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Emerson Radio Corp Reports Operating Results (10-Q)

November 15, 2010 | About:
10qk

10qk

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Emerson Radio Corp (MSN) filed Quarterly Report for the period ended 2010-09-30.

Emerson Radio Corp has a market cap of $57.79 million; its shares were traded at around $2.13 with a P/E ratio of 3.55 and P/S ratio of 0.28. The dividend yield of Emerson Radio Corp stocks is 51.64%.MSN is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Net Revenues Net revenues for the second quarter of fiscal 2011 were $52.0 million as compared to $51.8 million for the second quarter of fiscal 2010, an increase of $0.2 million or 0.4%. For the six month period of fiscal 2011, net revenues were $119.1 million as compared to $107.4 million for the six month period of fiscal 2010, an increase of $11.7 million or 10.9%. Net revenues may be periodically impacted by adjustments made to the Companys sales allowance and marketing support accrual to record unanticipated customer deductions from accounts receivable or to reduce the accrual by any amounts which were accrued in the past but not taken by customers through deductions from accounts receivable within a certain time period. In the aggregate, these adjustments had the effect of increasing net revenues and operating income by approximately $136,000 and $371,000 for the second quarters of fiscal 2011 and fiscal 2010, respectively, and approximately $267,000 and $681,000 for the six month periods of fiscal 2011 and fiscal 2010, respectively.

Cost of Sales In absolute terms, cost of sales increased $2.2 million, or 5.0%, to $45.9 million in the second quarter of fiscal 2011 as compared to $43.7 million in the second quarter of fiscal 2010. In absolute terms, cost of sales increased $10.1 million, or 10.8%, to $103.4 million in the six month period of fiscal 2011 as compared to $93.3 million in the six month period of fiscal 2010. Cost of sales, as a percentage of net revenues, was 88.3% and 84.4% in the second quarters of fiscal 2011 and fiscal 2010, respectively, and 86.8% and 86.9% in the six month periods of fiscal 2011 and 2010, respectively. Cost of sales as a percentage of sales revenues less license revenues increased to 90.6% in the second quarter of fiscal 2011 from 86.9% in the second quarter of fiscal 2010. Cost of sales as a percentage of sales revenues less license revenues was 88.9% in the six month period of fiscal 2011 as compared to 89.3% in the six month period of fiscal 2010. The increase in cost of sales in absolute terms for both the second quarter and six month period of fiscal 2011 as compared to the second quarter and six month period of fiscal 2010 was primarily related to an increase in core product cost of sales, partially offset by reduced royalties related to themed products and higher purchase return credits.

Other Operating Costs and Expenses As a percentage of net revenues, other operating costs and expenses were 1.4% in the second quarter of fiscal 2011 and 2.1% in the second quarter of fiscal 2010. In absolute terms, other operating costs and expenses decreased $365,000, or 33.9%, to $712,000 for the second quarter of fiscal 2011 as compared to $1.1 million in the second quarter of fiscal 2010 as a result of decreased warranty-related costs and lower allocated selling, general and administrative expenses associated with this activity, partially offset by higher costs associated with product returns. For the six month period of fiscal 2011, other operating costs and expenses were 0.8% of net revenues as compared to 1.7% of net revenues for the six month period of fiscal 2010. In absolute terms, other operating costs and expenses decreased $844,000, or 45.5%, to $1.0 million for the six month period of fiscal 2011 as compared to $1.9 million in the six month period of fiscal 2010, as a result of decreased warranty-related costs, decreased costs associated with product returns and lower allocated selling, general and administrative expenses associated with these activities

Selling, General and Administrative Expenses (S,G&A) S,G&A, as a percentage of net revenues, was 3.9% in the second quarter of fiscal 2011 as compared to 7.0% in the second quarter of fiscal 2010. S,G&A, in absolute terms, decreased $1.6 million, or 43.9%, to $2.0 million for the second quarter of fiscal 2011 as compared to $3.6 million for the second quarter of fiscal 2010. The decrease in S,G&A in absolute terms between the second quarter of fiscal 2011 and second quarter of fiscal 2010 was primarily due to lower in legal, rent and advertising expenses. For the six month period of fiscal 2011, S,G&A was 3.3% of net revenues as compared to 6.9% of net revenues in the six month period of fiscal 2010. In absolute terms, S,G&A decreased $3.4 million, or 46.5%, to $4.0 million for the six month period of fiscal 2011 as compared to $7.4 million in the six month period of fiscal 2010. The decrease in S,G&A in absolute terms between the six month periods of fiscal 2011 and 2010 was primarily due to lower legal and compensation expenses, changes in the bad debt reserve, and lower rent and advertising expenses.

Interest Income, net Interest income, net, was $4,000 in the second quarter of fiscal 2011 as compared to $12,000 in the second quarter of fiscal 2010. For the six month period of fiscal 2011, interest income, net was $14,000 as compared to $22,000 in the six month period of fiscal 2010. Both periodic decreases were due to lower interest rates and lower invested assets.

As of September 30, 2010, the Company had cash and cash equivalents of approximately $2.6 million, compared to approximately $29.0 million at September 30, 2009. Working capital decreased to $34.2 million at September 30, 2010 as compared to $47.9 million at September 30, 2009. The decrease in cash and cash equivalents of approximately $26.4 million was primarily due to the payment of an extraordinary dividend of $29.8 million in March 2010, an increase in inventories of approximately $12.7 million and the purchase of the Companys new headquarters building of approximately $2.6 million, partially offset by the net income generated by the Company during the twelve months ended September 30, 2010.

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