 | 11,306 | |||||||||||||
| Income from discontinued operations, net of tax | 3,153 | 92 | 3,048 | 584 | ||||||||||||||
| Cumulative effect of change in accounting principle | — | — | — | (5,546 | ) | |||||||||||||
Net income | $ | 2,813 | $ | 3,278 | $ | 3,049 | $ | 6,344 | ||||||||||
Basic net income per share: | ||||||||||||||||||
| Income (loss) from continuing operations | $ | (0.01 | ) | $ | 0.12 | $ | — | $ | 0.41 | |||||||||
| Discontinued operations | 0.11 | — | 0.11 | 0.02 | ||||||||||||||
| Cumulative effect of change In accounting principle | — | — | — | (0.20 | ) | |||||||||||||
| $ | 0.10 | $ | 0.12 | $ | 0.11 | $ | 0.23 | |||||||||||
Diluted net income per share: | ||||||||||||||||||
| Income (loss) from continuing operations | $ | (0.01 | ) | $ | 0.12 | $ | — | $ | 0.39 | |||||||||
| Discontinued operations | 0.11 | — | 0.11 | 0.02 | ||||||||||||||
| Cumulative effect of change In accounting principle | — | — | — | (0.19 | ) | |||||||||||||
| 0.10 | $ | 0.12 | $ | 0.11 | $ | 0.22 | ||||||||||||
Weighted average shares outstanding: | ||||||||||||||||||
| Basic | 27,189 | 27,134 | 27,388 | 27,837 | ||||||||||||||
| Diluted | 27,189 | 28,274 | 28,259 | 28,678 | ||||||||||||||
The accompanying notes are an integral part of the interim
consolidated financial statements.
2
EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
September 30, March 31,
2003 2003
--------------- ---------------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 3,064 $ 11,413
Accounts receivable (less allowances of $4,421 and
$3,938, respectively) 35,821 24,593
Other receivables 952 2,954
Inventories 50,169 45,177
Prepaid expenses and other current assets 3,413 6,871
Net assets related to discontinued operations 254 --
Deferred tax assets 6,464 6,761
--------------- ---------------
TOTAL CURRENT ASSETS 100,137 97,769
Property and equipment - (net of accumulated depreciation
and amortization of $7,686 and $6,628, respectively) 8,956 9,823
Deferred catalog expenses 1,589 1,912
Trademarks and other intangible assets (net of accumulated
amortization of $3,628 and $3,403,respectively) 5,388 5,613
Deferred tax assets 16,824 17,595
Other assets 1,572 1,850
--------------- ---------------
TOTAL ASSETS $ 134,466 $ 134,562
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings $ 4,227 $ 1,918
Current maturities of long-term borrowings 2,656 11,634
Accounts payable and other current liabilities 38,945 30,596
Accrued sales returns 3,438 3,768
Income taxes payable 115 752
--------------- ---------------
TOTAL CURRENT LIABILITIES 49,381 48,668
Long-term borrowings 17,529 18,079
Minority interest 16,501 16,578
Shareholders' Equity:
Preferred shares - 10,000,000 shares authorized, 3,677
shares issued and outstanding 3,310 3,310
Common shares - $.01 par value, 75,000,000 shares
authorized; 52,236,473 and 51,981,431 shares issued;
27,479,331 and 27,413,089 shares outstanding,
respectively 522 520
Capital in excess of par value 115,399 115,122
Accumulated other comprehensive losses (73) (104)
Accumulated deficit (47,700) (47,936)
Treasury stock, at cost 24,757,142 and 24,568,342
shares, respectively (20,403) (19,675)
--------------- ---------------
TOTAL SHAREHOLDERS' EQUITY 51,055 51,237
--------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 134,466 $ 134,562
=============== ===============
(In thousands)
| December 31, 2003 | March 31, 2003 | |||||||||
| (Unaudited) | ||||||||||
ASSETS | ||||||||||
| Current Assets: | ||||||||||
| Cash and cash equivalents | $ | 6,940 | $ | 11,413 | ||||||
| Accounts receivable (less allowances of $4,749 and $3,938, respectively) | 26,233 | 24,593 | ||||||||
| Other receivables | 1,873 | 2,954 | ||||||||
| Inventories | 37,920 | 45,177 | ||||||||
| Prepaid expenses and other current assets | 5,030 | 6,871 | ||||||||
| Net assets related to discontinued operations | 522 | — | ||||||||
| Deferred tax assets | 6,297 | 6,761 | ||||||||
Total current assets | 84,815 | 97,769 | ||||||||
| Property and equipment - (net of accumulated depreciation and amortization of $7,225 and $6,628, respectively) | 8,239 | 9,823 | ||||||||
| Deferred catalog expenses | 1,341 | 1,912 | ||||||||
| Trademarks and other intangible assets (net of accumulated amortization of $3,739 and $3,403,respectively) | 5,277 | 5,613 | ||||||||
| Deferred tax assets | 14,184 | 17,595 | ||||||||
| Other assets | 1,446 | 1,850 | ||||||||
Total Assets | $ | 115,302 | $ | 134,562 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
| Current Liabilities: | ||||||||||
| Current maturities of long-term borrowings | $ | 71 | $ | 11,634 | ||||||
| Short-term borrowings | 4,050 | 1,918 | ||||||||
| Accounts payable and other current liabilities | 30,019 | 30,596 | ||||||||
| Accrued sales returns | 2,855 | 3,768 | ||||||||
| Income taxes payable | 12 | 752 | ||||||||
Total current liabilities | 37,007 | 48,668 | ||||||||
| Long-term borrowings | 9,383 | 18,079 | ||||||||
| Minority interest | 16,772 | 16,578 | ||||||||
| Shareholders’ Equity: | ||||||||||
| Preferred shares - 10,000,000 shares authorized, 3,677 shares issued and outstanding | 3,310 | 3,310 | ||||||||
| Common shares - $.01 par value, 75,000,000 shares authorized; 52,310,350 and 51,981,431 shares issued; 26,956,683 and 27,413,089 shares outstanding, respectively | 523 | 520 | ||||||||
| Capital in excess of par value | 115,912 | 115,122 | ||||||||
| Accumulated other comprehensive losses | (100 | ) | (104 | ) | ||||||
| Accumulated deficit | (44,887 | ) | (47,936 | ) | ||||||
| Treasury stock, at cost 25,353,667 and 24,568,342 shares, respectively | (22,618 | ) | (19,675 | ) | ||||||
Total shareholders’ equity | 52,140 | 51,237 | ||||||||
Total Liabilities and Shareholders’ Equity | $ | 115,302 | $ | 134,562 | ||||||
The accompanying notes are an integral part of the interim
consolidated financial statements.
3
EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Six Months Ended
--------------------------------
September September
30,2003 30,2002
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 525 $ 3,056
Adjustments to reconcile net loss to net cash provided by operating activities:
Minority interest (82) 108
Depreciation and amortization 1,793 1,640
Deferred tax assets 1,068 4,325
Cumulative effect of accounting change -- 5,546
Asset allowances and reserves 1,019 3,938
Other 36 --
Changes in assets and liabilities, net of acquisition of SSG:
Accounts receivable (11,638) (21,984)
Other receivables 2,002 (101)
Inventories (5,601) (4,581)
Prepaid expenses and other current assets 3,781 (850)
Other assets (190) (1,017)
Accounts payable and other current liabilities 8,019 16,812
Income taxes payable (637) 604
------------ ------------
Net cash provided (used) by operating activities 95 7,496
------------ ------------
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Net assets related to discontinued operations (543) 10
------------ ------------
Net cash provided (used) by operating activities (543) 10
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (208) (326)
Other -- (78)
------------ ------------
Net cash used by investing activities (208) (404)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under line of credit facility 2,309 (8,481)
Purchase of common stock (728) (5,697)
Exercise of stock options and warrants 254 88
Long-term borrowings 54,725 56,618
Repayments of long-term borrowings (64,253) (65,002)
------------ ------------
Net cash used by financing activities (7,693) (22,474)
------------ ------------
Net decrease in cash and cash equivalents (8,349) (15,372)
Cash and cash equivalents at beginning of year 11,413 19,228
------------ ------------
Cash and cash equivalents at end of period $ 3,064 $ 3,856
============ ============
(Unaudited)
(In thousands)
| Nine Months Ended | |||||||||||
| December | December | ||||||||||
| 31, 2003 | 31, 2002 | ||||||||||
Cash Flows from Operating Activities: | |||||||||||
| Income from continuing operations | $ | 1 | $ | 5,760 | |||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||
| Minority interest | 190 | (996 | ) | ||||||||
| Depreciation and amortization | 2,769 | 2,394 | |||||||||
| Deferred tax assets | 3,875 | 4,093 | |||||||||
| Cumulative effect of accounting change | — | 5,546 | |||||||||
| Asset allowances, reserves and other | 628 | 4,438 | |||||||||
| Changes in assets and liabilities: | |||||||||||
| Accounts receivable | (7,580 | ) | 3,017 | ||||||||
| Other receivables | 1,072 | 680 | |||||||||
| Inventories | 2,367 | (4,851 | ) | ||||||||
| Prepaid expenses and other current assets | 2,341 | 548 | |||||||||
| Other assets | (21 | ) | (1,185 | ) | |||||||
| Accounts payable and other current liabilities | 1,235 | 467 | |||||||||
| Income taxes payable | (740 | ) | 1,125 | ||||||||
| Operating cash flow provided by continuing operations | 6,137 | 21,036 | |||||||||
| Operating cash flow provided by discontinued operations | 469 | 584 | |||||||||
| Net cash provided by operating activities | 6,606 | 21,620 | |||||||||
Cash Flows from Investing Activities: | |||||||||||
| Additions of property and equipment | (323 | ) | (495 | ) | |||||||
| Proceeds from sale of discontinued operations | 10,517 | — | |||||||||
| Net cash (used) provided by investing activities | 10,194 | (495 | ) | ||||||||
Cash Flows from Financing Activities: | |||||||||||
| Net borrowings (repayments) under line of Credit facility | 2,132 | (6,142 | ) | ||||||||
| Purchase of common stock | (2,943 | ) | (5,697 | ) | |||||||
| Exercise of stock options and warrants | 281 | 343 | |||||||||
| Long-term borrowings | 114,010 | 137,024 | |||||||||
| Repayments of long-term borrowings | (134,753 | ) | (142,921 | ) | |||||||
| Net cash used by financing activities | (21,273 | ) | (17,393 | ) | |||||||
| Net increase (decrease) in cash and cash equivalents | (4,473 | ) | 3,732 | ||||||||
| Cash and cash equivalents at beginning of year | 11,413 | 19,228 | |||||||||
| Cash and cash equivalents at end of period | $ | 6,940 | $ | 22,960 | |||||||
The accompanying notes are an integral part of the interim
consolidated financial statements.
4
EMERSON RADIO CORP. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Unaudited)
NOTE 1 -– BACKGROUND AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Emerson Radio Corp. ("Emerson"(“Emerson”, consolidated - "Us"“Us”, "We"“We”, "Our"“Our”) and its majority-owned subsidiaries, including Sport Supply Group, Inc. ("SSG"(“SSG”). We operate in two business segments: consumer electronics and sporting goods. The consumer electronics segment designs, sources, imports and markets a variety of consumer electronic products and licenses the "[EMERSON(R) LOGO]"“
” trademark for a variety of products domestically and internationally to certain licensees. The sporting goods segment, which is operated through Emerson'sEmerson’s 53.2% ownership of SSG, manufactures, markets, and distributes sports related equipment and leisure products to institutional customers in the United States.
