SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,Washington, D.C. 20549FORM 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-------------------------------------------------or[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
[] 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(Exact name of registrant as specified in its charter)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)
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(Registrant’s telephone number, including area code)- -------------------------------------------------------------------------------- (Former(Former name, former address, and former fiscal year, if changed since last report)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.February 9, 2004: 26,723,983. TABLE OF CONTENTSPART I
-– FINANCIAL INFORMATIONITEMItem 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 income907 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 principle313 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) ASSETSCurrent 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 assets84,815 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’ EQUITYCurrent 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 liabilities37,007 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 - $.01 par value, 75,000,000 shares authorized; 52,310,350 and 51,981,431 shares issued; 26,956,683 and 27,413,089 shares outstanding, respectively 523 520 Capital in excess of par value 115,912 115,122 Accumulated other comprehensive losses (100 ) (104 ) Accumulated deficit (44,887 ) (47,936 ) Treasury stock, at cost 25,353,667 and 24,568,342 shares, respectively (22,618 ) (19,675 ) Total shareholders’ equity52,140 51,237 Total Liabilities and Shareholders’ Equity$ 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 PRESENTATIONThe 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 throughEmerson'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 andsixnine month periods endedSeptember 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("(“fiscal2003"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 endedSeptember 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("(“fiscal2004"2004”).Emerson and SSG have elected to follow Accounting Principles Board Opinion No. 25,
"Accounting“Accounting for Stock Issued to Employees:("(“APB25"25”) and related Interpretations in accounting for its employee stock options. Under APB 25, because the exercise price ofthe Company's 5our employee stock options equals or exceeds the market price of the underlying stock on date of grant, no compensation expense is recognized. Emerson and SSG have adopted the disclosure-only provisions under Statement of Financial Accounting Standards No. 123, "Accounting“Accounting for Stock-BasedCompensation" ("Compensation” (“SFAS123"123”). For the purposes of SFAS 123 pro forma disclosures, the estimated fair value of the options is amortized to expense over theoptions'options’ vesting periods.The Company'sOur pro forma information for the three andsixnine month periods endedSeptember 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.6NOTE 2 - COMPREHENSIVE INCOME
Our comprehensive income for the three and
sixnine month periods endedSeptember 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 approximately936,000907,000 options with exercise prices ranging from $1.00 to $1.50 and SSG had outstanding approximately272,000239,000 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 andsixnine month periods endingSeptember 30,December 31, 2003, and$12,334$18,501 and$12,334$30,835 for the three andsixnine month periods endingSeptember 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 IntangibleAssets"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 accounting9principle"principle” of approximately $5.5 million ($0.19 per diluted share for thesixnine month period endedSeptember 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 thefollowing: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("(“LoanAgreement"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 million10revolving line of credit replaced 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.TheLoan 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 amountbased onis established by specified percentages of eligible accounts receivables and inventories and bears interest ranging from Prime plus 0.50% to 1.25% or, atEmerson'sEmerson’s election, LIBOR plus 2.00% to 2.75% depending on certain financial covenants. The interest rate charged on theterm loan rangesTerm Loan ranged from Prime plus 1.00% to 1.75% or, atEmerson'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,repurchasingEmerson'sEmerson’s common stock and entering into certain transactions without thelender'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 ofEmerson'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 millionwasoutstanding underthis 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, Emersonwas in compliance with the covenants contained in thesenior 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 amendedit'sits Loan and Security Agreement to financeit'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 wereincreased 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 specified11percentages of eligible accounts receivables and inventories. Amounts outstanding under the senior credit facility are secured by substantially all the assets of SSG and its subsidiaries. Pursuant to the loan documents governing this line of credit, SSG is restricted from, among other things, paying cash dividends and entering into certain transactions without the 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
sixnine month periods endedSeptember 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 12
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 ) NOTE 11
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 $ 35612NOTE 12- LEGAL PROCEEDINGSPutative Class Actions
The followingBetween 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, 2003Securities Litigation, 03cv4201 (JLL) (the “Consolidated Action.”) Further to that Stipulation andOctober 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.It13
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 additionalclass 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 OPERATIONSDuring 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 13full line of athletic products, and was the only such team dealer owned by SSG in this regional marketplace. OnIn July
15,2003, SSG discontinued operations atSpaulding 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).
