Audiovox Corporation Reports Fiscal 2011 Second Quarter and Six Month Results

Oct 12, 2010, 16:30 ET from Audiovox Corporation

HAUPPAUGE, N.Y., Oct. 12 /PRNewswire-FirstCall/ -- Audiovox Corporation (Nasdaq: VOXX), today announced results for its fiscal 2011 second quarter ended August 31, 2010.

Commenting on the Company's performance, Pat Lavelle, President and CEO stated, "We posted modest improvements in our top-line this quarter, driven by our acquisitions, new OEM programs and aftermarket automotive sales, as well as continued growth in our international operations.  The consumer market in the U.S. however, continues to suffer as consumer spending for non-essential items remains low.  Looking ahead, we are encouraged with recent reports pointing to continued increases in car sales as that will have a positive impact on both our top-line and our margins.  We continue to introduce new products across all segments of our business and are exploring new categories where we believe Audiovox and our portfolio of brands can prosper.  We remain on track for top-line growth and profitability in fiscal 2011, despite continued weakness in the global economies."

Fiscal Second Quarter Highlights

  • Sales up 3.5%, driven by continued improvements in the automotive market.
  • Gross margins increase 240 basis points due to new product introductions and shift in business mix.
  • OEM programs with Ford (Expedition), Lincoln (Navigator), Porsche (Cayenne), and BMW (X3).
  • New GM promotion for rear-seat entertainment systems.
  • Expanded remote start program under Prestige, Code Alarm and Omega brands.
  • Launched One-for-All Smart Remote to go after high-end remote category; Zentral remotes to be launched in fiscal 2011 fourth quarter.
  • Entered final testing stage for AirPower under the RCA brand; scheduled to launch in early 2011.

Fiscal Second Quarter Comparisons

Net sales for the second quarter ended August 31, 2010 were $129.3 million, an increase of 3.5% compared to net sales of $124.9 million reported in the comparable year ago period.  

Electronics sales were $95.2 million for the 2011 fiscal second quarter as compared to $79.0 million for the three months ended August 31, 2009, an increase of 20.5%.  Electronics sales were positively impacted by the acquisition of Invision Automotive Systems, new OEM programs and higher aftermarket sales of audio, video and security products for the mobile market.  Certain consumer electronics product lines were up for the quarter, including digital camcorders and digital players, though these gains were partially offset by declines in other electronics categories driven by the continued weakness in overall consumer spending.  Electronics represented 73.6% of net sales for the three months ended August 31, 2010 compared to 63.3% in the comparable prior year period.

Accessory sales were $34.1 million for the 2011 fiscal second quarter as compared to $45.9 million for the three months ended August 31, 2009, a decrease of 25.6%.  The majority of this decline was directly related to lower sales of digital antenna products in the fiscal 2011 second quarter as last fiscal year's results were positively influenced by the transition from analog to digital technology.  Excluding the impact of antennas, accessory sales were down 5.3% which can be attributed to weakness in consumer spending similar to core electronics products.  These declines in accessories were partially offset by increased sales in our international business, both in existing business and through the addition of the Schwaiger acquisition.  Accessories represented 26.4% and 36.7% of net sales for the three months ended August 31, 2010 and August 31, 2009, respectively.

Gross margins were 21.3% for the period ended August 31, 2010, a 240 basis point improvement from 18.9% reported in the comparable prior year period.  The increase in gross margins is a direct result of a shift in the Company's product mix towards more OEM related products, as well as better margins in the Company's existing product lines with new product introductions in several product categories.  Gross margins were also favorably impacted by reduced costs in freight and warehousing as compared to the prior year period.

Operating expenses increased by $4.5 million or 19.8% from $22.8 million, to $27.3 million for the periods ended August 31, 2009 and August 31, 2010, respectively.  The increase in total operating expenses was primarily due to approximately $4.0 million in expenses associated with the Company's acquisitions of Schwaiger and Invision.  In addition, the Company recorded charges for employee stock option costs and professional fees, bad debt expenses associated with a bankruptcy settlement, severance charges associated with the consolidation of a German operating location, and a reinstatement of a portion of the employee salary reductions below the vice president level.  As a percentage of net sales, operating expenses increased to 21.1% as compared to 18.2% for the three months ended August 31, 2010 and August 31, 2009, respectively.

The Company reported net income of $0.6 million and earnings per share of $0.03 for the 2011 fiscal second quarter compared to net income of $2.8 million or earnings per share of $0.12 for the 2010 fiscal second quarter.  Net income for the 2010 fiscal second quarter included an income tax benefit of $1.6 million.

Lavelle continued, "The slower than anticipated economic recovery has impacted our sales and our bottom-line performance through the first half of the year, but we remain profitable given the steps taken to improve our margins, better align our overhead and improve operating efficiencies.  Our OEM presence is growing as are our retail partnerships, and our cash position and balance sheet remain strong.  We believe the Company is well positioned to generate both near and long-term value, especially as the economy improves."