The unaudited interim consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary to present a fair statement of our consolidated financial position as of September 30,December 31, 2003 and the results of operations for the three and sixnine month periods ended September 30,December 31, 2003 and 2002. The unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and accordingly do not include all of the disclosures normally made in our annual consolidated financial statements. It is suggested that these unaudited interim consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended March 31, 2003 ("(“fiscal 2003"2003”), included in our annual report on Form 10-K.
The consolidated financial statements include our accounts and all of our majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The preparation of the unaudited interim consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes; actual results could materially differ from those estimates.
From July 2003 through October 2003 certain of SSG’s team dealers located in Little Rock, Arkansas, Enid, Oklahoma and Wichita, Kansas were discontinued. In November 2003, SSG sold all of the issued and outstanding capital stock of it’s wholly-owned subsidiary, Athletic Training Equipment Company, Inc. (“ATEC”). Collectively, SSG refers to these as “Discontinued Operations” and accordingly, the accompanying financial statements reflect these as discontinued operations. See Note 12 Discontinued Operations.
5
Due to the seasonal nature of both segments, the results of operations for the three and sixnine month periods ended September 30,December 31, 2003 are not necessarily indicative of the results of operations that may be expected for any other interim period or for the full year ending March 31, 2004 ("(“fiscal 2004"2004”).
Emerson and SSG have elected to follow Accounting Principles Board Opinion No. 25, "Accounting“Accounting for Stock Issued to Employees: ("(“APB 25"25”) and related Interpretations in accounting for its employee stock options. Under APB 25, because the exercise price of the Company's
5
"Accounting“Accounting for Stock-Based Compensation" ("Compensation” (“SFAS 123"123”). For the purposes of SFAS 123 pro forma disclosures, the estimated fair value of the options is amortized to expense over the options'options’ vesting periods. The Company'sOur pro forma information for the three and sixnine month periods ended September 30,December 31, 2003 and 2002 follows:
Three Months Ended Six Months Ended
--------------------------------- ---------------------------------
September September September September
30, 2003 30, 2002 30, 2003 30, 2002
------------- ------------- ------------- -------------
Income from continuing operations (in thousands)
As reported $ 937 $ 5,937 $ 525 $ 8,602
Less: Stock-based compensation expense (7) (27) (14) (54)
------------- ------------- ------------- -------------
Pro forma $ 930 $ 5,910 $ 511 $ 8,548
============= ============= ============= =============
Income from continuing operations per common share:
Basic - as reported $ .03 $ .22 $ .02 $ .31
Basic - pro forma $ .03 $ .22 $ .02 $ .30
Diluted - as reported $ .03 $ .21 $ .02 $ .30
Diluted - pro forma $ .03 $ .21 $ .02 $ .30
Three Months Ended Six Months Ended
--------------------------------- ---------------------------------
September September September September
30, 2003 30, 2002 30, 2003 30, 2002
------------- ------------- ------------- -------------
Net income:(in thousands)
As reported $ 681 $ 5,952 $ 236 $ 3,066
Less: Stock-based compensation expense (7) (27) (14) (54)
------------- ------------- ------------- -------------
Pro forma $ 674 $ 5,925 $ 222 $ 3,012
============= ============= ============= =============
Net income per common share:
Basic - as reported $ .02 $ .22 $ .01 $ .11
Basic - pro forma $ .02 $ .22 $ .01 $ .11
Diluted - as reported $ .02 $ .21 $ .01 $ .11
Diluted - pro forma $ .02 $ .21 $ .01 $ .10
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| December | December | December | December | ||||||||||||||
| 31, 2003 | 31, 2002 | 31, 2003 | 31, 2002 | ||||||||||||||
| Income (loss) from continuing operations (in thousands) | |||||||||||||||||
| As reported | $ | (340 | ) | $ | 3,186 | $ | 1 | $ | 11,306 | ||||||||
| Less: Employee stock- based compensation expense | (10 | ) | (29 | ) | (24 | ) | (83 | ) | |||||||||
| Pro forma | $ | (350 | ) | $ | 3,157 | $ | (23 | ) | $ | 11,223 | |||||||
| Income (loss) from continuing operations per common share: | |||||||||||||||||
| Basic - as reported | $ | (0.01 | ) | $ | 0.12 | $ | — | $ | 0.41 | ||||||||
| Basic - pro forma | $ | (0.01 | ) | $ | 0.12 | $ | — | $ | 0.40 | ||||||||
| Diluted - as reported | $ | (0.01 | ) | $ | 0.12 | $ | — | $ | 0.39 | ||||||||
| Diluted - pro forma | $ | (0.01 | ) | $ | 0.11 | $ | — | $ | 0.39 | ||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| December | December | December | December | ||||||||||||||
| 31, 2003 | 31, 2002 | 31, 2003 | 31, 2002 | ||||||||||||||
| Net income:(in thousands) | |||||||||||||||||
| As reported | $ | 2,813 | $ | 3,278 | $ | 3,049 | $ | 6,344 | |||||||||
| Less: Employee stock- based compensation expense | (10 | ) | (29 | ) | (24 | ) | (83 | ) | |||||||||
| Pro forma | $ | 2,803 | $ | 3,249 | $ | 3,025 | $ | 6,261 | |||||||||
6
\
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| December | December | December | December | ||||||||||||||
| 31, 2003 | 31, 2002 | 31, 2003 | 31, 2002 | ||||||||||||||
| Net income per common share: | |||||||||||||||||
| Basic - as reported | $ | 0.10 | $ | 0.12 | $ | 0.11 | $ | 0.23 | |||||||||
| Basic - pro forma | $ | 0.10 | $ | 0.12 | $ | 0.11 | $ | 0.22 | |||||||||
| Diluted - as reported | $ | 0.10 | $ | 0.12 | $ | 0.11 | $ | 0.22 | |||||||||
| Diluted - pro forma | $ | 0.10 | $ | 0.11 | $ | 0.11 | $ | 0.22 | |||||||||
Certain reclassifications were made to conform prior years financial statementsStatements to the current presentation.
6
NOTE 2 - COMPREHENSIVE INCOME
Our comprehensive income for the three and sixnine month periods ended September 30,December 31, 2003 and 2002 is as follows (in thousands):
Three Months Ended Six Months Ended
------------------------ ------------------------
September September September September
30, 2003 30, 2002 30, 2003 30, 2002
--------- --------- --------- ---------
(Unaudited) (Unaudited)
Net income $ 681 $ 5,952 $ 236 $ 3,066
Currency translation adjustment -- -- -- 1
Interest rate swap (4) (37) (8) (37)
Cumulative effect on equity of
SFAS 133, net of taxes -- (40) -- (40)
Unrealized income (loss) on
securities, net 1 (1) (3) (2)
Recognition of unrealized losses
related to investments
included in net income -- -- 42 --
--------- --------- --------- ---------
Comprehensive income $ 678 $ 5,874 $ 267 $ 2,988
========= ========= ========= =========
| Three Months Ended | Nine Months Ended | |||||||||||||||
| December | December | December | December | |||||||||||||
| 31, 2003 | 31, 2002 | 31, 2003 | 31,2002 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Net income | $ | 2,813 | $ | 3,278 | $ | 3,049 | $ | 6,344 | ||||||||
| Currency translation adjustment | — | (1 | ) | — | — | |||||||||||
| Interest rate swap | (4 | ) | (7 | ) | (12 | ) | (44 | ) | ||||||||
| Cumulative effect on equity of SFAS 133, net of taxes | — | — | — | (40 | ) | |||||||||||
| Unrealized loss on securities, net | (23 | ) | — | (26 | ) | (2 | ) | |||||||||
| Recognition of unrealized losses related to investments included in net income | — | — | 42 | — | ||||||||||||
| Comprehensive income | $ | 2,786 | $ | 3,270 | $ | 3,053 | $ | 6,258 | ||||||||
NOTE 3 - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts):
For the Three For the Six
Months Ended Months Ended
---------------------------- ----------------------------
September September September September
30, 2003 30, 2002 30, 2003 30, 2002
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
NUMERATOR:
Net earnings before discontinued
operations and cumulative
effect of change in accounting
principle and for basic and
diluted earnings
per share $ 937 $ 5,937 $ 525 $ 8,602
=========== =========== =========== ===========
DENOMINATOR:
Denominator for basic earnings
per share - weighted average
shares 27,560 26,948 27,488 28,189
Effect of dilutive securities:
Options and warrants 868 1,003 970 693
----------- ----------- ----------- -----------
Denominator for diluted
earnings per share -
weighted average shares and
assumed conversions 28,428 27,951 28,458 28,882
=========== =========== =========== ===========
Basic earnings per share,
from continuing operations $ 0.03 $ 0.22 $ 0.02 $ 0.31
Discontinued operations (0.01) -- (0.01) --
Cumulative effect of change in
accounting principle -- -- -- (0.20)
----------- ----------- ----------- -----------
Basic earnings per share $ 0.02 $ 0.22 $ 0.01 $ 0.11
=========== =========== =========== ===========
Diluted earnings per share,
from continuing operations $ 0.03 $ 0.21 $ 0.02 $ 0.30
Discontinued operations (0.01) -- (0.01) --
Cumulative effect of change in
accounting principle -- -- -- (0.19)
----------- ----------- ----------- -----------
Diluted earnings per share $ 0.02 $ 0.21 $ 0.01 $ 0.11
=========== =========== =========== ===========
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| December | December | December | December | ||||||||||||||
| 31, 2003 | 31,2002 | 31, 2003 | 31,2002 | ||||||||||||||
| (Unaudited) | (Unaudited) | ||||||||||||||||
Numerator: | |||||||||||||||||
| Net earnings (loss) before discontinued operations and cumulative effect of change in accounting principle and for basic and diluted earnings per share | $ | (340 | ) | $ | 3,186 | $ | 1 | $ | 11,306 | ||||||||
7
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| December | December | December | December | ||||||||||||||
| 31, 2003 | 31,2002 | 31, 2003 | 31,2002 | ||||||||||||||
| (Unaudited) | (Unaudited) | ||||||||||||||||
Denominator: | |||||||||||||||||
| Denominator for basic earnings per share - weighted average shares | 27,189 | 27,134 | 27,388 | 27,837 | |||||||||||||
| Effect of dilutive securities: | |||||||||||||||||
| Options and warrants | — | 1,140 | 871 | 841 | |||||||||||||
| Denominator for diluted earnings per share - weighted average shares and assumed conversions | 27,189 | 28,274 | 28,259 | 28,678 | |||||||||||||
| Basic earnings (loss) per share, from continuing operations | $ | (0.01 | ) | $ | 0.12 | $ | — | $ | 0.41 | ||||||||
| Discontinued operations | 0.11 | — | 0.11 | 0.02 | |||||||||||||
| Cumulative effect of change in accounting principle | — | — | — | (0.20 | ) | ||||||||||||
| Basic earnings per share | $ | 0.10 | $ | 0.12 | $ | 0.11 | $ | 0.23 | |||||||||
| Diluted earnings(loss) per share, from continuing operations | $ | (0.01 | ) | $ | 0.12 | $ | — | $ | 0.39 | ||||||||
| Discontinued operations | 0.11 | — | 0.11 | 0.02 | |||||||||||||
| Cumulative effect of change in accounting principle | — | — | — | (0.19 | ) | ||||||||||||
| Diluted earnings per share | $ | 0.10 | $ | 0.12 | $ | 0.11 | $ | 0.22 | |||||||||
NOTE 4- CAPITAL STRUCTURE
Our outstanding capital stock at September 30,December 31, 2003 consisted of common stock and Series A convertible preferred stock in which the conversion feature expired effective March 31, 2002.
At September 30,December 31, 2003, Emerson had outstanding approximately 936,000907,000 options with exercise prices ranging from $1.00 to $1.50 and SSG had outstanding approximately 272,000239,000 options with exercise prices ranging from $0.95 to $9.44.
