Business Editors
LAKE MARY, Fla.--(BUSINESS WIRE)--Nov. 5, 2001
Recoton Corporation (Nasdaq National Market:RCOT), a leading global consumer electronics company, today announced financial results for the third quarter ended September 30, 2001 (see attached tables).
The Company reported net income of $359,000, or $.03 per share, a more than $2,000,000 improvement from the prior year period, despite a 13.2% drop in sales from the third quarter of 2000 due to a weaker economy and the tragic events of September 11th. Management also highlighted improved overall gross profit margins, reduced operating expenses and a $3,434,000 decrease in interest expense from the same period last year.
Robert L. Borchardt, Chairman, President and Chief Executive Officer of Recoton, stated, "Our return to profitability in the third quarter of 2001 highlights both the tremendous strides that Recoton has made in refining its operations and the benefits (realized and expected) of the new digital product cycle. The sluggish retail environment and the economic impact of the tragic events of September 11th clearly had an effect on our results for the third quarter. Although we are facing near-term economic challenges, we remain optimistic about the long-term outlook for the consumer electronics industry and Recoton's business in particular."
Recoton's car and home audio segment produced EBIT of $4,500,000 in the third quarter of 2001 on gross profit margins of 35.8%, compared to EBIT of $4,000,000 on gross profit margins of 33.4% for the same period last year. This is noteworthy when considering that sales of Recoton's car and home audio products decreased during the third quarter by more than 10%. Profitability at this segment improved as new products achieved greater market penetration and consumer acceptance.
Mr. Borchardt continued, "The anticipated improvement at our audio segment is progressing on plan. The extension of digital products such as DVD players, display monitors, video game systems and Internet/satellite access from the living room into the automobile is developing into an important market for Recoton. In addition to providing our 900 MHz wireless stereo headphones for use with car entertainment systems, we anticipate being one of the first companies to provide car radio products, under the Jensen(R) brand, for the launch of the Sirius Satellite Radio(R) (Nasdaq: SIRI) 100 channel subscription service expected in 2002."
An improved product mix resulted in gross profit margin improvement of 2.6% at Recoton's consumer electronics accessories segment, notwithstanding a 10.3% drop in sales due primarily to lower OEM sales. In the third quarter of 2001, this segment produced EBIT of $4,900,000 on gross profit margins of 44.7% versus EBIT of $5,300,000 on gross profit margins of 42.1% for the same period last year. Sales in this segment decreased to $49,700,000 versus $55,400,000 for the same period last year.
Mr. Borchardt stated, "Accessories continue to be one of Recoton's most stable and profitable business segments. Just a few years ago, digital products such as HDTV, DVD players, MP3 players, satellite radios, digital video camcorders, cameras and wireless telephones were either non-existent or a novelty in the marketplace. Today, they are becoming an important part of our daily lives. Through our well-recognized family of brand names, consumers are able to purchase such products as Advent(R) and Jensen wireless products, Jensen TV antennas and digital headphones, A/R(R) high performance digital cables, Ambico(R) digital camcorder and camera accessories, and Discwasher(R) care and maintenance products to support and enhance these new digital technologies."
Sales at Recoton's video game segment decreased to $34,700,0000 during the third quarter of 2001 from $43,800,000 for the same period last year. This segment produced an EBIT loss of $1,900,000 on gross profit margins of 33.3% versus an EBIT loss of $1,700,000 on gross profit margins of 35.8% for the same period last year. Lower gross profit margins were primarily attributable to the pricing pressures on products compatible with legacy video game platforms. Despite the slightly larger EBIT loss, Recoton's success in reducing operating expenses helped to minimize the impact of lower sales and margins at this segment. Recoton is committed to maintaining this expense profile as it continues shipping full lines of products that are compatible with Microsoft's (Nasdaq: MSFT) new Xbox(TM) and Nintendo's(R) new Game Cube(R) video gaming platforms, both of which are scheduled to debut in mid-November."
