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_____________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_______________________
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-25226
EMERSON RADIO CORP.
(Exact name of registrant as specified in its charter)
Delaware 22-3285224
_______________________________ _______________________________
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organzation) Number)
Nine Entin Road, Parsippany, NJ 07054
_______________________________________ _____________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 884-5800
______________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Shares, par value $.01 per share American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: Series A
Preferred Stock and Warrants.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirement for the past 90 days. [X] YES [ ] NO.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ].
Aggregate market value of the voting stock of the registrant held by non-
affiliates of the registrant at June 15, 1995 (computed by reference to
the last reported sale price of the Common Shares on the American Stock
Exchange on such date): $26,042,103.
Indicate by check mark whether the registrant has filed all documents and
reports to be filed by Section 12, 13 or 15(d) of the Securities Exchange
Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. [X] YES [ ] NO.
Number of Common Shares outstanding at June 15, 1995: 40,252,772
DOCUMENTS INCORPORATED BY REFERENCE: Proxy Statement for the 1995
Annual Meeting of Stockholders: Part III
__________________________________________________________________________
PART I
Item 1. BUSINESS
General
Emerson Radio Corp. ("Emerson" or the "Company"), one of the nation's
largest volume consumer electronics distributors, directly and through
subsidiaries, designs, sources, imports and markets a variety of video and
audio consumer electronics and microwave oven products. The Company
distributes its products primarily through mass merchants and discount
retailers. The Company relies primarily on the strength of its "Emerson"
trademark, a nationally recognized trade name in the consumer electronics
industry. The trade name "Emerson Radio" dates back to 1912 and is one of
the oldest and most well respected names in the consumer products industry.
In addition, the Company offers a line of audio products for sale under the
"H.H. Scott" brand name. Approximately $15 billion of factory sales are
generated by the industry in the market segment in which the Company
competes. In calendar year 1994, Emerson was among the top three brand
names in unit sales volume of video cassette recorders ("VCRs") and TV/VCR
combinations and among the top five brand names in unit sales volume of
color televisions.
The Company believes it possesses an advantage over its competitors
due to (i) the Emerson brand recognition, (ii) its extensive distribution
base and established relations with customers in the mass merchant and
discount retail channels of distribution, (iii) its sourcing expertise and
established vendor relations, and (iv) an infrastructure boasting personnel
experienced in servicing and providing logistical support to the domestic
mass merchant distribution channel. Emerson intends to leverage its key
strengths to offer a broad variety of current and new consumer products to
retail customers in developing markets worldwide. The Company intends to
form joint ventures and enter into licensing agreements which will take
advantage of the Company's trademarks and utilize the Company's logistical
and sourcing advantages.
The Company's core business consists of the distribution and sale of
various low to moderately priced product categories, including black and
white and color televisions, VCRs, video cassette players ("VCPs"), TV/VCR
combination units, home stereo and portable audio products and microwave
ovens. The majority of the Company's marketing and sales of these products
is concentrated in the United States and, to a lesser extent, Canada and
certain other international regions. Emerson's major competition in these
markets are foreign-based manufacturers and distributors. See "Business -
Competition."
The Company successfully restructured its financial position (the
"Restructuring") through a plan of reorganization, confirmed by the United
States Bankruptcy Court for the District of New Jersey (the "Bankruptcy
Court"), pursuant to the provisions of Chapter 11 of the Bankruptcy Code on
March 31, 1994 ("Plan of Reorganization"). Through the Restructuring, the
Company reduced its institutional debt by approximately $203 million.
Additionally, the Company increased its net sales by 34% in the fiscal year
ended March 31, 1995, the fiscal year immediately following its emergence
from bankruptcy, as compared to the prior fiscal year, and since the fiscal
year ended March 31, 1993, has reduced its annual fixed operating costs by
more than 50%.
The Company was originally formed in the State of New York in 1956
under the name Major Electronics Corp. In 1977, the Company reincorporated
in the State of New Jersey and changed its name to Emerson Radio Corp. On
April 4, 1994, the Company was reincorporated in Delaware by merger of its
predecessor into its wholly-owned Delaware subsidiary formed for such
purpose. References to "Emerson" or the "Company" refers to Emerson Radio
Corp. and its subsidiaries, unless the context otherwise indicates. The
Company's principal executive offices are located at Nine Entin Road,
Parsippany, New Jersey 07054-0430. The Company's telephone number in
Parsippany, New Jersey, is (201) 884-5800.
Company Products
The Company directly and through subsidiaries designs, sources,
imports and markets a variety of video and audio consumer electronics and
microwave oven products, primarily on the strength of its "Emerson"
trademark, a nationally recognized symbol in the consumer electronics
industry. The Company's core business currently consists of the
following video and audio product categories as well as microwave ovens:
Video Products Audio Products
Color Televisions Shelf systems
Black and White
Specialty Televisions CD stereo systems
Color Specialty Televisions Portable audio,
cassette and CD systems
Color TV/VCR Combination Units AM/FM Bicycle radios
Video Cassette Recorders Personal audio, cassette
and CD systems
Specialty Video Cassette Players Digital clock radios
All of the Company's products offer various features. Specialty
televisions include products with built-in stereo cassette players,
AM/FM radios and/or AC/DC capabilities. Color television units range in
screen size from 5 inches to 25 inches and specialty color televisions are
offered in 5 inch and 9 inch units. Combination units range in screen size
from 9 inches to 25 inches. Portable audio systems incorporate AM/FM radios
and/or cassette and/or CD players in a variety of models. Microwave
ovens range in size from 0.6 cubic feet to 1.2 cubic feet containing
features such as turntables, key pad touch controls, auto defrost and
multi-power levels. The Company is also introducing ready-to-assemble
furniture and personal safety products to complement its current
product line.
Growth Strategy
The Company believes that the "Emerson" trademark is widely
recognized on a world-wide basis. A principal component of the
Company's growth strategy is to utilize this brand name recognition together
with the Company's reputation for quality and cost competitive products to
aggressively promote its product lines within the United States and
Canada and targeted geographic areas on an international basis. The
Company's management believes that the Company will be able to compete more
effectively in the highly competitive consumer electronics and microwave oven
industries, domestically and internationally, by combining innovative
approaches to the Company's current product line and augmenting its product
line with complementary products. The Company intends to pursue such plans
either on its own, or by forging new relationships, including through license
arrangements, partnerships or joint ventures. The Company has successfully
negotiated definitive licensing arrangements with its largest supplier,
a distributor of consumer electronics accessories, and a manufacturer of
clocks and watches, and the Franklin Mint. See "Business-Licensing".
Further, the Company is currently involved in negotiations with different
parties with respect to additional similar transactions.
The Company's strategic focus is to: (i) develop and expand its
distribution of consumer electronics products in the domestic marketplace
to new customers and develop and distribute new products for its own
account, such as ready-to-assemble furniture and personal safety
products; (ii) capitalize on opportunities to license the "Emerson" and
"H.H. Scott" trade names; (iii) leverage and exploit its sourcing
capabilities, buying power and logistics expertise in the Far East either
internally or on behalf of third parties; and (iv) expand international
sales including not only core consumer electronic products but also other
consumer products such as ready-to-assemble furniture and personal safety
products.
Sales and Distribution
The Company has implemented an integrated system to coordinate the
purchasing, sales and distribution segments of its operations. The
Company is equipped to receive orders from its major accounts electronically
or by the conventional modes of facsimile, telephone or mail. The Company
does not have long-term contracts with any of its customers, but rather
receives orders on an ongoing basis. Products imported by the Company
(generally from the Far East) are shipped by ocean freight and then stored
in contracted public warehouse facilities for shipment to customers.
Products manufactured by a vendor in Indiana are stored in public warehouses
on an interim basis until shipped to the Company's customers. All
merchandise received by Emerson is automatically updated into the
Company's on-line inventory system. As a purchase order is received
and filled, warehoused product is labeled and prepared for outbound
shipment to Company customers by common, contract or small package carriers.
The Company also makes available to its customers (through
subsidiaries) a direct import program, pursuant to which products are
imported directly by the Company's customers. In the years ended March
31, 1995 and 1994 ("Fiscal 1995" and "Fiscal 1994", respectively), products
representing approximately 68% and 52% of net sales, respectively, were
imported directly from manufacturers to the Company's customers. If the
Company experiences a decline in the percentage of sales effected
through direct imports, its working capital and inventory requirements may be
incrementally affected. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition".
Domestic Marketing
In the United States, the Company markets its products primarily
through mass merchandisers and discount retailers. Wal-Mart Stores,
Inc. ("Wal-Mart") accounted for approximately 53% and 34%, and Target Stores,
Inc., accounted for approximately 10% and 12% of the Company's net sales
in Fiscal 1995 and Fiscal 1994, respectively. Net sales to Wal-Mart
include sales of certain video products which are subject to a license/supply
arrangement with the Company's largest supplier, effective March 31,
1995. Net sales of these products to Wal-Mart accounted for approximately
47% and 21% of consolidated net sales in Fiscal 1995 and Fiscal 1994,
respectively. See "Business-Licensing". No other customer accounted for
more than 10% of the Company's net sales in either period.
A portion of the Company's sales are made through sales representative
organizations which receive sales commissions and work closely with
Company sales personnel. The remainder of the Company's sales are made
to retail customers serviced principally by Company sales personnel.
The Company has six sales professionals based in the United States.
The domestic sales force is based in the Company's New Jersey corporate
headquarters, and in regional offices located in Georgia, Missouri
and California. The sales representative organizations sell, in addition
to the Company's products, allied, but generally non-competitive,
products. In most instances, either party may terminate a sales
representative relationship on 30 days' prior notice in accordance with
customary industry practice. The Company utilizes approximately 30
sales representative organizations, including one through which approximately
10% of the Company's net sales were made in Fiscal 1995. No other sales
representative organization accounted for more than 10% of the Company's
net sales in Fiscal 1995.
Foreign Marketing
While the major portion of the Company's marketing efforts are
directed toward the United States, approximately 7% of the Company's net
sales in Fiscal 1995 were made to foreign customers in Canada, Central
and South America, Spain and the Middle East. See Note M of Notes to
Consolidated Financial Statements and "Management's Discussion and
Analysis of Results of Operations and Financial Condition". The Company is
expanding its marketing and sales activities in certain international
geographic regions and has expanded such activities to cover other parts
of Europe, South America, the Far East and Mexico.
Licensing
The Company has successfully concluded licensing agreements with
(i) Otake Trading Co., Ltd. and certain affiliates ("Otake") for the sale of
video products bearing the "Emerson" trademark to Wal-Mart locations in the
United States and Canada, (ii) Jasco Products Co., Inc. ("Jasco"), the third
largest domestic electronics accessory company, for distribution of
electronic accessories in the United States, (iii) Herald Holding Limited
("Herald"), a publicly-traded Hong Kong Company, for the distribution of
clocks and watches in the United States bearing the "Emerson" trademark and
(iv) the Franklin Mint for distribution of classic Emerson Radio
reproductions. The Company intends to pursue additional licensing
opportunities and believes that such licensing activities will have a
positive impact on net operating results by generating royalty income
with minimal costs, if any, and without the necessity of utilizing working
capital or accepting customer returns. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition".
Design and Manufacturing
The Company's design team is responsible for product development
and operates closely with the Company's manufacturers. The Company's
engineers determine the detailed cosmetic and option specifications for new
products, which typically incorporate commercially available electronic parts
to be assembled according to the Company's designs. Accordingly, the
exterior designs and operating features of the Company's products reflect
the Company's judgment of current styles and consumer preferences. The
Company's designs are tailored to meet the needs of the local market,
particularly in the case of international distribution, where products are
generally introduced on a country-by-country basis.
The majority of the Company's products are manufactured by original
equipment manufacturers in accordance with the Company's specifications.
The manufacturers are primarily located in Hong Kong, South Korea,
Taiwan, China, Malaysia and Thailand. Certain of the Company's products are
also assembled by a contract manufacturer in Indiana.
During Fiscal 1995 and Fiscal 1994, approximately 89% and 84%,
respectively, of the cost value of the Company's purchases consisted of
imported finished goods. Otake, a manufacturer headquartered in Japan,
supplied approximately 73% and 59%, respectively, of the Company's total
purchases in Fiscal 1995 and Fiscal 1994. Approximately 52% and 30% of
the cost value of the Company's purchases in Fiscal 1995 and Fiscal 1994,
respectively, were video products purchased from Otake and sold to Wal-
Mart. As a result of the license/supply arrangement with Otake, the
Company expects to purchase a significantly lower proportion of its
finished goods from Otake over the three-year term of the agreements.
See "Business-Licensing". The license/supply arrangement also provides that
Otake will supply the Company with certain video products for sale to
other customers at preferred prices for a three-year term. Otake also
sells a line of video products under its Orion trademark. Kong Wah, a
manufacturer headquartered in Hong Kong, supplied approximately 10% of the
Company's total purchases in Fiscal 1994. No other supplier accounted for
more than 10% of the Company's total purchases in either period. The Company
considers its relationships with its suppliers to be satisfactory and
believes that, barring any unusual shortages or economic conditions, it
could develop alternative sources for any of the products it currently
purchases. Except with respect to the agreements with Otake, the
Company does not have a contractual agreement with any of its suppliers and
no assurance can be given that certain short-term shortages of product
would not result if the Company were required to seek alternative sources of
supply without adequate notice by the supplier or a reasonable opportunity
to seek alternate production facilities and component parts.
Warranties
The Company offers its United States and Canadian consumers limited
warranties comparable to those offered to consumers by its competitors
and accepts returns from its customers in accordance with customary industry
practices. Warranties for products sold internationally are, in certain
cases, provided on a region-by-region basis through local entities
retained by the Company.
Refurbished Products
The Company's customers return product to the Company for a variety
of reasons, including liberal retailer return policies, damage to goods
in transit and occasional cosmetic imperfections and mechanical failure.
Effective April 1, 1994, the Company formed a partnership
("Partnership") with Hopper Radio of Florida, Inc. ("Hopper"). The
Company and Hopper each own a 50% interest in the Partnership. The
Partnership was formed to purchase (i) all returned consumer electronics
products from the Company, refurbish them, if feasible, and sell them
refurbished or "As-Is", on a worldwide basis in all countries where the
Company has trademark rights and (ii) new consumer electronics products from
manufacturers sourced through a subsidiary of the Company or through
third parties, if such new products could be obtained on more favorable prices
and terms, for sale exclusively in Mexico and Central and South America.
The Partnership with Hopper has enabled the Company to control the
costs associated with product returns, by providing a stable selling
price for returned products and increased inventory turnover, by utilizing
the distribution network of Hopper to sell products, and by potentially
increasing the Company's sales of new products to Mexico and Central and
South America. The Partnership's profits and losses are allocated
evenly and the general managerial activities are under the control of Barry
Smith, who is also the President of Hopper. The Company previously
refurbished certain products which were either sold as refurbished or, if
not refurbished, sold "As-Is". See "Management's Discussion and Analysis of
Results of Operations and Financial Condition".