On August 1, 2002, Emerson granted 200,000 warrants with an exercise price of $2.20, vesting 50% in six months and 50% one year from date of grant in conjunction with a consulting agreement. The warrants were valued using the Black-Scholes option valuation model and are charged to earnings over the related service period of the consulting agreement with $6,163$396,000 and $24,664$420,664 being charged to operations for the three and sixnine month periods ending September 30,December 31, 2003, and $12,334$18,501 and $12,334$30,835 for the three and sixnine month periods ending September 30, 2002, respectively.December 31, 2002. In February 2003, 100,000 of these warrants were exercised. In November 2003, the remaining 100,000 of these warrants were exercised under a cashless exercise and 45,544 shares of common stock were issued.
On October 7, 2003, in conjunction with a consulting agreement, Emerson granted 50,000 warrants with an exercise price of $5.00 per share. These warrants were valued using the Black-Scholes option valuation model, which resulted in $90,500 being charged to earnings during the three and nine month periods ending December 31, 2003. As of August 15, 2002, Emerson's $20.8 million of 8.5% Senior
Subordinated Convertible Debentures (the "Debentures") were fully retired using
funds secured from a financing facility dated June 28, 2002 and from the
generation of cash from operations. See "Note 9 - Borrowings".
December 31, 2003 these warrants had not been exercised.
8
NOTE 5 - INVENTORY
Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method for the consumer electronics segment and for the sporting goods segment, standard cost method for items manufactured and weighted average cost for items purchased for resale. As of September 30,December 31, 2003 and March 31, 2003, inventories consisted of the following (in thousands):
8
September 30, 2003 March 31, 2003
------------------ --------------
(Unaudited)
Raw materials $ 1,968 $ 2,095
Work-in-process 390 318
Finished 51,043 45,387
------------------ --------------
53,401 47,800
Less inventory allowances (3,232) (2,623)
------------------ --------------
$ 50,169 $45,177
================== ==============
| December 31, | March 31, | |||||||
| 2003 | 2003 | |||||||
| (Unaudited) | ||||||||
| Raw materials | $ | 1,135 | $ | 2,095 | ||||
| Work-in-process | 37 | 318 | ||||||
| Finished | 38,788 | 45,387 | ||||||
| 39,960 | 47,800 | |||||||
| Less inventory allowances | (2,040 | ) | (2,623 | ) | ||||
| $ | 37,920 | $ | 45,177 | |||||
NOTE 6 - INCOME TAXES
We have tax net operating loss carry forwards included in net deferred tax assets that are available to offset future taxable income and can be carried forward for 15 to 20 years. Although realization is not assured, we believe it is more likely than not that all of the net deferred tax assets will be realized through tax planning strategies available in future periods and through future profitable operating results. The amount of the deferred tax asset considered realizable, however, could be reduced or eliminated if certain tax planning strategies are not successfully executed or estimates of future taxable income during the carryforward period are reduced. If we determine that we would not be able to realize all or part of the net deferred tax asset in the future, an adjustment to the deferred tax asset would be charged to income in the period such determination was made.
Tax benefits resulting from operating losses and discontinued operations losses for the nine months ended December 31, 2003 have been fully reserved in our tax allowance and, accordingly, a tax benefit was not recorded in our consolidated Statement of Operations. Income taxes from the gain on the sale of ATEC are reflected as a reduction to our net deferred tax asset. The high effective tax rate reflected in the consolidated statement of operations for the three and nine months ended December 31, 2003 was the result of our multinational tax structure, which yields varying tax effective rates. See Note 1 - Background and Basis of Presentation and Note 12 - Discontinued Operations.
9
At September 30,December 31, 2003, approximately $23.3$20.5 million of deferred tax assets were reported on our balance sheet.
NOTE 7 - INVESTMENT IN SPORT SUPPLY GROUP, INC.
As of September 30,December 31, 2003 and March 31, 2003, Emerson owned 4,746,023 (53.2%(approximately 53.2% of the issued and outstanding) shares of common stock of SSG. SSG'sSSG’s results of operations and the minority interest related to those results have been included in our quarterly and year-to-date results of operations.
Effective March 1997, Emerson entered into a Management Services Agreement with SSG, under which each company provides various managerial and administrative services to the other company for a fee at terms reflected in an arms-length transaction. These charges have been eliminated in consolidation.
NOTE 8 - GOODWILL AND OTHER INTANGIBLE ASSETS
In June 2001, the Financial Accounting Standards Board issued Statement No. 142, "Goodwill“Goodwill and Other Intangible Assets"Assets” (SFAS 142). SFAS 142 requires that goodwill not be amortized but instead be tested for impairment at least annually by reporting unit. As a result of adopting SFAS 142, we ceased recording amortization of goodwill on April 1, 2002 and, recorded a non-cash "cumulative“cumulative effect of change in accounting 9
principle"principle” of approximately $5.5 million ($0.19 per diluted share for the sixnine month period ended September 30,December 31, 2002), associated with the write-off of all of the goodwill attributed to the sporting goods segment.
As of September 30,December 31, 2003, estimated amortization expense of other intangible assets for each of the next five years is as follows (in thousands):
2004 $ 504
2005 504
2006 466
2007 406
2008 337
Thereafter 3,171
-----------
$ 5,388
===========
| 2004 | $ | 504 | ||
| 2005 | 504 | |||
| 2006 | 466 | |||
| 2007 | 406 | |||
| 2008 | 337 | |||
| Thereafter | 3,060 | |||
| $ | 5,277 | |||
10
NOTE 9 - BORROWINGS
As of September 30,December 31, 2003 and March 31, 2003, short-term borrowings consisted of the following:
following (in thousands):
September 30, March 31,
2003 2003
------------- -----------
(Unaudited)
Foreign bank loan $ 4,227 $ 1,918
============= ===========
| December 31, | March 31, | |||||||
| 2003 | 2003 | |||||||
| (Unaudited) | ||||||||
| Foreign bank loan | $ | 4,050 | $ | 1,918 | ||||
As of September 30,December 31, 2003 and March 31, 2003, long-term borrowings consisted of the following (in thousands):
September 30, March 31,
2003 2003
------------- ---------
(Unaudited)
Revolver (Revolver A) $ 4,000 $ --
Term loan (Term Loan) 2,575 12,000
Notes payable under revolving line of credit
(Revolver B) 13,495 17,522
Equipment notes and other 115 191
------------- ---------
20,185 29,713
Less current maturities 2,656 11,634
------------- ---------
Long term debt and notes payable $ 17,529 $ 18,079
============= =========
| December 31, | March 31, | ||||||||
| 2003 | 2003 | ||||||||
| (Unaudited) | |||||||||
Revolver(Revolver A) | $ | 2,450 | $ | — | |||||
Term loan(Term Loan) | — | 12,000 | |||||||
Revolving line of credit(Revolver B) | 6,876 | 17,522 | |||||||
| Equipment notes and other | 128 | 191 | |||||||
| 9,454 | 29,713 | ||||||||
| Less current maturities | 71 | 11,634 | |||||||
| Long term debt and notes payable | $ | 9,383 | $ | 18,079 | |||||
Refinancing Transaction in fiscalFiscal 2003- On June 28, 2002, Emerson entered into a $40 million Revolving Credit and Term Loan Agreement ("(“Loan Agreement"Agreement”) with several U.S. financial institutions. The Loan Agreement provides for a $25 million revolving line of credit (Revolver(Revolver A)and a $15 million term loan (Term(Term Loan). The $25 million
10
Emerson's existingEmerson’s $15 million senior secured facility and provides for revolving loans, subject to individual maximums which, in the aggregate, are not to exceed the lesser of $25 million or a "Borrowing
Base"“Borrowing Base” as defined in the Loan Agreement.
The $15 million term loan (Term Loan) combined with cash
earned from Emerson's operations was used to retire all of Emerson's 8.5% Senior
Subordinated Convertible Debentures (Debentures) in the amount of $20.75 million
in fiscal 2003.
Revolver A and Term Loan- On June 28, 2002, Emerson entered
into a $40 million Loan Agreement with several U.S. financial institutions. The Loan Agreement provides for a three year, $25 million revolving line of credit
(Revolver A) and a $15 million term loan (Term Loan). The $25 million revolving
line of credit replaced Emerson's existing $15 million senior secured facility
and provides for revolving loans, subject to individual maximums which, in the
aggregate, are not to exceed the lesser of $25 million or a "Borrowing Base"Borrowing Base amount based onis established by specified percentages of eligible accounts receivables and inventories and bears interest ranging from Prime plus 0.50% to 1.25% or, at Emerson'sEmerson’s election, LIBOR plus 2.00% to 2.75% depending on certain financial covenants. The interest rate charged on the term loan rangesTerm Loan ranged from Prime plus 1.00% to 1.75% or, at Emerson'sEmerson’s election, LIBOR plus 2.50% and 3.25% depending on certain financial covenants and amortizes over a three-year period. Pursuant to the Loan Agreement, Emerson is restricted from, among other things, paying certain cash dividends, other than on preferred shares, repurchasing Emerson'sEmerson’s common stock and entering into certain transactions without the lender'slender’s prior consent and are subject to certain net worth and leverage financial covenants. Amounts outstanding under the Loan Agreement are secured by substantially all of Emerson'sEmerson’s tangible assets.
11
As of September 30,December 31, 2003, Emerson repaid in full ahead of schedule the Term Loan, and had approximately $2.6$2.5 million was outstanding under this term facility,Revolver A and $4.0 million was outstanding under the
revolver. Pursuant to the terms of Emerson's term loan, excess cash flow earned
in the fiscal year ended March 31, 2003 of approximately $7.4 million was
required to pay down the term loan in July 2003. Repayment of the excess cash
flow provision was made from borrowings under its revolving credit facility,
which was partially repaid as of September 30, 2003. As of September 30, 2003,
Emerson was in compliance with the covenants contained in the senior credit
facility.
Loan Agreement, as amended during the three months ended December 31, 2003.
Revolver B- Subsequent to September 30,During the quarter ending December 31, 2003, SSG amended it'sits Loan and Security Agreement to finance it'sits working capital requirements through October 31, 2007. Under this amendment, SSG'sSSG’s line of credit was reduced from $25 million to $20 million; it'sits LIBOR borrowing rates were reduced from 2.5% to 2.25%; and its inventory and accounts receivable borrowing rates were increased with decreases in associated fees.increased. This agreement provides for revolving loans and letters of credit which, in the aggregate, cannot exceed the lesser of $20 million or a "Borrowing Base"“Borrowing Base” amount based upon specified
11
lender'slender’s prior consent and it is required to maintain certain net worth levels.
SSG’s Loan and Security Agreement allows its lender to accelerate payment upon the occurrence of an event that has a material adverse effect upon the business, operations, properties, assets, goodwill, or condition (financial or otherwise) of SSG on a consolidated basis. Additionally, the Loan and Security Agreement requires SSG to maintain a depository account in favor of our lender. SSG’s lender has agreed to modify the Loan and Security Agreement to make the material adverse change clause provision an event of default only if availability levels, net of borrowings, fall below certain levels. As of September 30,December 31, 2003, SSG was in compliance with the covenants in the Loan Agreement, as amended.
As of December 31, 2003, the carrying value of these credit facilities approximated fair value.
