-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S6j+IU23fuoOV27BwDxmbr6Mq952MiSFJfVGLy3ZBcVv9PXr0zLqbBBNRMMSY2O0 Jz50XseZzjqMcCpnBEks+A== 0000032621-99-000028.txt : 19990817 0000032621-99-000028.hdr.sgml : 19990817 ACCESSION NUMBER: 0000032621-99-000028 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990702 FILED AS OF DATE: 19990816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMERSON RADIO CORP CENTRAL INDEX KEY: 0000032621 STANDARD INDUSTRIAL CLASSIFICATION: HOUSEHOLD AUDIO & VIDEO EQUIPMENT [3651] IRS NUMBER: 223285224 STATE OF INCORPORATION: DE FISCAL YEAR END: 0402 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-07731 FILM NUMBER: 99692232 BUSINESS ADDRESS: STREET 1: NINE ENTIN RD STREET 2: PO BOX 430 CITY: PARSIPPANY STATE: NJ ZIP: 07054-0430 BUSINESS PHONE: 2018845800 FORMER COMPANY: FORMER CONFORMED NAME: MAJOR ELECTRONICS CORP DATE OF NAME CHANGE: 19770921 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 2, 1999 or [ ] 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 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) (973)884-5800 (Registrant's telephone number, including area code) (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 the number of shares outstanding of common stock as of August 5, 1999: 47,828,215. PART I - FINANCIAL INFORMATION Item 1. Financial Statements. EMERSON RADIO CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except earnings per share data)
Three Months Ended July 2, July 3, 1999 1998 Net revenues $ 43,447 $59,126 Costs and expenses: Cost of sales 38,271 51,888 Other operating costs and expenses 773 1,266 Selling, general & administrative expenses 3,864 4,898 42,908 58,052 Operating income 539 1,074 Equity in earnings of Affiliate 459 443 Write-down of investment -- (185) Interest expense, net (574) (569) Income before income taxes 424 763 Provision (benefit) for income taxes 9 (1) Net income $ 415 $ 764 Net income per common share Basic $ .01 $ .01 Diluted $ .01 $ .01 Weighted average shares outstanding Basic 47,828 51,220 Diluted 55,197 64,253
The accompanying notes are an integral part of the interim consolidated financial statements. EMERSON RADIO CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands)
July 2, April 2, 1999 1999 (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 1,469 $ 3,100 Available for sale securities (net of fair value adjustment of $1,545 and $1,298, respectively) 490 738 Accounts receivable (less allowances of $4,109 and $3,907, respectively) 4,797 5,143 Other receivables 6,644 6,782 Inventories 13,863 11,608 Prepaid expenses and other current assets 1,929 2,839 Total current assets 29,192 30,210 Property and equipment - (net of accumulated depreciation and amortization of $2,913 and $2,777, respectively) 1,212 1,211 Investment in Affiliates and Joint Venture 19,974 19,525 Other assets 2,970 3,449 Total Assets $ 53,348 $ 54,395 LIABILITIES AND SHAREHOLDER'S EQUITY Current Liabilities: Notes payable $ 2,825 $ 2,216 Current maturities of long-term debt 47 50 Accounts payable and other current Liabilities 15,156 16,759 Accrued sales returns 4,004 3,926 Income taxes payable 152 400 Total current liabilities 22,184 23,351 Long-term debt, less current maturities 20,750 20,750 Other non-current liabilities 76 97 Shareholders' Equity: Preferred shares - 10,000,000 shares authorized, 3,714 shares issued and outstanding 3,343 3,343 Common shares - $.01 par value, 75,000,000 shares authorized, 51,331,615 shares issued; 47,828,215 shares outstanding 513 513 Capital in excess of par value 113,288 113,288 Cumulative translation adjustment (78) (78) Unrealized loss on marketable securities (248) -- Accumulated deficit (104,573) (104,962) Treasury stock, at cost 3,503,400 shares (1,907) (1,907) Total shareholders' equity 10,338 10,197 Total Liabilities and Shareholders'Equity $ 53,348 $ 54,395
The accompanying notes are an integral part of the interim consolidated financial statements. EMERSON RADIO CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
Three Months Ended July 2, July 3, 1999 1998 Cash Flows from Operating Activities: Net cash (used) provided by operating activities $(1,805) $2,521 Cash Flows from Investing Activities: Net cash used by investing activities (385) (44) Cash Flows from Financing Activities: Net cash provided by financing activities 559 534 Net increase (decrease) in cash and cash equivalents (1,631) 3,011 Cash and cash equivalents at beginning of year 3,100 1,608 Cash and cash equivalents at end of period $1,469 $4,619 Supplemental disclosure of cash flow information: Interest paid $ 530 $532 Income taxes paid $ 11 $ 32
