Emerson Radio Corp. Reports Fiscal 2014 Third Quarter Results

Marketwired

HACKENSACK, NJ--(Marketwired - Feb 14, 2014) - Emerson Radio Corp. (NYSE MKT: MSN) today reported financial results for its third quarter and nine month period ended December 31, 2013.

As reported by the Company in a Form 8-K filed with the SEC on October 19, 2012, the Company was informed by one its major customers, that, commencing with the Spring of 2013, this customer would discontinue purchasing from Emerson two microwave oven products that had been sold by the Company to this customer. Emerson continued shipping these two products throughout the remainder of Fiscal 2013 (the year ended March 31, 2013), with sales of such products declining through the fourth quarter of Fiscal 2013. During Fiscal 2013, these two microwave oven products comprised, in the aggregate, approximately $36.1 million, or 29.7%, of the Company's net product sales. Emerson anticipates that the full impact of this customer's decision will be realized by the Company in Fiscal 2014, which began on April 1, 2013. As previously disclosed by the Company, the complete loss of, or significant reduction in, business with either of the Company's key customers will have a material adverse effect on the Company's business and results of operations. Accordingly, this customer's decision has had a material adverse effect on the Company's business and results of operations in the quarter ended December 31, 2013. There can be no assurance that the Company will be able to increase sales of any products at levels sufficient to offset the adverse impact of this customer's decision, if at all.

As a result of the above, during the third quarter and nine month periods of fiscal 2014, sales of these two products by the Company were nil as compared to approximately $8.0 million and $32.0 million during the third quarter and nine month periods of fiscal 2013, respectively.

Net revenues for the third quarter of fiscal 2014 were $20.9 million, a decrease of $3.8 million, or 15.4%, as compared to the third quarter of fiscal 2013 net revenues of $24.7 million. The decline in year-over-year net revenues was driven by lower year-over-year net product sales, slightly offset by higher year-over-year licensing revenues.

Net product sales for the third quarter of fiscal 2014 were $18.4 million, as compared to $22.6 million for the third quarter of fiscal 2013, a decrease of $4.2 million, or 18.4%. The lower year-over-year net product sales were principally driven by a $4.0 million, or 18.4%, decline in net sales of houseware products, which was the result of lower year-over-year sales of microwave ovens and wine coolers, partly offset by higher year-over-year sales of compact refrigerators. Emerson continues to confront increasing pricing pressure, which is a trend that management expects to continue.

Licensing revenue in the third quarter of fiscal 2014 was $2.4 million, as compared to $2.0 million in the third quarter of fiscal 2013, an increase of $0.4 million, or 18.0%, principally on higher year-over-year licensing revenue earned from the Company's largest licensee.

Net revenues for the nine month period of fiscal 2014 were $63.8 million, a decrease of $41.6 million, or 39.4%, as compared to the nine month period of fiscal 2013 net revenues of $105.4 million. The decline in year-over-year net revenues was caused by lower year-over-year net product sales and lower year-over-year licensing revenues.

Net product sales for the nine month period of fiscal 2014 were $59.2 million, as compared to $99.8 million for the nine month period of fiscal 2013, a decrease of $40.6 million, or 40.7%. The lower year-over-year net product sales were principally driven by a $40.1 million, or 41.5%, decline in net sales of houseware products, which was the result of lower year-over-year sales of all products offered by the Company in the category, which is comprised of microwave ovens, compact refrigerators and wine coolers.

Licensing revenue in the nine month period of fiscal 2014 was $4.7 million, as compared to $5.6 million in the nine month period of fiscal 2013, a decrease of $0.9 million, or 16.7%, principally on lower year-over-year licensing revenue earned from the Company's largest licensee due to lower year-over-year sales of products by this licensee bearing the Emerson ® brand name.

Operating income for the third quarter of fiscal year 2014 was $1.1 million, a decrease of $0.9 million, or 46.0%, from operating income of $2.0 million for the third quarter of fiscal year 2013, due to the lower year-over-year net revenue and higher year-over-year SG&A expenses, primarily due to higher legal fees resulting from a lawsuit that was settled by the Company in December 2013.

Operating income for the nine month period of fiscal year 2014 was $2.6 million, a decrease of $6.0 million, or 69.6%, from operating income of $8.6 million for the nine month period of fiscal year 2013, due to the lower year-over-year net revenue, higher year-over-year SG&A expenses, primarily due to higher legal fees and tax consulting fees, partially offset by lower compensation costs and the impairment write-down in September 2012 of a non-strategic trademark.

Net loss for the third quarter of fiscal 2014 was $1.4 million, as compared to net income $1.7 million for the third quarter of fiscal 2013, a decrease of $3.1 million, or 181.6%, due primarily to the payment of a $4 million settlement by the Company in December 2013 of a lawsuit, and the year-over-year decrease in operating income. Net income for the nine month period of fiscal 2014 was $0.4 million, as compared to $7.5 million for the nine month period of fiscal 2013, a decrease of $7.1 million, or 95.0%, due primarily to the year-over-year decrease in operating income and the settlement by the Company in December 2013 of a lawsuit. Diluted loss per share for the third quarter of fiscal year 2014 was $0.05, as compared to diluted earnings per share of $0.06 for the third quarter of fiscal year 2013, a decrease of $0.11 per diluted share, or 183.3%. Diluted earnings per share for the nine month period of fiscal year 2014 were $0.01, as compared to $0.28 for the nine month period of fiscal year 2013, a decrease of $0.27 per diluted share, or 96.4%.