NOTE 10 - SEGMENT INFORMATION
The following table presents certain operating segment information for each of the three and 12 NOTE 11sixnine month periods ended September 30,December 31, 2003 and 2002 (in thousands):
Three Months Ended Three Months Ended
September 30, 2003 September 30, 2002
Consumer Consumer
Electronics Sporting Goods Electronics Sporting Goods
----------- -------------- ----------- --------------
Net revenues from
external customers $ 56,428 $ 25,897 $ 89,541 $ 25,544
Income (loss) before
income taxes,
discontinued
operations and
cumulative effect
of change in
accounting
principle $ 1,946 $ (54) $ 8,225 $ Three Months Ended Three Months Ended December 31, 2003 December 31, 2002 Consumer Consumer Electronics Sporting Goods Electronics Sporting Goods Net revenues from
external customers $61,619 $ 14,726 $ 71,427 $ 15,126 Three Months Ended Three Months Ended December 31, 2003 December 31, 2002 Consumer Consumer Electronics Sporting Goods Electronics Sporting Goods Income (loss) before income taxes, discontinued operations and cumulative effect of change in accounting principle $ 2,885 $ (2,572 ) $ 7,456 $ (2,339 ) Segment assets $ 70,260 $ 45,042 $ 69,794 $ 55,594 Nine Months Ended Nine Months Ended December 31, 2003 December 31, 2002 Consumer Consumer Electronics Sporting Goods Electronics Sporting Goods Net revenues from external customers $ 149,684 $ 59,705 $ 217,776 $ 58,712 Income (loss) before income taxes, discontinued operations and cumulative effect of change in accounting principle $ 4,271 $ (2,642 ) $ 20,016 $ (2,711 )
Segment assets $ 80,841 $ 53,625 $ 80,436 $ 53,454
Six Months Ended Six Months Ended
September 30, 2003 September 30, 2002
Consumer Consumer
Electronics Sporting Goods Electronics Sporting Goods
----------- -------------- ----------- --------------
Net revenues from $ 88,065 $ 51,688 $ 146,349 $ 51,951
external customers
Income before
income taxes,
discontinued
operations and
cumulative effect
of change in
accounting
principle $ 1,304 $ 183 $ 12,668 $ 356
12
NOTE 12 - LEGAL PROCEEDINGS
Putative Class Actions
The following
Between September 4, 2003 and October 30, 2003, several putative class action lawsuits have beenwere filed in the United States District Court for the District of New Jersey against us and Mssrs. Geoffrey Jurick, Kenneth Corby and John Raab (the "Individual Defendants"“Individual Defendants”) on behalf of purchasers of our publicly traded securities who bought shares between January 29, 2003 and August 12, 2003 (the "Class Period"“Class Period.”): Kaplan v. On December 17, 2003, the Court entered a Joint Stipulation and Order consolidating these putative class actions under the caption In Re Emerson Radio Corp., et al. 03-cv-4202; Pelone v. Emerson Radio Corp., et al.
03-cv-4201; Howard v. Jurick, et al. 03-cv-4330; Glascoff v. Emerson Radio
Corp., et al. 03-cv-4506; Stromer v. Emerson Radio Corp., et al. 03-cv-4647;
Kaplan v. Emerson Radio Corp., et al. 03-cv-4856; Freitag v. Emerson Radio
Corp., et al. 03-cv-5140; which filing dates were: September 4, 2003, September
5, 2003, September 12, 2003, September 23, 2003, October 1, 2003, October 14,
2003 Securities Litigation, 03cv4201 (JLL) (the “Consolidated Action.”) Further to that Stipulation and October 30, 2003, respectively.
TheOrder, lead plaintiff was appointed and co-lead counsel and co-liaison counsel were approved by the Court in the Consolidated Action.
Generally, the original complaints allege that we and the Individual Defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated there under,thereunder, by issuing certain positive statements during the Class Period regarding our growth and demand for our products. The complaints further allege that these statements were each materially false and misleading when made because we allegedly misrepresented and omitted certain adverse facts which then existed and disclosure of which was necessary to make the statements not false and misleading. It
13
The lead plaintiff in the Consolidated Action is possible thatcurrently scheduled to file an Amended and Consolidated Complaint on or about March 15, 2004, which may contain additional class
action complaints will be filed against us, and the Individual Defendants. No
court has yet made any rulings with respect to these complaints, including
whether these lawsuits will be able to proceed as class actions.allegations. We and the Individual Defendants intend to defend these lawsuits vigorously.
We are also involved in legal proceedings and claims of various types in the ordinary course of our business. While any such litigation to which we are a party contains an element of uncertainty, we presently believe that the outcome of each such proceeding or claim which is pending or known to be threatened, or all of them combined, will not have a material adverse effect on our consolidated financial position.
NOTE 1312 - DISCONTINUED OPERATIONS
During October 1999, SSG acquired substantially all of the
assets of Spaulding Athletic, which was a team dealer located in Little Rock,
Arkansas. A team dealer is a local sporting goods store that sells it products
primarily to teams in its local market. Spaulding Athletic serviced the local
institutional customers and teams with a
13
full line of athletic products, and was the only such team dealer owned by SSG
in this regional marketplace.
On
In July 15, 2003, SSG discontinued operations at Spaulding
Athletic, SSG'sits team dealer located in Little Rock, Arkansas and in October 2003, sold substantially all of the assets at that location (other than cash and accounts receivable). This closure, and the discontinued operation resulted in a pretax
loss of approximately $358,000 for the six months ended September 30, 2003,
which is included in the discontinued operations in the accompanying
consolidated statement of operations for the three and six month periods ended
September 30, 2003.
The following table represents current assets and liabilities
of discontinued operations as of September 30, 2003 and the results of
operations (in thousands).
The following table represents proforma current assets and
liabilities of the Enid, Oklahoma and Wichita, Kansas Larry Black team dealer
operations as of September 30, 2003 and the results of these discontinued operations, net of related income taxes (in thousands). The results of discontinuing the Enid, Oklahoma and Wichita, Kansas
Team Dealer locations will be reflected in the December 2003 quarterly financial
statements.
See Note 6 — Income Taxes.
| Three Months Ended | Nine Months Ended | |||||||||||||||
| December | December | December | December | |||||||||||||
| 31, 2003 | 31, 2002 | 31, 2003 | 31, 2002 | |||||||||||||
| Net revenues-ATEC | $ | 2,797 | $ | 2,005 | $ | 6,184 | $ | 7,468 | ||||||||
| Net revenues-Team Dealers | 368 | 1,387 | 3,043 | 5,200 | ||||||||||||
| Earnings from operations - ATEC | 181 | 384 | 477 | 892 | ||||||||||||
| Loss from operations - Team Dealers | (148 | ) | (292 | ) | (352 | ) | (308 | ) | ||||||||
| Loss on sale of Team Dealers | (632 | ) | — | (829 | ) | — | ||||||||||
| Gain on sale of ATEC, net | 3,752 | — | 3,752 | — | ||||||||||||
| Total discontinued operations, net | $ | 3,153 | $ | 92 | $ | 3,048 | $ | 584 | ||||||||
14
| Item 2. | Management’s Discussion and Analysis of Results of Operations and Financial Condition |
Management’s Discussion and Analysis of Results of Operation is presented in three parts: consolidated operations, the consumer electronics segment and the sporting goods segment.
In the following discussions, most percentages and dollar amounts have been rounded to aid presentation. As a result, all figures are approximations.
CONSOLIDATED OPERATIONS:
Consolidated Operations:
The following table sets forth, for the periods indicated, certain items related to the consolidated statements of operations as a percentage of net revenues for the three and sixnine month periods ended September
30,December 31, 2003 and 2002. A detailed discussion of the material changes in our operating results is set forth under our discussion of our two operating segments: consumer electronics and sporting goods.
15
Three Months ended Six Months ended
September 30 September 30
--------------------------- ---------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
(Unaudited) (Unaudited)
Net revenues (in thousands) $ 82,325 $ 115,085 $ 139,753 $ 198,300
100.0% 100.0% 100.0% 100.0%
Cost of sales 82.1% 79.7% 80.6% 79.0%
Other operating costs and
Expenses 1.6% 0.8% 1.8% 1.1%
Selling, general and
administrative expenses 13. 5% 11.7% 15. 9% 12.5%
---------- ---------- ---------- ----------
Operating income 2.8% 7.8% 1.7% 7.4%
Interest expense 0.5% 0.6% 0.6% 0.8%
Minority interest in net income
Of consolidated subsidiary 0.1% 0.0% 0.1% 0.0%
Provision for income taxes 1.3% 2.0% 0.8% 2.2%
Income(loss) from discontinued
Operations (0.3)% 0.0% (0.2)% 0.0%
Cumulative effect of change in
accounting principle 0.0% 0.0% 0.0% 2.8%
---------- ---------- ---------- ----------
Net income 0.8% 5.2% 0.2% 1.6%
========== ========== ========== ==========
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| December 31 | December 31 | ||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||
| (Unaudited) | (Unaudited) | ||||||||||||||||
| Net revenues (in thousands) | $ | 76,345 | $ | 86,553 | $ | 209,389 | $ | 276,488 | |||||||||
| 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||
| Cost of sales | 82.5 | % | 81.8 | % | 81.9 | % | 80.4 | % | |||||||||
| Other operating costs and Expenses | 1.9 | % | 1.2 | % | 1.9 | % | 1.1 | % | |||||||||
| Selling, general and administrative expenses | 13.8 | % | 11.9 | % | 14.6 | % | 11.9 | % | |||||||||
| Stock based costs | .6 | % | — | .2 | % | — | |||||||||||
| Operating income | 1.2 | % | 5.1 | % | 1.4 | % | 6.6 | % | |||||||||
| Interest expense | .4 | % | .5 | % | .5 | % | .7 | % | |||||||||
| Minority interest in net income (loss) Of consolidated subsidiary | (.4 | %) | 1.3 | % | (.1 | %) | .4 | % | |||||||||
| Provision for income taxes | .8 | % | 2.2 | % | .8 | % | 2.2 | % | |||||||||
| Income from discontinued Operations, net of tax | 4.1 | % | .1 | % | 1.5 | % | .2 | % | |||||||||
| Cumulative effect of change in accounting principle | — | — | — | (2.0 | %) | ||||||||||||
| Net income | 3.7 | % | 3.8 | % | 1.5 | % | 2.3 | % | |||||||||
Net Revenues - Consolidated net revenues for the three and sixnine month periods ended September 30,December 31, 2003 decreased $32.8to $76.3 million (28.5%from $86.6 million ($10.3 million or 11.8%) and $58.5to $209.4 million (29.5%from $276.5 million ($67.1 million or 24.3%) respectively, as compared to the same periods ended September 30,December 31, 2002. The decreases for both the three and sixnine month periods were primarily attributable to decreases in the consumer electronics segment.
15
Cost of Sales - Cost of sales, as a percentage of consolidated net revenues, for the three and sixnine month period ended September 30,December 31, 2003 and December 31, 2002 increased to 82.1%82.5% and 80.6%81.9% from 79.7%81.8% and 79.0%80.4%, respectively. The increase in cost of sales as a percentage of net revenues for the three and sixnine month periods werewas primarily the result of lower margins in both the consumer electronics and sporting goods segments. In absolute terms, cost of sales decreased $24.1to $63.0 million from $70.8 million ($7.8 million or 11.0%) and $44.0to $171.4 million from $222.2 million ($50.8 million or 22.9%) for the three and sixnine month periods of fiscal 2004 as compared to the same periods in fiscal 2003.
2003, respectively.
Other Operating Costs and Expenses - Other operating costs and expenses are associated with the consumer electronics segment. As a percentage of consolidated net revenues, other operating costs and expenses increased to 1.6%1.9% from 0.8%1.2% for the three months ended September 30,December 31, 2003 compared to the same period in fiscal 2003. For the sixnine months ended September 30,December 31, 2003, other operating costs, as a percentage of consolidated net revenues, increased to 1.8%1.9% from 1.1% forcompared to the same period in fiscal 2003. In absolute terms other operating costs and expenses increased by $397,000to $1.4 million from $1.1 million ($356,000 or 33.6%) and $356,000to $4.0 million from $3.3 million ($712,000 or 21.9%) for the three and sixnine month periods of fiscal 2004 as compared to the same periods in fiscal 2003.