September 30, 2003 ---------Current assets $ 364 Current liabilities (110) --------- Net current assets $ 254 =========
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS ENDED ENDED ENDED ENDED SEPTEMBER SEPTEMBER SEPTEMBER SEPTEMBER 30, 2003 30, 2002 30, 2003 30, 2003Net revenues $ 170 $ 543 $ 219 $ 909 ============ ============ ============= ============= Earnings(loss) from Operations $ (305) $ 20 $ (358) $ 12 Income tax (provision)benefit 49 (5) 69 (2) ------------ ------------ ------------- ------------- Total discontinued operations $ (256) $ 15 $ (289) $ 10 ============ ============ ============= =============NOTE 14 - SUBSEQUENT EVENTS During February 1999, SSG acquired substantially all of the assets of Larry Black Sporting Goods, Inc., a team dealer with locations in Enid, Oklahoma and Wichita, Kansas. Larry Black Sporting Goods, Inc. serviced local and institutional customers and teams with a full line of athletic products.In October 2003, SSG discontinued operations atit'sits team dealer located in Enid,Oklahoma. In addition,Oklahoma and in November 2003,SSGsold substantially all the assets (other than cash and accounts receivable) of its team dealer located in Wichita, Kansas.14These closures and sales of assets, and related discontinued operations resulted in a loss of approximately $780,000 for the three months ended December 31, 2003, which combined with the previously recorded loss recognized totaled $1.2 million for the nine months ended December 31, 2003. On November 18, 2003, SSG sold all of the issued and outstanding capital stock of ATEC, resulting in a net gain of approximately $3.8 million. The results of these transactions are included in discontinued operations in the accompanying Consolidated Statement of Operations for the three and nine month periods ended December 31, 2003. See Note 1 - Background and Basis of Presentation. 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 andthe 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
September 30, 2003 -----------Current assets $ 2,214 Current liabilities (994) ----------- Net current assets $ 1,220 ===========Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS ENDED ENDED ENDED ENDED SEPTEMBER SEPTEMBER SEPTEMBER SEPTEMBER 30, 2003 30, 2002 30, 2003 30, 2002Net revenues $ 1,233 $ 1,833 $ 2,455 $ 3,363 ============ ============ ============= ============= Earnings(loss) from operations $ 55 $ 14 $ 23 $ (42) ============ ============ ============= =============ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Management'sManagement’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 endedSeptember 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 endedSeptember 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 endedSeptember 30,December 31, 2002. The decreases for both the three andsixnine 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 endedSeptember 30,December 31, 2003 and December 31, 2002 increased to82.1%82.5% and80.6%81.9% from79.7%81.8% and79.0%80.4%, respectively. The increase in cost of sales as a percentage of net revenues for the three andsixnine month periodswerewas 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 andsixnine month periods of fiscal 2004 as compared to the same periods in fiscal2003.2003, 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% from0.8%1.2% for the three months endedSeptember 30,December 31, 2003 compared to the same period in fiscal 2003. For thesixnine months endedSeptember 30,December 31, 2003, other operating costs, as a percentage of consolidated net revenues, increased to1.8%1.9% from 1.1%forcompared to the same period in fiscal 2003. In absolute terms other operating costs and expenses increasedby $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 andsixnine month periods of fiscal 2004 as compared to the same periods in fiscal2003.2003, respectively.Selling, General and Administrative Expenses
("(“S,G&A"&A”) - S,G&A, as a percentage of consolidated net revenues, were13.5%13.8% for the three months endedSeptember 30,December 31, 2003 as compared to11.7%11.9% for the three months endedSeptember 30,December 31, 2002. For thesixnine months endedSeptember 30,December 31, 2003, S,G&A,16as a percentage of consolidated net revenues, were 15.9%14.6% as compared to12.5%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 andsixnine month periodsended September 30, 2003of fiscal 2004 as compared to the same periods in fiscal2003 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 endedSeptember 30, 2003 from $788,000 (0.6% of net revenues) for the three months ended September 30,December 31, 2002. For thesixnine months endedSeptember 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 borrowingsin the consumer electronics segmentand 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 endedSeptember 30,December 31, 2003 and2002, 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 endedSeptember 30,December 31, 2003 and 2002werewas primarily theresultsresult of utilizing previously recognized net operating loss carryforwards from the consumer electronics segment. Thehighhigher effective tax ratereflected in the consolidated statement of operationsfor the three andsixnine months endedSeptember 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 ofit'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 recordedlossesgains from discontinued operations ofapproximately $289,000$3.2 million and $3.0 million for thesix month periodthree and nine months endedSeptember 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 IntangibleAssets"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 accountingchange"change” of approximately $5.5 million for thesixnine months endedSeptember 30,December 31, 2002, due to the impairment of all of the goodwill attributed to theCompany'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 andsixnine months endedSeptember 30,December 31, 2003 as compared to17$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 endedSeptember 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 endedSeptember 30,December 31, 2002. For thesixnine months endedSeptember 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 thesixnine months endedSeptember 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 salesrepresentsrepresent 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 andsixnine 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 endedSeptember 30,December 31, 2002. For thesixnine months endedSeptember 