The accompanying notes are an integral part of the interim consolidated financial statements. EMERSON RADIO CORP. AND SUBSIDIARIES NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1 - BUSINESS 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 Emerson Radio Corp.'s (the "Company" or "Emerson") consolidated financial position as of July 2, 1999 and the results of operations for the quarters ended July 2, 1999 and July 3, 1998. 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 the Company's 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 April 2, 1999 ("Fiscal 1999"), included in the Company's annual report on Form 10-K. The consolidated financial statements include the accounts of the Company and all of its 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. Due to the seasonal nature of the Company's consumer electronics business, the results of operations for the quarter ended July 2, 1999 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, 2000 ("Fiscal 2000"). The management of the Company considers the Company to have one reportable segment, consumer electronics, and assesses performance on a single segment basis. Beginning in Fiscal 1998, the Company changed its financial reporting year to a 52-53 week year ending on the Friday closest to March 31. Accordingly, the current fiscal year will end on March 31, 2000. Such change in the Company's financial reporting year will not have a material effect on the Company's results of operations. Certain amounts in the prior period's consolidated financial statements have been reclassified to conform to the current period's presentation. NOTE 2 - COMPREHENSIVE INCOME The Company's total comprehensive income for the three months ended July 2, 1999 and July 3, 1998 are as follows (in thousands): Three Months Ended July 2 July 3, 1999 1998 Net Income $ 415 $ 764 Unrealized losses on securities, net (248) --- Comprehensive Income $ 167 $ 764
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 Months Ended July 2, July 3, 1999 1998 Numerator: Net income $ 415 $ 764 Less: preferred stock dividends 26 54 Numerator for basic earnings per share - income available to common stockholders 389 710 Add back to effect assumed conversions: Preferred stock dividends 26 54 Numerator for diluted earnings per share $ 415 $ 764 Denominator: Denominator for basic earnings per share - weighted average shares 47,828 51,220 Effect of dilutive securities: Preferred shares 7,369 13,033 Denominator for diluted earnings per share - adjusted weighted average shares and assumed conversions 55,197 64,253 Basic earnings per share $ .01 $ .01 Diluted earnings per share $ .01 $ .01
NOTE 4- CAPITAL STRUCTURE The outstanding capital stock of the Company at July 2, 1999 consisted of common stock and Series A convertible preferred stock. The preferred shares are convertible to common shares until March 31, 2002. During the quarter ended July 3, 1998, 100 shares of Series A Preferred Stock were converted into 286,885 shares of common stock. There were no conversions of Series A Preferred Stock for the quarter ended July 2, 1999. If all existing outstanding preferred shares were converted at July 2, 1999, an estimated 7.7 million additional common shares would be issuable. The dividend rates on the Series A Preferred Stock at July 2, 1999 and July 3, 1998 were 2.8% and 4.2%, with $879,000 and $801,000 of dividends in arrears, respectively. The dividend rate declines by 1.4% each succeeding year until March 31, 2001 when no further dividends are payable. At July 2, 1999, the Company had outstanding approximately 1.2 million options with exercise prices ranging from $1.00 to $1.10. Approximately 986,000 outstanding warrants are convertible into approximately 986,000 shares of common stock at conversion prices ranging between $1.20 to $4.00. The Company also has outstanding approximately $20.8 million of Senior Subordinated Convertible Debentures due in 2002. See "Note 9 - Long Term Debt" and "Note 11 - Subsequent Event". NOTE 5 - INCOME TAXES Income tax provisions and benefits for the quarterly periods ended July 2, 1999 and July 3, 1998 consist of taxes related to international operations. The Company does not recognize tax benefits for losses incurred by its domestic operations. NOTE 6 - INVENTORY Inventories are comprised primarily of finished goods which are stated at the lower of cost (first-in, first-out) or market. NOTE 7 - AVAILABLE-FOR-SALE SECURITIES Available-for-sale securities are stated at fair value, with the unrealized gains and losses reported in a separate component of shareholders' equity. Realized gains and losses, and declines in value judged to be other-than-temporary are included in earnings. The following is a summary of available-for-sale equity securities at July 2, 1999 (in thousands): Gross Gross Estimate Unrealized Unrealized Fair Cost Gains Losses Value Equity Securities $2,036 $-- $1,546 $490