2003, respectively.
Selling, General and Administrative Expenses ("(“S,G&A"&A”) - S,G&A, as a percentage of consolidated net revenues, were 13.5%13.8% for the three months ended September
30,December 31, 2003 as compared to 11.7%11.9% for the three months ended September 30,December 31, 2002. For the sixnine months ended September 30,December 31, 2003, S,G&A,
16
15.9%14.6% as compared to 12.5%11.9% for the same period in fiscal 2003. In absolute terms S,G&A increased to $10.5 million from $10.2 million ($319,000 or 3.1%) for the three month period ended December 31, 2003 compared to the same period in fiscal 2003, and decreased $2.4to $30.6 million from $32.7 million ($2.1 million or 6.5%) for the nine month period ended December 31, 2003 as compared to the same period in fiscal 2003. The fiscal 2004 quarterly increase is primarily due to the consumer electronics segment, while the decrease for the nine month period is due to decreases in both segments.
Stock Based Costs - Stock Based Costs are associated with the consumer electronics segment, which relate to the cost of warrants issued in exchange for consulting services. As a percentage of consolidated net revenues, stock based costs increased to 0.6% from 0 % for the three months ended December 31, 2003 compared to the same period in fiscal 2003. For the nine months ended December 31, 2003, stock based costs, as a percentage of consolidated net revenues, increased to 0.2% from 0 % for the same period in fiscal 2003. In absolute terms stock based costs increased by $468,000 and $2.7 million$480,000 for the three and sixnine month periods ended September 30,
2003of fiscal 2004 as compared to the same periods in fiscal 2003 due to decreases in both
segments.
2003.
16
Interest Expense, Net - Interest expense decreased $83,000 (20.5%) to $402,000$322,000 (0.4% of net revenues) for the three months ended December 31, 2003 from $405,000 (0.5% of net revenues) for the three months ended September 30, 2003 from $788,000 (0.6% of
net revenues) for the three months ended September 30,December 31, 2002. For the sixnine months ended September 30,December 31, 2003 interest expense decreased $833,000 (42.1%) to $816,000 (0.6%$1.1 million (0.5% of net revenues) from $1.6$2.0 million (0.8%(0.7% of net revenues) for the same period in fiscal 2003. The decrease in interest expense was a result of lower average borrowings in the consumer electronics segment and lower borrowing costs in both segments.
Minority Interest in Net Income (Loss) of Consolidated Subsidiary - Minority interest in net income (loss) of consolidated subsidiary represents that portion of the sporting goods segment for the three and sixnine month periods ended September 30,December 31, 2003 and 2002, that were not included in the consolidated
statements of operations.2002. See "Note“Note 1 - Background and Basis of Presentation."
”
Provision for Income Taxes - The provision for income taxes for the three and sixnine months ended September 30,December 31, 2003 and 2002 werewas primarily the resultsresult of utilizing previously recognized net operating loss carryforwards from the consumer electronics segment. The highhigher effective tax rate reflected in the
consolidated statement of operations for the three and sixnine months ended September 30,December 31, 2003 as compared to the same year ago periods was the result of our multinational tax structure, which yields varying tax effective rates.
Income (loss) from Discontinued Operations - In July, October and November 2003, SSG ceased operations of it'sits Team Dealer locations in Little Rock, Arkansas, Team Dealer locationEnid, Oklahoma, and Wichita, Kansas, respectively. In addition, SSG sold all of the issued and outstanding capital stock of ATEC. SSG has recorded lossesgains from discontinued operations of approximately $289,000$3.2 million and $3.0 million for the six month periodthree and nine months ended September 30, 2003.
December 31, 2003 as compared to $92,000 and $584,000 for the three and nine months ended December 31, 2002.
Cumulative Effect of Change in Accounting Principle - On April 1, 2002, we adopted Financial Accounting Standards Board'sBoard’s Statement No. 142, "Goodwill“Goodwill and Other Intangible Assets"Assets” (SFAS 142) that requires that goodwill not be amortized, but instead be tested for impairment at least annually by reporting unit. As a result of our impairment testing, we recorded a non-cash "cumulative“cumulative effect of accounting change"change” of approximately $5.5 million for the sixnine months ended September 30,December 31, 2002, due to the impairment of all of the goodwill attributed to the Company'sCompany’s sporting goods segment. See "Note“Note 8 - Goodwill and Other Intangible Assets."
”
Net Income - As a result of the foregoing factors, we earned net income of $681,000 (0.8%$2.8 million (3.7% of net revenues) and $236,000 (0.2%$3.0 million (1.5% of net revenues) for the three and sixnine months ended September 30,December 31, 2003 as compared to 17
$6.0$3.3 million (5.2%(3.8% of net revenues) and $3.1$6.3 million (1.6%(2.3% of net revenues) for the same periods in fiscal 2003.
CONSUMER ELECTRONICS SEGMENT:
17
Consumer Electronics Segment:
The following table summarizes certain financial information relating to the consumer electronics segment for the three and sixnine month periods ended September
30,December 31, 2003 and 2002 (in thousands):
Three Months Ended September 30 Six Months Ended September 30
------------------------------- -----------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
(Unaudited) (Unaudited)
Net revenues $ 56,428 $ 89,541 $ 88,065 $ 146,349
Cost of sales 49,042 74,006 75,644 120,552
Other operating
Costs 1,293 896 2,549 2,193
Selling, general &
administrative 3,897 5,769 8,040 9,680
---------- ---------- ---------- ----------
Operating income 2,196 8,870 1,832 13,924
Interest expense,
net (250) (645) (528) (1,256)
---------- ---------- ---------- ----------
Income before 1,946 8,225 1,304 12,668
income taxes
Provision for
income taxes 1,111 2,285 975 4,180
---------- ---------- ---------- ----------
Net income $ 835 $ 5,940 $ 329 $ 8,488
========== ========== ========== ==========
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| December 31 | December 31 | ||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||
| (Unaudited) | (Unaudited) | ||||||||||||||||
| Net revenues | $ | 61,619 | $ | 71,427 | $ | 149,684 | $ | 217,776 | |||||||||
| Cost of sales | 52,014 | 59,617 | 127,658 | 180,169 | |||||||||||||
| Other operating Costs | 1,414 | 1,058 | 3,963 | 3,251 | |||||||||||||
| Selling, general & administrative | 4,340 | 4,090 | 12,356 | 13,758 | |||||||||||||
| Stock based Costs | 487 | 19 | 511 | 31 | |||||||||||||
| Operating income | 3,364 | 6,643 | 5,196 | 20,567 | |||||||||||||
| Interest expense, Net | (207 | ) | (291 | ) | (735 | ) | (1,547 | ) | |||||||||
| Income before income taxes | 3,157 | 6,352 | 4,461 | 19,020 | |||||||||||||
| Provision for income taxes | 653 | 1,819 | 1,628 | 5,999 | |||||||||||||
| Net income | $ | 2,504 | $ | 4,533 | $ | 2,833 | $ | 13,021 | |||||||||
Net Revenues - Consumer electronics net revenues for the three months ended September 30,December 31, 2003 decreased $9.8 million (13.7%) to $56.4$61.6 million from $89.5$71.4 million for the three months ended September 30,December 31, 2002. For the sixnine months ended September 30,December 31, 2003 net revenues decreased $68.1 million (31.3%) to $88.1$149.7 million from $146.3$217.8 million for the sixnine months ended September 30,December 31, 2002. Consumer electronics net revenues are comprised of Emerson branded product sales, themed product sales and licensing revenues. Emerson branded product sales are earned from the sale of products bearing the Emerson or HH Scott brand name; themed product sales representsrepresent products sold bearing a certain theme or character; and licensing revenues are derived from licensing the Emerson and HH Scott brand names to licensees for a fee. The decrease in net revenues for the three and sixnine month period was comprised of:
i) A decrease in Emerson branded product sales to $49.0 and $77.2 million
from $68.7 and $117.2 million for the three and six months ended
September 30, 2003 and September 30, 2002, respectively. These
decreases were associated with increased competition, decreased orders
from our primary customers and an overall slower economy.
| i) | Revenues from the sale of Emerson branded product for the three months ended December 31, 2003 were relatively unchanged at $54.2 million from $54.1 million for the three months ended December 31, 2002. Revenues from the sale of Emerson branded product decreased to $131.4 million from $171.3 million for the nine months ended December 31, 2003 and December 31, 2002, respectively, associated with increased competition, a reduction in orders from our primary customers and an overall slower economy. |
18
ii) A decrease in themed product sales to $5.4 and $5.7 million and $18.8
and $23.2 million for the three and six months ended September 30, 2003
and September 30, 2002. These decreases were due to the discontinuance
of sales of NASCAR, Mary Kate and Ashley and Hello Kitty themed
products, partially offset by the start up sales from Nickelodeon
themed products.
iii) Licensing revenues were relatively unchanged at $2.0 million for the
three months ended September 30, 2003 as compared to the same period in
fiscal 2003. For the six month period ending September 30, 2003,
licensing revenues decreased to $5.2 million from $6.0 million in
fiscal 2003, which was primarily associated with a reduction in our
video licensing fees.
| ii) | A decrease in themed product sales to $4.5 and $10.2 million from $15.8 and $39.0 million for the three and nine months ended December 31, 2003 and December 31, 2002, respectively. These decreases were due to the discontinuance of sales of NASCAR, Mary Kate and Ashley and Hello Kitty themed products, partially offset by the continued introduction of Nickelodeon themed products. | ||
| iii) | Licensing revenues increased to $2.9 and $8.1 million from $1.5 and $7.5 million for the three and nine months ended December 31, 2003,respectively, associated with existing license agreements. |
Cost of Sales - Cost of sales for the three months ended September 30,December 31, 2003 decreased $25.0$7.6 million (33.7%)(12.8% of consumer electronic net revenues) to $49.0$52.0 million from $74.0$59.6 million for the three months ended September 30,December 31, 2002. For the sixnine months ended September 30,December 31, 2003 cost of sales decreased $44.9$52.5 million (37.3%)(29.1% of consumer electronic net revenues) to $75.6$127.7 million from $120.6$180.2 million for the sixnine months ended September 30,December 31, 2002. The decrease in cost of
sales in absolute terms for the three and six month periods was due to the lower
consumer electronics net revenues. In relative terms, cost of sales for the three months ended September 30,December 31, 2003 increased to 86.9%84.4% from 82.7%83.5% for the three months ended September 30,December 31, 2002. For the sixnine months ended September 30,December 31, 2003 cost of sales increased to 85.9%85.3% from 82.4%82.7% for the sixnine months ended September 30,December 31, 2002. TheIn relative terms, the increases in cost of sales for the three and sixnine month periods arewere due to lower sales of traditionally higher margin themed products, and lower margins on Emerson branded product, primarily attributable to competitive market conditions.
Gross profit margins continue to be subject to competitive pressures arising from lower pricing strategies associated withof the priceproduct categories ofin the consumer electronics market in which Emerson competes. Emerson'sEmerson’s branded products are generally placed in the low-to-medium priced category of the market.
Other Operating Costs and Expenses - Other operating costs and expenses, as a percentage of consumer electronics net revenues, increased to 2.3% from 1.0%1.5% and to 2.9%2.6% from 1.5% for the three and sixnine month periodperiods ended September 30,December 31, 2003 as compared to the same periods in fiscal 2003. In absolute terms, other operating costs and expenses increased to approximately $1.3$1.4 million from $896,000$1.1 million ($356,000 or 33.6%) and to approximately $2.5$4.0 million from $2.2$3.3 million ($712,000 or 21.9%)for the three and sixnine month periods ended September 30,December 31, 2003 as compared to the same periods in fiscal 2003, respectively. The increase for both the three and sixnine month period in absolute terms was primarily due to increased inventory servicing costs.
