-----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, ChjYa5WdHNdhKLz9Wx7VmjJSFCjF4nGN8MYxdLpS9NlDd8UZsTnV5PAu8Tnwnukt qdjbqOuByZc8RjTeXEN11g== 0000905718-00-000025.txt : 20000203 0000905718-00-000025.hdr.sgml : 20000203 ACCESSION NUMBER: 0000905718-00-000025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000202 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: 520376 BUSINESS ADDRESS: STREET 1: NINE ENTIN RD STREET 2: PO BOX 430 CITY: PARSIPPANY STATE: NJ ZIP: 07054-0430 BUSINESS PHONE: 9738845800 MAIL ADDRESS: STREET 1: NINE ENTIN RD CITY: PARSIPPANY STATE: NJ ZIP: 07054 FORMER COMPANY: FORMER CONFORMED NAME: MAJOR ELECTRONICS CORP DATE OF NAME CHANGE: 19770921 10-Q 1 QUARTERLY REPORT ENDING 12/31/99 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 December 31, 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 January 28, 2000: 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 Nine Months Ended -------------------------------------- ------------------------------------ December 31, January 1, December 31, January 1, 1999 1999 1999 1999 ------------------ --------------- ------------------ -------------- Net revenues $ 61,319 $ 31,588 $160,297 $137,476 Costs and expenses: Cost of sales 52,987 26,949 140,667 121,110 Other operating costs and expenses 1,303 990 2,953 3,153 Selling, general & administrative expenses 4,877 2,527 12,304 10,024 ------------------ --------------- ------------------ --------- 59,167 30,466 155,924 134,287 ------------------ --------------- ------------------ --------- Operating income 2,152 1,122 4,373 3,189 Equity in earnings (loss) of Affiliate (425) (196) 76 595 Write-down of investment -- -- -- (370) Interest expense, net (563) (620) (1,756) (1,740) ------------------ --------------- ------------------ --------- Income before income taxes 1,164 306 2,693 1,674 Provision (benefit) for income taxes 37 (4) 296 17 ------------------ --------------- ------------------ --------- Net income $ 1,127 $ 310 $ 2,397 $ 1,657 Net income per common share Basic $ .02 $ .01 $ .05 $ .02 Diluted $ .02 $ .01 $ .04 $ .02 Weighted average number of common shares outstanding Basic 47,828 48,601 47,828 49,935 Diluted 55,609 59,010 55,615 62,157 ====================================================================================================================================
The accompanying notes are an integral part of the interim consolidated financial statements. EMERSON RADIO CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands)
December 31, April 2, 1999 1999___ ASSETS (Unaudited) Current Assets: Cash and cash equivalents $ 3,331 $ 3,100 Available for sale securities (net of fair value adjustment of $1,578 and $1,298, respectively) 458 738 Accounts receivable (less allowances of $5,016 and $3,907, respectively) 7,640 5,143 Other receivables 6,309 6,782 Inventories 14,300 11,608 Prepaid expenses and other current assets 2,967 2,839 -------- -------- Total current assets 35,005 30,210 Property and equipment - (net of accumulated depreciation and amortization of $3,160 and $2,777, respectively) 1,230 1,211 Investment in Affiliate and Joint Venture 19,387 19,525 Other assets 2,602 3,449 -------- -------- Total Assets $ 58,224 $ 54,395 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Notes payable $ -- $ 2,216 Current maturities of long-term debt 73 50 Accounts payable and other current liabilities 18,840 16,759 Accrued sales returns 5,234 3,926 Income taxes payable 1,033 400 ------- -------- Total current liabilities 25,180 23,351 Long-term debt, less current maturities 20,750 20,750 Other non-current liabilities 92 97 Shareholders' Equity: Preferred shares - 10,000,000 shares authorized, 3,677 and 3,714 shares issued and outstanding, respectively 3,309 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 113,284 113,288 Cumulative translation adjustment (76) (78) Unrealized loss on marketable securities (280) -- Accumulated deficit (102,641) (104,962) Treasury stock, at cost 3,503,400 shares (1,907) (1,907) -------- ---------- Total shareholders' equity 12,202 10,197 -------- ---------- Total Liabilities and Shareholders' Equity $ 58,224 $ 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)
Nine Months Ended December 31, January 1, 1999 1999 Cash Flows from Operating Activities: Net cash provided by operating activities $ 3,175 $ 7,037 - Cash Flows from Investing Activities: Net cash used by investing activities (682) (2,036) Cash Flows from Financing Activities: Net cash used by financing activities (2,262) (2,020) -------- -------- Net increase in cash and cash equivalents 231 2,981 Cash and cash equivalents at beginning of period 3,100 1,208 -------- ------- Cash and cash equivalents at end of period $ 3,331 $ 4,189 ======== ======= Supplemental disclosure of cash flow information: Interest paid $ 1,622 $ 1,718 ======== ======= Income taxes paid $ 2 $ 0 ======== =======
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 December 31, 1999 and the results of operations for the three and nine month periods ended December 31, 1999 and January 1, 1999. 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 three and nine month periods ended December 31, 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. Certain amounts in the prior period's consolidated financial statements have been reclassified to conform to current period's presentation. NOTE 2 - COMPREHENSIVE INCOME The Company's total comprehensive income for the three and nine month periods ended December 31, 1999 and January 1, 1999 are as follows (in thousands):
