Recoton Posts Profits For Q3

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Riding high on the new digital cycle, accessories maker Recoton moved into the black during the third quarter, reporting net income of $359,000, up more than $2 million from a net loss of $1.9 million in the same three months last year.

However, the weaker economy and events of Sept. 11 helped push Recoton's third-quarter sales down 13.2 percent, to $136.7 million, compared with $157.6 million in the year-ago period.

Third-quarter sales in Recoton's car and home audio segment — the company's largest by sales volume in the current quarter — dropped more than 10 percent, to $52.3 million, down from $58.4 million in the prior year. However, the segment produced earnings before interest and taxes (EBIT) of $4.5 million in the third quarter, up from $4 million in the same quarter in 2000. Gross profit margins for the segment climbed 240 basis points to 35.8 percent in the three months, compared with the same period last year.

The company's traditional consumer electronics accessories segment recorded about a 9 percent drop in sales in the third quarter, reaching $49.7 million, down from $55.4 million in the same period last year. An improved product mix for the accessories segment resulted in a gross profit margin improvement of 260 basis points, to 44.7 percent, in the third quarter, but EBIT was reduced to $4.9 million, compared with $5.3 million in the same three months in 2000.

The company's smallest segment, video games, saw sales drop about 20 percent in the third quarter, down to $34.7 million, compared with $43.8 million in the same three months in 2000. The segment produced an EBIT loss of $1.9 million, up from an EBIT loss of $1.7 million in the same quarter last year. Gross profit margins slid 250 basis points, to 33.3 percent, year over year, primarily due to pricing pressures on products compatible with legacy video game platforms.

"The fact that three new gaming platforms have been or will be introduced in 2001 leads us to believe that sales of our video game accessories will increase," said Bob Borchardt, chairman/CEO.

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