Selling, General and Administrative Expenses ("(“S,G&A"&A”) - S,G&A, decreased in
absolute termsincreased approximately $250,000 or 6.1%, to $3.9$4.3 million (6.9%(7.0% of the consumer electronics net revenues) from $5.8$4.1 million (6.4%(5.7% of the consumer
19
September 30,December 31, 2003 as compared to the three months ended September 30,December 31, 2002. For the sixnine months ended September 30,December 31, 2003, S,G&A decreased $1.4 million, or 10.2%, to $8.0$12.4 million (9.1%(8.3% of the consumer electronics net revenues) from $9.7$13.8 million (6.6%(6.3% of the consumer electronics net revenues). The increases in
19
absolute terms for the three months ended December were primarily due to increased legal fees. The decreases in absolute terms for the nine months ended December 31, 2003, resulted from decreases in: i.) payroll related costs of approximately $450,000; ii.) bad debt charges of approximately $1.3 million; and iii.) sales commissions of approximately $560,000. These decreases for the nine month period were partially offset by increases in legal fees and expenses associated with an unsuccessful acquisition of approximately $375,000 and $643,000, respectively.
Stock Based Costs - Stock Based Costs as a percentage of consumer electronics net revenues, increased to 0.8% from 0% and 0.3% from 0% for the three and nine month periods ended December 31, 2003 as compared to the same periods in fiscal 2003. In absolute terms, stock based costs increased to $487,000 from $19,000, and to $511,000 from $31,000 for the three and nine month periods ended December 31, 2003 as compared to the same periods in fiscal 2003, respectively. The increase for both the three and nine month periods in absolute terms was primarily due to the re-measurement of warrants in the current period that were issued in a prior period, and the issuance of additional warrants in the current period.
Interest Expense, net - Interest expense decreased $84,000 or 28.9%, to $207,000 (0.3% of the consumer electronics net revenues) for the six months ended September 30, 2002. The decreases in
absolute terms for the three months ended September were primarilyDecember 31, 2003, from decreases in payroll related costs of approximately $750,000 and a reduction in
bad debt charges of approximately $750,000. The decreases in absolute terms for
the six months ended September were primarily from decreases in payroll related
costs of approximately $580,000 and a reduction in bad debt charges of
approximately $920,000.
Interest Expense, net - Interest expense decreased to $250,000$291,000 (0.4% of the consumer electronics net revenues) for the three months ended September 30,December 31, 2002. For the nine months ended December 31, 2003, interest expense decreased $812,000 or 52.5%, to $735,000 (0.5% of the consumer electronics net revenues) from $645,000$1.5 million (0.7% of the consumer electronics net revenues) for the three monthssame period ended September 30, 2002,, and to $528,000 (0.6% of the consumer
electronics net revenues) for the six months ended September 30, 2003 from
$1,256,000 (0.9% of the consumer electronics net revenues) for the six months
ended September 30,December 31, 2002. The decreases in interest expense for the three and sixnine month periods waswere the result of lower average borrowings and lower borrowing costs.
Provision for Income Taxes - The provision for income taxes was $1.1$653,000 and $1.6 million and
$975,000 for the three and sixnine months ended September 30,December 31, 2003, respectively, as compared to $2.3$1.8 million and $4.2$6.0 million for the three and sixnine month periods ended September 30,December 31, 2002, respectively. The decreases in the provisions for the three and sixnine month periods ended September 30,December 31, 2003 were primarily the result of lower taxable income as compared to the same periods in fiscal 2003. The high
effective tax rate reflected in the statement of operations for the three and
six months ended September 30, 2003 was the result of our multinational tax
structure, which yields varying tax effective rates.
Net Income - As a result of the foregoing factors, the consumer electronics segment earned net income of $835,000 (1.5%$2.5 million (4.1% of net revenues) for the three months ended September 30,December 31, 2003 as compared to $5.9$4.5 million (6.6%(6.3% of net revenues) for the three months ended September 30,December 31, 2002. For the sixnine months ended September 30,December 31, 2003 the consumer electronics segment earned $329,000 (0.4%$2.8 million (1.9% of net revenues) as compared to $8.5$13.0 million (5.8%(6.0% of net revenues) for the sixnine months ended September 30,December 31, 2002.
SPORTING GOODS SEGMENT:
20
Sporting Goods Segment:
The following table summarizes certain financial information relating to the sporting goods segment as reported by SSG for the three and sixnine month periods ended September 30,December 31, 2003 and 2002 (in thousands):
20
Three Months Ended September 30 Six Months Ended September 30
--------------------------------- ---------------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
Net revenues $ 25,897 $ 25,544 $ 51,688 $ 51,951
Cost of sales 18,585 17,696 37,045 36,088
Selling, general &
Administrative 7,214 7,694 14,172 15,188
------------ ------------ ------------ ------------
Operating income 98 154 471 675
Interest expense, net (152) (143) (288) (319)
------------ ------------ ------------ ------------
Income (loss) before
income taxes, discontinued
operations and
cumulative effect of
accounting change (54) 11 183 356
Provision (benefit) for
income taxes (20) 4 69 134
Income (loss) from
discontinued operations (256) 15 (289) 10
Cumulative effect of
change in accounting
principle -- -- -- (7,442)
------------ ------------ ------------ ------------
Net income (loss) $ (290) $ 22 $ (175) $ (7,210)
============ ============ ============ ============
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| December 31 | December 31 | ||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||
| (Unaudited) | (Unaudited) | ||||||||||||||||
| Net revenues | $ | 14,726 | $ | 15,126 | $ | 59,705 | $ | 58,712 | |||||||||
| Cost of sales | 10,978 | 11,215 | 43,723 | 42,055 | |||||||||||||
| Selling, general & Administrative | 6,205 | 6,136 | 18,215 | 18,938 | |||||||||||||
| Operating loss | (2,457 | ) | (2,225 | ) | (2,233 | ) | (2,281 | ) | |||||||||
| Interest expense, net | (115 | ) | (114 | ) | (409 | ) | (430 | ) | |||||||||
| Loss before income taxes, discontinued operations and cumulative effect of accounting change | (2,572 | ) | (2,339 | ) | (2,642 | ) | (2,711 | ) | |||||||||
| Provision (benefit) for income taxes | — | 112 | — | — | |||||||||||||
| Income from discontinued operations | 3,153 | 92 | 3,048 | 584 | |||||||||||||
| Cumulative effect of change in accounting principle | — | — | — | (7,442 | ) | ||||||||||||
| Net income (loss) | $ | 581 | $ | (2,359 | ) | $ | 406 | $ | (9,569 | ) | |||||||
Net Revenues - Net revenues decreased $400,000 (2.6%) to $14.7 million from $15.1 million and increased $353,000 (1.4%$993,000 (1.7%) and decreased $263,000
(0.5%)to $59.7 million from $58.7 million for the three and sixnine month periods ended September 30,December 31, 2003 as compared
to the three and six month periods ended September 30, 2002. The increase in net
revenues for the three month period was the result of a $1.2 million increase in
core institutional revenues as a result of more aggressive pricing and other
revenue generating programs. This increase in revenues for the three month
period was partially offset by a $383,000 decrease in revenues generated from
SSG's wholly-owned subsidiary, Athletic Training Equipment Company, Inc.
("ATEC"), and a $422,000 decrease in revenues generated from our Team Dealer
operations. The decrease in revenues for the six month period was the result of
an $811,000 decrease in ATEC revenues and a $635,000 decrease in Team Dealer
revenues. This decrease was partially offset by a $1.2 million increase in core
institutional revenues. SSG expects continued revenue challenges in fiscal year
2004, due toDecember 31, 2002, respectively. These variances are primarily associated with increased competition, a decreased salesforce,sales force, continued restrictions in state, federal and school budgets, an overall soft economy, and declining participation and funding of youth sports organizations. SSG is continuing with its implementation of sales and marketing programs to stabilize revenues in a very competitive marketplace.
Cost of Sales - Cost of sales increaseddecreased by approximately $889,000 (5.0%$237,000 (2.1%) to $11.0 million from $11.2 million and $957,000 (2.7%increased $1.7 million (4.0%) to $43.7 million from $42.1 million for the three and sixnine month periods ended September 30,December 31, 2003, respectively, as compared to same periods last year. As a percentage of net revenues, cost of sales increased to 71.8%74.5% from 69.3%74.1%, and increased to 71.7%73.2% from 69.5%71.6% for the three and sixnine month periods ended September 30,December 31, 2003, respectively, as compared to the same periods in the prior 21
These increasesThe increase in cost of sales werefor the nine month period was primarily the result of more aggressive pricing pressure, and increases in SSG's importwithin the markets which SSG competes, increased freight and operationsincreased importing costs.
21
Selling, General and Administrative Expenses ("(“S,G&A"&A”) - S,G&A expenses increased approximately $69,000 (1.1%) to $6.2 million from $6.1 million and decreased approximately $480,000 (6.2%$723,000 (3.8%) and $1.0to $18.2 million (6.7%)from $18.9 million for the three and sixnine month periods ended September 30,December 31, 2003, respectively, as compared to the three and sixnine month periods ended September 30,December 31, 2002. As a percentage of sporting goods net revenues, SG&A increased to 42.1% from 40.6% and decreased to 27.9%30.5% from 30.1% and 27.4% from
29.2%32.3% for the three and sixnine month periods ended September 30,December 31, 2003, as compared to the same periods in fiscal 2003. The decreasesincreases in SG&A for the three and six
month periodsperiod were primarily a result of: i)of increases of approximately $216,000 and $152,000 in legal fees and sales and marketing expenses, respectively. These increases were partially offset by a decrease in payroll related expense of approximately $211,000$250,000 attributable to a reduced headcount. The decreases in SG&A for the threenine month period andwere primarily the result of decreases in payroll related expenses of approximately $524,000 for the six month period, attributable to reduced headcounts,$308,000 and ii) a decrease in sellingsales and promotional expensemarketing expenses of approximately $145,000 for the
three month period,$379,000. In addition, SSG has elected not to renew its Huffy and $377,000 for the six month period, primarily asAMF license agreements and expects a resultroyalty expense reduction in future fiscal years of reduced marketing spending. SSG expects continued decreases in S,G&A this
fiscal year as comparedapproximately $185,000, annually, without an offsetting reduction to the prior year due to ongoing cost reduction
programs.
revenues.
Interest Expense, net - Interest expense increased by approximately $9,000
(6.3%)was relatively unchanged for the three months ending December 31, 2003 as compared to the same period in the prior year, and decreased by $31,000 (9.7%$21,000 (4.9%) to $409,000 from $430,000 for the three and sixnine month periodsperiod ended September 30,December 31, 2003, as compared to the same periods in fiscal 2003. The cash received from the sale of SSG’s ATEC subsidiary in November 2003 resulted in a reduction of SSG’s debt, and is expected to reduce future interest expense.
Provision (benefit) for Income Taxes - ASSG recorded no income tax benefit of approximately $20,000
and a provision of $69,000 was recorded for the three monthsand nine month periods ended September 30,December 31, 2003, respectively, as compared to an incomea tax provision of approximately $4,000$112,000 and $134,000no tax provision for the three and six monthsnine month periods ended September 30, 2002. SSG has aDecember 31, 2002, respectively. Discontinued operations are reported net operating
loss carryforward included in net deferredof income tax assets that can be used to offset
future taxable income and can be carried forward for 15 to 20 years. We believe
the net deferred tax assets will be realized through tax planning strategies
available in future periods and future profitable operating results. Although
realization is not assured, we believe it is more likely than not that all of
the net deferred tax assets will be realized. The amount of the deferred tax
asset considered realizable, however, could be reduced or eliminated in the near
term if certain tax planning strategies are not successfully executed or
estimates of future taxable income during the carryforward period are reduced.provisions. See Note 6 – Income (loss)Taxes.
