June 28, 2006
VIA FEDERAL EXPRESS
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Attention: Michael Moran, Accounting Branch Chief
RE: EMERSON RADIO CORP.
FORM 10-K FOR FISCAL YEAR ENDED MARCH 31, 2005
FILED JUNE 29, 2005
FILE NO. 1-07731
Dear Ladies and Gentlemen:
In response to the Staff's letter of comment dated April 18, 2006 (the "Comment
Letter") attached please find a memorandum in response to such Comment Letter.
In addition, attached to this letter as Appendix A is a written statement from
of Emerson Radio Corp. (the "Company") pursuant to which the Company
acknowledges that:
o the Company is responsible for the adequacy of the disclosure in
their filings;
o Staff comments or changes to disclosure in response to Staff
comments do not foreclose the Securities and Exchange Commission
from taking any action with respect to the filing; and
o the Company may not assert Staff comments as a defense in any
proceeding initiated by the Securities and Exchange Commission or
any person under federal securities laws of the United States.
Very truly yours,
John D. Florian
Corporate Controller, Deputy Chief Financial Officer
Emerson Radio Corp.
Enclosures
cc: Mr. Brian V. McAllister
Mr. Geoffrey P. Jurick - Emerson Radio Corp.
John D. Schupper, Esq. - Lowenstein Sandler PC
Steven M. Skolnick, Esq. - Lowenstein Sandler PC
Emerson Radio Corp.
Memorandum in Response to SEC Comment Letter
The following are responses to the Staff's Comment Letter by Emerson
Radio Corp. ("Emerson" or the "Company"). To assist the Staff's review, the
responses are numbered to correspond to the numbered paragraphs in the Staff's
Comment Letter.
FORM 10-K FOR FISCAL YEAR ENDED MARCH 31, 2005
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General
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1. PLEASE PROVIDE, IN WRITING, A STATEMENT FROM THE COMPANY ACKNOWLEDGING
THAT THE COMPANY IS RESPONSIBILITY FOR THE ADEQUACY AND ACCURACY OF THE
DISCLOSURE IN THE FILING, THAT STAFF COMMENTS OR CHANGES TO DISCLOSURE
IN RESPONSE TO STAFF COMMENTS DO NOT FORECLOSE THE COMMISSION FROM
TAKING ANY ACTION WITH RESPECT TO THE FILING, AND THE COMPANY MAY NOT
ASSERT STAFF COMMENTS AS A DEFENSE IN ANY PROCEEDING INITIATED BY THE
COMMISSION OR ANY PERSON UNDER THE FEDERAL SECURITIES LAWS OF THE
UNITED SATES. SEE OUR LETTER DATED FEBRUARY 24, 2006.
As requested by the Staff, attached to this letter as Appendix A is a written
statement from of the Company pursuant to which the Company acknowledges that:
o the Company is responsible for the adequacy of the disclosure in
their filings;
o Staff comments or changes to disclosure in response to Staff
comments do not foreclose the Securities and Exchange Commission
from taking any action with respect to the filing; and
o the Company may not assert Staff comments as a defense in any
proceeding initiated by the Securities and Exchange Commission or
any person under federal securities laws of the United States.
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CONSOLIDATED BALANCE SHEETS, PAGE 54
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2. WE NOTE YOUR RESPONSE TO COMMENT 4 IN OUR LETTER DATED FEBRUARY 24,
2006. PLEASE TELL US YOUR BASIS IN U.S. GAAP THAT SUPPORTS PRESENTING
LEGALLY RESTRICTED CASH DEPOSITS, HELD BY A FOREIGN BANK AND NOT TO BE
USED FOR GENERAL BUSINESS PURPOSES, AS UNRESTRICTED CASH AND CASH
EQUIVALENTS. DESCRIBE THE RESTRICTIONS CITING THE RELEVANT SECTIONS TO
THE CREDIT AGREEMENT AND REFERENCE ITS LOCATION IN YOUR EXHIBIT INDEX,
AS APPLICABLE. IF FURTHER CONSIDERATION LEADS YOU TO CONCLUDE THAT
COMPENSATING BALANCES ARE RESTRICTED CURRENT ASSETS, OR NON-CURRENT
ASSETS, PLEASE REVISE YOUR BALANCE SHEETS AND STATEMENTS OF CASH FLOWS
IN FUTURE FILINGS TO RECHARACTERIZE THE AMOUNTS ACCORDINGLY. ALSO,
INCLUDE IN YOUR RESPONSE A REVISED AND EXPANDED DISCLOSURE THAT STATES
COMPENSATING AMOUNTS ARE LEGALLY RESTRICTED FROM GENERAL BUSINESS
PURPOSES AND INCLUDE ALL RELATIVE TERMS OF THE AGREEMENT THAT ASSURE
FUTURE CREDIT AVAILABILITY. IN YOUR RESPONSE, PLEASE SHOW US WHAT YOUR
REVISED DISCLOSURE WILL LOOK LIKE.