Six-Month Comparisons

Net sales for the six months ended August 31, 2010 were $259.6 million, an increase of 6.1% compared to net sales of $244.7 million reported in the comparable six-month period.  

Electronics sales were $189.7 million for the 2011 fiscal six month period as compared to $158.0 million for the six months ended August 31, 2009, an increase of 20.1%.  Electronics sales were positively impacted by the acquisitions of Invision Automotive System as well as higher automotive sales driven by new OEM programs and aftermarket sales.  These increases were partially offset by declines in certain consumer electronics categories.  Electronics represented 73.1% of net sales for the six months ended August 31, 2010 compared to 64.6% in the prior six month period.

Accessory sales were $69.9 million for the six months ended August 31, 2010 as compared to $86.7 million for the six months ended August 31, 2009, a decrease of 19.4%.  The majority of this decline was directly related to lower sales of digital antenna products as last fiscal year's results were positively influenced by the transition from analog to digital technology.  Excluding the impact of antennas, accessory sales were up 2.4%.  Accessories represented 26.9% and 35.4% of net sales for the six months ended August 31, 2010 and August 31, 2009, respectively.

Gross margins were 21.0% for the six month period ended August 31, 2010, a 200 basis point improvement from 19.0% reported in the comparable six month period.  The increase in gross margins is a direct result of a shift in the company's product mix towards more OEM related products, as well as better margins in the Company's existing product lines with several new product introductions.  Gross margins were also favorably impacted by reduced costs in freight and warehousing as compared to the prior year period.

Operating expenses increased by $10.4 million or 22.8% from $45.5 million, to $55.8 million for the six month periods ended August 31, 2009 and August 31, 2010, respectively.  The increase in total operating expenses was primarily due to approximately $6.6 million in expenses associated with the Company's acquisitions of Schwaiger and Invision.  The additional increase in operating expenses is related to charges taken for employee stock option costs, higher professional fees, bad debt expenses associated with a bankruptcy settlement and a reinstatement of a portion of the employee salary reductions below the vice president level.   As a percentage of net sales, operating expenses increased to 21.5% as compared to 18.6% for the six months ended August 31, 2010 and August 31, 2009, respectively.

The Company reported net income of $1.8 million and earnings per share of $0.08 for the 2011 fiscal six month period compared to net income of $3.2 million or earnings per share of $0.14 for the 2010 fiscal six month period.  Net income for the 2010 fiscal six month period included an income tax benefit of $1.3 million.

Conference Call Information

The Company will be hosting its conference call on Wednesday, October 13 at 10:00 a.m. EDT.  Interested parties can participate by visiting www.audiovox.com, and clicking on the webcast in the Investor Relations section or via teleconference (toll-free number: 866-510-0676; international number: 617-597-5361; pass code: 46308111).  For those who will be unable to participate, a replay will be available approximately one hour after the call has been completed and will last for one week thereafter (replay number: 888-286-8010; international replay number: 617-801-6888; pass code: 38040798).

About Audiovox

Audiovox (Nasdaq: VOXX) is a recognized leader in the marketing of automotive entertainment, vehicle security and remote start systems, consumer electronics products and consumer electronics accessories. The company is number one in mobile video and places in the top ten of almost every category that it sells. Among the lines marketed by Audiovox are its mobile electronics products including mobile video systems, auto sound systems including satellite radio, vehicle security and remote start systems; consumer electronics products such as MP3 players, digital camcorders, DVRs, Internet radios, clock radios, portable DVD players, multimedia products like digital picture frames and home and portable stereos; consumer electronics accessories such as indoor/outdoor antennas, connectivity products, headphones, speakers, wireless solutions, remote controls, power & surge protectors and media cleaning & storage devices; Energizer®-branded products for rechargeable batteries and battery packs for camcorders, cordless phones, digital cameras and DVD players, as well as for power supply systems, automatic voltage regulators and surge protectors. The company markets its products through an extensive distribution network that includes power retailers, 12-volt specialists, mass merchandisers and an OE sales group. The company markets products under the Audiovox, Advent, RCA, Jensen, Acoustic Research, Energizer, Excalibur, Code Alarm, Invision, Omega, Prestige, Schwaiger, SURFACE  and Terk brands. For additional information, visit our Web site at www.audiovox.com.

