-----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, CLZqtFEGUGNHks8SQpjcNRCV7Y8iMjyqb6FehvVq593Zb+B8SDHPhxiP7vkECGmf abax0/xkH08GS6Jd+IOtFg== 0000950134-03-011826.txt : 20030814 0000950134-03-011826.hdr.sgml : 20030814 20030814144410 ACCESSION NUMBER: 0000950134-03-011826 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030814 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: 1934 Act SEC FILE NUMBER: 001-07731 FILM NUMBER: 03846513 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 d08374e10vq.txt FORM 10-Q UNITED STATES 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 June 30, 2003 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) (Registrant's telephone number, including area code): (973)884-5800 (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 August 8, 2003: 27,564,560. PART I - FINANCIAL INFORMATION Item 1. Financial Statements. EMERSON RADIO CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT EARNINGS (LOSS) PER SHARE DATA)
Three Months Ended ------------------ June 30, June 30, 2003 2002 ---- ---- Net revenues $ 57,598 $ 83,581 COSTS AND EXPENSES: Cost of sales 45,189 65,180 Other operating costs and expenses 1,256 1,297 Selling, general & administrative expenses 11,197 11,537 -------- -------- 57,642 78,014 -------- -------- OPERATING INCOME (LOSS) (44) 5,567 Interest expense, net (414) (787) Minority interest in net income of consolidated subsidiary (54) (98) -------- -------- INCOME (LOSS) BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF (512) 4,682 CHANGE IN ACCOUNTING PRINCIPLE Provision (benefit) for income taxes (67) 2,022 -------- -------- INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (445) 2,660 Cumulative effect of change in accounting principle -- (5,546) -------- -------- NET LOSS $ (445) $ (2,886) ======== ======== BASIC NET INCOME (LOSS) PER SHARE Income (loss) before cumulative effect of change in accounting principle $ (.02) $ .09 Cumulative effect of change in accounting principle $ -- $ (.19) -------- -------- $ (.02) $ (.10) ======== ======== DILUTED NET INCOME (LOSS) PER SHARE Income (loss) before cumulative effect of change in accounting principle $ (.02) $ .09 Cumulative effect of change in accounting principle $ -- $ (.16) -------- -------- $ (.02) $ (.07) ======== ======== WEIGHTED AVERAGE SHARES OUTSTANDING Basic 27,416 29,444 Diluted 28,482 35,025
The accompanying notes are an integral part of the interim consolidated financial statements. 2 EMERSON RADIO CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
June 30, March 31, 2003 2003 (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 3,698 $ 11,413 Accounts receivable (less allowances of $4,313 and $3,938, respectively) 29,505 24,593 Other receivables 3,281 2,954 Inventories 54,812 45,177 Prepaid expenses and other current assets 4,077 6,871 Deferred tax assets 6,702 6,761 --------- --------- Total current assets 102,075 97,769 Property and equipment - (net of accumulated depreciation and amortization of $7,157 and $6,628, respectively) 9,367 9,823 Deferred catalog expenses 1,444 1,912 Trademarks and other intangible assets (net of accumulated amortization of $3,537 and $3,403, respectively) 5,499 5,613 Deferred tax assets 17,622 17,595 Other assets 1,707 1,850 --------- --------- Total Assets $ 137,714 $ 134,562 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Short-term borrowings $ 4,614 $ 1,918 Current maturities of long-term borrowings 3,670 11,634 Accounts payable and other current liabilities 31,367 30,596 Accrued sales returns 3,528 3,768 Income taxes payable 550 752 --------- --------- Total current liabilities 43,729 48,668 Long-term borrowings 26,493 18,079 Minority interest 16,636 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; 51,993,131 and 51,981,431 shares issued; 27,424,789 and 27,413,089 shares outstanding, respectively 520 520 Capital in excess of par value 115,152 115,122 Accumulated other comprehensive losses (70) (104) Accumulated deficit (48,381) (47,936) Treasury stock, at cost, 24,568,342 shares (19,675) (19,675) --------- --------- Total shareholders' equity 50,856 51,237 --------- --------- Total Liabilities and Shareholders' Equity $ 137,714 $ 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)