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 thesixnine months endedSeptember 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 endedSeptember 30,December 31, 2003 increased to86.9%84.4% from82.7%83.5% for the three months endedSeptember 30,December 31, 2002. For thesixnine months endedSeptember 30,December 31, 2003 cost of sales increased to85.9%85.3% from82.4%82.7% for thesixnine months endedSeptember 30,December 31, 2002.TheIn relative terms, the increases in cost of sales for the three andsixnine month periodsarewere 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 thepriceproduct categoriesofin 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 to2.9%2.6% from 1.5% for the three andsixnine monthperiodperiods endedSeptember 30,December 31, 2003 as compared to the same periods in fiscal 2003. In absolute terms, other operating costs and expenses increased toapproximately $1.3$1.4 million from$896,000$1.1 million ($356,000 or 33.6%) and toapproximately $2.5$4.0 million from$2.2$3.3 million ($712,000 or 21.9%)for the three andsixnine month periods endedSeptember 30,December 31, 2003 as compared to the same periods in fiscal 2003, respectively. The increase for both the three andsixnine 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 consumer19electronics net revenues) for the three months ended September 30,December 31, 2003 as compared to the three months endedSeptember 30,December 31, 2002. For thesixnine months endedSeptember 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 in19
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 thethree months endedSeptember were primarilyDecember 31, 2003, fromdecreases 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 endedSeptember 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 thethree monthssame period endedSeptember 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 andsixnine month periodswaswere 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 millionand $975,000for the three andsixnine months endedSeptember 30,December 31, 2003, respectively, as compared to$2.3$1.8 million and$4.2$6.0 million for the three andsixnine month periods endedSeptember 30,December 31, 2002, respectively. The decreases in the provisions for the three andsixnine month periods endedSeptember 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 endedSeptember 30,December 31, 2003 as compared to$5.9$4.5 million(6.6%(6.3% of net revenues) for the three months endedSeptember 30,December 31, 2002. For thesixnine months endedSeptember 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 thesixnine months endedSeptember 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 endedSeptember 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 andsixnine month periods endedSeptember 30,December 31, 2003as compared to the threeandsix 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 decreasedsalesforce,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 andsixnine month periods endedSeptember 30,December 31, 2003, respectively, as compared to same periods last year. As a percentage of net revenues, cost of sales increased to71.8%74.5% from69.3%74.1%, andincreasedto71.7%73.2% from69.5%71.6% for the three andsixnine month periods endedSeptember 30,December 31, 2003, respectively, as compared to the same periods in the prior21fiscal year. These increasesThe increase in cost of saleswerefor the nine month period was primarily the result of more aggressive pricingpressure, and increases in SSG's importwithin the markets which SSG competes, increased freight andoperationsincreased 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 andsixnine month periods endedSeptember 30,December 31, 2003, respectively, as compared to the three andsixnine month periods endedSeptember 30,December 31, 2002. As a percentage of sporting goods net revenues, SG&A increased to 42.1% from 40.6% and decreased to27.9%30.5% from30.1% and 27.4% from 29.2%32.3% for the three andsixnine month periods endedSeptember 30,December 31, 2003, as compared to the same periods in fiscal 2003. Thedecreasesincreases in SG&A for the threeand sixmonthperiodsperiod were primarily a resultof: 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 thethreenine month periodandwere primarily the result of decreases in payroll related expenses of approximately$524,000 for the six month period, attributable to reduced headcounts,$308,000 andii)a decrease insellingsales andpromotional 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 aresultroyalty expense reduction in future fiscal years ofreduced marketing spending. SSG expects continued decreases in S,G&A this fiscal year as comparedapproximately $185,000, annually, without an offsetting reduction tothe 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 thethree and sixnine monthperiodsperiod endedSeptember 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 taxbenefit of approximately $20,000 and aprovisionof $69,000 was recordedfor the threemonthsand nine month periods endedSeptember 30,December 31, 2003, respectively, as compared toan incomea tax provision of approximately$4,000$112,000 and$134,000no tax provision for the three andsix monthsnine month periods endedSeptember 30, 2002. SSG has aDecember 31, 2002, respectively. Discontinued operations are reported netoperating loss carryforward included in net deferredof income taxassets 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 discontinuedoperations at Spaulding Athletic, SSG'sand sold team dealerlocated in Little Rock, Arkansas. As a result, SSG has recorded lossesoperations, and the net income fromdiscontinued operations,and net gain on sales oftaxes, of approximately $256,000 and $289,000SSG’s ATEC subsidiary for the three andsixnine month periods endedSeptember 30,December 31, 2003respectively. These expenses include estimated reserves for accounts receivableandinventory. 222002. See Note 12 – Discontinued Operations. Cumulative Effect of Change in Accounting Principle - On March 30, 2002, SSG adopted Financial Accounting Standards Board Statement No. 142,
"Goodwill“Goodwill and Other IntangibleAssets"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 annually22
by reporting unit. As a result of its impairment testing, SSG recorded a non-cash
"cumulative“cumulative effect of accountingchange"change” impairment write down of approximately $7.4 million for thesixnine month period endedSeptember 30,December 31, 2002.Net Income (Loss) - As a result of the foregoing factors, the sporting goods segment
