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Recoton Q1 Sales Off 5%, Accessories Flat

LAKE MARY, FLA. — Faced with lower sales across each of its business segments — accessories, audio and gaming — Recoton reported about a 5 percent drop in net revenues for the first quarter. Sales reached $137.8 million, down from $145.5 million, in what Recoton said is traditionally its weakest three-month period.

Accessories sales, for the first quarter ended March 31, hit $51.1 million, about flat with the $52.5 million reported in the year-ago first quarter. Audio sales in the first quarter dropped about 6 percent to $53 million, compared with $56.2 million in the first quarter in 2000. Gaming sales were off about 9 percent in the first quarter, falling to $33.7 million, compared with $36.8 million in the year-ago three months.

Recoton reported operating income of $3.9 million for the first quarter, down from the $5.1 million recorded in the same period last year. The company’s net loss expanded to $2.8 million, compared with $2.6 million in the year-ago three months.

“We are particularly pleased with the progress of our three business segments during the first quarter of 2001, particularly in view of the fact that most retailers had inventory reductions as the economy weakened,” said Bob Borchardt, president/CEO.

Borchardt noted the “strong performance” of Recoton’s consumer electronics accessory segment, which contributed about $5.7 million in earnings before income taxes (EBIT).

The audio segment generated about $1.9 million in EBIT in the first quarter, despite experiencing a nearly $3.2 million revenue shortfall for the same period last year, Borchardt said.

And even though revenues from the video gaming segment decreased nearly $3.1 million, the EBIT loss was about $3.7 million, compared to $3.5 million in the year-ago first quarter, he said.

“We expect that our accessory and audio segments will help insulate us from current economic conditions at the retail level,” continued Borchardt. “It has been our experience that consumers spend more time at home during periods of economic uncertainty. This has led consumers to enhance their home entertainment systems.”

Looking at the convergence of new technologies as a strong opportunity for Recoton, Borchardt said the company, through its mobile audio products group, remains committed to capitalizing on the growing trend to extend options such as DVD players, video monitors, MP3 players and Internet access to automobiles.

As for the “current malaise” in the video gaming industry, Borchardt expects a turnaround in 2001. As Sony ships more and more PlayStation 2 game platforms into the United States, he said the company’s third-party video game accessory marketer InterAct should benefit.

Also, InterAct, this spring, will introduce a full line of compatible accessories products for Nintendo’s Game Boy Advance and GameCube video game systems, as well as for Microsoft’s Xbox, which is scheduled for a fall launch.