Three Months Ended ------------------ June 30, June 30, 2003 2002 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (445) $ (2,886) Adjustments to reconcile net loss to net cash provided by operating activities: Minority interest 54 99 Depreciation and amortization 811 841 Deferred tax assets 32 2,007 Cumulative effect of accounting change -- 5,546 Asset allowances and reserves 522 2,274 Other 38 -- Changes in assets and liabilities, net of acquisition of SSG: Accounts receivable (4,991) (2,012) Other receivables (327) (1,768) Inventories (10,078) (3,683) Prepaid expenses and other current assets 3,262 250 Other assets -- (120) Accounts payable and other current liabilities 531 5,434 Income taxes payable (202) (129) -------- -------- Net cash provided (used) by operating activities (10,793) 5,853 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment (80) (165) -------- -------- Net cash used by investing activities (80) (165) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings under line of credit facility 2,696 (1,534) Purchase of common stock -- (5,697) Exercise of stock options and warrants 12 -- Long-term borrowings 450 -- Repayments of long-term borrowings -- (4,644) -------- -------- Net cash provided (used) by financing activities 3,158 (11,875) Net decrease in cash and cash equivalents (7,715) (6,187) Cash and cash equivalents at beginning of year 11,413 19,228 -------- -------- Cash and cash equivalents at end of period $ 3,698 $ 13,041 ======== ========
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) NOTE 1 - BACKGROUND AND BASIS OF PRESENTATION The consolidated financial statements include the accounts of Emerson Radio Corp. ("Emerson", consolidated - "Us", "We", "Our") and its majority-owned subsidiaries, including Sport Supply Group, Inc. ("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 LOGO]" trademark for a variety of products domestically and internationally to certain licensees. The sporting goods segment, which is operated through Emerson'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 June 30, 2003 and the results of operations for the quarters ended June 30, 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 ("fiscal 2003"), included in our annual report on Form 10-K. The consolidated financial statements include our accounts and those 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. Due to the seasonal nature of both segments, the results of operations for the quarter ended June 30, 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 ("fiscal 2004"). Emerson and SSG have elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees: ("APB 25") and related Interpretations in accounting for its employee stock options. Under APB 25, because the exercise price of the Company's 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 5 disclosure-only provisions under Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). For the purposes of SFAS 123 pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting periods. The Company's pro forma information for the three months ended June 30, 2003 and 2002 follows:
JUNE 30, JUNE 30, 2003 2002 --------- --------- Net loss: (in thousands) As reported $ (445) $ (2,886) Less: Stock-based compensation expense (7) (27) --------- --------- Pro forma $ (452) $ (2,913) ========= ========= Net loss per common share: Basic - as reported $ (.02) $ (.10) Basic - pro forma $ (.02) $ (.10) Diluted - as reported $ (.02) $ (.07) Diluted - pro forma $ (.02) $ (.07)
Certain reclassifications were made to conform prior years' financial statements to the current presentation. NOTE 2 - COMPREHENSIVE LOSS Our comprehensive loss for the three months ended June 30, 2003 and 2002 is as follows (in thousands):
Three Months Ended ------------------ June 30, June 30, 2003 2002 ---- ---- (Unaudited) Net loss $ (445) $ (2,886) Currency translation adjustment -- 1 Interest rate swap (4) -- Unrealized loss on securities, net (4) (1) Recognition of unrealized losses related to investments included in net income 42 -- -------- -------- Comprehensive loss $(411) $ (2,886) ======== ========
6 NOTE 3 - EARNINGS (LOSS) PER SHARE The following table sets forth the computation of basic and diluted earnings (loss) per share before cumulative effect of change in accounting principle (in thousands, except per share amounts):
For the Three Months Ended -------------------------- June 30, June 30, 2003 2002 --------- -------- (Unaudited) NUMERATOR: Net earnings (loss) before cumulative effect of change in accounting principle $ (445) $ 2,660 Add back to effect assumed conversions: Interest on convertible debentures -- 441 --------- -------- Numerator for diluted earnings (loss) per share $ (445) $ 3,101 ========= ======== DENOMINATOR: Denominator for basic earnings (loss) per share - weighted average shares 27,416 29,444 Effect of dilutive securities: Options 1,066 377 Convertible debentures -- 5,204 --------- -------- Denominator for diluted earnings (loss) per share - weighted average shares and assumed conversions 28,482 35,025 ========= ======== Basic earnings (loss) per share, before cumulative effect of change in accounting principle $ (0.02) $ 0.09 ========= ======== Cumulative effect of change in accounting principle $ -- $ (0.19) ========= ======== Basic (loss) per share $ (0.02) $ (0.10) ========= ======== Diluted earnings (loss) per share, before cumulative effect of change in accounting principle $ (0.02) $ 0.09 ========= ======== Cumulative effect of change in accounting principle $ -- $ (0.16) ========= ======== Diluted (loss) per share $ (0.02) $ (0.07) ========= ========