In forming the Partnership, the Company contributed returned product
to the Partnership equal in value to the amount of Hopper's initial cash
contribution of $500,000. The Company also agreed to (i) sell additional
returned products to the Partnership, pursuant to the terms of a sales
agreement, (ii) license to the Partnership its "Emerson" trademark for
sale of refurbished product worldwide and for sale of new products
exclusively in Mexico, Central and South America, (iii) provide the
Partnership with access to its vendors, (iv) relinquish its territories
for refurbished merchandise and (v) lease to the Partnership the
equipment to refurbish the returned merchandise. The Partnership agreement
similarly provides that Hopper is required to provide the Partnership with
(i) the set price list at which all merchandise shall be sold, to be approved
in advance by both partners, (ii) financing on terms to be agreed to by
both parties, and (iii) the physical location for refurbishing activities at
a rental rate of $2.00 per square foot, or as otherwise agreed to by the
parties.
Backlog
From time-to-time, the Company has substantial orders from customers
on hand. Management believes, however, that backlog is not a significant
factor in its operations. The ability of management to correctly
anticipate and provide for inventory requirements is essential to the
successful operation of the Company's business.
Trademarks
The Company owns the "Emerson", "H.H. Scott" and "Scott" trademarks
for certain of its home entertainment and electronic products in the
United States, Canada, Mexico and various other countries. Of the trademarks
owned by the Company, those registered in the United States must be
renewed at various times from 1996 to 2008 and those registered in Canada
must be renewed at various times from 1995 to 2007. The Company's trademarks
are also registered on a worldwide basis, which registrations must be
renewed at various times. The Company intends to renew all such trademarks.
The Company considers the "Emerson" trademark to be of material importance
to its business. The Company also owns the "Electrophonic" trademark and
is studying the introduction of this trademark on value priced audio
products in fiscal year 1996. The Company owns several other trademarks,
none of which is currently considered by the Company to be of material
importance to its business. The Company has licensed certain
applications of the "Emerson" trademark to Otake, Jasco, Herald and the
Franklin Mint on a limited basis. See "Business - Licensing".
Competition
The market segment of the consumer electronics industry in which
the Company competes generates approximately $15 billion of factory sales
annually and is highly fragmented, cyclical and very competitive,
supporting major American, Japanese and Korean companies, as well as
numerous small importers. The industry is characterized by the short
life cycle of products which requires continuous design and development
efforts. Market entry is comparatively easy because of low initial capital
requirements.
The Company primarily competes in the low to medium-priced sector
of the consumer electronics market. Management estimates that the Company
has several dozen competitors, many of which are much larger and have
greater financial resources than the Company. Emerson's major competitors
are foreign-based manufacturers and distributors. The Company competes
primarily on the basis of its products' reliability, quality, price and
design, the "Emerson" trademark and service to retailers and their
customers. The Company's products also compete at the retail level for
shelf space and promotional displays, all of which have an impact on the
Company's established and proposed distribution channels. See
"Management's Discussion and Analysis of Results of Operations and
Financial Condition".
Government Regulation
Pursuant to the Tariff Act of 1930, as amended, the Trade Act of
1974 and regulations promulgated thereunder, the United States government
charges tariff duties, excess charges, assessments and penalties on many
imports. These regulations are subject to constant change and revision
by government agencies and by action by the United States Trade
Representative and may have the effect of increasing the cost of goods
purchased by the Company or limiting quantities of goods available to the
Company from its overseas suppliers. A number of states have adopted
statutes regulating the manner of determining the amount of payments to
independent service centers performing warranty service on products such
as those sold by the Company. Additional Federal legislation and regulations
regarding the importation of consumer electronics products, including the
products marketed by the Company, have been proposed from time-to-time and,
if enacted into law, could adversely affect the Company's results of
operations.
Employees
As of June 15, 1995, the Company had approximately 200 employees.
The Company considers its labor relations to be generally satisfactory.
Item 2. PROPERTIES
The Company, directly and through its subsidiaries, leases warehouse
and office space in New Jersey, California, Canada, Georgia, Missouri,
the Far East and Spain under leases expiring at various times from calendar
1995 to 1998, at minimum aggregate rentals as follows:
Year Ending
March 31, (In Thousands)
1996 $1,507
1997 1,484
1998 1,071
1999 271
_____
$4,333
======
In the past several years, the Company has closed substantially
all of its leased or owned warehouse facilities in favor of utilizing public
warehouse space as part of the Company's effort to convert fixed costs
to variable costs. The cost for the public warehouse space is based on a
fixed percentage of the Company's sales from each respective location.
Such amounts are not included in the above table.
Item 3. LEGAL PROCEEDINGS
Bankruptcy Claims
Pursuant to the Plan of Reorganization and the Bankruptcy Code,
all claims against the Company existing as of September 29, 1993, were
discharged, except as specifically set forth in the Plan of Reorganization.
See "Management's Discussion and Analysis of Results of Operations and
Financial Condition". The Plan of Reorganization provides that unsecured
creditors other than the Company's bank group and the holders of the senior
notes holding pre-petition claims which are allowed, will receive unsecured
promissory notes in the principal amount equal to 18.3% of the allowed
amount of the claim; the notes would bear interest at a rate based on the
London Interbank Offered Rate ("LIBOR") for one year obligations and would
be payable as follows: (i) 35% of the outstanding principal is due 12
months from the date of issuance, and (ii) the remaining balance would be
due 18 months from the date of issuance. The Company is presently
contesting claims submitted by several creditors.
The largest claim was filed on July 25, 1994 in connection with
the rejection of certain executory contracts with two Brazilian entities,
Cineral Electronica de Amazonia Ltda. and Cineral Magazine Ltda.
(collectively, "Cineral"). The contracts were executed in August 1993,
shortly before the Company's filing for bankruptcy protection. The
amount claimed was $93,563,457, of which $86,785,000 represents a claim for
loss of profits and $6,400,000 for plant installation and the establishment
of offices, which were installed and established prior to execution of the
contracts. The claim was filed as an unsecured claim and, therefore,
will be satisfied, to the extent the claim is allowed by the Bankruptcy
Court, in the manner other allowed unsecured claims were satisfied. The
Company believes the Bankruptcy Court will separately review the portion
of the claim for lost profits from the substantially smaller claim for
actual damages. The Company has objected to the claim, intends to
vigorously contest such claim and believes it has meritorious defenses to
the highly speculative portion of the claim for lost profits and the portion
of the claim for actual damages for expenses incurred prior to the execution
of the contracts. Additionally, the Company has instituted an adversary
proceeding in the Bankruptcy Court asserting damages caused by Cineral. A
motion filed by Cineral to dismiss the adversary proceeding has been
denied. The adversary proceeding and claim objection have been
consolidated into one proceeding. An adverse final ruling on the Cineral
claim could have a material adverse effect on the Company, even though
it would be limited to 18.3% of the final claim determined by a court of
competent jurisdiction; however, with respect to the claim for lost
profits, in light of the foregoing, the Company believes the chances for
recovery for lost profits are remote.
Teletech Litigation
In December 1990, an action entitled Emerson Radio (Hong Kong)
Limited (a wholly owned subsidiary of the Company) and Teletech (Hong
Kong) Limited was commenced in the Supreme Court of Hong Kong High Court
(the "Teletech Action") by Emerson Radio (Hong Kong) Limited ("Emerson
(H.K.)") against Teletech (Hong Kong) Limited ("Teletech"). The Statement
of Claim (the "Claim"), filed and served in March 1991, alleges that
Teletech breached its agreements to sell cordless telephones and telephone
answering machines to Emerson (H.K.). The Claim seeks damages of
approximately $1,000,000.
In March 1991, Teletech filed a counterclaim that essentially denies
the allegations and alleges that Emerson (H.K.) breached its agreement
to purchase cordless telephones and telephone answering machines arising
from wrongful cancellation of placed orders. The counterclaim seeks damages
of approximately $1,700,000. In May 1991, Emerson (H.K.) filed a reply to
the counterclaim denying the allegations in the counterclaim. Discovery is
currently proceeding. This litigation was not affected by the bankruptcy
proceedings.
Tax Matters
In June and October 1988, the Franchise Tax Board of the State of
California issued Notices of Proposed Assessment to the Company proposing
additional state income tax of approximately $501,000 in the aggregate,
plus interest, for the fiscal years 1980, 1985 and 1986. In August and
November 1988, the Company filed protests with the Franchise Tax Board
taking exception to the Notices of Proposed Assessment. After disallowing
the Company's protest, on July 24, 1992, the Franchise Tax Board issued
a formal Notice of Action assessing a deficiency in the aggregate of
approximately $664,000, which includes interest through July 24, 1992.
On August 24, 1992, the Company filed an appeal with the California State
Board of Equalization. The Franchise Tax Board filed a response on
April 29, 1993, and the Company filed its reply on July 16, 1993.
On March 9, 1994, the Company filed an adversary complaint with
the Bankruptcy Court, to obtain a declaratory judgment against the Franchise
Tax Board with regard to this matter. The Franchise Tax Board filed its
response on April 6, 1994. Discovery is proceeding. The Franchise Tax
Board moved to dismiss the adversary proceeding and requested the
Bankruptcy Court to abstain. On October 19, 1994, the Bankruptcy Court
entered an order of abstention which directed the parties to litigate in
California. The Company has appealed.
On February 15, 1994, the Franchise Tax Board issued Notices of
Proposed Assessment to the Company proposing additional state income tax
of approximately $382,000 in the aggregate, plus interest, for the fiscal
years 1987, 1988 and 1989. The Company filed its protest with the
Franchise Tax Board on April 15, 1994, taking exception to the Notices
of Proposed Settlement.
Management believes that adequate amounts of tax reserves have
been provided for any adjustments which may result from the above assessments
and any possible additional adjustments for years not currently under
examination.
Litigation Regarding Certain Outstanding Common Stock
Subsequent to confirmation of the Plan of Reorganization, litigation
arose among the principal shareholders of Fidenas Investment Limited
("FIL"), the Company's largest shareholder prior to confirmation of the
Plan of Reorganization, with respect to various business relations and
transactions entered into between the shareholders, certain affiliates
and their principals, including Geoffrey Jurick, the Company's Chairman and
Chief Executive Officer, and Donald Stelling, former Chairman of the
Company. Mr. Stelling resigned on December 2, 1993 from the Company's
Board of Directors creating uncertainty about the ability of FIL to
honor its commitment to the Company and the Company's bank group to satisfy
its obligations to infuse $75 million in funds for the purpose of financing
the Restructuring. The $75 million commitment was made available by Mr.
Jurick and related companies, which utilized approximately $15.2 million in
funds which had been deposited by FIL into an escrow account for the purpose
of securing the Company's Debtor-in-Possession financing obtained in
connection with the Restructuring. Management believes that, as of the
present date, Messrs. Jurick and Peter Bunger, directors of the Company,
comprise the Board of Directors of FIL. The use of the $15.2 million
has been challenged by various Stelling interests in three countries.
Proceedings were commenced in the Commonwealth of Bahamas for the
winding-up of FIL. The proceeding was brought by one of its shareholders,
a Bahamian entity controlled by Petra Stelling, wife of Donald Stelling.
The liquidator appointed by the Bahamian Court for the winding-up of FIL
commenced litigation against Fidenas International Limited, L.L.C.
("Fidenas International"), presently the Company's largest stockholder,
and Mr. Jurick with respect to claims arising from the acquisition of the
Company's Common Stock by GSE Multimedia Technologies Corporation
("GSE") and Fidenas International.
The liquidator commenced ancillary proceedings in the United
States Bankruptcy Court pursuant to authorization granted by the Bahamian
Court for the purposes of, among other things, (i) conducting discovery
regarding the issuance of the shares of Common Stock to Fidenas
International, GSE and Elision International, Inc. ("Elision") and
utilization of the $15.2 million in funds which secured the Company's
Debtor-in-Possession Financing and (ii) restraining the transfer,
disposition or further encumbrance of any shares of the Company owned by
Fidenas International, GSE, and Elision issued pursuant to the Plan of
Reorganization. The ancillary proceeding was dismissed by the United
States Bankruptcy Court on February 16, 1995.
In addition to the litigation pending in the Bahamas and New York,
the Stelling interests have pursued Mr. Jurick and certain business
associates and affiliates in civil and criminal actions in Switzerland
for various claims relating to their business relationships and transactions.
Based on certain charges raised by the Stellings, the Swiss authorities
have commenced investigations of Messrs. Jurick, Bunger and Jerome Farnum
(also a director of the Company). In addition, the Swiss authorities
have questioned Messrs. Jurick and Farnum as part of an investigation of
possible violations by them of certain Swiss bank licensing laws. None
of Messrs. Jurick, Farnum or Bunger has been charged or indicted by the
Swiss authorities. The Federal Banking Commission of Switzerland has
issued a decree purporting to determine that certain entities affiliated
with Messrs. Jurick and Farnum are subject to Swiss banking laws and have
engaged in banking activities without a license; the Commission has
ordered (i) the liquidation of one affiliate and the assets of another,
(ii) the appointment of a Swiss accounting firm to conduct the decreed
liquidation and (iii) certain preliminary measures providing for the
appointment of the Swiss accounting firm to act as an observer with special
supervisory powers. The Company has been informed by counsel to those
entities that an appeal has been filed with respect to the decree and that
during the appeal, if timely filed, the provisions of the decree providing
for the liquidation shall not be implemented.
Though the Company is not a party to any of the proceedings in
Switzerland or in the Commonwealth of Bahamas, the Company intends to
monitor the litigation. The Company believes none of the litigation
will have a material adverse effect on the Company or its assets although an
order of a court of competent jurisdiction requiring the turnover of all
or a substantial portion of the Common Stock may result in a default under
the terms of the United States credit facility. Additionally, such
a change in control could result in a second ownership change further
limiting the Company's ability to use its net operating loss
carryforwards ("NOLs") and tax credit carryovers ("TCCOs").
The Official Liquidator appointed in the Commonwealth of Bahamas
for Fidenas International Bank Limited (which management believes to be a
holder of approximately 18% of the shares of Elision and approximately
11% of the shares of GSE) has filed an action in the Bahamas concerning the
ownership by Fidenas International of certain shares of Common Stock.
Transfer of the stock has been enjoined by the Bahamian courts. The
Liquidator has also filed an action in the United States District Court
on behalf of Fidenas International Bank Limited with respect to certain
shares of Common Stock issued to Fidenas International in conjunction with
the Restructuring. As of the date hereof, the transfer of such shares has
been restrained and discovery in the action has been commenced.
Stelling Litigation
The Company filed a suit in federal court in New Jersey on July
14, 1994, naming Mr. Stelling and his spouse as defendants alleging, among
other things, breaches by Mr. Stelling of fiduciary duties and breaches of
contract by Mr. Stelling, as agent, and Mrs. Stelling, as principal. The
suit sets forth requests for monetary damages as well as declaratory
judgments that the provisions of the Plan of Reorganization providing
for releases do not apply to the Stellings and that they are estopped from
claiming any interest in the Company. The Stellings have filed a motion
to dismiss the suit. As of the date hereof, no ruling has been made with
respect to such motion.
Other Litigation
The Company is involved in other legal proceedings and claims of
various types in the ordinary course of business. While any litigation
contains an element of uncertainty, management presently believes that
the outcome of each such proceeding or claim which is pending or known to be
threatened (including the actions noted above), or all of them combined,
will not have a material adverse effect on the Company's consolidated
financial position.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended March 31, 1995.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(a) Market Information
The Company's Common Stock has traded on the American Stock Exchange
since December 22, 1994 under the symbol MSN. The Common Stock began
trading publicly on September 1, 1994 in the over-the-counter market.