As of July 3, 1998 there were no securities held as available-for-sale. NOTE 8 - INVESTMENT IN SPORT SUPPLY GROUP, INC. The Company owns 2,269,500 (31% of the outstanding) shares of common stock of Sport Supply Group, Inc. ("SSG") which it purchased in 1996 at an aggregate cost of $15,728,000. In addition, the Company owns warrants also purchased by it in 1996 for $500,000 to purchase an additional 1 million shares of SSG at $7.50 per share ("SSG Warrants"). If the Company exercises all of the SSG Warrants, it will beneficially own approximately 40% of the SSG common shares. Effective March 1997, the Company entered into a Management Services Agreement with SSG, under which SSG provides various managerial and administrative services to the Company. The investment in and results of operations of SSG are accounted for by the equity method. The Company's investment in SSG includes goodwill of $6,530,000 which is being amortized on a straight line basis over 40 years. At July 2, 1999, the aggregate market value quoted on the New York Stock Exchange of SSG common shares equivalent in number to those owned by Emerson was approximately $23 million. Summarized financial information derived from SSG's financial reports to the Securities and Exchange Commission was as follows (in thousands): (Unaudited) July 2, 1999 April 2, 1999 Current assets $ 41,808 $ 44,322 Property, plant and equipment and other assets 30,832 30,252 Current liabilities 14,068 14,965 Long-term debt 16,063 19,045 Stockholders' Equity 42,510 40,563
(Unaudited) For the 3 Months For the 3 Months Ended Ended July 2, 1999 July 3, 1998 Net sales $ 26,310 $ 25,340 Gross profit 10,717 9,840 Net income 1,759 1,739
See "Note 11 - Subsequent Event". NOTE 9 - LONG-TERM DEBT As of July 2, 1999 and April 2, 1999 long-term debt consisted of the following in (thousands of dollars): July 2 April 2 1999 1999 8-1/2% Senior Subordinated Convertible Debentures Due 2002 $20,750 $20,750 Equipment notes and other 47 50 20,797 20,835 Less current obligations 47 50 Long term debt $20,750 $20,750
The Senior Subordinated Convertible Debentures Due 2002 ("Debentures") were issued in August 1995, bear interest at the rate of 8-1/2% per annum, payable quarterly, and mature on August 15, 2002. The Debentures are convertible into shares of the Company's common stock at any time prior to redemption or maturity at a conversion price of $3.9875 per share, subject to adjustment under certain circumstances. Beginning August 15, 1998, at the option of the Company, the Debentures are redeemable in whole or in part at an initial redemption price of 104% of principal, decreasing by 1% per year until maturity. The Debentures are subordinated to all existing and future senior indebtedness (as defined in the Indenture governing the Debentures). The Debentures restrict, among other things, the amount of senior indebtedness and other indebtedness that the Company, and, in certain instances, its subsidiaries, may incur. Each Debenture holder has the right to cause the Company to redeem the Debentures if certain designated events (as defined) should occur. See "Note 11 - Subsequent Event". NOTE 10 - LEGAL PROCEEDINGS The Company is involved in a number of legal proceedings and claims of various types, the most significant of which are described in "Part I - Item 3. Legal Proceedings" of the Company's Form 10-K for the fiscal year ended April 2, 1999 and "Part II -- Other Information Item 1. Legal Proceedings" of this Quarterly Report on Form 10-Q, and Form 8-K dated August 6, 1999. While any such litigation contains an element of uncertainty, management presently believes that the outcome of such proceedings and claims will not have a material adverse effect on the Company's consolidated financial position. Note 11 - SUBSEQUENT EVENT On August 3, 1999, the Company and Geoffrey P. Jurick, the Company's Chairman of the Board, Chief Executive Officer and President, entered into a letter of intent with Oaktree Capital Management Corp. and certain of its affiliated entities ("Oaktree"). The letter of intent sets forth a proposed series of transactions which, if consummated, would result in the following: . The Company would sell its entire ownership in SSG to Oaktree. Under the terms of the letter of intent, Oaktree would purchase from Emerson 2,269,500 shares of SSG common stock and warrants to purchase one