Income from Discontinued Operations - In July 2003, SSG– Discontinued operations reflect net operating losses related to our discontinued operations at Spaulding Athletic, SSG'sand sold team dealer located in Little Rock,
Arkansas. As a result, SSG has recorded lossesoperations, and the net income from discontinued operations,and net gain on sales of taxes, of approximately $256,000 and $289,000SSG’s ATEC subsidiary for the three and sixnine month periods ended September 30,December 31, 2003 respectively. These expenses include estimated
reserves for accounts receivable and inventory.
22
Cumulative Effect of Change in Accounting Principle - On March 30, 2002, SSG adopted Financial Accounting Standards Board Statement No. 142, "Goodwill“Goodwill and Other Intangible Assets"Assets” (SFAS 142). SFAS 142 requires that goodwill not be amortized but instead be tested for impairment at least annually by reporting unit. Goodwill is required to be tested for impairment in a transitional test upon adoption and then at least annually
22
by reporting unit. As a result of its impairment testing, SSG recorded a non-cash "cumulative“cumulative effect of accounting change"change” impairment write down of approximately $7.4 million for the sixnine month period ended September 30,December 31, 2002.
Net Income (Loss) - As a result of the foregoing factors, the sporting goods segment incurred aearned net lossincome of approximately $290,000$581,000 for the three months ended September 30,December 31, 2003 as compared to net incomeloss of $22,000$2.4 million for the three months ended September 30,December 31, 2002. For the sixnine months ended September 30,December 31, 2003 the sporting goods segment incurred aearned net lossincome of $175,000$406,000 as compared to a net loss of $7.2$9.6 million for the sixnine months ended September 30,December 31, 2002.
LIQUIDITY AND CAPITAL RESOURCES
Net
Liquidity and Capital Resources
Operating cash flow provided by continuing operating activities was $95,000approximately $6.1 million for the sixnine months ended September 30,December 31, 2003. Cash was primarily utilizedprovided from decreases in inventory, prepaid expenses and other current assets, partially offset by increasesan increase in accounts receivable and inventory, partially offset by a decrease in accounts payable and other current liabilities.
Operating cash flow provided by discontinued operations for the nine months ended December 31, 2003 was approximately $469,000 due to the results and disposals of SSG’s ATEC subsidiary and Team Dealer locations in Arkansas, Oklahoma and Kansas.
Net cash usedprovided by investing activities was $208,000approximately $10.2 million for the sixnine months ended September 30, 2003. Cash was utilized forDecember 31, 2003, due to the sale of ATEC shares of $10.5 million, offset by the purchase of fixed assets, which consisted mainly of computer and office equipment.
Net cash used for financing activities was $7.7approximately $21.3 million for the sixnine months ended September 30,December 31, 2003. Cash was primarily utilized for the reduction of borrowings and the repurchase of Emerson'sEmerson’s common stock. During the
six months ended September 30, 2003, 188,800 shares of Emerson's common stock
were repurchased at a cost of approximately $728,000.
Emerson and SSG maintain credit facilities as described in Note 9 -– Borrowings. At September 30,December 31, 2003, there were approximately $20.2$9.5 million of borrowings outstanding under these facilities, of which approximately
$6.7no letters of credit were outstanding. Approximately $2.6 million of borrowings were outstanding by Emerson and $13.5$6.9 million of borrowings were outstanding by SSG. No letters of creditAt December 31, 2003, Emerson and SSG were outstanding under
these facilities by either Emerson or SSGin compliance with the covenants in the Loan Agreements, as of September 30, 2003.
Twoamended.
Certain of our foreign subsidiaries maintain various credit facilities, as amended, aggregating $52.5$87.5 million with Hong Kong banks consisting of the following: (i) a $7.5two letter of credit facilities totaling $12.5 million credit facility withthat provide for a $2.5 million seasonal increase which isincrease. The facilities are used for inventory purchases and (ii) two
back-to-back letters of credit totaling $45 million. At
23
September 30, 2003, our Hong Kong subsidiary pledged $1.7require us to pledge approximately $3.0 million in certificates of deposit to this bank to assure thefor such availability and, (ii) four back-to-back
23
letter of the $7.5credit facilities totaling $75 million credit facility andthat require a $2.5 million seasonal line increase.compensating cash balance of $1.5 million. At September
30,December 31, 2003, there were approximately $5.8$7.3 million and $8.7 million,$502,000, respectively, of letters of credit outstanding under these credit facilities.
At present, we believe that future cash flow from operations and our existing institutional financing noted above will be sufficient to fund all of our cash requirements for the next twelve months.
The following summarizes our obligations at September 30,December 31, 2003 for the periods shown (in thousands):
PAYMENT DUE BY PERIOD
-------------------------------------------------------
LESS THAN 1 1 - 3 3 - 5 MORE THAN
TOTAL YEAR YEARS YEARS 5 YEARS
-------- ----------- ------- --------- ---------
Notes Payable $ 20,152 $ 2,632 $ 4,025 $ 13,495 $ --
Capital lease obligations 33 24 9 -- --
Leases 7,985 2,593 4,045 1,347 --
-------- ----------- ------- --------- ---------
Total $ 28,170 $ 5,249 $ 8,079 $ 14,842 $ --
======== =========== ======= ========= =========
| Payment due by period | ||||||||||||||||||||
| Less than 1 | More than 5 | |||||||||||||||||||
| Total | year | 1 – 3 years | 3 – 5 years | years | ||||||||||||||||
| Notes Payable | $ | 9,335 | $ | 9 | $ | 2,450 | $ | 6,876 | $ | — | ||||||||||
| Capital lease obligations | 119 | 62 | 57 | — | — | |||||||||||||||
| Leases | 4,601 | 1,816 | 2,091 | 694 | — | |||||||||||||||
| Total | $ | 14,055 | $ | 1,887 | $ | 4,598 | $ | 7,570 | $ | — | ||||||||||
There were no material capital expenditure commitments and no substantial commitments for purchase orders outside the normal purchase orderscourse of business used to secure product as of September 30,December 31, 2003.
CONTINGENCIES
Contingencies
During the past several years, SSG used the services of Strategic Technologies, Inc. ("STI"(“STI”) to process their outbound truck freight bills. STI audited SSG'sSSG’s freight bills and provided a listing of freight invoices that were scheduled for payment, at which time SSG transferred funds to STI. STI was required to issue checks to the various carriers within forty-eight (48) hours of receipt of SSG'sSSG’s funds. STI filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code on July 19, 2002, which was converted to Chapter 7 of the U.S. Bankruptcy Code on July 31, 2002. In certain circumstances, SSG has had to pay their freight carriers for invoices that were previously paid to STI and to attemptis attempting to recover such monies from STI. SSG has filed a proof of claim of approximately $593,000 for unpaid shipping charges and service fees paid to STI. No assurance can be made that SSG will be able to recover such money.
During the past several years, SSG used the services of Consolidated Freightways Corporation to ship product to it'sits customers. Consolidated Freightways Corporation filed for reorganization under Chapter 11 of the U. S. Bankruptcy Code on SeptemberDecember 2, 2002, in the United States Bankruptcy Court in the District of California, Case No. RS 02-24284-MG. On August 25, 2003, the Bankruptcy Trustee for Consolidated
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Consolidated
Freightways Corporation of Delaware filed a lawsuit in the United States Bankruptcy Court, Central District of California,to collect fees for the transportation of goods, that are alleged to be owed to the bankruptcy estate. The Trustee'sTrustee’s initial claim is $866,684, which includes approximately $265,000 in collection fees and late payment charges. SSG disputes the amount claimed by the Trustee and claims an offset of approximately $308,000 for goods lost or damaged by Consolidated Freightways in transit.
It is not possible at this time to determine the ultimate liabilities or recoveries that we may incur resulting from these lawsuits, claims, and proceedings. If these matters were to be ultimately resolved unfavorably at amounts exceeding our reserves, an outcome not currently anticipated, it is possible that such outcome could have a material adverse effect on our consolidated financial position or results of operations.
CRITICAL ACCOUNTING POLICIES
Critical Accounting Policies
For the three and sixnine month periods ended September 30,December 31, 2003, there were no significant changes to our accounting policies from those reported in Form 10-K for the fiscal year ended March 31, 2003.
INFLATION, FOREIGN CURRENCY, AND INTEREST RATES
Inflation, Foreign Currency, and Interest Rates
Neither inflation nor currency fluctuations had a significant effect on our results of operations during the first or second quarterthree quarters of fiscal 2004. Our exposure to currency fluctuations has been minimized by the use of U.S. dollar denominated purchase orders, and by sourcing production in more than one country. The consumer electronics segment purchases virtually all of its products from manufacturers located in various Asian countries.
The interest on borrowings under our credit facilities is based on the prime and LIBOR rate. We believe that given the present economic climate, interest rates are not expected to increase significantly during the coming year.
RECENT PRONOUNCEMENTS OF THE FINANCIAL ACCOUNTING STANDARDS BOARD
Recent Pronouncements of the Financial Accounting Standards Board
In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46 ("(“FIN 46"46”), "Consolidation“Consolidation of Variable Interest Entities,"” which addresses consolidation of variable interest entities ("VIE's"(“VIE’s”). FIN 46 requires a variable interest entity to be consolidated by a parent company if that company is subject to a majority of the risk of loss from the variable interest entity'sentity’s activities or entitled to receive a majority of the entity'sentity’s residual
25
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other legal structure used for business purposes that either does not have equity investors with voting rights or has equity investors that do not provide sufficient financial resources for the entity to support its activities. In October 2003, the FASB agreed to defer the effective date of FIN 46 for variable interest held by public companies in all entities that were acquired prior to February 1, 2003. This deferral is to allow time for certain implementation issues to be addressed through the issuance of a potential modification to the interpretation. The deferral revised the effective date for consolidation of these entities until the end of the first interim or annual period ending after December 15, 2003. We doadopted this statement as of December 31, 2003 and it did not believe that FIN 46 will have any material impact on our financial statements.
In April 2003, the FASB issued FAS 149, "Amendment“Amendment of Statement 133 on Derivative Instruments and Hedging Activities."” FAS 149 amends and clarifies financial accounting and reporting for derivative instruments. This statement is effective for contracts entered into or modified after June 30, 2003. We adopted this statement as of July 1, 2003 and it did not have any material impact on our financial statements.
In May 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 150 (SFAS 150), "Accounting“Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity,"” which addresses how an issuer classifies and measures financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances) because that financial instrument embodies an obligation of the issuers. This Statement shall be effective for financial instruments entered into or modified after May 31, 2003, and otherwise shall be effective (except for certain measurement requirements, the effective date of which has been deferred indefinitely) at the beginning of the first interim period beginning after June 15, 2003. For financial instruments created before the issuance date of this Statement and still existing at the beginning of the interim period of adoption, transition shall be achieved by reporting the cumulative effect of a change in an accounting principle by initially measuring the financial instruments at fair value or other measurement attribute required by this Statement. We adopted this statement as of July 1, 2003 and it did not have any material impact on our financial statements.