Prior thereto, there was no established public trading market for the
Common Stock.
Prior to confirmation of the Plan of Reorganization on March 31,
1994, there were approximately 4,500 shareholders of record of the
Common Stock of the Company. The shares of such shareholders were terminated
and cancelled on the effective date of the Plan of Reorganization. Such
shares had been traded on the New York Stock Exchange until trading was
suspended on October 6, 1993 and the shares delisted on April 15, 1994.
The following table sets forth, for the fiscal quarters indicated,
the range of high and low bid prices for the Company's Common Stock as
reported by the National Quotations Bureau for the period September 1,
1994 through December 21, 1994 and the range of high and low sales prices as
reported by the American Stock Exchange from December 22, 1994.
Quarter Ended High Low
September 30, 1994 $1-1/2 $1
December 31, 1994 2-7/8 15/16
March 31, 1995 3-3/8 2
The Series A Preferred Stock and Warrants outstanding are freely
tradeable; however, there is no established trading market for either
security.
(b) Holders
At June 15, 1995, there were approximately 500 shareholders of record
of the Company's Common Stock, and 21 holders of record of the Series A
Preferred Stock and 11 holders of the Warrants.
(c) Dividends
The Company's policy has been to retain all available earnings, if
any, for the development and growth of its business. The Company has
never paid cash dividends on its Common Stock. In deciding whether to pay
dividends on the Common Stock in the future, the Company's Board of
Directors will consider factors it deems relevant, including the Company's
earnings and financial condition and its working capital and anticipated
capital expenditures. The Company's United States credit facility contains
certain dividend payment restrictions on the Company's Common Stock.
Additionally, the Company's Certificate of Incorporation, defining the
rights of the Series A Preferred Stock, prohibits Common Stock dividends
unless the Series A Preferred Stock dividends are paid or put aside.
The Series A Preferred Stock earns dividends, payable on a quarterly basis,
at a 7% dividend rate through March 31, 1997, then declining by a 1.4%
dividend rate each succeeding year until March 31, 2001 when no further
dividends are payable.
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA
The Company changed its fiscal year end from December 31 to March
31, commencing with the period ended March 31, 1992. Previously, the Company
had changed its fiscal year end from March 31 to December 31, beginning
with the period ended December 31, 1990. The following table sets forth
selected consolidated financial data of the Company for the years ended
March 31, 1995, 1994 and 1993, the three months ended March 31, 1992, the
year ended December 31, 1991 and the nine months ended December 31, 1990.
The selected consolidated financial data should be read in conjunction
with the Company's consolidated financial statements, including the notes
thereto, and "Management's Discussion and Analysis of Results of Operations
and Financial Condition" set forth elsewhere in this Form 10-K.
Nine Three
Months Year Months Year Year Year
Ended Ended Ended Ended Ended Ended
Dec. 31, Dec. 31, Mar. 31, Mar. 31, Mar. 31, Mar. 31,
1990 1991 1992 1993 1994 1995
(In thousands, except per share data)
Summary of Operations:
Net Sales:
Core Business $528,809 $716,651 $169,936 $741,357 $487,390 $654,671
Personal Computers
and Other 96,609 73,555 1,562
_______ _______ _______ ________ _______ _______
$625,418 $790,206 $171,498 $741,357 $487,390 $654,671
======== ======== ======== ======== ======== ========
Net Earnings (Loss) (1):
Before Extraordinary
Gain $(37,463) $(60,746) $ (6,976) $(56,000) $(73,654) $ 7,375
Extraordinary Gain 129,155
________ ________ ________ ________ _______ ______
$(37,463) $(60,746) $ (6,976) $(56,000) $ 55,501 $ 7,375
Balance Sheet Data at Period End:
Total Assets $300,366 $226,131 $216,693 $194,510 $119,021 $113,969
Current Liabilities(2)232,220 218,504 215,069 249,307 76,083 59,782
Long-Term Debt (2) 60 130 157 151 227 214
Shareholders'
Equity (Deficit) 65,139 4,550 (1,480) (57,895) 42,617 53,651
Working Capital
(Deficit) 31,111 (29,503) (36,003) (89,949) 32,248 42,598
Current Ratio 1.1 to 1 0.9 to 1 0.8 to 1 0.6 to 1 1.4 to 1 1.7 to 1
Per Common Share:
Net Earnings (Loss)
Per Common
Share (1) (3):
Before Extraordinary
Gain $(1.03) $( 1.60) $(0.18) $ (1.47) $ (1.93) $ 0.16
Extraordinary Gain 3.38
______ _______ _______ _______ ______ _______
$(1.03) $( 1.60) $(0.18) $ (1.47) $ 1.45 $ 0.16
Weighted Average Number of
Common and Common Equivalent
Shares Outstanding 36,519 37,897 37,968 38,179 38,191 46,571
====== ===== ====== ====== ====== ======
Common Shareholders' Equity
(Deficit) (4) $ 1.78 $ 0.12 $(0.04) $(1.52) $ 0.98 $ 1.08
====== ======= ======= ======= ======= ======
_____________________________
(1) The net earnings for the fiscal year ended March 31, 1994 include
an extraordinary gain of $129,155,000, or $3.38 per common share, on
the extinguishment of debt settled in the Plan of Reorganization.
Accordingly, the Company recorded reorganization expenses of
$17,385,000 relating primarily to the writedown of assets transferred
to creditors under the Plan of Reorganization and professional fees and
other related expenses incurred during the bankruptcy proceedings. The
results of operations for the fiscal year ended March 31, 1993, the
three months ended March 31, 1992 and the year ended December 31, 1991
include restructuring and other nonrecurring charges aggregating
$35,002,000, $3,698,000 and $36,964,000, respectively. These charges
represent the cost of discontinuing the personal computer business,
professional fees and other expenses related to the Company's financial
restructuring, and the up-front costs and writedowns of certain assets
associated with implementing long-term cost reduction programs.
Charges for the fiscal year ended March 31, 1993 also include costs
related to the proxy contest settled in June 1992. The year ended
December 31, 1991 also includes charges related to the discontinuance
of the H.H. Scott domestic business. See Note C of Notes to
Consolidated Financial Statements.
(2) The aggregate outstanding principal balance of the Company's senior
notes has been classified as current as of March 31, 1993 and 1992, and
December 31, 1991 and 1990. See Note B of Notes to Consolidated
Financial Statements.
(3) Net earnings (loss) per common share for all periods, except the
year ended March 31, 1995, are based on the weighted average number of
old common shares outstanding during each fiscal year. Net earnings
per common share for the year ended March 31, 1995 is based on the
weighted average number of shares of new Common Stock and related
common stock equivalents outstanding during the year. Common Stock
equivalents include 9,081,000 shares assuming conversion of $10
million of Series A Preferred Stock at a price equal to 80% of the
weighted average market value of a share of Common Stock, determined on
a quarterly basis. Since the Series A Preferred Stock is not
convertible into Common Stock until March 31, 1997, the number of
shares issuable upon conversion may be significantly different.
(4) Calculated based on common shareholders' equity (deficit) divided by
actual shares of Common Stock outstanding. Common shareholders' equity
at March 31, 1995 and 1994 is equal to total shareholders' equity
less $10 million for the liquidation preference of the Series A
Preferred Stock.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
General
On March 31, 1994, the Company emerged from bankruptcy pursuant to
the Plan of Reorganization which resulted in a net reduction of
approximately $203 million in institutional debt, cancellation of the
Company's old common stock and other equity, the issuance of 30
million shares of new common stock for $30 million and the issuance of
certain equity securities to certain of the Company's former creditors. The
Restructuring substantially reduced the Company's debt service costs and
significantly improved the Company's financial condition. The Company
experienced a significant improvement in its United States sales in
Fiscal 1995 over Fiscal 1994. However, the Company expects sales for the
fiscal year ending March 31, 1996 ("Fiscal 1996") to decline from Fiscal 1995
due to a license agreement entered into with the Company's largest supplier
(as described below).
Effective March 31, 1995, the Company entered into two mutually
contingent agreements with its largest supplier which, among other
things, provide to the supplier the right to sell certain video products
under the "Emerson" trademark to the Company's largest customer (see
"Liquidity and Capital Resources"). As a result, the Company will receive
royalties attributable to such sales over the three-year term of the
agreements in lieu of reporting the full dollar value of such sales and
associated costs. Net sales of these products to this customer accounted
for approximately 47% of consolidated net sales for Fiscal 1995. The Company
expects to report lower sales in Fiscal 1996 as a result of these agreements,
but no material impact is expected on its net operating results for such year.
Exclusive of the licensed video sales, the Company expects its United
States sales for the first quarter of Fiscal 1996 to remain comparable with
or decline from the first quarter of Fiscal 1995. The sales outlook reflects
the higher level of sales achieved in Fiscal 1995, increased price
competition, retail stock levels and a slowdown in retail activity.
Results of Operations -- Fiscal 1995 Compared with Fiscal 1994
Consolidated net sales for Fiscal 1995 increased $167,281,000 as
compared to Fiscal 1994, resulting from a significant increase in unit
sales of VCRs, VCPs and TV/VCR combination units, partially offset by a
decline in unit sales of color televisions and audio products, as well as
lower sales prices for such products. The sales increase for the VCR,
VCP and TV/VCR product categories was attributable to significantly higher
sales to the Company's two largest customers, resulting from an improved
retail climate, low retail stock levels after the 1993 holiday season,
and an improved perception of the Company by retailers since its emergence
from bankruptcy. Net sales to the Company's largest customer approximated
53% of consolidated net sales for Fiscal 1995. The Company's Canadian
operations experienced a decline in net sales for Fiscal 1995 due to
declines in unit volume and sales prices (relating to a weak retail
climate) and unfavorable foreign currency exchange rates.
Cost of sales, as a percentage of consolidated sales, was
approximately 92% for Fiscal 1995 as compared to approximately 100% for
Fiscal 1994. Gross profit margins were favorably impacted by the allocation
of fixed overhead costs over a significantly higher sales base, a decline
in fixed overhead costs, reduced losses associated with product returns,
the recognition of $9.9 million of purchase discounts from a supplier,
$1.2 million of licensing income and reduced reserve requirements for
sales returns due primarily to an agreement with the Company's largest
supplier. See "Liquidity and Capital Resources". This improvement was
partially offset by a 1% decline in gross profit margins attributable to
lower sales prices in most product categories resulting from increased
price competition, and a change in product mix.
The Company's margins continue to be impacted by the pricing
category of the consumer electronics market in which the Company competes.
The Company's products are generally placed in the low-to-medium priced
category of the market. These categories tend to be the most competitive
and generate the lowest profits. The Company intends to focus on its
higher margin products and is reviewing new product categories that can
generate higher margins than the current business, either through license
arrangements, joint ventures or on its own.
Other operating costs and expenses declined $3,230,000 in Fiscal
1995 as compared to Fiscal 1994, primarily as a result of a decrease in
compensation and other expenses incurred to process product returns, due
to the Company's downsizing program and changes in the resale arrangement
for product returns. See "Business - Refurbished Products".
Selling, general and administrative expenses ("S,G&A"), as a
percentage of sales, was 5% and 7% for Fiscal 1995 and Fiscal 1994,
respectively. In absolute terms, S,G&A decreased $3,505,000 in Fiscal
1995. The decrease was primarily attributable to lower compensation
expense relating to the Company's downsizing program, lower selling
expenses, including decreases in promotional allowances granted to
customers, and improved foreign currency results. The Company's exposure
to foreign currency fluctuations, primarily in Canada and Spain, resulted
in net foreign currency exchange gains aggregating $354,000 in Fiscal,
1995 as compared to net foreign currency exchange losses of $1,406,000 in
Fiscal 1994. In Fiscal 1996, the Company intends to reduce its foreign
currency exposure by conducting its Canadian and European business in
U.S. dollars.
The Company has implemented additional cost reductions in the first
quarter of Fiscal 1996 by reducing the infrastructure of its foreign
offices, which should improve the Company's operating results in Fiscal
1996.
Interest expense decreased $7,361,000 in Fiscal 1995 as compared
to Fiscal 1994. The decrease was attributable to the extinquishment of
approximately $203 million of institutional debt in connection with the
Restructuring, effective March 31, 1994, and a moratorium on interest
accrued on pre-petition indebtedness during the pendency of the
Company's bankruptcy proceedings in Fiscal 1994.
In Fiscal 1994, the Company recorded reorganization costs of
$17,385,000 relating to professional fees and related expenses incurred
in the bankruptcy proceedings, and the writedown of certain assets
transferred to a liquidating trust pursuant to the bankruptcy settlement.
The Company recorded an extraordinary gain on extinguishment of
debt of $129,155,000 in Fiscal 1994. This gain related to the settlement of
the Company's pre-petition liabilities, as a result of the Company's
emergence from bankruptcy.
As a result of the foregoing factors, the Company earned $7,375,000
and $55,501,000 for Fiscal 1995 and Fiscal 1994, respectively.
Results of Operations -- Fiscal 1994 Compared with Fiscal 1993
Consolidated net sales for Fiscal 1994 decreased $253,967,000 as
compared to the fiscal year ended March 31, 1993 ("Fiscal 1993"),
resulting from a significant decrease in unit sales of VCR/VCP and television
products, as well as lower sales prices for the same product categories.
The sales decline was attributable to the effect of the Restructuring and
the Company's financial condition on the retailers' perception of the
Company, a cautious outlook maintained by retailers over inventory levels,
excess stock at the retail level and increased price competition in the
Company's major product categories.
Cost of sales, as a percentage of consolidated sales, was
approximately 100% for Fiscal 1994 as compared to approximately 91% for
Fiscal 1993. Gross profit margins were negatively impacted by a $6.3
million increase in the reserve for sales returns and were impacted
further by the allocation of fixed overhead costs over a significantly lower
sales base, sales price decreases which were in excess of price reductions
received from suppliers, and significant costs and inventory writedowns
associated with product returns. Additionally, gross margins earned by
the Company's foreign operations were adversely impacted by a decline in the
Canadian dollar and Spanish peseta of 9% and 16%, respectively, from March
31, 1993 to March 31, 1994. Although the Company entered into foreign
currency contracts to minimize its exposure to foreign currency fluctuations
in Europe, it lacked the necessary working capital to hedge all its foreign
currency commitments.
Other operating costs and expenses declined $7,025,000 in Fiscal
1994, as compared to Fiscal 1993, primarily as a result of a reduction in
compensation costs relating to the Company's downsizing program and lower
warranty expenses associated with the decline in the Company's net sales.
S, G & A, as a percentage of sales, was 7% for Fiscal 1994 and
Fiscal 1993. In absolute terms, S, G & A decreased by $14,956,000 in Fiscal
1994 as compared to Fiscal 1993. In terms of actual cost, the decrease in
Fiscal 1994 was primarily attributable to lower variable selling expenses,
including decreases in promotional allowances granted to customers,
sales commissions, facility and compensation costs relating to the Company's
downsizing program and a decrease in reserves against the Company's accounts
receivable.