million shares for a purchase price consisting of $15 million in cash, the surrender of approximately $13.9 million face amount of Emerson's convertible debentures presently owned by Oaktree and an exit consent amending certain provisions of the indenture governing the Company's convertible debentures. . The Company would purchase up to $23 million of its outstanding common stock through a self-tender offer at a price of not less than $1.00 per share. The $15 million cash proceeds from the sale of the SSG securities would be utilized by Emerson to fund, in part, a partial tender offer. The remainder of the $23 million would come from additional borrowings. . The resolution of litigation between Mr. Jurick, Emerson's Chairman and largest shareholder, and certain of his creditors. Pursuant to the terms of the letter of intent and an option agreement, Oaktree would acquire all claims held by certain creditors of Mr. Jurick for $20 million. The claims to be acquired by Oaktree have been the subject of litigation in the U.S. District Court for the District of New Jersey. Under the terms of the transactions, Mr. Jurick would use amounts received by him pursuant to Emerson's selftender, together with certain other funds, to acquire those claims from Oaktree, thereby eliminating the need for him to sell his Emerson shares. Subject to approval by SSG's Board, Mr. Jurick also intends to assign options to acquire 300,000 shares of SSG's common stock to Oaktree. Completion of the transaction described is contingent upon a number of conditions being satisfied. Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition GENERAL The Company's operating results and liquidity are impacted by the seasonality of its business. The Company records the majority of its annual sales in the fiscal quarters ending in September and December and receives the largest amount of customer returns in the fiscal quarters ending in March and June. Therefore, the results of operations discussed below are not necessarily indicative of the Company's results for any subsequent periods or for the year ending March 31, 2000. The Company expects its United States sales for the quarter ended October 1, 1999 to increase as compared to the quarter ended October 2, 1998 due to increased product sales. RESULTS OF OPERATIONS NET REVENUES Consolidated net revenues for the three month period ended July 2, 1999 decreased $15.7 million (26.5%) as compared to the same period ended July 3, 1998. The decrease in net revenues resulted primarily from decreased unit sales of audio products and microwave ovens, partially offset by the introduction of the Digital Video Disc (DVD) product line. The decline in audio products was primarily attributable to a one-time sale of an audio unit in the quarter ended July 2, 1998. Revenues earned from the licensing of the Emerson and G-Clef trademark were $704,000 and $613,000 in the three month period ended July 2,1999 and July 3,1998, respectively. The Company reports royalty and commission revenues earned from its licensing arrangements, covering various products and territories, in lieu of reporting the full dollar value of such sales and associated costs. COST OF SALES Cost of Sales, as a percentage of consolidated net revenues for both periods was 88%. OTHER OPERATING COSTS AND EXPENSES Other operating costs and expenses decreased $493,000 for the three months ended July 2, 1999 as compared to the same period in Fiscal 1999, primarily as a result of reduced handling charges on returns. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("S,G&A") S,G&A decreased by $1.0 million in the period ended July 2, 1999 as compared to the same period last year. The decrease was primarily attributable to a reduction in charges related to bad debts, partially offset by an increase in salaries and professional fees. EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATE The Company's 31% share in the earnings of SSG amounted to $459,000 for the three month period ended July 2, 1999 as compared to $443,000 for the same period in the prior year. WRITE-DOWN OF INVESTMENT Write-down for the three months ended July 3, 1998 consisted of a charge of $185,000 for the write-down of a foreign investment. INTEREST EXPENSE Interest expense was substantially unchanged for the three months ended July 2, 1999 as compared to the same period in the prior year. NET INCOME As a result of the foregoing factors, the Company recorded net income of $415,000 for the three months ended July 2, 1999, as compared to $764,000 for the three months ended July 3, 1998. LIQUIDITY AND CAPITAL RESOURCES Net cash used by operating