NOTE 4 - CAPITAL STRUCTURE Our outstanding capital stock at June 30, 2003 consisted of common stock and Series A convertible preferred stock in which the conversion feature expired effective March 31, 2002. 7 At June 30, 2003, Emerson had outstanding approximately 1.2 million options with exercise prices ranging from $1.00 to $1.50. At June 30, 2003, SSG had outstanding approximately 279,000 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 $19,000 being charged to operations for the three months ending June 30, 2003. In February 2003, 100,000 of these warrants were exercised, and accordingly the Company issued 100,000 shares of common stock. 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". 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 June 30, 2003 and March 31, 2003, inventories consisted of the following (in thousands):
June 30, March 31, 2003 2003 --------- --------- (Unaudited) Raw materials $ 2,049 $ 2,095 Work-in-process 335 318 Finished 55,494 45,387 --------- --------- 57,878 47,800 Less inventory allowances (3,066) (2,623) --------- --------- $ 54,812 $ 45,177 ========= =========
NOTE 6 - INCOME TAXES We have tax net operating loss carry forwards included in net deferred tax assets that can be used to offset future taxable income and can be carried forward for 15 to 20 years. Although realization is not assured, we believe it is likely 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. At June 30, 2003, 8 approximately $24.3 million of deferred tax assets were reported on our balance sheet. NOTE 7 - INVESTMENT IN SPORT SUPPLY GROUP, INC. As of June 30, 2003 and March 31, 2003, Emerson owned 4,746,023 (53.2% of the issued and outstanding) shares of common stock of SSG. SSG's results of operations and the minority interest related to those results have been included in our quarterly 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 Statements of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). SFAS 142 requires that goodwill not be amortized but instead be tested for impairment at least annually by reporting unit. We adopted SFAS 142 effective April 1, 2002. As a result, we ceased recording amortization of goodwill on April 1, 2002 and, as a result of our impairment testing, we recorded a non-cash "cumulative effect of change in accounting principle" of approximately $5.5 million ($-0.16 per diluted share for the three months ended June 30, 2002) due to the impairment of all of the goodwill attributed to the sporting goods segment for the three months ended June 30, 2002. As of June 30, 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 3,282 ----------- $ 5,499 ===========
NOTE 9 - BORROWINGS As of June 30, 2003 and March 31, 2003, short-term borrowings consisted of the following (in thousands): 9
June 30, March 31, 2003 2003 ---------- ---------- (Unaudited) Foreign bank loan $ 4,614 $ 1,918 ---------- ---------- Short-term borrowings $ 4,614 $ 1,918 ========== ==========
As of June 30, 2003 and March 31, 2003, long-term borrowings consisted of the following (in thousands):
June 30, March 31, 2003 2003 ---- ---- (Unaudited) Revolver (Revolver A) $ 3,000 $ -- Term Loan (Term Loan) 11,000 12,000 Notes payable under revolving line of credit (Revolver B) 16,032 17,522 Equipment notes and other 131 191 ------- ------- 30,163 29,713 Less current maturities 3,670 11,634 ------- ------- Long term debt and notes payable $26,493 $18,079 ======= =======
Refinancing Transaction in fiscal 2003 - On June 28, 2002, Emerson entered into a $40 million Revolving Credit and Term Loan Agreement ("Loan Agreement") with several U.S. financial institutions. The Loan Agreement provides for a $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" 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. The Loan Agreement provides for a $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" amount based on specified percentages of eligible accounts receivables and inventories and bears interest ranging from Prime plus 0.50% to 1.25% or, at Emerson's election, LIBOR plus 2.00% to 2.75% depending on 10 certain financial covenants. The interest rate charged on the term loan ranges from Prime plus 1.00% to 1.75% or, at Emerson'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 cash dividends other than on preferred shares, repurchasing Emerson's common stock and entering into certain transactions without the lender'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 of Emerson's assets. As of June 30, 2003, $11.0 million was outstanding under this term facility, and $3.0 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 is required to be repaid. Repayment was made from borrowings under its revolving credit facility subsequent to June 30, 2003. Revolver B - Notes payable under a revolving line of credit (Revolver B) were issued by SSG in March 2001, replacing a prior facility. The facility, which expires on August 1, 2004 provides for a $25 million revolving line of credit, and provides for revolving loans and is subject to individual maximums which, in the aggregate, cannot exceed the lesser of $25 million or a "Borrowing Base" amount based upon specified percentages 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. At June 30, 2003, the interest rate charged under this facility was a combination of LIBOR plus 2.5% and the prime rate of interest ranging from minus .25% to prime plus 1.0%. 