Interest expense decreased by $8,014,000 in Fiscal 1994 as compared
to Fiscal 1993. The decrease was attributable to the moratorium on
interest accrued on pre-petition indebtedness for the six month period
ended March 31, 1994. Interest expense was only accrued and paid on the
Company's debtor-in-possession financing during the pendency of the
bankruptcy proceedings.
During Fiscal 1993, the Company recorded restructuring and other
nonrecurring charges aggregating $35,002,000. The provision included $31.9
million of charges related to the Company's core business operations of
consumer electronics products. These charges are primarily comprised of
certain costs associated with the consolidation of facilities, severance
of employees ($3,967,000 provision for termination of officers and other
employees), the writedown of certain assets, a provision relating to a
significant change in the resale arrangement for returned product, and
professional fees and other charges related to the Company's proposed
financial restructuring and to the proxy contest settled in June 1992.
The provision also included $3.1 million in charges relating to the final
wind-down of the Company's personal computer business.
In Fiscal 1994, the Company recorded reorganization costs of
$17,385,000 relating to professional fees and related expenses incurred
in the bankruptcy proceedings, and the writedown of certain assets
transferred to a liquidating trust pursuant to the bankruptcy settlement.
The Company recorded an extraordinary gain on extinguishment of debt
of $129,155,000 in Fiscal 1994. This gain related to the settlement of
the Company's pre-petition liabilities, as a result of the Restructuring.
As a result of the foregoing factors, the Company earned $55,501,000
for Fiscal 1994, compared to a net loss of $56,000,000 for Fiscal 1993.
Liquidity and Capital Resources
Net cash utilized by operating activities was $20,974,000 for Fiscal
1995. Cash was utilized to purchase inventory for sale which resulted
in increased sales and accounts receivable. The increase in accounts
receivable also reflects sales of returned product to a 50% owned joint
venture that has a net payable to the Company of $15,283,000 at March
31, 1995. See "Business - Refurbished Products". Further, a reduction in
accounts payable to the Company's largest supplier (as noted below) and
a reduction of a large customer's credit balance, negatively impacted
cash.
Net cash provided by investing activities was $5,691,000 for Fiscal
1995. Investing activities consisted primarily of a redemption of pledged
certificates of deposit, net of capital expenditures, primarily for new
product molds. The redemption of the pledged certificates of deposit
relates primarily to a draw-down of an $8 million standby letter of credit
by the Company's largest supplier against a certificate of deposit for
the same amount, fulfilling commitments made during the Restructuring.
In Fiscal 1995, the Company's financing activities provided
$10,680,000 of cash. The Company increased borrowings under its U.S. line
of credit facility by $7,256,000 to finance the higher accounts receivable
levels and reduce accounts payable. Additionally, the Company generated
net proceeds of $5,692,000 from an initial public offering of Common
Stock, as described below.
On September 29, 1993, the Company and five of its U.S. subsidiaries
filed voluntary petitions for relief under the reorganization provisions
of Chapter 11 of the United States Bankruptcy Code and operated as
debtors-in-possession under the supervision of the Bankruptcy Court while
their reorganization case was pending. The precipitating factor for
these filings was the Company's severe liquidity problems relating to its
high level of indebtedness and a significant decline in sales from the prior
year.
Effective March 31, 1994, the Bankruptcy Court entered an order
confirming the Plan of Reorganization. The Plan of Reorganization
provided for the implementation of a recapitalization of the Company. In
accordance with the Plan of Reorganization, the Company's pre-petition
liabilities (of approximately $233 million) were settled with the creditors
in the aggregate, as follows:
I. The Company's bank group (the "Bank Lenders") received $70
million in cash and the right to receive the initial $2 million of
net proceeds from the Company's anti-dumping duty receivable.
II. The institutional holders of the Company's senior notes
(the "Noteholders") initially received $2,650,000 in cash and
warrants to purchase 750,000 shares of Common Stock for a period of
seven years at an exercise price of $1.00 per share, provided that
the exercise price shall increase by 10% per year commencing in year
four, and further received $1 million, payable $922,498 in cash from
the initial public offering of Common Stock and $77,502 in Common
Stock calculated on the basis of $1.00 per share.
III. The Bank Lenders and Noteholders received their pro rata
percentage of the following:
A. $2,350,000 in cash (however $350,000 of this amount
was distributable to the holders of allowed unsecured
claims);
B. 10,000 shares of Series A Preferred Stock with a face
value of $10 million (estimated fair market value of
approximately $9 million at March 31, 1994);
C. 4,025,277 shares of Common Stock, including 691,944
shares issued in February 1995 pursuant to an
anti-dilution provision;
D. The net proceeds from the sale of the Company's
Indiana land and building; and
E. The net proceeds to be received from the Company's
anti-dumping duty receivable in excess of $2 million .
IV. Holders of allowed unsecured claims received a pro-rata
portion of the $350,000 distribution and interest bearing promissory
notes equal to 18.3% of the allowed claim amount, payable in two
installments over 18 months. See "Legal Proceedings".
In accordance with the Plan of Reorganization, the Company completed
an initial public offering of its Common Stock in September 1994 to
shareholders of record as of March 31, 1994, excluding FIL. The Company
sold 6,149,993 shares of Common Stock for $1.00 per share resulting in
proceeds to the Company, net of issuance costs, of $5,692,000.
The Company maintains an asset-based revolving credit facility with a
U.S. financial institution (the "Lender"). The facility provides for
revolving loans and letters of credit, subject to individual maximums
which, in the aggregate, cannot exceed the lesser of $60 million or a
"Borrowing Base" amount based on specified percentages of eligible
accounts receivable and inventories. Credit extended under the line is
secured by the U.S. and Canadian assets of the Company. The interest rate
on these borrowings is 2.25% above the prime rate. At March 31, 1995, the
weighted average interest rate on the outstanding borrowings was 11.25%.
The facility is also subject to an unused line fee of 0.5% per annum.
Pursuant to the terms of this credit facility, the Company is restricted
from, among other things, paying cash dividends (other than on the Series A
Preferred Stock), redeeming stock, and entering into certain transactions
and is required to maintain certain working capital and equity levels (as
defined). The Company is required to maintain a minimum net worth of
$42,000,000, excluding net proceeds received by the Company from the sale
of equity securities, which minimum will increase to $50,000,000, effective
January 1, 1996. At March 31, 1995, there was $27,296,000 outstanding
under the revolving loan facility, and $3,622,000 of outstanding letters
of credit issued for inventory purchases.
The Company's Hong Kong subsidiary maintains various credit facilities
aggregating $114.3 million with a bank in Hong Kong consisting of the
following: (i) a $12.3 million credit facility which is generally
used for letters of credit for a foreign subsidiary's direct import
business and affiliates' inventory purchases, (ii) a $2 million standby
letter of credit facility, and (iii) a $100 million credit facility, for
the benefit of a foreign subsidiary, which is for the establishment of
back-to-back letters of credit with the Company's largest customer. At
March 31, 1995, the Company's Hong Kong subsidiary had pledged $4 million
in certificates of deposit to this bank to assure the availability of
these credit facilities. At March 31, 1995, there were $5,974,000 and
$8,415,000, respectively, of letters of credit outstanding under the
$12.3 million and $100 million credit facilities.
The Company's Hong Kong subsidiary secured an additional credit
facility in Fiscal 1995 with another bank in Hong Kong. The facility
provides for a $10 million line of credit for documentary letters of
credit and a $10 million back-to-back letter of credit line, collateralized
by a $5 million certificate of deposit. At March 31, 1995, the Company's
Hong Kong subsidiary had pledged $5,041,000 in certificates of deposit to
assure the availability of these credit facilities. At March 31, 1995,
$3,871,000 of the letter of credit line was utilized.
On February 22, 1995, the Company and Otake entered into two
mutually contingent agreements (the "Agreements"). Effective March 31,
1995, the Company granted a license of certain trademarks to Otake for a
three-year term. The license permits Otake to manufacture and sell certain
video products under the "Emerson" trademark to Wal-Mart in the U.S. and
Canada, and precludes Otake from supplying product to Wal-Mart other than
under the "Emerson" or Orion trademarks. The Company will continue to supply
other products to Wal-Mart directly. Further, the Agreements provide
that Otake will supply the Company with certain video products for
sale to other customers at preferred prices for a three-year term.
Under the terms of the Agreements, the Company will receive non-
refundable minimum annual royalties from Otake to be credited against
royalties earned from sales of VCRs, VCPs and TV/VCR combination units
and color televisions to Wal-Mart. In addition, effective August 1,
1995, Otake will assume responsibility for returns and after-sale and
warranty services on all video products manufactured by Otake and sold
to Wal-Mart, including video products sold by the Company prior to
April 1, 1995.
As a result of the Agreements, the Company's gross margins are
expected to improve based on a change in mix to higher margin products
and from a reduction in costs for product returns which have historically
been higher for video products. Additionally, the Company expects to realize
a more stable cash flow and reduce short-term borrowings used to finance
accounts receivable and inventory, thereby reducing interest costs.
Since the emergence of the Company from bankruptcy, management
believes that it has been able to compete more effectively in the highly
competitive consumer electronics and microwave oven industries in the
United States and Canada by combining innovative approaches to the
Company's current product line and augmenting its product line with
complementary products. The Company also intends to undertake efforts to
expand the international distribution of its products into areas where
management believes low to moderately priced, dependable consumer
electronics and microwave oven products will have a broad appeal. The
Company has in the past and intends in the future to pursue such plans
either on its own or by forging new relationships, including license
arrangements, partnerships or joint ventures.
In the past fiscal year, the Company successfully concluded licensing
agreements for existing core business products and new products. The
Company intends to pursue additional licensing opportunities and believes
that such licensing activitites will have a positive impact on net
operating results by generating royalty income with minimal costs, if any,
and without the necessity of utilizing working capital or accepting
customer returns.
Short-Term Liquidity. At present, management believes that cash flow
from operations and the institutional financing noted above will be
sufficient to fund all of the Company's cash requirements for the next
year.
The Company's liquidity is also impacted by the seasonality of its
business. The Company records the majority of its annual sales in the
quarters ending September 30 and December 31. This requires the Company to
open significantly higher amounts of letters of credit during the quarters
ending June 30 and September 30, therefore significantly increasing the
Company's working capital needs during this period. Additionally, the
Company receives the largest percentage of customer returns in the quarter
ending March 31. The high level of returns during this period adversely
impacts the Company's collection activity during this period, and therefore
its liquidity. The Company believes that its recent Agreements with Otake
(as noted above) should favorably impact the Company's cash flow over the
three-year term of the Agreements.
Long-Term Liquidity. The revolving credit facility with the Lender
imposes financial covenants on the Company that could materially affect
its liquidity in the future. However, management believes that the financing
noted above and cash flow from operations will provide sufficient liquidity
to meet the Company's operating and debt service cash requirements on a
long-term basis for its current core business.
Inflation and Foreign Currency
Except as disclosed above, neither inflation nor currency fluctuations
had a significant effect on the Company's results of operations during Fiscal
1995, Fiscal 1994 or Fiscal 1993. The Company's exposure to currency
fluctuations has been minimized by the use of U.S. dollar denominated
purchase orders, and by sourcing production in more than one country.
However, the strength of the Japanese Yen in 1995 is beginning to raise the
costs of certain raw materials and subassemblies of the Company's suppliers
which may be passed on to the Company in the form of price increases in
Fiscal 1996. There can be no assurance that the Company will be able to
recover such potential price increases from the selling price to its
customers.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by this Item
8 are set forth at the pages indicated in Item 14(a) below.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS
The information required is incorporated herein by reference to the
Company's definitive Proxy Statement for the 1995 Annual Meeting of
Shareholders.
Item 11. EXECUTIVE COMPENSATION
The information required is incorporated herein by reference to the
Company's definitive Proxy Statement for the 1995 Annual Meeting of
Shareholders.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required is incorporated herein by reference to the
Company's definitive Proxy Statement for the 1995 Annual Meeting of
Shareholders.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required is incorporated herein by reference to the
Company's definitive Proxy Statement for the 1995 Annual Meeting of
Shareholders.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENTS, STATEMENT SCHEDULE AND REPORTS
ON FORM 8-K
(a) Financial Statements and Schedule:
Report of Ernst & Young LLP F-1
Consolidated Statements of Operations for the years ended
March 31, 1995, 1994 and 1993 F-2
Consolidated Balance Sheets at March 31, 1995 and 1994 F-3
Consolidated Statements of Changes in Shareholders' Equity
for the years ended March 31, 1995, 1994 and 1993 F-4
Consolidated Statements of Cash Flows for the years ended
March 31, 1995, 1994 and 1993 F-5
Notes to Consolidated Financial Statements F-6
Schedule VIII -- Valuation and Qualifying Accounts
and Reserves F-26
ALL OTHER SCHEDULES ARE OMITTED BECAUSE THEY ARE NOT APPLICABLE OR THE
REQUIRED INFORMATION IS SHOWN IN THE FINANCIAL STATEMENTS OR NOTES
THERETO.
(b) No reports on Form 8-K were filed by the Company during the last
quarter of the fiscal year ended March 31, 1995.
(c) Exhibits
(2) Confirmation Order and Fourth Amended Joint Plan of
Reorganization of Emerson Radio Corp. ("Old Emerson") and
certain subsidiaries under Chapter 11 of the United States
Bankruptcy Code, dated March 31, 1994 (incorporated by
reference to Exhibit (2) of Emerson's Registration Statement on
Form S-1, Registration No. 33-53621, declared effective by the
Securities and Exchange Commission ("SEC") on August 9, 1994).
(3) (a) Certificate of Incorporation of Emerson (incorporated by
reference to Exhibit (3) (a) of Emerson's Registration
Statement on Form S-1, Registration No. 33-53621, declared
effective by the SEC on August 9, 1994).
(3) (b) Certificate of Designation for Series A Preferred Stock
(incorporated by reference to Exhibit (3) (b) of Emerson's
Registration Statement on Form S-1, Registration No. 33-53621,
declared effective by the SEC on August 9, 1994).
(3) (c) Plan of Reorganization and Agreement of Merger by and between
Old Emerson and Emerson Radio (Delaware) Corp. (incorporated by
reference to Exhibit (3) (c) of Emerson's Registration
Statement on Form S-1, Registration No. 33-53621, declared
effective by the SEC on August 9, 1994).
(3) (d) Certificate of Merger of Old Emerson with and into Emerson
Radio (Delaware) Corp. (incorporated by reference to Exhibit
(3) (d) of Emerson's Registration Statement on Form S-1,
Registration No. 33-53621, declared effective by the SEC on
August 9, 1994).
(3) (e) By-Laws of Emerson adopted March 1994 (incorporated by
reference to Exhibit (3) (e) of Emerson's Registration
Statement on Form S-1, Registration No. 33-53621, declared
effective by the SEC on August 9, 1994).
(4) (a) Warrant Agreement to Purchase 750,000 shares of Common Stock,
dated as of March 31, 1994 (incorporated by reference to
Exhibit (4) (a) of Emerson's Registration Statement on Form S-
1, Registration No. 33-53621, declared effective by the SEC on
August 9, 1994).