activities was $1.8 million for the three months ended July 2, 1999. Cash was utilized primarily to increase inventory. This was done in anticipation of a possible longshoremen strike that could have materially and adversely affected the Company's ability to import product. A tentative contract was approved in July with the longshoremen's union ending the possibility of a strike. In the three months ended July 2, 1999, the Company's financing activities provided $559,000 of cash. The Company increased its borrowings under its $10 million U.S. line of credit facility from $2.2 million at April 2, 1999 to $2.8 million at July 2, 1999. The Company maintains two credit facilities with a Hong Kong based bank: a $3.5 million letter of credit facility and a $25 million back-to-back letter of credit facility. At July 2, 1999, there was $3.2 million and $17.0 million, respectively, of letters of credit outstanding under these facilities. At present, management believes that future cash flow from operations and its existing institutional financing noted above will be sufficient to fund all of the Company's cash requirements for the next twelve months. However, the adequacy of future cash flow from operations is dependent upon the Company achieving its operating plan. The Company's proposed sale of its ownership interest in SSG would initially reduce its existing long-term debt by approximately $13.9 million. However, the Company would need an additional facility of approximately $8 million to fund the $23 million partial self-tender for its own shares of stock, resulting in a net reduction of approximately $5.9 million of indebtedness. See "Note 11 - Subsequent Event". As of July 2, 1999 the Company had no material commitments for capital expenditures. INFLATION AND FOREIGN CURRENCY Neither inflation nor currency fluctuations had a significant effect on the Company's results of operations during the first quarter of Fiscal 2000. The Company's 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 Company purchases virtually all of its products from manufacturers located in various Asian countries. These countries are emerging from an economic and financial market crisis that, to date, has not adversely affected the Company's ability to purchase product. If the economic recovery currently in progress should reverse its trend, it could adversely affect the Company's relationship with its suppliers and its ability to acquire products. Additional financial turmoil in the South American economies may have an adverse impact on the Company's South American licensee. YEAR 2000 The Year 2000 issue is primarily the result of computer programs or databases using a two-digit format, as opposed to four digits, to represent a calendar year. Some computer systems will be unable to correctly interpret dates beyond the year 1999, which could cause a system failure or other computer errors, leading to a disruption in the operation or accuracy of such systems. The Company has undertaken a company-wide study and testing program to locate and cure any Year 2000 issues in the products or systems on which it relies and in the products it offers for sale. The Company has completed the Year 2000 project and is Year 2000 compliant. The specific costs of achieving Year 2000 compliance was approximately $500,000. The Company has been working jointly with strategic vendors and business partners to identify any Year 2000 issues that may impact the Company. The Company anticipates that evaluation and corrective actions, if any, will be ongoing throughout 1999. To date, the Company has not identified any such problems requiring corrective action that will result in a material adverse impact on the Company. However, there can be no assurance that the companies with which the Company does business will achieve Year 2000 compliance in a timely fashion, or that such failure to comply by another company will not have a material adverse effect on the Company. The Company believes the products it currently offers for sale or license are all Year 2000 compliant, and that the cost to remediate any previously sold product that is not Year 2000 compliant will not be material. The Company has incurred and will incur internal but not incremental staff costs related to the above initiative. Based on the assessment effort to date, the Company does not believe that the Year 2000 issue will have a material adverse effect on its financial condition, results of operations, or cash flows. This represents a forward looking statement under the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from the Company's belief and expectations, which