Three Months Ended Nine Months Ended --------------------------------- ---------------------------- December January December January 31,1999 1,1999 31,1999 1,1999 --------------- -------------- -------------- ---------- Net income $ 1,127 $ 310 $2,397 $1,657 Currency translation adjustment (2) -- 2 -- Unrealized gain (loss)on securities, net 87 (120) (280) (890) --------------- -------------- -------------- ---------- Comprehensive income $ 1,212 $ 190 $2,119 $ 767 =============== ============== ============== ==========
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):
Three Months Ended Nine Months Ended ----------------------------------------- ---------------------------------- December 31, January 1, December 31, January 1, 1999 1999 1999 1999 ------------------ ------------------ ------------------ --------------- Numerator: Net income $ 1,127 $ 310 $ 2,397 $ 1,657 Less: preferred stock dividends 26 39 78 539 ------------------ ------------------ ------------------ ------------- Numerator for basic earnings per share - income available to common stockholders 1,101 271 2,319 1,118 Add back to effect assumed conversions: Preferred stock dividends 26 39 78 132 ------------------ ------------------ ------------------ ------------- Numerator for diluted earnings per share $ 1,127 $ 310 $ 2,397 $ 1,250 ================== ================== ================== ============= Denominator: Denominator for basic earnings per share - weighted average shares 47,828 48,601 47,828 49,935 Effect of dilutive securities: Preferred shares 7,781 10,409 7,787 12,222 ================== ================== ================== ============= Denominator for diluted earnings per share - weighted average shares and assumed conversions 55,609 59,010 55,615 62,157 ================== ================== ================== ============== Basic earnings per share $ .02 $ .01 $ .05 $ .02 ================== ================== ================== ============= Diluted earnings per share $ .02 $ .01 $ .04 $ .02 ================== ================== ================== =============
NOTE 4 - CAPITAL STRUCTURE The outstanding capital stock of the Company at December 31, 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 December 31, 1999, the Company repurchased 37 shares of its Series A Preferred Stock. There were no repurchases for the quarter ended January 1, 1999. If all existing outstanding preferred shares were converted at December 31, 1999, approximately 7.8 million additional common shares would be issuable. The dividend rates on the Series A Preferred Stock at December 31, 1999 and January 1, 1999 were 2.8% and 4.2%, with $905,000 and $801,000 of dividends in arrears, respectively. The dividend rate declines by 1.4% each succeeding fiscal year until March 31, 2001, when no further dividends are payable. At December 31, 1999, the Company had outstanding approximately 1.4 million options with exercise prices ranging from $1.00 to $1.10. Approximately 987,000 outstanding warrants are convertible into an equal number of shares of common stock at conversion prices ranging between $1.30 and $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". NOTE 5 - INCOME TAXES Income tax provisions for the quarterly periods ended December 31, 1999 and January 1, 1999 relate to its international operations. For the quarter ended December 31, 1999 a provision of $656,000 was recorded which was offset by a tax credit of $619,000, as a result of a favorable court ruling pertaining to a foreign subsidiary. See "Note 10 - Legal Proceedings". 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 December 31, 1999 and April 2, 1999 (in thousands):
Gross Gross Estimated Unrealized Unrealized Fair Cost Gains Losses Value ------------- ------------------ -------------------- ----------------- Equity Securities: December 31,1999 $2,036 $-- $1,578 $458 April 2,1999 2,036 -- 1,298 738
NOTE 8 - INVESTMENT IN SPORT SUPPLY GROUP, INC. The Company owns 2,269,500 (approximately 31% of the outstanding) shares of common stock of Sport Supply Group, Inc. ("SSG") that it purchased in 1996 at an aggregate cost of $15,728,000. In addition, the Company acquired in 1996 for $500,000, warrants 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 December 31, 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 $15.6 million. Summarized financial information derived from SSG's financial reports to the Securities and Exchange Commission was as follows (in thousands):
December 31, 1999 April 2, 1999 ------------------------ ----------------------- (Unaudited) (Unaudited) Current assets $ 49,110 $ 44,322 Property, plant and equipment and other assets 29,521 30,252 Current liabilities 15,184 14,966 Long-term debt 22,541 19,045 Stockholders' Equity 40,906 40,563 ----------------------------- -------------------------- For the 9 Months Ended For the 9 Months Ended December 31, 1999 January 1, 1999 ----------------------------- -------------------------- Net sales $ 75,756 $ 65,477 Gross profit 28,084 25,703 Net income 1,056 2,434
