Recoton Cuts Losses, Gets Financing
Staff -- TWICE, 11/13/2000
LAKE MARY, FLA. -Recoton Corp. significantly reduced its loss for the third quarter ended Sept. 30, recording a net loss of $1.9 million, compared with $26.7 million for the same three months last year. The company also dramatically reduced its loss for the nine months, hitting a $7.3 million net loss, compared with $35.9 million in the year-ago nine months.
Recoton cited delays in finalizing its new $275 million financing deal, the significantly reduced availability of the Sony PlayStation2 video game system at its launch, and weakness in European currencies as primary reasons for the third-quarter net loss. However, the company remains encouraged by its continued improvement in operating results.
Operating income for the third quarter was $7.6 million, compared with an operating loss of $9.9 million in the same quarter in 1999. For the nine months, operating income reached $18 million, compared with a loss of $7.7 million in the year-ago nine months.
"The company's audio and accessories segments continued to reflect the positive impact of the company's reorganization initiatives," said president/CEO Bob Borchardt, "as the elimination of poorly performing products resulted in improved operating results on lower sales.
"The positive results of our audio and accessories segments are offset by the temporary weakness at our video game segment, which experienced an approximate $3.5 million reversal in operating profit during the third quarter of 2000 due to delays in the delivery of new game platforms by Sony."
Recoton also announced closing of a new three-year $275 million syndicated senior credit facility, led by Heller Financial, which replaces all of the company's existing senior debt.
Borchardt said the new financing is estimated to save the company about $7 million in annual interest expense.
With the credit package and "an anticipated strong holiday selling season," he said, "We believe that Recoton will return to profitability in the 2000 fourth quarter."
Sales for the three months decreased about 10 percent, reaching $157.6 million, compared with $174.2 million in the same three months in 1999. For the nine months, sales dropped about 4 percent, hitting $439.7 million, compared with $459.9 million in the year-ago nine months.
Recoton attributed the sales decline primarily to consumers delaying their purchases of video game products and accessories while awaiting introduction of new platforms this year and in 2001, and the restricted launch quantities of PlayStation2.
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