Safe Harbor Statement

Except for historical information contained herein, statements made in this release that would constitute forward-looking statements may involve certain risks and uncertainties. All forward-looking statements made in this release are based on currently available information and the Company assumes no responsibility to update any such forward-looking statement. The following factors, among others, may cause actual results to differ materially from the results suggested in the forward-looking statements. The factors include, but are not limited to, risks that may result from changes in the Company's business operations; our ability to keep pace with technological advances; significant competition in the mobile and consumer electronics businesses as well as the wireless business; our relationships with key suppliers and customers; quality and consumer acceptance of newly introduced products; market volatility; non-availability of product; excess inventory; price and product competition; new product introductions; the possibility that the review of our prior filings by the SEC may result in changes to our financial statements; and the possibility that stockholders or regulatory authorities may initiate proceedings against Audiovox and/or our officers and directors as a result of any restatements. Risk factors associated with our business, including some of the facts set forth herein, are detailed in the Company's Form 10-K for the fiscal year ended February 28, 2010 and in its most recent quarterly filing with the Securities and Exchange Commission (SEC).

Company Contact:

Glenn Wiener, GW Communications

Tel: 212-786-6011

Email: gwiener@GWCco.com

Audiovox Corporation and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share data)

August 31,

February 28,

2010

2010

Assets

(unaudited)

Current assets:

Cash and cash equivalents

$52,947

$69,511

Short-term investments

20,249

-

Accounts receivable, net

97,947

131,266

Inventory

126,345

102,717

Receivables from vendors

15,243

11,170

Prepaid expenses and other current assets

14,994

16,311

Income tax receivable

749

1,304

Deferred income taxes

47

47

Total current assets

328,521

332,326

Investment securities

15,003

15,892

Equity investments

12,327

11,272

Property, plant and equipment, net

20,682

22,145

Goodwill

7,631

7,389

Intangible assets

96,131

97,226

Deferred income taxes

509

515

Other assets

1,886

2,213

Total assets

$482,690

$488,978

Audiovox Corporation and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share data)

August 31,

February 28,

2010

2010

Liabilities and Stockholders' Equity

(unaudited)

Current liabilities:

Accounts payable

$37,754

$36,126

Accrued expenses and other current liabilities

31,289

35,790

Accrued sales incentives

12,513

10,606

Deferred income taxes

1,879

1,931

Bank obligations

1,584

1,703

Current portion of long-term debt

1,263

6,383

Total current liabilities

86,282

92,539

Long-term debt

5,673

6,613

Capital lease obligation

5,406

5,490

Deferred compensation

3,245

3,158

Other tax liabilities

1,219

1,219

Deferred tax liabilities

8,147

8,502

Other long-term liabilities

6,532

7,194

Total liabilities

116,504

124,715

Commitments and contingencies

Stockholders' equity:

Series preferred stock, $.01 par value; 1,500,000 shares authorized, no shares issued or outstanding

-

-

Common stock:

Class A, $.01 par value; 60,000,000 shares authorized, 22,454,112 and 22,441,712 shares issued and 20,635,305 and 20,622,905 shares outstanding at August 31, 2010 and February 28, 2010, respectively

225

225

Class B convertible, $.01 par value; 10,000,000 shares authorized, 2,260,954 shares issued and outstanding at August 31, 2010 and February 28, 2010

22

22

Paid-in capital

276,600

275,684

Retained earnings

115,760

113,996

Accumulated other comprehensive loss

(8,035)

(7,278)

Treasury stock, at cost, 1,818,807 shares of Class A common stock at August 31, 2010 and February 28, 2010

(18,386)

(18,386)

Total stockholders' equity

366,186

364,263

Total liabilities and stockholders' equity

$482,690

$488,978

Audiovox Corporation and Subsidiaries

Consolidated Statements of Operations

For the three and six months ended August 31, 2010 and 2009

(In thousands, except share and per share data)

(unaudited)

Three Months Ended

Six Months Ended

August 31,

August 31,

2010

2009

2010

2009

Net sales

$129,297

$124,890

$259,611

$244,697

Cost of sales

101,827

101,292

205,079

198,174

Gross profit

27,470

23,598

54,532

46,523

Operating expenses:

Selling

7,623

6,203

16,452

13,162

General and administrative

16,032

14,372

33,362

28,033

Engineering and technical support

3,640

2,205

6,029

4,277

Total operating expenses

27,295

22,780

55,843

45,472

Operating income (loss)

175

818

(1,311)

1,051

Other income (expense):

Interest and bank charges

(479)

(384)

(920)

(703)

Equity in income of equity investees

840

355

1,748

750

Other, net

498

408

1,998

855

Total other income, net

859

379

2,826

902

Income before income taxes

1,034

1,197

1,515

1,953

Income tax expense (benefit)

389

(1,578)

(249)

(1,295)

Net income  

$645

$2,775

$1,764

$3,248

Net income per common share (basic)

$0.03

$0.12

$0.08

$0.14

Net income per common share (diluted)

$0.03

$0.12

$0.08

$0.14

Weighted-average common shares outstanding (basic)

22,893,161

22,872,191

22,890,174

22,868,792

Weighted-average common shares outstanding (diluted)

23,043,136

22,933,728

23,037,640

22,899,561

SOURCE Audiovox Corporation



RELATED LINKS

http://www.audiovox.com