(10) (a) Agreement, dated as of November 14, 1973, between National
Union Electric Corporation ("NUE") and Emerson (incorporated by
reference to Exhibit (10) (a) of Emerson's Registration
Statement on Form S-1, Registration No. 33-53621, declared
effective by the SEC on August 9, 1994).
(10) (b) Trademark User Agreement, dated as of February 28, 1979, by and
between NUE and Emerson (incorporated by reference to Exhibit
(10) (b) of Emerson's Registration Statement on Form S-1,
Registration No. 33-53621, declared effective by the SEC on
August 9, 1994).
(10) (c) Agreement, dated July 2, 1984, between NUE and Emerson
(incorporated by reference to Exhibit (10) (c) of Emerson's
Registration Statement on Form S-1, Registration No. 33-53621,
declared effective by the SEC on August 9, 1994).
(10) (d) Agreement, dated September 15, 1988, between NUE and Emerson
(incorporated by reference to Exhibit (10) (d) of Emerson's
Registration Statement on Form S-1, Registration No. 33-
53621, declared effective by the SEC on August 9, 1994).
(10) (e) Form of Promissory Note issued to certain Pre-Petition
Creditors (incorporated by reference to Exhibit (10) (e) of
Emerson's Registration Statement on Form S-1, Registration No.
33-53621, declared effective by the SEC on August 9, 1994).
(10) (f) Loan and Security Agreement, dated March 31, 1994, by and among
Emerson, Majexco Imports, Inc. and Congress Financial
Corporation ("Congress") (incorporated by reference to Exhibit
(10) (f) of Emerson's Registration Statement on Form S-1,
Registration No. 33-53621, declared effective by the SEC on
August 9, 1994).
(10) (g) Emerson Radio Corp. Stock Compensation Program (incorporated
by reference to Exhibit (10) (i) of Emerson's Registration
Statement on Form S-1, Registration No. 33-53621, declared
effective by the SEC on August 9, 1994).
(10) (h) Employment Agreement between Emerson and Eugene I. Davis
(incorporated by reference to Exhibit 6(a)(4) of Emerson's
Quarterly Report on Form 10-Q for quarter ended June 30, 1992).
(10) (i) Employment Agreement between Emerson and Albert G. McGrath, Jr.
(incorporated by reference to Exhibit 6(a)(7) of Emerson's
Quarterly Report on Form 10-Q for quarter ended June 30, 1992).
(10) (j) Employment Agreement between Emerson and Geoffrey P. Jurick
(incorporated by reference to Exhibit 6(a)(6) of Emerson's
Quarterly Report on Form 10-Q for quarter ended June 30, 1992).
(10) (k) Employment Agreement between Emerson Radio (Hong Kong) Ltd. and
Geoffrey P. Jurick (incorporated by reference to Exhibit
6(a)(6) of Emerson's Quarterly Report on Form 10-Q for quarter
ended June 30, 1992).
(10) (l) Employment Agreement between Emerson Radio International Ltd.
(formerly Emerson Radio (B.V.I), Ltd.) and Geoffrey P. Jurick
(incorporated by reference to Exhibit 6(a)(6) of Emerson's
Quarterly Report on Form 10-Q for quarter ended June 30, 1992).
(10) (m) Lease Agreement dated as of March 26, 1993, by and between
Hartz Mountain Parsippany and Emerson with respect to the
premises located at Nine Entin Road, Parsippany, NJ
(incorporated by reference to Exhibit (10) (ww) of Emerson's
Annual Report on Form 10-K for the year ended December 31,
1992).
(10) (n) Employment Agreement, dated July 13, 1993, between Emerson and
Merle Eakins (incorporated herein by reference to Exhibit
(10)(vv) to Emerson's Annual Report on Form 10-K for the year
ended March 31, 1993).
(10) (o) Employment Agreement, dated April 1, 1994, between Emerson and
John Walker (incorporated herein by reference to Exhibit
(10)(ee) of Emerson's Statement on Form S-1, Registration No.
33-53621, declared effective by the SEC on August 9, 1994).
(10) (p) Liquidity Trust Agreement, dated as of March 31, 1994, by and
among Emerson, Majexco Imports, Inc., H.H. Scott, Inc., and
Stuart D. Gavsy, Esq., as Trustee (incorporated by reference to
Exhibit (10) (ff) of Emerson's Registration Statement on Form S-
1, Registration No. 33-53621, declared effective by the SEC on
August 9, 1994).
(10) (q) Partnership Agreement, dated April 1, 1994, between Emerson and
Hopper Radio of Florida, Inc.*
(10) (r) Sales Agreement, dated April 1, 1994, between Emerson and E & H
Partners.*
(10) (s) Agreement, dated July 1, 1994, between Emerson and Alex Wijnen
relating to termination of employment and agreement on
consulting services.*
(10) (t) Independent Consultant's Agreement, dated October 1, 1994,
between Emerson Radio International Ltd. and Peter G. Bunger.*
(10) (u) Independent Consultant's Agreement, dated October 1, 1994,
between Emerson Radio Europe B.V. and Peter G. Bunger.*
(10) (v) Employment Agreement, dated October 3, 1994, between Emerson
and Andrew Cohan.*
(10) (w) License Agreement, dated February 22, 1995, between Emerson and
Otake (incorporated by reference to Exhibit 6(a)(1) of
Emerson's Quarterly Report on Form 10-Q for quarter ended
December 31, 1994).
(10) (x) Supply Agreement, dated February 22, 1995, between Emerson and
Otake (incorporated by reference to Exhibit 6(a)(2) of
Emerson's Quarterly Report on Form 10-Q for quarter ended
December 31, 1994).
(10) (y) 1994 Non-Employee Director Stock Option Plan.*
(11) Computation of Primary Earnings Per Share.*
(21) Subsidiaries of the Company as of March 31, 1995.*
(27) Financial Data Schedule for year ended March 31, 1995.*
___________________
* Filed herewith.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
EMERSON RADIO CORP.
By:/s/ Geoffrey P. Jurick
______________________
Geoffrey P. Jurick
Chairman of the Board
Dated: June 19, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
/s/ Geoffrey P. Jurick
__________________
Geoffrey P. Jurick Chairman of the Board, June 19, 1995
Chief Executive Officer
/s/ Eugene I. Davis
_________________
Eugene I. Davis President and Director June 19, 1995
/s/ Robert H. Brown, Jr.
____________________
Robert H. Brown, Jr. Director June 19, 1995
/s/ Peter G. Bunger
________________
Peter G. Bunger Director June 19, 1995
/s/ Jerome H. Farnum
________________
Jerome H. Farnum Director June 19, 1995
/s/ Colin G. Honess
_______________
Colin G. Honess Director June 19, 1995
/s/ Raymond L. Steele
_________________
Raymond L. Steele Director June 19, 1995
/s/ Peter Roggendorf Director June 19, 1995
________________
Peter Roggendorf
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
of Emerson Radio Corp.
We have audited the accompanying consolidated balance sheets of Emerson
Radio Corp. and Subsidiaries as of March 31, 1995 and 1994, and the related
consolidated statements of operations, shareholders' equity, and cash flows
for the years ended March 31, 1995, 1994 and 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Emerson Radio Corp. and Subsidiaries at March 31, 1995 and 1994
and the consolidated results of its operations and cash flows for the years
ended March 31, 1995, 1994 and 1993, in conformity with generally accepted
accounting principles.
As discussed in Note H to the financial statements, in the year ended March
31, 1994, the Company changed its method of accounting for income taxes.
ERNST & YOUNG LLP
New York, New York
May 24, 1995
EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Years Ended March 31,
1995 1994 1993
Net sales $ 654,671 $ 487,390 $741,357
Costs and expenses: _________ _________ ________
Cost of sales 604,329 486,536 674,855
Other operating costs and expenses 8,771 12,001 19,026
Selling, general and administrative
expenses 31,047 34,552 49,508
Restructuring and other
nonrecurring charges 35,002
_______ _______ _______
644,147 533,089 778,391
_______ _______ ______
Operating profit (loss) 10,524 (45,699) (37,034)
Interest expense 2,882 10,243 18,257
Earnings (loss) before ______ _______ _______
reorganization costs and taxes 7,642 (55,942) (55,291)
Reorganization items: ______ ________ _______
Writedown of assets 12,914
Professional fees and other related expenses 4,545
Interest earned on accumulated cash (74)
_____ _______ ______
- 17,385 -
_____ _______ ______
Earnings (loss) before income taxes
and extraordinary gain 7,642 (73,327) (55,291)
Provision for income taxes 267 327 709
Earnings (loss) before _____ ________ ________
extraordinary gain 7,375 (73,654) (56,000)
Extraordinary gain on extinguishment
of debt 129,155
_______ _______ _________
Net earnings (loss) $ 7,375 $ 55,501 $(56,000)
======= ========= ========
Net earnings (loss) per common share:
Before extraordinary gain $0.16 ($ 1.93) ($ 1.47)
Extraordinary gain 3.38
_____ _________ _________
Net earnings (loss) $0.16 $ 1.45 ($ 1.47)
_____ ________ __________
Weighted average number of
common and common equivalent
shares outstanding 46,571 38,191 38,179
______ ______ ______
Pro Forma:
Loss per common share $ (1.51)
Weighted average number of _________
common shares outstanding 33,333
_________
The accompanying notes are an integral part of the consolidated financial
statements.
EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
March 31,
ASSETS 1995 1994
Current Assets:
Cash and cash equivalents $ 17,020 $ 21,623
Accounts receivable (less allowances
of $9,350 and $6,442, respectively) 34,309 20,131
Inventories 35,336 45,980
Prepaid expenses and other current assets 15,715 20,597
_______ _______
Total current assets 102,380 108,331
Property and equipment, net 4,676 5,256
Other assets 6,913 5,434
_______ __________
Total Assets $ 113,969 $ 119,021
========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 27,296 $ 20,040
Current maturities of long-term debt 508 1,498
Accounts payable and other
current liabilities 18,982 37,378
Accrued sales returns 12,713 16,634
Income taxes payable 283 533
______ ______
Total current liabilities 59,782 76,083
Long-term debt 214 227
Other non-current liabilities 322 94
Shareholders' Equity:
Preferred stock -- $.01 par value,
1,000,000 shares authorized, 10,000
issued and outstanding 9,000 9,000
Common stock -- $.01 par value,
75,000,000 shares authorized;
40,252,772 and 33,333,333 shares
issued and outstanding, respectively 403 333
Capital in excess of par value 107,969 103,427
Accumulated deficit (64,086) (70,761)
Cumulative translation adjustment 365 618
______ ______
Total shareholders' equity 53,651 42,617
Total Liabilities and Shareholders' ______ ______
Equity $113,969 $119,021
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands, except share data)
Common Shares Issued
Capital Cumulative
Preferred Number Par in Excess Accumulated Translation
Stock of Shares Value of Par Value Deficit Adjustment
Balance -- March 31, 1992 37,978,119 $ 3,798 $ 63,881 $(70,262) $ 1,103
Issuance of shares upon
exercise of stock options and
distribution of stock grants 59,333 6 113
Issuance of stock and warrants to
Semi-Tech 153,847 15 (15)
Redemption of stock purchase rights (271)
Other 22 (285)
Net loss (56,000)
_______ __________ _____ ______ ________
Balance -- March 31, 1993 38,191,299 3,819 63,730 (126,262) 818
Cancellation of common stock (38,191,299) (3,819) 3,819
Issuance of common stock 30,000,000 300 29,700
Issuance of preferred and
common stock and warrants
pursuant to bankruptcy
settlement $ 9,000 3,333,333 33 6,192
Other (14) (200)
Net earnings 55,501
_____ __________ ___ _______ ________
Balance -- March 31, 1994 9,000 33,333,333 333 103,427 (70,761) 618
Issuance of common stock in public
offering, net of expenses 6,149,993 62 5,630
Issuance of common stock to former
creditors 769,446 8 (8)
Payment to former creditors (922)
Preferred stock dividends (700)
Other (158) (253)
Net earnings
7,375
_______ __________ _____ ________ __________
Balance -- March 31, 1995 $ 9,000 40,252,772 $ 403 $107,969 $ (64,086) $ 365
======= ========== ===== ======== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands except share data)
Years Ended March 31,
1995 1994 1993
Cash Flows from Operating Activities:
Net earnings (loss) $ 7,375 $ 55,501 $(56,000)
Adjustments to reconcile net
earnings (loss) to net cash
provided (used) by operating
activities:
Depreciation and amortization 3,876 7,327 6,419
Extraordinary gain (129,155)
Restructuring and other
nonrecurring charges (237) (9,711) 16,350
Reorganization expenses 12,914
Asset valuation and
loss reserves (2,031) 8,415 6,495
Other (969) 2,643 1,570
Changes in assets and liabilities:
Accounts receivable (14,805) 12,081 26,769
Inventories 11,032 34,942 (28,884)
Prepaid expenses and other
current assets (5,598) 6,181 4,694
Other assets (605) 89 (498)
Accounts payable and other
current liabilities (18,633) 27,287 2,981
Income taxes payable (379) (924) (194)
_______ _______ ______
Net cash provided (used)
by operations (20,974) 27,590 (20,298)
________ ______ ________
Cash Flows from Investing Activities:
Additions to property and
equipment (2,874) (3,552) (4,859)
Redemption of (investment in)
certificates of deposit 8,455 (500) (4,000)
Other 110 114 (134)
Net cash provided (used) by _____ _______ _______
investing activities 5,691 (3,938) (8,993)
_____ _______ _______
Cash Flows from Financing Activities:
Net borrowings under line of
credit facility 7,256 20,040 25,366
Proceeds from issuances of
common stock 5,692 30,000 125
Retirement of long-term debt (500) (30) (600)
Payment to former creditors (922)
Payment of preferred stock
dividends (525)
Redemption of stock
purchase rights (271)
Payment of pre-petition obligations (75,000)
Payment of debt costs (2,139)
Other (321) (83) (49)
_____ _______ _____
Net cash provided (used) by
financing activities 10,680 (27,212) 24,571
Net decrease in cash and cash _______ ________ _______
equivalents (4,603) (3,560) (4,720)
Cash and cash equivalents at
beginning of year 21,623 25,183 29,903
Cash and cash equivalents at ________ ________ _________
end of year $ 17,020 $ 21,623 $ 25,183
======== ======== =========
The accompanying notes are an integral part of the consolidated financial
statements.
EMERSON RADIO CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1995
Note A -- Significant Accounting Policies:
(1) Basis of Presentation:
The consolidated financial statements include the accounts of Emerson
Radio Corp. and its majority-owned subsidiaries (the "Company"). All
significant intercompany transactions and balances have been eliminated. A
50% ownership of a domestic joint venture is accounted for by the equity
method (see Note N). Historical cost accounting was used to account for
the plan of reorganization (the "Plan of Reorganization") (see Note B)
since the transaction did not meet the criteria required for fresh-start
reporting.
Certain prior year information has been reclassified to conform with
the current year presentation.
(2) Cash and Cash Equivalents:
Short-term investments with original maturities of three months or
less at the time of purchase are considered to be cash equivalents. The
carrying amount reported in the balance sheet for cash and cash equivalents
approximates fair value.
(3) Inventories:
Inventories are stated at the lower of cost (first-in, first-out) or
market.