Duncan Hon, Chief Executive Officer of Emerson Radio, commented, "Our third quarter and nine month fiscal 2014 revenues and net income declined significantly as compared to the prior year due primarily to the decision by one of our major customers to discontinue purchasing, effective Spring 2013, from the Company two microwave oven products sold throughout fiscal year 2013 by the Company to this customer, the last shipments of which were made in February and March 2013, the payment of a $4 million settlement by the Company in December 2013 of a lawsuit and intense competition within all of our product categories. We expect these factors to affect our year-over-year comparisons throughout the remainder of fiscal 2014. The Company continues to seek to implement pricing and product strategy initiatives to improve the Company's results of operations, although there can be no assurance that such initiatives will be successfully implemented or have the desired effects on the Company's results of operations and financial condition."

About Emerson Radio Corp.
Emerson Radio Corp. (NYSE MKT: MSN), incorporated in 1994, is headquartered in Hackensack, N.J. The Company designs, sources, imports and markets a variety of houseware and consumer electronic products, and licenses its trademarks to others on a worldwide basis for a variety of products. For more information, please visit Emerson Radio's web site at www.emersonradio.com.

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

 
 
EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except earnings per share data)
               
    Three Months Ended  
Nine Months Ended
    December 31,   December 31,
    2013     2012   2013     2012
                             
Net revenues:                            
Net product sales   $ 18,443     $ 22,608   $ 59,182     $ 99,783
Licensing revenue     2,414       2,046     4,665       5,597
Net revenues     20,857       24,654     63,847       105,380
                             
Costs and expenses:                            
Cost of sales     15,986       20,484     52,605       88,759
Other operating costs and expenses     361       253     683       1,046
Selling, general and administrative expenses     3,216       1,926     7,729       5,671
Impairment of trademark     219       --     219       1,326
      19,782       22,663     61,236       96,802
Operating income     1,075       1,991     2,611       8,578
                             
Other (loss) income:                            
Loss on settlement of litigation     (4,000 )     --     (4,000 )     --
Interest income, net     98       132     441       230
(Loss) income before income taxes     (2,827 )     2,123     (948 )     8,808
(Benefit) provision for income taxes     (1,446 )     430     (1,324 )     1,328
Net (loss) income   $ (1,381 )   $ 1,693   $ 376     $ 7,480
                             
Net (loss) income per share:                            
  Basic     (0.05 )     0.06     0.01       0.28
  Diluted     (0.05 )     0.06     0.01       0.28
                             
Weighted average shares outstanding:                            
  Basic     27,130       27,130     27,130       27,130
  Diluted     27,130       27,130     27,130       27,130
                               
                               
                               
EMERSON RADIO CORP. AND SUBSIDIARIES  
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
(In thousands except share data)  
             
             
    12/31/13     3/31/13  
                 
ASSETS                
Current Assets:                
Cash and cash equivalents   $ 18,698     $ 21,412  
Restricted cash     --       70  
Short term investments     37,226       45,235  
Accounts receivable, net     10,278       7,883  
Other receivables     1,735       969  
Due from affiliates     --       1  
Inventory     5,683       3,454  
Prepaid expenses and other current assets     2,603       1,873  
Deferred tax assets     1,567       1,685  
                 
  Total Current Assets     77,790       82,582  
Property, plant, and equipment, net     210       258  
Trademarks, net     --       219  
Deferred tax assets     2,579       1,121  
Other assets     19       104  
                 
  Total Assets   $ 80,598     $ 84,284  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY                
Current Liabilities:                
Current maturities of long-term borrowings     43       43  
Accounts payable and other current liabilities     4,701       7,790  
Accrued sales returns     1,106       965  
Income taxes payable     169       1,281  
                 
  Total Current Liabilities     6,019       10,079  
Capital lease obligations     15       30  
Deferred tax liabilities     207       194  
                 
  Total Liabilities     6,241       10,303  
Shareholders' Equity:                
                 
Preferred shares -$.01 par value, 10,000,000 shares authorized at December 31, 2013 and March 31, 2013, respectively; 3,677 shares issued and outstanding at December 31, 2013 and March 31, 2013, respectively; liquidation preference of $3,677,000 at December 31, 2013 and March 31, 2013, respectively     3,310       3,310  
                 
Common shares -- $.01 par value, 75,000,000 shares authorized, 52,965,797 shares issued at December 31, 2013 and March 31, 2013, respectively; 27,129,832 shares outstanding at December 31, 2013 and March 31, 2013, respectively     529       529  
Additional paid-in capital     98,785       98,785  
Accumulated deficit     (4,043 )     (4,419 )
Treasury stock, at cost, 25,835,965 shares     (24,224 )     (24,224 )
                 
  Total Shareholders' Equity     74,357       73,981  
                 
  Total Liabilities and Shareholders' Equity   $ 80,598     $ 84,284  
                 
Contact:
CONTACT:
Investor Relations:
Barry Smith
Investor Relations Manager
(973) 428-2004

EMERSON RADIO CORP.
3 University Plaza, suite 405
Hackensack, NJ 07601