incurred aearned netlossincome of approximately$290,000$581,000 for the three months endedSeptember 30,December 31, 2003 as compared to netincomeloss of$22,000$2.4 million for the three months endedSeptember 30,December 31, 2002. For thesixnine months endedSeptember 30,December 31, 2003 the sporting goods segmentincurred aearned netlossincome of$175,000$406,000 as compared to a net loss of$7.2$9.6 million for thesixnine months endedSeptember 30,December 31, 2002.LIQUIDITY AND CAPITAL RESOURCES NetLiquidity and Capital Resources
Operating cash flow provided by continuing operating activities was
$95,000approximately $6.1 million for thesixnine months endedSeptember 30,December 31, 2003. Cash was primarilyutilizedprovided from decreases in inventory, prepaid expenses and other current assets, partially offset byincreasesan increase in accounts receivable andinventory, partially offset bya 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 thesixnine months endedSeptember 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 thesixnine months endedSeptember 30,December 31, 2003. Cash was primarily utilized for the reduction of borrowings and the repurchase ofEmerson'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. AtSeptember 30,December 31, 2003, there were approximately$20.2$9.5 million of borrowings outstanding under these facilities, of whichapproximately $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 wereoutstanding under these facilities by either Emerson or SSGin compliance with the covenants in the Loan Agreements, asof September 30, 2003. Twoamended.Certain of our foreign subsidiaries maintain
variouscredit facilities, as amended, aggregating$52.5$87.5 millionwith Hong Kong banksconsisting of the following: (i)a $7.5two letter of credit facilities totaling $12.5 millioncredit facility withthat provide for a $2.5 million seasonalincrease which isincrease. The facilities are used for inventory purchases and(ii) two back-to-back letters of credit totaling $45 million. At 23September 30, 2003, our Hong Kong subsidiary pledged $1.7require us to pledge approximately $3.0 million in certificates of depositto this bank to assure thefor such availability and, (ii) four back-to-back23
letter of
the $7.5credit facilities totaling $75 millioncredit facility andthat require a$2.5 million seasonal line increase.compensating cash balance of $1.5 million. AtSeptember 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 ofSeptember 30,December 31, 2003.CONTINGENCIESContingencies
During the past several years, SSG used the services of Strategic Technologies, Inc.
("STI"(“STI”) to process their outbound truck freight bills. STI auditedSSG'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 ofSSG'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 andto 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 onSeptemberDecember 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 Consolidated24
ConsolidatedFreightways 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 POLICIESCritical Accounting Policies
For the three and
sixnine month periods endedSeptember 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 RATESInflation, 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 BOARDRecent Pronouncements of the Financial Accounting Standards Board
In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46
("(“FIN46"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 interestentity'sentity’s activities or entitled to receive a majority of theentity'sentity’s residual25returns or both. A variable interest entity is a corporation, partnership, trust or any 25
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 notbelieve that FIN 46 willhave 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 INFORMATIONForward-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 onmanagement'smanagement’s beliefs as well as assumptions made by and information currently available to management. Although we believe that the expectations reflected in suchforward- 26lookingforward-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, seeSSG'sSSG’s Form 10-K for the fiscal year ended March 28, 2003 Item 7- "Certain– “Certain Factors that May Affect theCompany'sCompany’s Business or Future OperatingResults"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.ITEMWe 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 RiskThere have been no significant changes from items disclosed in Form 10-K for the fiscal year ended March 31, 2003.
ITEMItem 4.
CONTROLS AND PROCEDURES (a) Disclosure controlsControls andprocedures. 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 over financial reporting. There have been no changes in the Company's internal control over financial reporting that occurred during the Company's last fiscal quarter to which this Quarterly Report on Form 10-Q relates that have materially affected, or are reasonably likely to materially affect, the Company's internal controlover financial reporting. There have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter to which this Quarterly Report on Form 10-Q relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.27
PART II OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS.Legal Proceedings.Putative Class Actions
The followingBetween 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, 2003Securities Litigation, 03cv4201 (JLL) (the “Consolidated Action.”) Further to that Stipulation andOctober 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.
ItThe 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 additionalclass 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) NoneChanges 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
28
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Annual Meetingoutstanding 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 stockof 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 2,089,692ITEM 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 quarterendedending December 31, 2003. The share repurchase program was publicly announced in September26, 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 toLoanthe 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 29
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 Form10-Q for the quarter ended September 26, 2003). 2931.1 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. * filed herewith30
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) 31