(4) Property and Equipment:
Property and equipment, stated at cost, is being depreciated for
financial accounting purposes on the straight-line method over its estimated
useful life. Leasehold improvements are amortized on a straight-line basis
over the shorter of the useful life of the improvement or the term of the
lease. Upon the sale or retirement of property and equipment, the costs and
related accumulated depreciation are eliminated from the accounts. Any
resulting gains or losses are included in income. The cost of repairs and
maintenance is charged to expense as incurred.
(5) Warranty Claims:
The Company provides an accrual for future warranty costs when the
product is sold.
(6) Income Taxes:
Deferred income taxes are accounted for on the liability method in
accordance with Statement of Financial Accounting Standards No. 109.
Provision is made for federal income tax which may be payable on earnings
of foreign subsidiaries to the extent that the Company anticipates they
will be remitted.
(7) Earnings (Loss) per Share:
Net earnings per common share for the year ended March 31, 1995 is
based on the weighted average number of shares of Common Stock and common
stock equivalents outstanding during the year. Common stock equivalents
include shares issuable upon conversion of the Company's Series A Preferred
Stock, exercise of stock options and warrants, and shares issued in the
year ended March 31, 1995 primarily to satisfy an anti-dilution provision.
The Series A Preferred Stock is not convertible into Common Stock until
March 31, 1997, and the shares of Common Stock issuable upon conversion is
dependent on the market value of the Common Stock at the time of conversion
(See Note J(6)). Net earnings (loss) per common share for the years ended
March 31, 1994 and 1993 are based on the weighted average number of shares
of Common Stock outstanding prior to confirmation of the Plan of
Reorganization (See Note B) and cancelled as a part thereof, and do not
include common stock equivalents assumed outstanding since they were not
dilutive.
Pro forma loss per common share for the year ended March 31, 1994
gives effect to the bankruptcy restructuring and is based on the number of
shares of Common Stock issued and outstanding at March 31, 1994. The pro
forma loss per common share does not include common stock equivalents
assumed outstanding since they are anti-dilutive. The pro forma loss per
common share also gives effect to the following adjustments:
(i) Elimination of extraordinary gain of $129,155,000 and
reorganization expenses of $17,385,000;
(ii) Reduction of $6,666,000 in interest expense to give
effect to the reorganized debt structure. The pro forma interest
expense is based on the maximum amount of borrowings ($45 million)
permitted under the new credit facility at the interest rate that
would have been in effect for the year ended March 31, 1994 (8.25%).
Additionally, the amortization of closing fees on the credit facility
is included in the pro forma interest expense above;
(iii) Assumed dividends on the Series A Preferred Stock
aggregating $700,000 for the year ended March 31, 1994.
(8) Foreign Currency:
The assets and liabilities of foreign subsidiaries have been
translated at current exchange rates, and related revenues and expenses
have been translated at average rates of exchange in effect during the
year. Related translation adjustments are reported as a separate component
of shareholders' equity. Gains and losses resulting from foreign currency
transactions are included in the Consolidated Statements of Operations and
amounted to a gain of $220,000 and losses of $1,489,000 and $1,073,000 for
the years ended March 31, 1995, 1994 and 1993, respectively.
The Company entered into foreign currency exchange contracts to hedge
exposures related to foreign currency fluctuations for its European
operations. Gains and losses were recognized in the same period as the
transactions being hedged. At March 31, 1995, the Company has no forward
exchange contracts outstanding. In the fiscal year ending March 31, 1996,
the Company intends to reduce its foreign currency exposure by conducting
its Canadian and European businesses in U.S. dollars.
Note B -- Reorganization:
On September 29, 1993, the Company and five of its U.S. subsidiaries
filed voluntary petitions for relief under the reorganization provisions
of Chapter 11 of the United States Bankruptcy Code and operated as
debtors-in-possession under the supervision of the Bankruptcy Court while
their reorganization cases were pending. The precipitating factor for
these filings was the Company's severe liquidity problems relating to its
high level of indebtedness and a significant decline in sales from the
prior year.
Effective March 31, 1994, the Bankruptcy Court entered an order
confirming the Plan of Reorganization. The Plan of Reorganization provided
for the implementation of a recapitalization of the Company. In accordance
with the Plan of Reorganization, the Company's pre-petition liabilities (of
approximately $233 million) were settled with the creditors in the
aggregate, as follows:
I. The Company's bank group (the "Bank Lenders") received $70
million in cash and the right to receive the initial $2 million of
net proceeds from the Company's anti-dumping duty receivable (see
Note I (3)).
II. The institutional holders of the Company's senior notes
(the "Noteholders") initially received $2,650,000 in cash and
warrants to purchase 750,000 shares of Common Stock for a period of
seven years at an exercise price of $1.00 per share, provided that
the exercise price shall increase by 10% per year commencing in year
four, and further received $1 million, payable $922,498 in
cash from the initial public offering of Common Stock (see Note
J(8)) and $77,502 in Common Stock calculated on the basis of
$1.00 per share.
III. The Bank Lenders and Noteholders received their pro rata
percentage of the following:
A. $2,350,000 in cash (however $350,000 of this amount
was distributable to the holders of allowed unsecured
claims);
B. 10,000 shares of Series A Preferred Stock with a face
value of $10 million (estimated fair market value of
approximately $9 million at March 31, 1994);
C. 4,025,277 shares of Common Stock, including 691,944
shares issued in February 1995 pursuant to an anti-dilution
provision;
D. The net proceeds from the sale of the Company's
Indiana land and building; and
E. The net proceeds to be received from the Company's
anti-dumping duty receivable in excess of $2 million (see
Note I (3)).
IV. Holders of allowed unsecured claims received a pro-rata
portion of the $350,000 distribution and interest bearing promissory
notes equal to 18.3% of the allowed claim amount, payable in two
installments over 18 months (see Note G).
Pursuant to the provisions of the Plan of Reorganization, as of March
31, 1994, the equity of the Company's stockholders, and the equity interest
of holders of stock options and warrants were cancelled.
Based on the settlement of the Chapter 11 proceedings, the Company
recognized an extraordinary gain of $129.2 million from the extinguishment
of debt. Additionally, the Company recognized a writedown of $12.9 million
to estimated fair market value on the assets transferred for the benefit of
the Bank Lenders and Noteholders.
Pursuant to the Plan of Reorganization, and in consideration for $30
million, the reorganized Company issued 30 million shares of Common Stock,
currently held by the following parties:
Number of Shares
Fidenas International Limited L.L.C.
("Fidenas International") 16,400,000
Elision International, Inc. ("Elision") 1,600,000
GSE Multimedia Technologies Corporation ("GSE") 12,000,000
The Company's Chairman and Chief Executive Officer is an officer and
beneficial owner of 40% of Fidenas Investment Limited ("FIL"), the
Company's largest shareholder prior to confirmation of the Plan of
Reorganization with an approximate 20% ownership interest.
This officer has a controlling beneficial ownership interest in each
of the three entities listed above which purchased the Company's Common
Stock, and therefore holds an approximate 75% interest in the Company's
outstanding Common Stock at March 31, 1995.
Note C -- Restructuring and Other Nonrecurring Charges:
During the year ended March 31, 1993, the Company recorded
restructuring and other nonrecurring charges aggregating $35,002,000. The
provision included $31.9 million of charges related to the Company's core
business operations of consumer electronics products. These charges were
comprised primarily of certain costs associated with the consolidation of
facilities, severance of employees ($3,967,000 provision for termination of
officers and other employees), the writedown of certain assets, a provision
relating to a significant change in the resale arrangement for returned
product, and professional fees and other charges related to the Company's
proposed financial restructuring and to a proxy contest settled in June
1992. The provision also included $3.1 million in charges relating to the
final wind-down of the Company's personal computer business.
Note D -- Inventories:
Inventories are comprised primarily of finished goods. Spare parts
inventories, net of reserves, aggregating $2,763,000 and $4,140,000 at
March 31, 1995 and 1994, respectively, are included in "Prepaid expenses
and other current assets".
Note E -- Property and Equipment:
Property and equipment is comprised of the following:
March 31,
1995 1994
(In thousands)
Furniture and fixtures $ 5,854 $ 6,025
Molds and tooling 3,806 2,948
Machinery and equipment 1,847 2,509
Leasehold improvements 271 454
______ ______
11,778 11,936
Less accumulated depreciation and amortization 7,102 6,680
_____ ______
$ 4,676 $ 5,256
======== ========
Depreciation and amortization of property and equipment amounted to
$3,267,000, $6,679,000 and $5,062,000, for the years ended March 31,
1995, 1994 and 1993, respectively.
Pursuant to the Plan of Reorganization, the Company transferred its
land and building in Indiana to a liquidating trust established for the
benefit of the Bank Lenders and Noteholders. In connection with this
transfer, the Company recorded a writedown of approximately $2.3 million to
reduce the carrying value to estimated fair market value at March 31, 1994.
Note F -- Notes Payable:
Effective March 31, 1994, the Company entered into a three year Loan
and Security Agreement with a U.S. financial institution (the "Lender")
providing for an asset-based revolving credit facility. The facility
provides for revolving loans and letters of credit, subject to individual
maximums and, in the aggregate, not to exceed the lesser of $60 million or
a "Borrowing Base" amount based on specified percentages of eligible
accounts receivable and inventories. All credit extended under the line of
credit is secured by the U.S. and Canadian assets of the Company. The
interest rate on these borrowings is 2.25% above the prime rate. At March
31, 1995 and 1994, the weighted average interest rate on the outstanding
borrowings was 11.25% and 8.5%, respectively. The facility is also subject
to an unused line fee of 0.5% per annum. Pursuant to the Loan and Security
Agreement, the Company is restricted from, among other things, paying cash
dividends (other than on the Series A Preferred Stock), redeeming stock,
and entering into certain transactions and is required to maintain certain
working capital and equity levels (as defined). At March 31, 1995, there
was $27,296,000 outstanding under the revolving loan facility and
approximately $3,622,000 of outstanding letters of credit issued for
inventory purchases. The fair market value of the short-term notes payable
to the Lender at March 31, 1995 and 1994 is estimated to be $27,296,000 and
$20,040,000, respectively, which is the historical cost.
During the pendency of the bankruptcy proceedings, the Company
obtained debtor-in-possession financing ("DIP Financing") from the Lender.
The terms of the DIP Financing provided for a revolving credit facility in
an aggregate principal amount of $14.9 million and bore interest at the
prime rate plus 0.5% per annum. Repayment of the proceeds was guaranteed
by FIL. All principal and accrued interest on the DIP Financing was paid
and the DIP Financing was terminated as of March 31, 1994.
Cash paid for interest was $3,371,000, $11,251,000 and $20,108,000
for the years ended March 31, 1995, 1994 and 1993, respectively.
In the six months ended March 31, 1994, interest expense was only
accrued and paid on the Company's DIP Financing loan. No interest was
accrued during the pendency of the bankruptcy proceedings on the debt
owed to the Bank Lenders or the Noteholders. Had the contractual interest
been accrued during this period, interest expense would have been
approximately $10.2 million higher than the amount reported on the
Consolidated Statement of Operations for the year ended March 31, 1994.
Note G -- Long-Term Debt:
Long-term debt consists of the following:
March 31,
1995 1994
(In thousands)
Notes payable to unsecured creditors $ 465 $ 842
Equipment notes and other 257 383
11 1/2% convertible subordinated note 500
____ _____
722 1,725
Less current obligations 508 1,498
______ ______
$ 214 $ 227
====== ======
Pursuant to the Plan of Reorganization, the holders of allowed
unsecured claims received interest bearing promissory notes equal to 18.3%
of the claim amount. The notes are due in two installments: 35% of the
outstanding principal is due 12 months from the date of issuance, and the
remaining balance is due 18 months from the date of issuance. The notes
bear interest at the London Interbank Offered Rate in effect at the date of
issuance for one year obligations.
Note H -- Income Taxes:
The income tax provision consists of the following:
Years Ended March 31,
1995 1994 1993
(In thousands)
Current:
Federal $ 40 $215
Foreign, State and Other 227 $327 494
____ ____ ____
$267 $327 $709
==== ==== ====
The difference between the effective rate reflected in the provision
for income taxes and the amounts determined by applying the statutory U.S.
rate of 34% to earnings (loss) before income taxes are analyzed below:
Years Ended March 31,
1995 1994 1993
(In thousands)
Statutory tax (benefit) $ 2,598 $(24,931) $(18,799)
Utilization of net operating loss
carryforwards (632)
U.S. and foreign net operating
losses without tax benefit 1,675 24,975 20,752
Foreign income subject to foreign
tax, not subject to U.S. tax (785) (1,431)
Tax recognition of prior year book
deductions (888)
Rate differential on foreign income (1,959) 327 (638)
Nondeductible bankruptcy expenses 137 1,545
Nondeductible debt restructuring expenses (1,540) 521
Other, net 121 (49) 304
______ _______ ______
Total income tax provision $ 267 $ 327 $ 709
====== ======= ======
Effective April 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," under which
the liability method (rather than the deferred method) is used in
accounting for income taxes. Under the liability method, deferred tax
assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities, and are
measured using enacted tax rates and laws that will be in effect when the
differences are expected to reverse. The change had no effect on the results
of operations for the year ended March 31, 1994.
Significant components of the Company's deferred tax assets and
liabilities are as follows:
March 31,
1995 1994
(In thousands)
Deferred tax assets:
Accounts receivable reserves $ 7,653 $8,287
Inventory reserves 1,188 1,394
Net operating loss carryforwards 10,588 11,550
Other 1,014 1,131
______ ______
Total deferred tax assets 20,443 22,362
Valuation allowance for deferred tax assets
(20,189) (22,011)
________ ________
Net deferred tax assets 254 351
Deferred tax liabilities: ________ ________
Other (254) (351)
________ ________
Total deferred tax liabilities (254) (351)
________ ________
Net deferred taxes $ -- $ --
======== ========
Total deferred tax assets of the Company at March 31, 1995 represent
the tax-effected annual limitation multiplied by the net operating loss
carryforward period and tax-effected deductible temporary differences. The
Company has established a valuation reserve against any expected future
benefits.
Cash paid for income taxes was $725,000, $946,000 and $453,000 for
the years ended March 31, 1995, 1994 and 1993, respectively.
Income before taxes of foreign subsidiaries was $3,786,000 and
$5,334,000 for the years ended March 31, 1995 and 1993, respectively.
Losses before taxes of foreign subsidiaries was $16,042,000 for the year
ended March 31, 1994. Unremitted earnings of foreign subsidiaries which
have been, or are intended to be permanently reinvested (and for
which no Federal income tax has been provided) aggregated $3,396,000
and $1,086,000 at March 31, 1995 and 1994, respectively.