Mr. Borchardt said, "The eagerly anticipated new game systems from Microsoft and Nintendo are expected to be supported by continued consumer acceptance of Game Boy Advance(R), which was introduced in June 2001, and PlayStation 2(R). An increased emphasis on home entertainment and the fact that three new gaming platforms have been or will be introduced in 2001 leads us to believe that sales of our video game accessories will increase as each of these game platforms become available at retail as we approach the key holiday selling season."
The following tables depict the results produced by the Company's three principal business segments for the three and nine month periods ended September 30, 1999, 2000 and 2001. They also illustrate the effect that the video gaming segments results have had on overall operating performance during this time of industry transition:
Three months ending September 30, (in millions) ---------------------------------------------------------------------- Accessory Audio Gaming 1999(a) 2000(a) 2001 1999(a) 2000(a) 2001 1999(a) 2000(a) 2001 ---------------------------------------------------------------------- Sales $64.6 $55.4 $49.7 $60.9 $58.4 $52.3 $48.7 $ 43.8 $34.7 GP 35.6% 42.1% 44.7% 23.3% 33.4% 35.8% 46.8% 35.8% 33.3% EBIT $(2.4) $ 5.3 $ 4.9 $(8.7) $ 4.0 $ 4.5 $ 1.7 $ (1.7) $(1.9) ---------------------------------------------------------------------- Nine months ending September 30, (in millions) ---------------------------------------------------------------------- Accessory Audio Gaming 1999(a) 2000(a) 2001 1999(a) 2000(a) 2001 1999(a) 2000(a) 2001 ---------------------------------------------------------------------- Sales $168.5 $162.3 $156.7 $162.8 $169.6 $155.6 $128.6 $107.8 $95.1 GP 36.3% 42.7% 44.4% 28.0% 34.0% 33.2% 45.4% 33.7% 32.6% EBIT $ 0.8 $ 16.1 $ 16.5 $(10.0) $12.4 $ 9.2 $ 2.1 $(10.5) $(10.7) ---------------------------------------------------------------------- (a) Prior period amounts reflect reclassification to conform to the current year presentation.
Net sales for the 2001 third quarter totaled $136,711,000 versus $157,582,000 for the same period last year. Net sales for the nine months ended September 30, 2001 were $407,408,000 as compared to $439,723,000 for the comparable period of 2000.
Operating income for the 2001 third quarter was $7,531,000 versus operating income of $7,615,000 for the same period one year ago. Operating income for the nine months ended September 30, 2001 was $15,051,000 as compared to $18,032,000 for the same period last year. Net income for the third quarter of 2001 was $359,000, or $.03 per share, versus a net loss of $1,929,000, or $.16 per share, for the third quarter of 2000. The net loss for the 2001 nine-month period narrowed to $5,194,000, or $.44 per share, versus a net loss of $7,346,000, or $.63 per share, for the same period last year.
Interest expense for the third quarter of 2001 decreased by approximately $3,434,000 from the third quarter of 2000, reflecting lower interest rates and the new senior credit facility that was signed in October 2000. Interest expense for the nine-month period of 2001 decreased by approximately $6,769,000. The Company expects that the benefits of its strategic business plan will continue to be manifested throughout 2001.
Mr. Borchardt concluded by stating, "Despite the global economic slowdown, we continue to be positive about our business. Our three distinct business segments offer great opportunities for growth and we have positioned Recoton to benefit from the reversal of the recent poor economic cycle. It has been our experience that people spend more time at home during periods of economic and social uncertainty, which, in the past, has led consumers to enhance their home entertainment systems. In addition, Recoton should further benefit as the next generation of digital products reach more affordable price points and increased consumer awareness. We view this return to profitability as a beginning. Recoton has been in business for more than 63 years and we will continue to leverage our experience, large family of brand names, strong R & D, powerful industry retail relationships and global distribution facilities to weather the current economic storm and position the Company to take advantage of future opportunities in our industry."