NOTE 9 - LONG TERM DEBT As of December 31, 1999 and April 2, 1999, long-term debt consisted of the following (in thousands of dollars): December 31, April 2, 1999 1999___ 8 1/2% Senior Subordinated Convertible Debentures Due 2002 $20,750 $20,750 Equipment notes and other 73 50 ------- ------- 20,823 20,800 Less current obligations 73 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. Presently the Company may, at its option, redeem the Debentures in whole or in part at a redemption price of 103% 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. NOTE 10 - LEGAL PROCEEDINGS Tax Claim The Company's wholly owned subsidiary, Emerson Radio (Hong Kong) Ltd., received a favorable ruling from the Hong Kong Court of Final Appeals regarding a tax assessment levied by the Hong Kong Inland Revenue Department. Accordingly, a tax credit of $619,000 has been recorded in the Company's financial results for the quarter ended December 31, 1999. Swiss Proceedings, Involving Certain Directors In 1994, two creditors of Geoffrey P. Jurick, the Company's Chairman, Chief Executive Officer and President, Petra and Donald Stelling (the "Stellings"), filed a complaint with the Swiss Authorities claiming that Mr. Jurick, Jerome H. Farnum and Peter G. Bunger, also directors of the Company had engaged in improper activities in connection with the financing of the Company's Plan of Reorganization. These allegations also had formed the basis for a number of the claims made by the Creditors which were settled in 1996 in the United States District Court for the District of New Jersey. In December 1999, the Swiss Tribunal dismissed all charges against Messrs. Jurick, Farnum and Bunger. The Swiss Tribunal did find, however, which finding is subject to appeal that Messrs. Jurick and Farnum had engaged in banking operations in Switzerland without all appropriate licenses and fined them approximately $12,500 and $5,000, respectively. The Company is involved in a number of other 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 Form 8-K dated December 16,1999. 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 - TERMINATION OF LETTER OF INTENT 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 set forth a proposed series of transactions which, if consummated, would have resulted in: i) the Company selling its entire ownership in SSG to Oaktree; ii) the Company purchasing up to $23 million of its outstanding common stock through a self-tender; and iii) the resolution of litigation between Mr. Jurick and certain of his creditors. On December 2, 1999, Oaktree stated in an amended 13D filing that it did not intend to consummate the transactions described in the letter of intent. 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 ending March 31, 2000 to increase as compared to the quarter ended April 2, 1999 due to increased product sales. Results of Operations Net Revenues Consolidated net revenues for the three and nine month periods ended December 31, 1999 increased $29.7 million (94.1%) and $22.8 million (16.6%) as compared to the same periods in Fiscal 1999, respectively. The increase in revenues for the three months ended December 31,1999 resulted primarily from increases in unit sales of microwave ovens, audio products, digital video disc (DVD) products, and home office product categories, partially offset by a reduction in unit sales in the home theater category. The increase in revenues for the nine months ended December 31, 1999 resulted primarily from increases in unit sales of microwave ovens and DVD product category, partially offset by a decrease in unit sales of audio and home theater products. Revenues earned from the licensing of the "[OBJECT OMITTED]" trademark were $939,000 and $2.5 million in the three and nine month periods ended December 31, 1999 as compared to $1.0 million and $2.6 million in the same periods in Fiscal 1999, 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, was 86.4% and 87.8% for the three and nine month periods ended December 31, 1999 as compared to 85.3% and 88.1% for the same periods in Fiscal 1999, respectively. The increase in the cost of sales as a percentage of sales for the three months ended December 31, 1999, as compared to the prior fiscal year, was primarily attributable to a change in the product mix. Other Operating Costs and Expenses Other operating costs and expenses for the three month period ended December 31, 1999 as compared to the same period in Fiscal 1999 decreased from 3.1% to 2.1% of revenues primarily due to reduced fees associated with its return-to-vendor program. For the nine month period ended December 31, 1999 as compared to the same period in the prior year, other operating costs decreased from 2.3% to 1.8% of revenues due primarily to a reduction in warranty related expenses. Selling, General and Administrative Expenses ("S,G&A") S,G&A as a percentage of revenues was substantially unchanged at 8.0% for the three months ended December 31,1999 as compared to the same period in Fiscal 1999 and increased from 7.3% to 7.7% for the nine month period ended December 31, 1999. In absolute terms, S,G&A