The Company acknowledges the Staff's comment and hereby advises the
Staff that, based on current U.S. GAAP, the Company will revise this
disclosure in future filings. The Company will present these amounts as
"Restricted Cash" in the current asset section of the balance sheet. In
addition, the Company will also reference this restricted cash in the
MD&A section of future filings and in Note 6 and Note 8 of the
financial statements, respectively. Disclosure similar to those set
forth below, will be presented in the Company's Annual Report on Form
10-K for the fiscal year ending March 31, 2006 and subsequent filings
as applicable:
MD&A SECTION
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LIQUIDITY AND CAPITAL RESOURCES:
Our foreign subsidiaries maintain various credit facilities,
aggregating $76.0 million, with foreign banks consisting of the
following:
o four letter of credit facilities totaling $21.0 million which are
used for inventory purposes; and
o five back-to-back letter of credit facilities totaling $55.0
million which are used for inventory purposes
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At March 31, 2005, our foreign subsidiaries pledged approximately $5.6
million in certificates of deposit to these banks to assure the
availability of the $21.0 million credit facilities. The compensating
amount of $5.6 million of restricted cash is legally restricted from
general business purposes.
NOTES TO FINANCIAL STATEMENTS
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NOTE 6 - BORROWINGS:
As of March 31, 2005 and 2004, short-term borrowings consisted of
amounts outstanding under the Company's foreign bank facilities held by
its foreign subsidiaries. Availability under this facility totals $21.0
million and is maintained by the pledge of bank deposits of
approximately $5.6 million and $3.0 million as of March 31, 2005 and
March 31, 2004, respectively. These amounts are legally restricted from
general business purposes and are classified as restricted cash in the
current asset section of the balance sheet.
NOTE 8 - CONTINGENCIES AND COMMITMENTS:
LETTERS OF CREDIT:
There were no letters of credit outstanding under the Emerson Loan
Agreement (see Note 6) as of either March 31, 2005 or 2004. The
Company's foreign subsidiaries also currently maintain various credit
facilities aggregating $76.0 million with foreign banks subject to
annual review consisting of the following: (i) four letter of credit
facilities totaling $21.0 and (ii) five back-to-back credit facilities
totaling $55.0 million. These facilities are used for inventory
purchases and require the Company to pledge approximately $5.6 million
of cash for such availability and for the benefit of its' foreign
subsidiaries, who establish back-to-back letters of credit with the
Company's customers. The $5.6 million is legally restricted from
general business purposes and is classified as restricted cash in the
current asset section of the balance sheet. At March 31, 2005, there
were $15.7 million of letters of credit outstanding under these credit
facilities. These credit facilities include net worth covenants of the
foreign subsidiaries, for which they were in compliance at March 31,
2005.
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NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES, PAGE 57
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CONCENTRATIONS OF CREDIT RISK, PAGE 58
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3. WE NOTE YOUR RESPONSE TO COMMENT 6 IN OUR LETTER DATED FEBRUARY 24,
2006. PLEASE ADVISE OR REVISE YOUR FUTURE FILINGS TO INCLUDE SCHEDULE
II AND SEPARATELY LIST THE ADDITIONS, DEDUCTIONS AND END BALANCES FOR
THE TRADE RECEIVABLES ALLOWANCE, CHARGEBACK RESERVES AND SALES RETURNS
ALLOWANCE, AS REQUIRED BY RULE 5-04(A)(2) OF REGULATION S-X. IN YOUR
RESPONSE PLEASE SHOW US WHAT YOUR REVISED DISCLOSURES WILL LOOK LIKE.
The Company acknowledges the Staff's comment and hereby provides Schedule
II as requested for fiscal 2005, which lists separately the additions,
deductions and end balances for the trade receivable allowance, chargeback
reserves and sales returns allowance, as required by Rule 5-04(a)(2) of
Regulation SX. The Company also wishes to advise the staff that all future
filings will contain such a schedule in the required format.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNT AND RESERVES
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COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
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CHARGED TO
BALANCE AT COSTS AND BALANCE AT END
DESCRIPTION BEGINNING OF YEAR EXPENSES DEDUCTIONS OF YEAR (1)
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Allowance for Doubtful Accounts Year
Ended March 31, 2005 $ 958 $ 253 $ 666 $ 545
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Allowance for Chargebacks
Year Ended March 31, 2005 $ 326 $ 4 0 $ 330
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Sales Return Reserves
Year Ended March 31, 2005 $5,030 $16,672 $16,294 $5,408
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(1) Sales returns reserve amount includes related accrued sales returns of
$2,136 for fiscal 2005 which are not presented as part of the accounts
receivable disclosed as "allowances" on the Consolidated Balance Sheet and
have been reported as accrued expenses.
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Appendix A
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Emerson Radio Corp.
Nine Entin Road
Parsippany, NJ 07054
June 28, 2006
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Attention: Michael Moran, Accounting Branch Chief
RE: EMERSON RADIO CORP.
FORM 10-K FOR FISCAL YEAR ENDED MARCH 31, 2005
FILED JUNE 29, 2005
FILE NO. 1-07731
Dear Mr. Moran:
Reference is hereby made to the Staff's letter of comment dated April 18, 2006
(the "Comment Letter"). In accordance with the Comment Letter, the Company
hereby acknowledges that:
o the Company is responsible for the adequacy of the disclosure in
their filings;
o Staff comments or changes to disclosure in response to Staff
comments do not foreclose the Securities and Exchange Commission
from taking any action with respect to the filing; and
o the Company may not assert Staff comments as a defense in any
proceeding initiated by the Securities and Exchange Commission or
any person under federal securities laws of the United States.
Very truly yours,
Emerson Radio Corp.
By: ___________________________
Name
Title
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