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's prior consent. As of June 30, 2003, SSG was in compliance with the covenants contained in the senior credit facility. As of June 30, 2003, the carrying value of the credit facilities approximated their fair value. NOTE 10 - SEGMENT INFORMATION The following table presents certain operating segment information for each of the three-month periods ended June 30, 2003 and 2002 (in thousands):
Three Months Ended June 30, 2003: ------------------------------------ Consumer Sporting Electronics Goods ----------- -------- Net revenues from external customers $ 31,637 $ 25,961 Income (loss) before income taxes and cumulative effect of change in accounting principle $ (696) $ 184 Segment assets $ 84,346 $ 53,368
11
Three Months Ended June 30, 2002: ------------------------------------ Consumer Sporting Electronics Goods ----------- -------- Net revenues from external customers $ 56,808 $ 26,773 Income before income taxes and cumulative effect of change in accounting principle $ 4,345 $ 337 Segment assets $ 73,458 $ 53,024
NOTE 11 - LEGAL PROCEEDINGS We are 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. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Management'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: The following table sets forth, for the periods indicated, certain items related to our consolidated statements of operations as a percentage of consolidated net revenues for the three month periods ended June 30, 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.
2003 2002 --------- --------- (Unaudited) Net revenues (in thousands) $ 57,598 $ 83,581 100.0% 100.0% Cost of sales 78.5% 78.0% Other operating costs and expenses 2.2% 1.5%
12 Selling, general and administrative expenses 19.4% 13.8% --------- --------- Operating income (loss) (0.1)% 6.7% Interest expense (0.7)% (1.0)% Minority interest in net income of consolidated subsidiary (0.1)% (0.1)% Provision (benefit) for income taxes (0.1)% 2.4% Cumulative effect of change in Accounting principle 0.0% (6.6)% --------- --------- Net loss (0.8)% (3.4)% ========= =========
Net Revenues - Net revenues for the three month period ended June 30, 2003 were $57.6 million as compared to $83.6 million for the three month period ended June 30, 2002. The decrease of approximately $26.0 million (31.1%) was attributable to decreases in both segments, with the majority of the decreases occurring in the consumer electronics segment. Cost of Sales - Cost of sales, as a percentage of consolidated net revenues, increased from 78.0% for the three months ended June 30, 2002 to 78.5% for the same period in fiscal 2004. The increase in cost of sales was primarily the result of lower margins in both the consumer electronics and sporting goods segments. In absolute terms, cost of sales decreased $20.0 million for the three month period of fiscal 2004 as compared to the same period in fiscal 2003. 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 increased from 1.5% for the three months ended June 30, 2002 as compared to 2.2% for the same period in fiscal 2004. In absolute terms, other operating costs and expenses remained relatively unchanged for the three month period of fiscal 2004 as compared to the same period in fiscal 2003. Selling, General and Administrative Expenses ("S,G&A") - S,G&A Expenses, were $11.2 million (19.4% of net revenues) for the three month period of fiscal 2004 as compared to $11.5 million (13.8% of net revenues) for the three months ended June 30, 2002. The decrease in absolute terms was due to decreases in the sporting goods segment, partially offset by increases in the consumer electronics segment. Interest Expense, Net - Interest expense decreased from $787,000 (1.0% of net revenues) for the three months ended June 30, 2002 to $414,000 (0.7% of net revenues) in the three months ended June 30, 2003. The decrease in interest expense was in both segments as a result of lower borrowings and lower borrowing costs in the consumer electronics segment. Minority Interest in Net Income of Consolidated Subsidiary - Minority interest in net income of consolidated subsidiary represents that portion of the sporting goods segment income for the three month periods ended June 30, 13 2003 and 2002, that were not included