increased by $2.4 million for the three month period ended December 31, 1999, and for the nine month period ended December 31, 1999 increased by $2.3 million as compared to the same period in Fiscal 1999. The increase of $2.4 million in S,G&A for the three month period was primarily attributable to an increase in: i)advertising costs; ii) salaries; iii) professional fees; and iv) charges related to bad debt. The increase of $2.3 million in S,G&A for the nine month period was primarily attributable to an increase in i) advertising costs; ii) salaries; and iii) professional fees. Equity In Earnings Of Unconsolidated Affiliate The Company's share in the earnings of SSG amounted to a loss of $425,000 and income of $76,000 in the three and nine month periods ended December 31,1999 as compared to a loss of $196,000 and income of $595,000 for the same periods in the prior fiscal year, respectively. Interest Expense Interest expense decreased by $57,000 and increased by $16,000 in the three and nine month periods ended December 31, 1999 as compared to the same periods in Fiscal 1999, respectively. The decrease was attributable to a decrease in average short term borrowings which more then offset the increase in the cost of borrowings. The decrease in short term borrowings was due to a decrease in working capital requirements. Net Income As a result of the foregoing factors, the Company generated net income of $1,127,000 and $2,397,000 for the three and nine month periods ended December 31, 1999, as compared to net earnings of $310,000 and $1,657,000 for the same periods in Fiscal 1999, respectively. Liquidity and Capital Resources Net cash provided by operating activities was $3.2 million for the nine months ended December 31, 1999. Cash was provided primarily by increases in accounts payable, income taxes payable and the profitability of the Company, offset by an increase in accounts receivable and inventory. Net cash utilized by investing activities was $682,000 for the nine months ended December 31, 1999. In the nine months ended December 31, 1999, the Company's financing activities utilized $2.3 million primarily to repay the borrowings under the Company's U.S. line of credit facility. The Company maintains an asset-based $10 million U.S. line of credit facility. In addition, the Company maintains 2 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 December 31, 1999, the $3.1 million of the $3.5 million letter of credit facility was fully utilized and $23.5 million was outstanding under the $25 million letter of credit facility. 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. As of December 31, 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 three or nine months ended December 31,1999. The Company's exposure to currency fluctuations has been minimized by the use of U.S. dollar denominated purchase orders, and by sourcing production from manufacturers located in various Asian countries. 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. Prior to December 31,1999, the Company completed a company-wide study and testing program to locate and cure any Year 2000 issues in the information systems on which it relies and in the products it offers for sale at a cost of approximately $500,000. To date, the Company has not experienced any significant Year 2000 related system failures nor, to our knowledge, have any of our suppliers, or the products the company currently offers for sale or license. The Company plans on monitoring its information systems for ongoing Year 2000 compliance; however, there can be no assurance that the companies with which the Company does business will not be adversely affected. 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. 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; and (vi) general economic conditions. Item 3. Quantitative and Qualitative Disclosures About Market Risk Not material. PART II OTHER INFORMATION ITEM 1. Legal Proceedings. 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 December 16,1999. ITEM 2. Changes in Securities and Use of Proceeds. In December 1999, the Company repurchased 37 shares of its outstanding Series A Preferred Stock. 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 December 31, 1999.* (b) Reports on Form 8-K - Current report on Form 8-K dated December 16, 1999, reporting the retention by Sport Supply Group, Inc. of PaineWebber as its investment banker and the decision by Oaktree not to exercise its option to purchase the Sport Supply Group, Inc. common stock held by the Company. - ---------------------------- *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: January 28, 2000 /s/Geoffrey P. Jurick _________________________ Geoffrey P. Jurick Chairman, Chief Executive Officer and President Date: January 28, 2000 /s/John P. Walker __________________________ John P. Walker Executive Vice President and Chief Financial Officer EX-27 2 FDS --
5 (Replace this text with the legend 0000032621 EMERSON RADIO CORP. 1,000 US 3-MOS MAR-31-2000 DEC-31-1999 1 3,331 458 12,656 5,016 7,640 35,005 4,390 3,160 58,224 25,180 20,750 0 3,309 513 8,380 58,224 60,380 61,319 52,987 52,987 5,778 402 563 1,164 37 1,127 0 0 0 1,127 .02 .02
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