As of March 31, 1995, the Company has a net operating loss
carryforward of approximately $95,270,000, of which $31,692,000,
$13,385,000 and $50,193,000 will expire in 2006, 2007 and 2009,
respectively. This net operating loss carryforward reflects downward
adjustments made in 1995 pursuant to IRS examinations completed for the
years ended March 31, 1990 and 1989 totaling $20,346,000. As of March 31,
1995, foreign tax credit carryforwards of $929,000 are available and if
not utilized, will expire in 1996. In addition, as of March 31, 1995, the
Company has deductible temporary differences of approximately $26,003,000
principally attributable to accounts receivable reserves related to sales
returns and inventory reserves. The utilization of these net operating
losses and tax credits will be limited based on the effects of the Plan of
Reorganization consummated on March 31, 1994. Pursuant to the Plan of
Reorganization, the Bank Lenders, the Noteholders, Fidenas International,
Elision and GSE initially received 100% of the Common Stock. As a
result, an ownership change occurred with respect to the Company, and
subjected the Company's net operating losses and tax credits to the
limitation provided for in Section 382 and 383, respectively, of the
Internal Revenue Code. Subject to special rules regarding increases in the
annual limitation for the recognition of net unrealized built-in gains, the
Company's annual limitation will be approximately $2.2 million.
Note I -- Commitments, Contingencies and Related Party Transactions:
(1) Leases:
The Company leases warehouse and office space at minimum aggregate
rentals as follows:
Year Ending
March 31, Amount
(In thousands)
1996 $ 1,507
1997 1,484
1998 1,071
1999 271
2000 --
______
$4,333
======
Rent expense aggregated $2,731,000, $2,663,000 and $3,520,000 for the
years ended March 31, 1995, 1994 and 1993, respectively. Rental income
from the sublease of warehouse space aggregated $273,000, $89,000 and
$201,000 in the years ended March 31, 1995, 1994 and 1993, respectively.
The Company's previous headquarters was leased from a limited
partnership, 51% of which was indirectly owned by four former executive
officers of the Company. The lease, which was scheduled to expire in April
1995 (excluding renewal options), terminated in July 1993, as noted below.
Rent expense related to this lease amounted to $491,000 and $1,575,000 for
the years ended March 31, 1994 and 1993, respectively. In March 1993, the
Company entered into an agreement with the general partner of the limited
partnership under which the Company was released without penalty from
its lease obligations with respect to the above location, effective July
1993, in consideration for executing a five year lease (commencing on the
same date) for office space with an affiliate of the general partner. The
new lease provides for the annual payment of rent of approximately
$813,000, and that the Company pay for its proportionate share of increases
in real estate taxes.
(2) Letters of Credit:
Outstanding letters of credit for the purchase of inventory, not
reflected in the accompanying financial statements, aggregated $11,863,000
(including $3,622,000 issued under the Loan and Security Agreement -- see
Note F) at March 31, 1995.
The Company's Hong Kong subsidiary also maintains various credit
facilities aggregating $114.3 million with a bank in Hong Kong consisting
of the following: (i) a $12.3 million credit facility which is generally
used for letters of credit for a foreign subsidiary's direct import
business and affiliates' inventory purchases, (ii) a $2 million standby
letter of credit facility, and (iii) a $100 million credit facility, for
the benefit of a foreign subsidiary, which is for the establishment of
back-to-back letters of credit with the Company's largest customer. At
March 31, 1995, the Company's Hong Kong subsidiary had pledged $4 million in
certificates of deposit to this bank to assure the availability of these
credit facilities. At March 31, 1995, there were $5,974,000 and $8,415,000
of letters of credit outstanding under the $12.3 million and $100 million
credit facilities, respectively.
The Company's Hong Kong subsidiary secured an additional credit
facility in the year ended March 31, 1995 with another bank in Hong Kong.
The facility provides for a $10 million line of credit for documentary
letters of credit and a $10 million back-to-back letter of credit line,
collateralized by a $5 million certificate of deposit. At March 31,
1995, the Company's Hong Kong subsidiary had pledged $5,041,000 in
certificates of deposit to assure the availability of these credit
facilities. At March 31, 1995, $3,871,000 of the letter of credit line was
utilized.
The Company has discounted unmatured notes received from its European
customers for payments of accounts receivable with various foreign banks.
At March 31, 1995, $1,282,000 of discounted notes have not matured.
(3) Anti-Dumping Duty Receivable:
The Company was a participant in matters pending before the United
States Customs Service and the United States Department of Commerce
pertaining to the assessment and deposit of anti-dumping duties on
importations of color televisions from both the Republic of Korea and
Taiwan. Such deposits were based on U.S. Commerce Department deposit
requirements in effect at the time and were deemed excessive based on the
U.S. Commerce Department's determinations of anti-dumping margins; however,
the deposits will not be refunded until litigation challenging the U.S.
Commerce Department determination of anti-dumping margins is completed.
Pursuant to the Plan of Reorganization, the Company transferred the
anti-dumping duty deposits and related interest, net of anti-dumping duty
liabilities, to a liquidating trust for the benefit of the Bank Lenders and
Noteholders in exchange for a reduction in outstanding indebtedness. In
preparation for the transfer, the Company reviewed the anti-dumping duty
deposit records of the U.S. Customs Service and noted significant
discrepancies between the Company's records and those of the U.S. Customs
Service on anti-dumping duties eligible for refund. The Company believes
that the U.S. Customs Service erroneously liquidated certain anti-dumping
duty entries that should be suspended in accordance with court orders and
misclassified certain anti-dumping duty deposits as regular duty payments.
The magnitude of these differences, including interest accruing thereon,
was estimated at $6.6 million. The net anti-dumping duty receivable was
transferred to the liquidating trust at a fair market value of $4 million
based on third-party analysis, resulting in a writedown of approximately
$10.6 million (based on a book value of $14.6 million).
(4) Other Matters:
A law firm of which two officers of the Company (one of whom is a
director) were members until July 1992 and August 1992, respectively,
received fees of $541,000 in the year ended March 31, 1993, primarily as
reimbursement of amounts incurred by FIL in a 1992 proxy contest. Another
law firm which represented FIL in the proxy contest was paid fees
aggregating $200,000 in the year ended March 31, 1993 by the Company in
reimbursement of amounts incurred by FIL in the proxy contest. Upon
settlement of the proxy contest, such law firm was retained as the
Company's outside counsel and provided legal services to the Company for
fees aggregating $737,000, $1,070,000 and $259,000 for the years ended
March 31, 1995, 1994 and 1993, respectively. A family member of an officer
of the Company joined such law firm, as of counsel, subsequent to its
retention by the Company.
Effective April 1, 1995, the Company's Canadian subsidiary entered
into a series of three-year agreements with a company owned by a former
employee of the Canadian subsidiary, and who is also the daughter of a
former officer of the Canadian subsidiary. The agreements provide for this
Canadian company to perform certain after sale services, act as the
exclusive parts distributor for the Company's Canadian subsidiary and
purchase all products returned by the Company's Canadian customers.
In the year ended March 31, 1994, the Company paid $208,000 to a
designee of FIL for expenses incurred relating to the DIP Financing and
$187,000 to guarantee the DIP Financing. Additionally, the Company
reimbursed Fidenas International $568,000 for various legal, accounting and
filing fees relating to the capital infusion and debt restructuring in the
year ended March 31, 1994.
At March 31, 1994, the Company's Hong Kong subsidiary had $1 million
on deposit with a bank that is an affiliate of Fidenas International.
These funds were withdrawn shortly thereafter.
The Company paid fees to a former executive officer of the Company,
in accordance with a three-year consulting agreement, aggregating $204,000
and $490,000 for the years ended March 31, 1994 and 1993, respectively.
In accordance with the employment contract of an officer of the
Company, the Company has provided a non-interest bearing relocation bridge
loan to the officer of $120,000, secured by the equity in the former
personal residence of the officer. The maturity date of the loan has been
extended and is due in the fiscal year ending March 31, 1996.
The Company has employment agreements with certain of its officers,
that expire at various dates through 1997, and provide for minimum payments
aggregating $3,601,000.
Note J -- Shareholders' Equity:
(1) In connection with the settlement of shareholder litigation in
1991, the Company was required to redeem the common stock purchase rights
(the "Rights") previously granted under the Company's 1989 Shareholder
Rights Agreement at a redemption price of $.01 per Right. In the year
ended March 31, 1993, the Company paid approximately $271,000 to holders of
record on March 13, 1992 to redeem the Rights and granted additional rights
which expired without exercise in July 1992.
(2) In June 1991, the Company entered into a Securities Purchase
Agreement (as amended, the "Securities Purchase Agreement") with a
subsidiary of Semi-Tech (Global) Limited ("Semi-Tech") providing for the
purchase of 10 million common shares and the issuance of stock purchase
warrants. In April 1992, the Securities Purchase Agreement was
terminated in exchange for payment by the Company of $500,000 in cash
and the issuance of 153,847 common shares (then equal in value to $500,000).
Concurrently, the Company and Semi-Tech entered into a three-year
Supply Agreement (the "Supply Agreement"). Pursuant to the Supply
Agreement, the Company issued to Semi-Tech a four-year warrant (valued
at $600,000) to purchase 1 million common shares at $4.00 per share and a
five-year warrant to purchase 500,000 common shares at $4.00 per share.
The Supply Agreement and the warrants were cancelled pursuant to the
Plan of Reorganization.
(3) All stock options outstanding at March 31, 1994 under the 1987
Stock Option Plan and the 1980 Employees' Stock Participation Plan were
cancelled pursuant to the Plan of Reorganization.
(4) In July 1994, the Company's Board of Directors adopted, and the
stockholders subsequently ratified, a Stock Compensation Program
("Program") intended to secure for the Company and its stockholders the
benefits arising from ownership of the Company's Common Stock by those
selected directors, officers, other key employees, advisors and consultants
of the Company who are most responsible for the Company's success and
future growth. The maximum aggregate number of shares of Common Stock
available pursuant to the Program is 2,000,000 shares and the Program is
comprised of 4 parts -- the Incentive Stock Option Plan, the Supplemental
Stock Option Plan, the Stock Appreciation Rights Plan and the Stock Bonus
Plan. A summary of transactions since the inception of the Program is as
follows:
Number of Price Aggregate
Shares Per Share Price
Granted 1,860,000 $1.00 - $1.10 $1,920,000
Cancelled (30,000) $1.00 (30,000)
_________ _____________ __________
Outstanding -- March 31, 1995 1,830,000 $1.00 - $1.10 $1,890,000
========= ==========
The term of each option is ten years, except for options issued to
any person who owns more than 10% of the voting power of all classes of
capital stock for which the term is five years. Options may not be
exercised during the first year after the date of the grant. Thereafter
each option becomes exercisable on a pro rata basis on each of the first
through third anniversaries of the date of the grant. The exercise price
of options granted must be at least equal to the fair market value of the
shares on the date of the grant, except that the option price with respect
to an option granted to any person who owns more than 10% of the voting
power of all classes of capital stock shall not be less than 110% of the
fair market value of the shares on the date of the grant.
(5) In October 1994, the Company's Board of Directors adopted,
subject to stockholder approval, the 1994 Non-Employee Director Stock
Option Plan. The maximum number of shares of Common Stock available under
such plan is 300,000. A summary of transactions since inception of the
plan is as follows:
Number of Price Aggregate
Shares Per Share Price
Granted 175,000 $1.00 $175,000
_______ ________
Outstanding -- March 31, 1995 175,000 $1.00 $175,000
======= ========
The provisions for exercise price, term and vesting schedule are the
same as noted above for the Stock Compensation Program.
(6) Pursuant to the Plan of Reorganization, on March 31, 1994, the
Company issued Series A Preferred Stock with a face value of $10 million
and an estimated fair market value of approximately $9 million. The
preferred stock is convertible into Common Stock at any time during the
period beginning on March 31, 1997 and ending on March 31, 2002; the
preferred stock is convertible into Common Stock at a price per share of
Common Stock equal to 80% of the market value of a share of Common Stock on
the date of conversion. The preferred stock bears dividends commencing
June 30, 1994 on a cumulative basis at the following rates:
Dividend Rate
Year 1 to 3 7.0%
Year 4 5.6%
Year 5 4.2%
Year 6 2.8%
Year 7 1.4%
Thereafter None
The preferred stock is non-voting. However, the terms of the
preferred stock provide that holders shall have the right to appoint two
directors to the Company's Board of Directors if the preferred stock
dividends are in default for six consecutive quarters.
(7) Pursuant to the Plan of Reorganization, the Noteholders received
warrants for the purchase of 750,000 shares of Common Stock. The warrants
are exercisable for a period of seven years from March 31, 1994 and provide
for an exercise price of $1.00 per share for the first three years,
escalating by $.10 per share per annum thereafter until expiration of the
warrant.
(8) In accordance with the Company's Plan of Reorganization, the
Company completed an initial public offering of its Common Stock in
September 1994 to shareholders of record (in those states in which the
offering could be made) as of March 31, 1994, excluding FIL. The
Company sold 6,149,993 shares of Common Stock for $1.00 per share resulting
in proceeds to the Company, net of issuance costs, of approximately
$5,692,000. Pursuant to the terms of the Plan of Reorganization, in
January 1995, the Company paid approximately $922,000 to satisfy certain
obligations owed to former creditors, and in February 1995 issued 691,944
and 77,502 shares of Common Stock to former creditors, primarily to satisfy
an anti-dilution provision. The remainder of such funds were used for
working capital and other corporate purposes.
Note K -- License Agreements:
(1) In February 1995, the Company and Otake Trading Co. Ltd. and
certain affiliates ("Otake"), the Company's largest supplier, entered into
two mutually contingent agreements (the "Agreements"). Effective March 31,
1995, the Company granted a license of certain trademarks to Otake for a
three-year term. The license permits Otake to manufacture and sell certain
video products under the "Emerson" trademark to Wal-Mart Stores, Inc. ("Wal-
Mart"), the Company's largest customer, in the U.S. and Canada, and
precludes Otake from supplying product to Wal-Mart other than under the
Emerson or Orion trademarks. The Company will continue to supply other
products to Wal-Mart directly. Further, the Agreements provide that Otake
will supply the Company with certain video products for sale to other
customers at preferred prices for a three-year term. Under the terms of
the Agreements, the Company will receive non-refundable minimum annual
royalties from Otake to be credited against royalties earned from sales of
video cassette recorders and players, television/video cassette recorder
and player combinations, and color televisions to Wal-Mart. In addition,
effective August 1, 1995, Otake will assume responsibility for returns and
after-sale and warranty services on all video products manufactured by
Otake and sold to Wal-Mart, including video products sold by the Company
prior to April 1, 1995.
Additionally, the Company and Otake agreed on a series of purchase
discounts, consistent with agreements and past practices between Otake and
the Company. Through March 31, 1995, Otake has paid the Company $6.3
million against an aggregate $10.2 million of purchase discounts for
product purchased from January 1, 1993 to March 31, 1995, and the
balance of $3.9 million is due in September 1995. The Company
recognized $9.9 million of discounts in the year ended March 31, 1995,
of which $4.3 million of discounts were attributable to purchases prior
to April 1, 1994.
(2) In October 1994, the Company entered into a license agreement
with Jasco Products Co., Inc., ("Jasco") whereby the Company granted a
license of certain trademarks to Jasco for use on non-competing consumer
electronic accessories. Under the terms of the agreement, the Company
will receive minimum annual royalties through the life of the agreement,
which expires on December 31, 1997, and the agreement is automatically
renewable for three successive three-year periods based upon Jasco's
compliance with the agreement. The Company recognized license fee
income of approximately $1,125,000 in the year ended March 31, 1995.