FORWARD-LOOKING INFORMATION
Forward-Looking Information
This report contains various forward-looking statements made pursuant to the safe harbor provisions under the Private Securities Litigation Reform Act of 1995 (the "Reform Act"“Reform Act”) and information that is based on management'smanagement’s beliefs as well as assumptions made by and information currently available to management. Although we believe that the expectations reflected in such forward-
26
lookingforward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. When used in this report, the words "anticipate"“anticipate”, "believe"“believe”,
26
“estimate”, "estimate"“expect”, "expect"“predict”, "predict", "project"“project”, and similar expressions are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements which speak only as of the date hereof, and should be aware that our actual results could differ materially from those contained in the forward-looking statements due to a number of factors, including the statements under "Risk Factors"“Risk Factors” set forth in our Form 10-K for the fiscal year ended March 31, 2003 and other filings with the Securities and Exchange Commission (the "SEC"“SEC”). For additional risk factors as they relate to the sporting goods segment, see SSG'sSSG’s Form 10-K for the fiscal year ended March 28, 2003 Item 7 - "Certain– “Certain Factors that May Affect the Company'sCompany’s Business or Future Operating Results"Results” and other filings with the SEC. We undertake no obligation to publicly release the results on any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
ITEM
We maintain a website at www.emersonradio.com. We make available on our website the proxy statements and reports on Forms 8-K, 10-K and 10-Q that we file with the SEC and other filings with the SEC with respect to our securities as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKQuantitative and Qualitative Disclosures About Market Risk
There have been no significant changes from items disclosed in Form 10-K for the fiscal year ended March 31, 2003.
ITEM
Item 4. CONTROLS AND PROCEDURES
(a) Disclosure controlsControls and procedures. As of the end of the
period covered by this Quarterly Report on Form 10-Q, the
Company carried out an evaluation, with the participation of
the Company's management, including the Company's Chief
Executive Officer and Chief Financial Officer, of the
effectiveness of the Company's disclosure controls and
procedures pursuant to Securities Exchange Act Rule 13a-15.
Based upon that evaluation, the Company's Chief Executive
Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures are effective in
ensuring that information required to be disclosed by the
Company in the reports that it files or submits under the
Securities Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the SEC's rules
and forms.
(b) Procedures
| (a) | Disclosure controls and procedures. As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-15. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. | ||
| (b) | Changes in internal controls |
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PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Legal Proceedings.
Putative Class Actions
The following
Between September 4, 2003 and October 30, 2003, several putative class action lawsuits have beenwere filed in the United States District Court for the District of New Jersey against us and Mssrs. Geoffrey Jurick, Kenneth Corby and John Raab (the "Individual Defendants"“Individual Defendants”) on behalf of purchasers of our publicly traded securities who bought shares between January 29, 2003 and August 12, 2003 (the "Class Period"“Class Period.”): Kaplan v. On December 17, 2003, the Court entered a Joint Stipulation and Order consolidating these putative class actions under the caption In Re Emerson Radio Corp., et al. 03-cv-4202; Pelone v. Emerson Radio Corp., et al.
03-cv-4201; Howard v. Jurick, et al. 03-cv-4330; Glascoff v. Emerson Radio
Corp., et al. 03-cv-4506; Stromer v. Emerson Radio Corp., et al. 03-cv-4647;
Kaplan v. Emerson Radio Corp., et al.03-cv-4856; Freitag v. Emerson Radio Corp.,
et al. 03-cv-5140; which filing dates were: September 4, 2003, September 5,
2003, September 12, 2003, September 23, 2003, October 1, 2003, October 14, 2003 Securities Litigation, 03cv4201 (JLL) (the “Consolidated Action.”) Further to that Stipulation and October 30, 2003, respectively.
TheOrder, lead plaintiff was appointed and co-lead counsel and co-liaison counsel were approved by the Court in the Consolidated Action.
Generally, the original complaints allege that we and the Individual Defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated there under, by issuing certain positive statements during the Class Period regarding our growth and demand for our products. The complaints further allege that these statements were each materially false and misleading when made because we allegedly misrepresented and omitted certain adverse facts which then existed and disclosure of which was necessary to make the statements not false and misleading. It
The lead plaintiff in the Consolidated Action is possible thatcurrently scheduled to file an Amended and Consolidated Complaint on or about March 15, 2004, which may contain additional class
action complaints will be filed against us and the Individual Defendants. No
court has yet made any rulings with respect to these complaints, including
whether these lawsuits will be able to proceed as class actions.allegations. We and the Individual Defendants intend to defend these lawsuits vigorously.
For other information on litigation to which we are a party, reference is made to Part 1 Item-3-Legal Proceedings in the Company'sour most recent annual report on Form 10-K.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None
ITEM 3. DEFAULT UPON SENIOR SECURITIES.
(a) None
(b) None
Changes in Securities and Use of Proceeds.
Issuance of Securities:
In October 2003, in connection with a consulting arrangement, we granted warrants to purchase 50,000 shares of our common stock with an exercise price of $5.00 per share. In addition, in November 2003, we issued 45,544 shares of our common stock upon exercise of 100,000
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting
outstanding warrants under a cashless transaction. These securities were issued in transactions not involving a public offering and exempt from registration under Section 4(2) of the Company's shareholders was held on
September 4, 2003, at which time the shareholders elected theSecurities Act of 1933, as amended.
Share Repurchases:
The following slate of nominees to remain on the Board of Directors: Robert H. Brown,
Jr., Peter G. Bunger, Jerome H. Farnum, Stephen H. Goodman and Geoffrey
P. Jurick. Election of the Board of Directors was the only matter
submitted for shareholder vote. There were 27,562,560 shares of
outstanding capitaltable summarizes Emerson Radio Corp.’s common stock of the Company entitled to vote at the record
date for this meeting and there were present at such meeting, in person
or by proxy, stockholders holding 25,601,943 shares of the Company's
Common Stock, which represented 92.9% of the total capital stock
outstanding and entitled to vote. There were 25,601,943 shares voted on
the matter of the election of directors. The result of the votes cast
regarding each nominee for office was:
Nominee for Director Votes For Votes Withheld
-------------------- --------- --------------
Robert H. Brown, Jr. 25,162,365 439,578
Peter G. Bunger 23,081,232 2,520,711
Jerome H. Farnum 25,161,365 440,578
Stephen H. Goodman 25,155,225 446,718
Geoffrey P. Jurick 23,512,251 2,089,692
ITEM 5. OTHER INFORMATION.
(a) None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS:
10.29 Separation Agreement dated September 15, 2003 between SSG and John P.
Walker (incorporated by reference to Exhibit 10.1 of Sport Supply's
Quarterly Report on Form 10-Qshare repurchase program for the quarter endedending December 31, 2003. The share repurchase program was publicly announced in September 26,
2003)2003 to repurchase up to 2,000,000 shares of Emerson’s outstanding common stock. Share repurchases are made from time to time in open market transactions in such amounts as determined in the discretion of Emerson’s management within the guidelines set forth by the Securities and Exchange Act Rule 10B (18). 10.35.2 Third AmendmentPrior to Loanthe December 31, 2003 quarter, we repurchased 188,800 shares under this program.
| Cumulative | ||||||||||||||||
| Number of | Maximum Number | |||||||||||||||
| Shares Purchased | of Shares that | |||||||||||||||
| as Part of | May Yet Be | |||||||||||||||
| Total Number | Average | Publicly | Purchased | |||||||||||||
| of Shares | Price Paid | Announced | Under the | |||||||||||||
| Period | Purchased | Per Share | Programs | Programs | ||||||||||||
| October 01, 2003 through October 31, 2003 | 267,000 | $ | 3.99 | 455,800 | 1,544,200 | |||||||||||
| November 01, 2003 through November 30, 2003 | 84,425 | $ | 3.76 | 540,225 | 1,459,775 | |||||||||||
| December 01, 2003 through December 31, 2003 | 245,100 | $ | 3.39 | 785,325 | 1,214,675 | |||||||||||
| TOTAL | 596,525 | $ | 3.71 | |||||||||||||
ITEM 3. Default Upon Senior Securities.
| (a) | None | ||
| (b) | None |
ITEM 4. Submission of Matters to a Vote of Security Holders.
| None |
ITEM 5. Other Information.
| (a) | None |
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ITEM 6. Exhibits and Security Agreement dated November 6, 2003
by and between Sport Supply Group, Inc. and Congress Financial
Corporation (incorporated by reference to Exhibit 10.4 of Sport
Supply's Quarterly ReportReports on Form 10-Q for the quarter ended September
26, 2003).
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31.1 Certification of the Company's Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*
31.2 Certification of the Company's Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*
32 Certification of the Company's Chief Executive Officer and Chief
Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
(b) REPORTS ON FORM 8-K - Current report on Form 8-K, dated July 14, 2003
furnishing the press release announcing the Company's financial results
for the year ended March 31, 2003.
Current report on Form 8-K, dated July 18, 2003, related to the
earnings teleconference.
Current report on Form 8-K, dated August 12, 2003, furnishing the press
release announcing the Company's financial results for the quarter
ended June 30, 2003.
Current report on Form 8-K, dated August 15, 2003, for the purpose of
furnishing the definition of free cash flow which was discussed on
Emerson's teleconference on August 12, 2003.
Current report on Form 8-K, dated September 2, 2003 furnishing the
press release announcing the Company's share repurchase program.
Current report on Form 8-K, dated September 10, 2003 furnishing the
press release announcing the appointment of S & I Electronics Plc as
its Master Distributor in the United Kingdom.
Current report on Form 8-K, dated November 14, 2003, furnishing the
press release announcing the Company's financial results for the
quarter ended September 30, 2003.
- ---------------------
8-K.
| (a) | Exhibits: | |
| 10.27.1 | Amendment to Revolving Credit and Term Loan Agreement (Number One) dated November 7, 2003 among Emerson Radio Corp., Majexco Imports, Inc., Emerson Radio (Hong Kong) Ltd., and Emerson Radio international Ltd. Jointly and Severally, and PNC Bank, National Association.* | |
| 10.27.2 | Amendment to Revolving Credit and Term Loan Agreement (Number Two) dated December 31, 2003 among Emerson Radio Corp., Majexco Imports, Inc., Emerson Radio (Hong Kong) Ltd., and Emerson Radio international Ltd. Jointly and Severally, and PNC Bank, National Association.* | |
| 10.28.1 | Form of Common Stock Warrant Agreement entered into on October 7, 2003 by and between Emerson Radio Corp. and Ladenburg Thalmann & Co., Inc.* | |
| 10.35.3 | Fourth Amendment to Loan and Security Agreement dated December 29, 2003 by and between Sport Supply Group, Inc. and Congress Financial Corporation (incorporated by reference to Exhibit 10.1 of Sport Supply’s Quarterly Report on Form 10-Q for the quarter ended December 26, 2003). | |
| 31.1 | Certification of the Company’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* | |
| 31.2 | Certification of the Company’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* | |
| 32 | Certification of the Company’s Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* | |
| (b) | Reports on Form 8-K: | |
| Current report on Form 8-K, dated November 14, 2003, furnishing the press release announcing the Company’s financial results for the quarter ended September 30, 2003. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
EMERSON RADIO CORP.
-------------------
(Registrant)
Date: November 14, 2003 /s/ Geoffrey P. Jurick
-----------------------
Geoffrey P. Jurick
Chairman of the Board,
Chief Executive Officer and
President
(Principal Executive Officer)
Date: November 14, 2003 /s/ Kenneth A. Corby
--------------------
Kenneth A. Corby
Executive Vice President and
Chief Financial Officer
(Principal Finance and
Accounting Officer)
| EMERSON RADIO CORP. | ||||
| (Registrant) | ||||
| Date: February 17, 2004 | /s/ Geoffrey P. Jurick | |||
| Geoffrey P. Jurick | ||||
| Chairman of the Board, | ||||
| Chief Executive Officer and | ||||
| President | ||||
| (Principal Executive Officer) | ||||
| Date: February 17, 2004 | /s/ Kenneth A. Corby Kenneth A. Corby | |
| Kenneth A. Corby | ||
| Executive Vice President and | ||
| Chief Financial Officer | ||
| (Principal Finance and | ||
| Accounting Officer) |
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