Recoton Corporation is a global leader in the development and marketing of consumer electronic accessories, audio products and gaming products. Recoton's more than 4,000 products include highly functional accessories for audio, video, car audio, camcorder, multi-media/computer, home office and cellular and standard telephone products, as well as 900MHz wireless technology products including headphones and speakers; loudspeakers and car and marine audio products including high fidelity loudspeakers, home theater speakers and car audio speakers and components; and accessories for video and computer games. The Company's products are marketed under three business segments: Accessory, Audio and Gaming. Accessory products are offered under the AAMP(R), Ambico(R), Ampersand(R), AR(R)/Acoustic Research(R), Discwasher(R), InterAct(R), Jensen(R), Parsec(R), Peripheral(R), Recoton(R), Rembrandt(R), Ross(TM) , SoleControl(R), SoundQuest and Stinger brand names. Audio products are offered under the Advent(R), AR(R)/Acoustic Research(R), HECO(TM), Jensen(R) , MacAudio(R), Magnat(R), NHT(R) (Now Hear This), Phase Linear(R) and Recoton(R) brand names. Gaming products are offered under the Game Shark(R), InterAct(R) and Performance(TM) brand names.
The following marks are owned by other companies not associated with Recoton: Sirius Satellite Radio, Microsoft, Xbox, Nintendo, Game Cube, Game Boy Advance and PlayStation 2.
This press release may contain forward-looking information within the meaning of the Private Securities Litigation Reform Act of l995. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. Such statements speak only as of the date made. Please refer to the Company's current Form 10-K and other SEC filings.
RECOTON CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Data) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ------------ ------------ 2001 2000 2001 2000 ---- ---- ---- ---- Net Sales $ 136,711 $ 157,582 $ 407,408 $ 439,723 Cost of Sales 84,206 99,108 255,037 276,371 --------- --------- --------- ---------- Gross Profit 52,505 58,474 152,371 163,352 Selling, General and Administrative Expenses 44,974 50,859 137,320 145,320 --------- --------- --------- ---------- Operating Income 7,531 7,615 15,051 18,032 Other (Income) Expenses Interest Expense 6,222 9,656 20,198 26,967 Amortization of Financing Costs 853 561 2,403 1,631 Investment Income (57) (222) (130) (771) --------- --------- --------- ---------- Income (Loss) Before Income Taxes 513 (2,380) (7,420) (9,795) Income Tax Provision (Benefit) 154 (451) (2,226) (2,449) --------- --------- --------- ---------- Net Income (Loss) $ 359 $ (1,929) $ (5,194) $ (7,346) ========= ========= ========= ========== Income (Loss) Per Share: Basic $ 0.03 $ (0.16) $ (0.44) $ (0.63) ========= ========= ========= ========== Diluted $ 0.03 $ (0.16) $ (0.44) $ (0.63) ========= ========= ========= ========== Average Number of Shares Used in Computing Per Share Amounts Basic 12,081 11,747 11,908 11,743 ====== ====== ====== ====== Diluted 12,972 11,747 11,908 11,743 ====== ====== ====== ====== RECOTON CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In Thousands) September 30, December 31, 2001 2000 ------------- ----------- (Unaudited) ASSETS Current Assets: Cash and Cash Equivalents $ 6,317 $ 10,098 Accounts Receivable (Net) 130,940 165,575 Inventories 166,916 164,596 Prepaid, Refundable and Deferred Income Taxes 12,002 9,573 Prepaid Expenses and Other Current Assets 9,737 10,632 ---------- ----------- Total Current Assets 325,912 360,474 Property and Equipment (Net) 44,536 35,286 Goodwill and Other Assets (Net) 64,512 67,751 ---------- ----------- TOTAL ASSETS $ 434,960 $ 463,511 ========== =========== LIABILITIES Current Liabilities: Current Portion of Long-Term Debt $ 14,666 $ 11,994 Accounts Payable 72,687 64,821 Accrued Expenses 17,155 25,097 ---------- ----------- Total Current Liabilities 104,508 101,912 Long-Term Debt (Less Current Portion Above) 219,374 243,914 Other Non Current Liabilities 2,509 4,426 ---------- ----------- TOTAL LIABILITIES 326,391 350,252 SHAREHOLDERS' EQUITY 108,569 113,259 ---------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 434,960 $ 463,511 ========== ===========
