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Recoton Narrows Q2 Loss, Sales Off 4%

Lake Mary, Fla. – Bolstered by the strength of its consumer electronics segment, Recoton slightly narrowed its net loss in the second quarter to $2.75 million, compared with $2.79 million in the same three months last year.

However, the company reported lower net sales in the second quarter, down about 4 percent to $132.4 million, compared with $136.7 million in the year-ago period.

Sales in Recoton’s CE segment climbed 3.3 percent during the second quarter ended June 30, hitting $54.4 million, compared with $52.7 million in the same three months in 2000. Segment earnings before income taxes (EBIT) were $7.4 million in the second three months, compared with $5.7 million in the same quarter last year.

‘Accessories will be one of the company’s biggest growth areas, with many of our new product additions geared to support and enhance new digital technologies,’ said Robert L. Borchardt, chairman/CEO.

Sales in the car and home audio segment, however, dropped about 9 percent to $51.8 million in the second three months, down from $56.8 million in the same period a year ago. The company attributed the decline to the softening economy. EBIT for the segment was about halved to $2.6 million in the second quarter, compared with $5 million in the year-ago period.

Margins in the car and home audio segment were lower as inventories of more mature products were lowered to prepare for the launch of newer, more advanced products, including MP3 players for automobiles. Recoton anticipates that sales and profit margins in the segment should normalize during the remainder of 2001 as its new product offerings achieve greater expected market penetration and consumer acceptance in the second half.

‘The ongoing operational improvement of our audio segment is progressing on plan,’ said Borchardt. ‘We remain committed to capitalizing on the growing trend to extend technology, such as DVD players, video monitors, MP3 players and Internet and satellite access to automobiles.’

Gaming sales dipped slightly to $26.2 million in the second quarter, down about 3 percent from the $27.2 million posted in the second quarter last year. However, EBIT losses were extended to $6.4 million in the second quarter, up from a $5.4 million loss in the same period last year.

‘Although Recoton’s video game segment continued to suffer because of the industry-wide transition period that persisted through the second quarter, indications are that the malaise that has gripped the video game sector over the past year is dissipating,’ said Borchardt. ‘Industry analysts are predicting that 2001 and beyond will product record results for the video game industry,’ he said.

The company reported CE segment sales of $107 million in the six months, flat with the $106.9 million recorded in the year-ago period. Audio segment sales dropped to $103.3 million in the second half, down from the $111.2 million reported in the same six months in 2000. Gaming segment sales also were down in the first half, hitting $59.8 million, compared with $64 million in the year-ago first half.

Overall net sales for the six months were $270.1 million, about a 4 percent decrease from the $282.1 million recorded in the first half of 2000. The net loss in the second half was $5.55 million, up slightly from the $5.42 million recorded in the year-ago first half.

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