in the consolidated statements of operations. See "Note 1 - Background and Basis of Presentation." Provision (Benefit) for Income Taxes - The benefit for income taxes for the three months ended June 30, 2003 was $67,000 as compared to a provision of approximately $2.0 million for the three months ended June 30, 2002. Cumulative Effect of Change in Accounting Principle - On April 1, 2002, we adopted Financial Accounting Standards Board's Statement No. 142, "Goodwill and Other Intangible 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 our impairment testing, we recorded a non-cash "cumulative effect of accounting change" of approximately $5.5 million for the three months ended June 30, 2002, due to the impairment of all of the goodwill attributed to the Company's sporting goods segment. See "Note 8 - Goodwill and Other Intangible Assets." Net Loss - As a result of the foregoing factors, we generated a loss of $445,000 (-0.8% of net revenues) for the three months ended June 30, 2003 as compared to a loss of $2.9 million (-3.4% of net revenues) for the three months ended June 30, 2002. CONSUMER ELECTRONICS SEGMENT: The following table summarizes certain financial information relating to the consumer electronics segment for the three months ending June 30, 2003 and 2002(in thousands):
2003 2002 -------- -------- (Unaudited) Net revenues $ 31,637 $ 56,808 Cost of sales 26,602 46,546 Other operating costs 1,256 1,297 Selling, general & administrative 4,143 3,911 -------- -------- Operating income (loss) (364) 5,054 Interest expense, net (278) (611) -------- -------- Income (loss) before income taxes (642) 4,443 Provision (benefit) for income taxes (136) 1,895 -------- -------- Net income (loss) $ (506) $ 2,548 ======== ========
Net Revenues - Net revenues for the three months ended June 30, 2003 decreased $25.2 million (44.3%) as compared to the same period ended June 30, 2002. The decrease in net revenues was the result of decreases in sales in all product categories mainly due to the general slow down of the economy, a reduction in license revenues, an increase in returned product and a reduction in inventory levels maintained by our customers. Revenues earned from the licensing of Emerson's trademarks decreased to $3.1 million for the 14 first three months of fiscal 2004 as compared to $3.9 million for the same period in fiscal 2003. The Company has elected to discontinue the sale of products marketed under the NASCAR(R) and Mary-Kate and Ashley(R) names. For the quarter ending September 30, 2003, the Company expects net revenues for its consumer electronics segment to be approximately 25% lower than that of the September 30, 2002 quarter. Cost of Sales - Cost of sales, as a percentage of consumer electronics net revenues, increased to 84.1% for the three months ended June 30, 2003 as compared to 81.9% for the three months ended June 30, 2002. The increase in cost of sales as a percentage of consumer electronics net revenues was primarily attributable to competitive market conditions and a reduction in sales of higher margin themed products. In absolute terms, cost of sales decreased $20.0 million for the three month period of fiscal 2004 as compared to the same period in fiscal 2003. The consumer electronics segment gross profit margins continue to be subject to competitive pressures arising from pricing strategies associated with the price categories of the consumer electronics market in which Emerson competes. Emerson's products are generally placed in the low-to-medium priced category of the market, which has a tendency to be highly competitive. Other Operating Costs and Expenses - Other operating costs and expenses as a percentage of consumer electronics net revenues increased from 2.3% for the three months ended June 30, 2002 to 4.0% for the three months ended June 30, 2003. The increase between fiscal 2003 and 2004 was primarily due to a reduced revenue base while maintaining a higher average inventory level. In absolute terms, other operating costs and expenses remained relatively unchanged at $1.3 million for the three months ended June 30, 2003 and 2002. Selling, General and Administrative Expenses ("S,G&A") - S,G&A, as a percentage of consumer electronics net revenues, was 13.1% for the three months ended June 30, 2003 as compared to 6.9% for the three months ended June 30, 2002. The increase in S,G&A as a percentage of net revenues was mainly due to a lower net revenue base for the three months ended June 30, 2003. S,G&A, in absolute terms, increased by $232,000 for the three months ended June 30,2003 as compared to the same period ended June 30, 2002. The increase in absolute terms was primarily due to costs of approximately $643,000 associated with an attempted acquisition which was unsuccessful, that were partially offset by reductions in various other categories of S,G&A. Interest Expense, net - Interest expense decreased from $611,000 (1.1% of the consumer electronics net revenues) for the three months ended June 30, 2002 to $278,000 (0.9% of the consumer electronics net revenues) in the three months ended June 30, 2003. In absolute terms, interest expense decreased by approximately $333,000 for the three months ended June 30, 2003 as compared to the same period ended June 30, 2002. The decrease in interest expense was the result of lower borrowings and lower borrowing costs. Provision (benefit) for Income Taxes - Emerson's provision for income taxes was $1.9 million for the three months ended June 30, 2002 as compared to a benefit of $136,000 for the three months ended June 30, 2003. The decrease in the provision for income taxes for the three months ended June 30, 2003 was the result of a loss in the current period as compared to income before income taxes and cumulative effect of change in accounting principle of 15 approximately $4.7 million for the three months ended June 30, 2002. The benefit of $136,000 in fiscal 2003 consisted of a benefit in foreign, Federal and state taxes. Net Income (Loss) - As a result of the foregoing factors, the consumer electronics segment generated a net loss $506,000 (-1.6% of net revenues) for the three months ended June 30, 2003 as compared to net income of $2.5 million (4.5% of net revenues) for the three months ended June 30, 2002. SPORTING GOODS SEGMENT: The following table summarizes certain financial information relating to the sporting goods segment as reported by SSG for the three months ended June 30, 2003 and 2002 (in thousands):
2003 2002 -------- -------- (Unaudited) Net revenues $ 25,961 $ 26,773 Cost of sales 18,587 18,634 Selling, general & administrative 7,054 7,626 -------- -------- Operating income 320 513 Interest expense, net (136) (176) -------- -------- Income before income taxes 184 337 Provision for income taxes 69 127 Cumulative effect of accounting change -- (7,442) -------- -------- Net income (loss) $ 115 $ (7,232) ======== ========
Net Revenues - Net revenues decreased approximately $812,000 (3.0%) for the three-month period ended June 30, 2003 as compared to the three-month period ended June 30, 2002. The decrease in sporting goods net revenues was primarily the result of decreases in sales to resellers and decreased sales in the team dealer operations. Team dealer operations are being restructured, which SSG believes will result in continued team dealer revenue declines, significantly lower operating costs and an improved impact on operating income. We expect continued revenue challenges in fiscal 2004, due to increased competition, a decreased salesforce, continued restrictions in state, Federal and school budgets, an overall soft economy, and declining participation and funding of youth sports organizations. Cost of Sales - Cost of sales, as a percentage of sporting goods net revenues, increased from 69.6% for the three month period ended June 30, 2002 to 71.6% for the three month period ended June 30, 2003. The increase is primarily the result of increased competition and pricing pressure causing gross profit erosion. 16 Selling, General and Administrative Expenses ("S,G&A") - S,G&A expenses decreased approximately $572,000 for the three month period ended June 30, 2003 as compared to the three month period ended June 30, 2002. As a percentage of sporting goods net revenues, S,G&A decreased to 27.2% from 28.5% for the three month period ended June 30, 2003 as compared to the three month period ended June 30, 2002. The decrease was primarily the result of the following: (i) a decrease in payroll related expenses attributable to a reduced headcount and (ii) a decrease in selling and promotional expense, primarily as a result of reduced spending on producing and mailing catalogs. SSG expects continued S,G&A expense decreases this fiscal year as compared to the prior year. Interest Expense, net - Interest expense decreased by approximately $40,000 for the three month period ended June 30, 2003 as compared to the three month period ended June 30, 2002, due primarily to lower interest rates. Provision for Income Taxes - Provision for income taxes decreased approximately $58,000 (45.7%) for the three month period ended June 30, 2003 as compared to the same period last year due to lower taxable income. SSG has a net operating loss carryforward included in net deferred tax assets that can be used to offset future taxable income and can be carried forward for 15 to 20 years. SSG believes 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, SSG believes 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. Cumulative Effect of Accounting Change - On March 30, 2002, we adopted Financial Accounting Standards Board Statement No. 142, "Goodwill and Other Intangible 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 annually by reporting unit. As a