Parsippany, N.J. — Emerson Radio — which designs, sources and imports and markets a variety of consumer electronics products, as well as licenses the Emerson name — reported a 19.2 percent decrease in net revenue for its fiscal first quarter. Revenue dipped to $38.6 million, from $47.8 million for the period.
At the same time, Geoffrey P. Jurick, chairman/CEO, said he is selling 10 million of his Emerson shares to Grande Holdings, a Hong Kong-based group of companies that manufacture, sell and distribute audio, video and other CE products.
Jurick, who plans to retire within the next two months following the naming of a successor, will sell the shares for $5.20 each in cash and a convertible debenture of Grande. The shares represent about 37 percent of Emerson’s total outstanding shares.
The company recorded a 20.6 percent slide in Emerson-branded product for the three months, ended June 30, down to $34.3 million, from $43.2 million a year earlier. The decrease was partially due to a shift in sales volume for the company’s major customer from the June quarter to the current September quarter, said Emerson.
The company registered an increase in themed product sales during the first quarter, reaching $1.8 million, up from $590,000 a year ago. This was primarily due to the continued increase in sales of Nickelodeon-themed products.
Licensing revenue dropped 38 percent in the three months, down to $2.5 million, from $4 million year-on-year. This was attributed primarily to lower sales volume under Emerson’s video licensing agreement. The company said it expects its licensing revenue for the current fiscal year will be less than the $10.8 million recorded in fiscal 2005, ended last June.
Emerson operating income in the quarter dropped to $613,000, from $2.4 million in the same period the prior year. Income from continuous operations slid to $144,000 from $1.2 million, while net income came in at $415,000, compared with a year-ago $1.8 million.
The company’s first-quarter results include the accounts of both Emerson Radio and its 53.2 percent ownership of Sport Supply Group (SSG), which had been previously reported as the company’s sporting goods segment.
In July, Emerson completed the sale of its interest in SSG for about $30.1 million, after estimated depreciation costs, which is expected to result in a net gain of about $11.7 million. This figure will be reported in Emerson’s fiscal second quarter, ended Sept. 30.
As a result of the sale, the financial position and results of operations of SSH have been presented as discontinued operations, and Emerson now operates in one segment, the consumer electronics segment. Income from discontinued operations, net of tax, for the first quarter, was $415,000, down from $1.8 million year-over year.
Emerson said about its first quarter that gross profit margin continues to be subject to competitive pressures arising from lower pricing of the product categories in the CE market in which Emerson competes. The company’s branded products generally are placed in the low-to-medium price category of the market.
Expenses in the quarter decreased 16.2 percent to $3.8 million from a year-ago $4.6 million.
As for Jurick’s departure in early fall, he said, “I am delighted to have taken steps to diversify my personal assets, while at the same time finding an ideal strategic partner for Emerson.
“Grande’s strong presence in the Far East, its manufacturing expertise, particularly for plasma and LCD television sets, and its commitment to building a first-class worldwide electronics distribution network for branded products, should substantially enhance Emerson’s business.”
The transaction is expected to close within 30 days.
Jurick said he plans to remain actively involved for the “foreseeable future” as a director and in an advisory capacity.
In addition, Emerson said it intends to seek a waiver from its domestic lending banks of a provision in its loan agreement providing that the sale of Jurick’s shares would constitute a default.
The company currently has about $3.5 million of borrowings outstanding under its $35 million line of credit, but said it will increase borrowings in the upcoming weeks to meet seasonal needs.