Note L -- Legal Proceedings:
FIL Litigation:
The 30 million shares of Common Stock issued to GSE, Fidenas
International and Elision on March 31, 1994, pursuant to the Plan of
Reorganization, are the subject of certain legal proceedings. Transfers of
certain shares owned by Fidenas International have been enjoined by court
orders issued in the United States Bankruptcy Court for the Southern
District of New York and in the Commonwealth of Bahamas. The Company is
not a party to any of the proceedings described herein; it is possible that
a court of competent jurisdiction may order the turnover of all or a
portion of the shares of Common Stock owned by such persons to a third
party. A turnover of a substantial portion of the Common Stock could
result in a "change of controlling ownership" prohibited pursuant to the
terms of the Company's Loan and Security Agreement with its primary lender.
Additionally, such a change in control could result in a second "ownership
change" under Internal Revenue Code Section 382, which could affect the
Company's ability to use its net operating loss and tax credit
carryforwards. The Company does not believe the litigation or the results
thereof will have a material adverse effect on the Company or on the
Company's financial position.
Bankruptcy Claims:
The Company is presently engaged in litigation regarding several
bankruptcy claims which have not been resolved since the restructuring of
the Company's debt. The largest claim was filed July 25, 1994 in
connection with the rejection of certain executory contracts with two
Brazilian entities, Cineral Electronica de Amazonia Ltda. and Cineral
Magazine Ltda. (collectively, "Cineral"). The contracts were executed in
August 1993, shortly before the Company's filing for bankruptcy protection.
The amount claimed was $93,563,457, of which $86,785,000 represents a claim
for loss of profits and $6,400,000 for plant installation and establishment
of offices, which were installed and established prior to execution of the
contracts. The claim was filed as an unsecured claim and, therefore, will
be satisfied, to the extent the claim is allowed by the Bankruptcy Court,
in the manner other allowed unsecured claims were satisfied. The Company
has objected to the claim and intends to vigorously contest such claim and
believes it has meritorious defenses to the highly speculative portion of
the claim for lost profits and the portion of the claim for actual damages
for expenses incurred prior to the execution of the contracts.
Additionally, the Company has instituted an adversary proceeding in the
Bankruptcy Court asserting damages caused by Cineral. A motion filed by
Cineral to dismiss the adversary proceeding has been denied. The adversary
proceeding and claim objection have been consolidated into one proceeding.
An adverse final ruling on the Cineral claim could have a material adverse
effect on the Company, even though it would be limited to 18.3% of the
final claim determined by a court of competent jurisdiction; however, with
respect to the claim for lost profits, in light of the foregoing, the
Company believes the chances for recovery for lost profits are remote.
Other Litigation:
The Company is involved in other legal proceedings and claims of
various types in the ordinary course of business. While any litigation
contains an element of uncertainty, management presently believes that the
outcome of each such proceeding or claim which is pending or known to be
threatened (including the actions noted above), or all of them combined,
will not have a material adverse effect on the Company's consolidated
financial position.
Note M -- Business Segment Information and Major Customers:
The consumer electronics business is the Company's only business
segment. Operations in this business segment are summarized below by
geographic area:
Year Ended March 31, 1995 U.S. Foreign Eliminations Consolidated
(In thousands)
Sales to unaffiliated customers $ 608,717 $45,954 $ -- $ 654,671
Transfers between geographic areas 5,954 184 (6,138) --
________ ______ ________ ________
Total net revenues $ 614,671 $46,138 $ (6,138) $ 654,671
======== ====== ======== =========
Earnings (loss) before income
taxes $ 12,238 $(4,596) $ -- $ 7,642
======== ======= ======== ========
Identifiable assets $ 98,604 $15,470 $ (105) $ 113,969
======== ====== ========= ========
Year Ended March 31, 1994
Sales to unaffiliated customers $ 433,495 $53,895 $ -- $ 487,390
Transfers between geographic areas 2,587 -- (2,587) --
________ ______ _________ ________
Total net revenues $ 436,082 $53,895 $ (2,587) $ 487,390
Loss before reorganization ======== ====== ========= =========
costs and income taxes $ (50,718) $(5,224) $ -- $ (55,942)
========= ======= ========= =========
Identifiable assets $ 99,726 $19,295 $ -- $ 119,021
======== ====== ========= =========
Year Ended March 31, 1993
Sales to unaffiliated customers $ 693,997 $47,360 $ -- $ 741,357
Transfers between geographic areas 3,803 -- (3,803) --
_________ ______ _________ _________
Total net revenues $ 697,800 $47,360 $ (3,803) $ 741,357
Loss before income taxes $ (53,279) $(2,012) $ -- $ (55,291)
========= ======= ========= ==========
Identifiable assets $ 175,363 $19,147 $ -- $ 194,510
======== ====== ========= =========
Transfers between geographic areas are accounted for on a cost basis.
Identifiable assets are those assets used in operations in each geographic
area.
At March 31, 1995 and 1994, identifiable assets include $37,492,000
and $51,390,000, respectively, of assets located in foreign countries.
The Company's net sales to one customer aggregated approximately 53%,
34% and 39%, of consolidated net sales for the years ended March 31, 1995,
1994 and 1993, respectively. At March 31, 1995 and 1994, the Company had a
liability balance to this customer for product returns. The Company's net
sales to another customer aggregated 10%, 12% and 11% for the years ended
March 31, 1995, 1994 and 1993, respectively. Trade receivables from this
customer approximated 10% and 11% of accounts receivable at March 31, 1995
and 1994, respectively, and are not collateralized.
Note N -- Investment in Joint Venture
The Company has a 50% investment in E & H Partners, a joint venture
that purchases, refurbishes and sells all of the Company's product returns.
The results of this joint venture are accounted for by the equity method.
The Company's equity in the earnings of the joint venture is reflected as a
reduction of cost of sales in the Company's Consolidated Statements of
Operations. Summarized financial information relating to the joint venture
is as follows:
March 31, 1995
(In thousands)
Accounts receivable from joint venture $15,283(a)
Investment in joint venture 1,565
Condensed balance sheet:
Current assets $26,749
Noncurrent assets 161
______
Total $26,910
======
Current liabilities $23,780
Partnership equity 3,130
______
Total $26,910
======
Year Ended
March 31, 1995
(In thousands)
Sales to joint venture $32,500
Condensed income statement:
Net sales 24,760(b)
Net earnings 2,130
___________________
(a) Secured by a lien on the partnership's inventory. Such lien has been
assigned to the Lender as collateral for the U.S. line of credit
facility.
(b) Includes sales to the Company of $3,796,000.
EMERSON RADIO CORP. AND SUBSIDIARIES
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(In thousands)
Column A Column B Column C Column D Column E
Balance at Charged to Balance
beginning costs and at end of
Description of year expenses Deductions year
Allowance for doubtful accounts:
Year ended:
March 31, 1995 $ 1,639 $ 1,574 $ 280(A) $ 2,933
March 31, 1994 2,374 998 1,733(A) 1,639
March 31, 1993 2,390 2,043 2,059(A) 2,374
Inventory reserves:
Year ended:
March 31, 1995 $ 644 $ 251 $ 425(B) $ 470
March 31, 1994 1,559 6,619 7,534(B) 644
March 31, 1993 1,817 4,587 4,845(B) 1,559
(A) Accounts written off, net of recoveries.
(B) Net realizable value reserve removed from account when inventory is sold.
INDEX TO EXHIBITS
PAGE NUMBER
IN
SEQUENTIAL
NUMBERING
EXHIBIT DESCRIPTION SYSTEM
(2) Confirmation Order and Fourth Amended Joint Plan of
Reorganization of Emerson Radio Corp. ("Old Emerson")
and certain subsidiaries under Chapter 11 of
the United States Bankruptcy Code, dated March 31, 1994
(incorporated by reference to Exhibit (2) of Emerson's
Registration Statement on Form S-1, Registration No. 33-
53621, declared effective by the Securities and Exchange
Commission ("SEC") on August 9, 1994).
(3)(a) Certificate of Incorporation of Emerson (incorporated by
reference to Exhibit (3) (a) of Emerson's Registration
Statement on Form S-1, Registration No. 33-53621,
declared effective by the SEC on August 9, 1994).
(3) (b) Certificate of Designation for Series A Preferred
Stock (incorporated by reference to Exhibit (3) (b)
of Emerson's Registration Statement on Form S-1,
Registration No. 33-53621, declared effective by
the SEC on August 9, 1994).
(3) (c) Plan of Reorganization and Agreement of Merger by
and between Old Emerson and Emerson Radio (Delaware) Corp.
(incorporated by reference to Exhibit (3)(c) of Emerson's
Registration Statement on Form S-1, Registration No. 33-53621,
declared effective by the SEC on August 9,
1994).
(3) (d) Certificate of Merger of Old Emerson with and into Emerson
Radio (Delaware) Corp. (incorporated by reference to Exhibit (3)
(d) of Emerson's Registration Statement on Form S-1, Registration
No. 33-53621, declared effective by the SEC on August 9, 1994).
(3) (e) By-Laws of Emerson adopted March 1994 (incorporated by reference
to Exhibit (3)(e) of Emerson's Registration Statement on
Form S-1, Registration No. 33-53621, declared effective by the SEC
on August 9, 1994).
(4) (a) Warrant Agreement to Purchase 750,000 shares of Common Stock,
dated as of March 31, 1994 (incorporated by reference to
Exhibit (4) (a) of Emerson's Registration Statement on Form S-1,
Registration No. 33-53621, declared effective by the SEC on
August 9, 1994).
(10) (a) Agreement, dated as of November 14, 1973, between National Union
Electric Corporation ("NUE") and Emerson (incorporated by reference
to Exhibit (10)(a) of Emerson's Registration Statement on
Form S-1, Registration No. 33-53621, declared effective by the
SEC on August 9, 1994).
(10) (b) Trademark User Agreement, dated as of February 28, 1979, by and
between NUE and Emerson (incorporated by reference to Exhibit
(10) (b) of Emerson's Registration Statement on Form S-1,
Registration No. 33-53621, declared effective by the SEC on
August 9, 1994).
(10) (c) Agreement, dated July 2, 1984, between NUE and Emerson
(incorporated by reference to Exhibit (10) (c) of Emerson's
Registration Statement on Form S-1, Registration No. 33-
53621, declared effective by the SEC on August 9, 1994).
(10) (d) Agreement, dated September 15, 1988, between NUE and Emerson
(incorporated by reference to Exhibit (10) (d) of Emerson's
Registration Statement on Form S-1, Registration No. 33-53621,
declared effective by the SEC on August 9, 1994).
(10) (e) Form of Promissory Note issued to certain Pre-Petition Creditors
(incorporated by reference to Exhibit (10) (e) of Emerson's
Registration Statement on Form S-1, Registration No. 33-53621,
declared effective by the SEC on August 9, 1994).
(10) (f) Loan and Security Agreement, dated March 31, 1994, by and
among Emerson, Majexco Imports, Inc. and Congress Financial
Corporation ("Congress") (incorporated by reference to
Exhibit (10) (f) of Emerson's Registration Statement on
Form S-1, Registration No. 33-53621, declared effective
by the SEC on August 9, 1994).
(10) (g) Emerson Radio Corp. Stock Compensation Program (incorporated
by reference to Exhibit (10) (i) of Emerson's Registration
Statement on Form S-1, Registration No. 33-53621, declared
effective by the SEC on August 9, 1994).
(10) (h) Employment Agreement between Emerson and Eugene I. Davis
(incorporated by reference to Exhibit 6(a)(4) of Emerson's
Quarterly Report on Form 10-Q for quarter ended June 30,
1992).
(10) (i) Employment Agreement between Emerson and Albert G. McGrath,
Jr. (incorporated by reference to Exhibit 6(a)(7) of Emerson's
Quarterly Report on Form 10-Q for quarter ended June 30, 1992).
(10) (j) Employment Agreement between Emerson and Geoffrey P. Jurick
(incorporated by reference to Exhibit 6(a)(6) of Emerson's
Quarterly Report on Form 10-Q for quarter ended June
30, 1992).
(10) (k) Employment Agreement between Emerson Radio (Hong Kong) Ltd.
and Geoffrey P. Jurick (incorporated by reference to Exhibit
6(a)(6) of Emerson's Quarterly Report on Form 10-Q
for quarter ended June 30, 1992).
(10) (l) Employment Agreement between Emerson Radio International Ltd.
(formerly Emerson Radio (B.V.I), Ltd.) and Geoffrey P. Jurick
(incorporated by reference to Exhibit 6(a)(6) of Emerson's
Quarterly Report on Form 10-Q for quarter ended June 30, 1992).
(10) (m) Lease Agreement dated as of March 26, 1993, by and between
Hartz Mountain Parsippany and Emerson with respect to the
premises located at Nine Entin Road, Parsippany, NJ
(incorporated by reference to Exhibit (10)(ww) of
Emerson's Annual Report on Form 10-K for the year ended
December 31, 1992).
(10) (n) Employment Agreement, dated July 13, 1993, between Emerson
and Merle Eakins (incorporated herein by reference to Exhibit
(10)(vv) to Emerson's Annual Report on Form 10-K for the year
ended March 31, 1993).
(10) (o) Employment Agreement, dated April 1, 1994, between Emerson and
John Walker (incorporated herein by reference to Exhibit
(10)(ee) of Emerson's Registration Statement on Form S-1,
Registration No. 33-53621, declared effective
by the SEC on August 9, 1994).
(10) (p) Liquidity Trust Agreement, dated as of March 31, 1994, by and
among Emerson, Majexco Imports, Inc., H.H. Scott, Inc., and Stuart
D. Gavsy, Esq., as Trustee (incorporated by reference to Exhibit
(10) (ff) of Emerson's Registration Statement on Form S-1,
Registration No. 33-53621, declared effective by the SEC on
August 9, 1994).
(10) (q) Partnership Agreement, dated April 1, 1994, between Emerson
and Hopper Radio of Florida, Inc.*
(10) (r) Sales Agreement, dated April 1, 1994, between Emerson and E & H
Partners.*
(10) (s) Agreement, dated July 1, 1994, between Emerson and Alex Wijnen
relating to termination of employment and agreement on consulting
services.*
(10) (t) Independent Consultant's Agreement, dated October 1, 1994,
between Emerson Radio International Ltd. and Peter G. Bunger.*
(10) (u) Independent Consultant's Agreement, dated October 1, 1994,
between Emerson Radio Europe B.V. and Peter G. Bunger.*
(10) (v) Employment Agreement, dated October 3, 1994, between Emerson
and Andrew Cohan.*
(10) (w) License Agreement, dated February 22, 1995, between Emerson and
Otake (incorporated by reference to Exhibit 6(a)(1) of Emerson's
quarterly report on Form 10-Q for quarter ended December 31, 1994).
(10) (x) Supply Agreement, dated February 22, 1995, between Emerson and
Otake (incorporated by reference to Exhibit 6(a)(2) of Emerson's
quarterly report on Form 10-Q for quarter ended December 31, 1994).
(10) (y) 1994 Non-Employee Director Stock Option Plan.*
(11) Computation of Primary Earnings Per Share.*
(21) Subsidiaries of the Registrant as of March 31, 1995.*
(27) Financial Data Schedule for year ended March 31, 1995.*
___________________
* Filed herewith.