result of its impairment testing, SSG recorded a non-cash "cumulative effect of accounting change" impairment write down of approximately $7.4 million for the three month period ended June 30, 2002. Net Income (loss) - As a result of the foregoing factors, the sporting goods segment earned net income of $115,000 (0.4% of net revenues) for the three months ended June 30, 2003 as compared to a net loss of $7.2 million (-27.0% of net revenues) for the three months ended June 30, 2002. Liquidity and Capital Resources Net cash utilized by operating activities was $10.8 million for the three months ended June 30, 2003. Cash was primarily utilized by an increase 17 in inventory and accounts receivable, partially offset by a decrease in other current assets. Net cash used by investing activities was $80,000 for the three months ended June 30, 2003. Cash was utilized primarily for the purchase of fixed assets, which consisted mainly of computer related equipment. Net cash provided from financing activities was $3.2 million for the three months ended June 30, 2003. Cash was primarily provided from borrowing under short and long term facilities. Emerson and SSG maintain credit facilities as described in Note 9 - Borrowings. At June 30, 2003, there were approximately $30.0 million of borrowings outstanding under these facilities, of which approximately $14.0 million of borrowings were outstanding by Emerson and $16.0 million of borrowings were outstanding by SSG with letters of credit outstanding. Two of our foreign subsidiaries maintain various credit facilities, aggregating $52.5 million, with Hong Kong banks consisting of the following: (i) a $7.5 million letter of credit facility with a $2.5 million seasonal increase which is used for inventory purchases, and (ii) two back-to-back letters of credit totaling $45 million. At June 30, 2003, our Hong Kong subsidiary pledged $1.7 million in certificates of deposit to this bank to assure the availability of the $7.5 million credit facility and a $2.5 million seasonal line increase. At June 30, 2003, there were approximately $7.8 million and $610,000, 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 June 30, 2003 for the periods shown (in thousands):
PAYMENT DUE BY PERIOD ----------------------------------------------------------------------------------- LESS THAN 1 1 - 3 YEARS 3 - 5 YEARS MORE THAN 5 TOTAL YEAR YEARS ----------------------------------------------------------------------------------- Notes Payable $30,115 $11,058 $19,057 $ -- $ -- Capital lease obligations 47 37 10 -- -- Leases 6,563 2,500 3,143 920 -- ------- ------- ------- ---- ------- Total $36,725 $13,595 $22,210 $920 $ -- ======= ======= ======= ==== =======
There were no material capital expenditure commitments and no substantial commitments for purchase orders outside the normal purchase orders used to secure product as of June 30, 2003. 18 CONTINGENCIES During the past several years, SSG has used the services of Strategic Technologies, Inc. ("STI") to process their outbound truck freight bills. STI audited SSG'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 of SSG'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. It is not possible for SSG to currently determine the amount of funds, if any, that were transferred to STI and not subsequently forwarded to SSG's carriers. In certain circumstances, SSG may have to pay their freight carriers for invoices that were previously paid to STI and to attempt to recover such monies from STI. No assurance can be made that SSG will be able to recover such money. CRITICAL ACCOUNTING POLICIES For the quarter ended June 30, 2003, there were no significant changes to our critical accounting policies from those reported in Form 10-K for the fiscal year ended March 31, 2003. INFLATION, FOREIGN CURRENCY, AND INTEREST RATES Neither inflation nor currency fluctuations had a significant effect on our results of operations during the first quarter 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 rate and LIBOR rate. While a significant increase in interest rates could have an adverse effect on the our financial condition and our results of operations, 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 BOARD In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities," which addresses consolidation of variable interest entities ("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 interest entity's activities or entitled to receive a majority of the entity's residual returns or both. A variable interest entity is a corporation, partnership, trust or any 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 19 resources for the entity to support its activities. The consolidation requirements of FIN 46 apply immediately to VIE's created after January 31, 2003. For older entities, these requirements will begin to apply in the first fiscal year or interim period