Recoton took a hefty $27.5 million in third-quarter charges and write-offs as part of a restructuring plan designed to streamline operations, revamp product, and reduce expenses. As a result of that and other unfavorable market factors, the accessories and audio product marketer posted losses for both its quarter and nine-month periods.
For the three months Recoton reported a net loss of $26.7 million, as opposed to earnings of $3.74 million in the same year-earlier period, leaving it with a nine-month loss of $35.9 million, against earnings last year of $10.5 million. Sales were off a scant 1.6% to $174.2 million but were up 0.8% to $459.9 million for the full period.
The largest portion of the charge, $10 million, covered debt-restructuring expenses. Also included were $8.3 million for inventory write-downs, $5.8 million for anticipated losses on asset sales and revaluation of related receivables, and $3.4 million in severance and lease-termination costs.
“We are implementing the previously announced business plan, the full benefits of which are expected to be realized in the year 2000 and beyond,” said president Robert Borchardt.
“Having now restructured our finances,” he added, “we can focus on our future with products, distribution and service to benefit from the digital evolution.”
Recoton’s InterAct subsidiary is already shipping controls for Sega’s new video game, Borchardt said.
The company is also developing plug-and-play and wireless systems to receive the signals from future CD Radio service, and he expects the expanding market for digital TV sets will generate “increased sales of our branded lines of home theater speakers, antennas, connectors and accessories.”
Recoton also expects to capitalize on the market for mobile entertainment systems by providing “wireless stereo headphones, speakers and other accessories for retail outlets and car manufacturers on an OEM basis.”