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Emerson Radio Fiscal Q2 CE Revenue Drops 13%

11/13/2001 09:25:00 AM Eastern

Parsippany, N.J. - Responding to a slowing economy and reduced consumer spending, retailers have been maintaining a tight hold on inventory levels, sending consumer electronics revenue at Emerson Radio down 13 percent in the fiscal second quarter to $83.3 million.

By comparison, during Emerson's first and second fiscal quarters of last year, retailers pressed for higher-than-traditional merchandise shipments, resulting in CE revenue of $96.1 million during the company's fiscal second quarter.

Emerson restricted the revenue decline in the second quarter ending Sept. 30 primarily to audio products and microwave ovens. Licensing revenue, which is primarily associated with video products, and has minimal associated costs, was strongly ahead of last year.

The CE segment reported net income of $5 million in the second quarter, compared with $5.6 million in the same three months in 2000.

"Unlike certain competitors, which have been reporting losses, our consumer electronics business is solidly in the black and is producing margin gains," said Geoffrey P. Jurick, chairman/CEO. "While overall audio revenue is down, we have been very encouraged by the robust sell-through on Emerson's CD Cruiser and our theme licensed audio products.

"The single most significant and favorable development in our consumer electronics mix is the boost we are getting under our various licensing agreements," Jurick continued. "For the first nine months of this calendar year, sales of Emerson-brand video products subject to the license agreement with Funai Electronics were more than three times last year's levels than our previous video license," Jurick said. These products include DVD players and recorders, traditional and now flat-screen televisions, TV combinations and VCRs.

For the first fiscal half, CE revenue was $132.4 million, compared with $178.7 million the previous year. Net income for the company's CE segment dropped to $7.4 million, compared with $8.8 million for the same six months in 2000. Licensing revenue for the first half rose 145 percent to $2.7 million, up from $1.1 million in the same period last year.

"Licensing revenue will continue to be a major focus at Emerson going forward, since this revenue contributes directly to the bottom line with minimal associated costs or capital," said Jurick. "We believe that we have the business structure and operating model to support current, or better, margin levels in our consumer electronics segment. However, with the uncertainties in the economy, it would be premature to forecast with a high degree of certainty revenue levels for the second half of this year," Jurick said.

Emerson recorded consolidated total net revenue of $111.5 million in the second quarter, down from $128.1 million in the same period last year. This included the company's sporting goods segment. Net income for the second quarter dipped to $4.7 million, down from $5.1 million in the year-ago period.

For the six months, consolidated total net revenue reached $188.6 million, compared with $241.4 million the previous year. Net income for the six months dropped to $6.9 million, compared with $8.2 million in the same six months in 2000.