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Recoton Expects Q4 $2.3 Mil. Loss

Lake Mary, Fla. – Citing problems directly attributable to its video games segment, Recoton anticipates reporting a net loss of about $2.3 million in the fourth quarter ended Dec. 31 and about $7.5 million for the 12 months.

Recoton, in stating preliminary financial results for its fourth quarter and year, said its accessories and audio segments continued to generate strong operating performances in 2001, and all indications are that in 2002 these two segments should surpass the prior year.

Losses in the video game segment were the result of the conclusion of the recent industry transition and sell-through of legacy platform inventories. As the installed base of all the new platforms expands in 2002, Recoton believes that its video game segment should return to profitability this year.

Losses in the video game segment also resulted from provisions taken as a result of the Kmart Chapter 11 filing, said Recoton.

As a result of the losses, Recoton will have breached financial covenants under its senior credit facility. The company is in negotiations with its lenders regarding modifications of these covenants and waivers of any default.

Recoton said it is optimistic that these negotiations will conclude satisfactorily. At that time, the company will formally report fourth-quarter and 12-month earnings.