beginning after June 15, 2003. We do not believe that FIN 46 will have an impact on the Company's consolidated financial statements. In May 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 150 (SFAS 150), "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 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 do not believe that SFAS 150 will have an impact on the company's consolidated financial statements. FORWARD-LOOKING INFORMATION This report contains various forward-looking statements made 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. Although we believe that the expectations reflected in such forward-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", "believe", "estimate", "expect", "predict", "project", and similar expressions are intended to identify forward-looking statements. We cannot guarantee the accuracy of the forward-looking statements, and you 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" 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"). For additional risk factors as they relate to the sporting goods segment, see SSG's Form 10-K for the fiscal year ended March 28, 2003 Item 7 - "Certain Factors that May Affect the Company's Business or Future Operating Results", and other Filings with the SEC. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no significant changes from items disclosed in Form 10-K for the fiscal year ended March 31, 2003. 20 ITEM 4. CONTROLS AND PROCEDURES (a) Disclosure controls and procedures. 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) 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 control over financial reporting. PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. For information on litigation to which we are a party, reference is made to Part 1 Item-3-Legal Proceedings in the Company's 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) None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not Applicable. ITEM 5. OTHER INFORMATION. (a) None 21 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) EXHIBITS: 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 June 30, 2003, for the purpose of reporting our filing of Form 12b-25 Notification of Late Filing of our Form 10-K for the fiscal year ended March 31, 2003. 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. - ----------------- * filed herewith 22 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 12, 2003 /s/ Geoffrey P. Jurick ------------------------------- Geoffrey P. Jurick Chairman of the Board, Chief Executive Officer and President (Principal Executive Officer) Date: August 12, 2003 /s/ Kenneth A. Corby ------------------------------ Kenneth A. Corby Executive Vice President and Chief Financial Officer (Principal Finance and Accounting Officer) 23 EX-31.1 3 d08374exv31w1.txt CERTIFICATION OF CEO PURSUANT TO SECTION 302 EXHIBIT 31.1 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES - OXLEY ACT OF 2002 I, Geoffrey P. Jurick, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Emerson Radio Corp.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 12, 2003 /s/ Geoffrey P. Jurick ---------------------------- Chairman of the Board, Chief Executive Officer and President 24 EX-31.2 4 d08374exv31w2.txt CERTIFICATION OF CFO PURSUANT TO SECTION 302 EXHIBIT 31.2 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES - OXLEY ACT OF 2002 I, Kenneth A. Corby, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Emerson Radio Corp.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 12, 2003 /s/ Kenneth A. Corby ----------------------------- Executive Vice President and Chief Financial Officer 25 EX-32 5 d08374exv32.txt CERTIFICATIONS OF CEO & CFO PURSUANT TO SEC. 906 EXHIBIT 32 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Emerson Radio Corp., (the "Company") on Form 10-Q for the period ended June 30, 2003, as filed with the Securities and Exchange Commission on August 12, 2003, Geoffrey P. Jurick, Chief Executive Officer, and Kenneth A. Corby, Chief Financial Officer, of the Company each hereby certifies pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended; and (2) The information contained in the Report fairly presents, in all material respects, the consolidated financial condition and result of operations of the Company. Dated: August 12, 2003 By: /s/ Geoffrey P. Jurick -------------------------------- Geoffrey P. Jurick Chief Executive Officer By: /s/ Kenneth A. Corby -------------------------------- Executive Vice President and Chief Financial Officer The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and is not being filed as part of the Form 10-Q or as a separate disclosure document. A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Emerson Radio Corp. and will be retained by Emerson Radio Corp. and furnished to the Securities and Exchange Commission or its staff upon request. 26 -----END PRIVACY-ENHANCED MESSAGE-----