are based on certain assumptions and expectations that ultimately may prove to be inaccurate. Potential sources of risk include (a) the inability of principal suppliers to be Year 2000 ready, which could result in delays in product deliveries from such suppliers; (b) disruption of the distribution channel, including transportation vendors; (c) customer problems that could affect revenue demand; and (d) undiscovered issues related to Year 2000 compatibility which could have a material adverse impact. The Company's Year 2000 assessment is ongoing and the consideration of contingency plans will continue to be evaluated as new information becomes available. At this stage, however, the Company has not developed a comprehensive contingency plan to address situations that may result if any of the third parties upon which the Company is dependent is unable to achieve Year 2000 compliance. The need for such a contingency plan will be evaluated throughout 1999. RECENT PRONOUNCEMENTS OF THE FINANCIAL ACCOUNTING STANDARDS BOARD SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which will be effective for the Company for Fiscal 2001, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities. The Company has not yet determined the effects, if any, of implementing SFAS No. 133 on its reporting of financial information. FORWARD-LOOKING INFORMATION This report contains various forward looking statements under the Private Securities Litigation Reform Act of 1995 (the "Reform Act') and information that is based on Management's beliefs as well as assumptions made by and information currently available to Management. When used in this report, the words "anticipate", "estimate", "expect", "predict", "project", and similar expressions are intended to identify forward looking statements. Such statements are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, expected or projected. Among the key factors that could cause actual results to differ materially are as follows: (i) the ability of the Company to continue selling products to its largest customers whose net revenues represented 52% and 24% of Fiscal 1999 net revenues; (ii) competitive factors such as competitive pricing strategies utilized by retailers in the domestic marketplace that negatively impacts product gross margins; (iii) the ability of the Company to maintain its suppliers, primarily all of whom are located in the Far East; (iv) the outcome of litigation; (v) the ability of the Company to comply with the restrictions imposed upon it by its outstanding indebtedness; (vi) the Year 2000 Issue (as described above); (vii) general economic conditions; and (viii) the ability of the Company to execute its proposed plan involving the sale of its ownership interest in SSG and the partial self-tender for the Company's shares of common stock. Item 3. Quantitative and Qualitative Disclosures About Market Risk Not material. PART II OTHER INFORMATION ITEM 1. Legal Proceedings. In June 1999, the Hong Kong Inland Revenue Department (the "IRD") accepted the Company's proposed compromise offer in which the Company and the IRD settled, without prejudice, an assessment of $858,000 for the amount of $256,000. This assessment related to the Fiscal 1993 to Fiscal 1998 tax years and asserted that certain revenues reported as non-taxable by Emerson Radio (Hong Kong) Ltd. were subject to a profits tax. For further information on litigation to which the Company is a party, reference is made to Part 1 Item-3- Legal Proceedings in the Company's most recent annual report on Form 10-K, and on Form 8-K dated August 6, 1999. ITEM 2. Changes in Securities and Use of Proceeds. None. ITEM 3. Default Upon Senior Securities. (a) None (b) None ITEM 4. Submission of Matters to a Vote of Security Holders. Not Applicable. ITEM 5. Other Information. (a) None ITEM 6. Exhibits and Reports on Form 8-K. (a) Exhibits: (27) Financial Data Schedule for quarter ended July 2, 1999.* (b) Reports on Form 8-K - Current report on Form 8-K dated August 6, 1999, reporting a letter of intent to resolve certain litigation and ownership issues. *Filed herewith. 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: August 11, 1999 /s/ Geoffrey P. Jurick Geoffrey P. Jurick Chairman, Chief Executive Officer and President Date: August 11, 1999 /s/ John P. Walker John P. Walker Executive Vice President and Chief Financial Officer EX-27 2
5 1,000 3-MOS MAR-31-2000 JUL-02-1999 1,469 490 8,906 4,109 13,863 29,192 4,125 2,913 53,348 22,184 20,750 0 3,343 513 6,482 53,348 42,743 43,447 38,271 38,271 4,570 67 574 424 9 415 0 0 0 415 .01 .01
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