Audiovox Corporation Reports Fiscal 2009 Third Quarter and Nine Month Results

- Fiscal third quarter sales of $196 million represent largest sales quarter in Company's history, excluding the former wireless business
- Gross margins increase to 19.9% in fiscal 3Q09 vs. 19.1% in fiscal 3Q08
- Partnerships with SIRIUS XM, Sony Playstation and Qualcomm's Media FLO highlight start to fiscal fourth quarter

Audiovox Corporation (Nasdaq: VOXX). Audiovox Corporation today announced results for its fiscal 2009 third quarter and nine months ended November 30, 2008.

Net sales for the quarter ended November 30, 2008 were $195.6 million compared to net sales of $183.6 million reported in the comparable prior year period. Operating income from continuing operations before income taxes were $10.7 million in the fiscal 2009 third quarter compared to $6.7 million in the fiscal third quarter last year.

Net income for the quarter ended November 30, 2008 was $6.5 million or earnings per diluted share of $0.29 compared to net income of $4.7 million or $0.20 per diluted share in the comparable fiscal 2008 period.

Patrick Lavelle, President and CEO stated, "We are generally pleased with our third quarter performance, especially in light of the continued economic turbulence worldwide. Despite waning consumer confidence and spending and the difficulties of the automakers, we experienced our highest sales quarter for electronics and accessories products in our Company's history. Our margins have increased to target levels and we continue to manage our expense structure to match anticipated sales. While I believe third quarter results are reflective of our efforts to increase distribution and expand our brand presence, I am also cautious of our near-term outlook given recent reports of a lackluster holiday season. Economic difficulties will persist over the coming year but I believe we are well positioned to weather this storm and should be in a position to show strong growth and profits with new partnerships in the second half of our next fiscal year."

Electronics sales, which include both mobile and consumer electronics were $152.0 million for the quarter ended November 30, 2008, an increase of 9.4% compared to $139.0 million reported in the comparable fiscal 2008 period. This increase is primarily related to new product categories from the RCA Audio/Video acquisition and increases in electronic sales of the Company's operations in Mexico and Venezuela. This increase was partially offset by the absence of sales in select categories as the Company discontinued non-profitable product lines such as portable navigation and flat screen televisions. Additionally, sales increases were offset by declines in our mobile, audio/video categories primarily due to the weakening U.S. economy.

Accessories sales for the fiscal 2009 third quarter were $43.7 million, a decrease of 2.1% compared to $44.6 million reported in the period ended November 30, 2007 and are a result of the overall decline of the U.S. economy. This decrease was partially offset by sales generated from the Technuity acquisition in November 2007.

For the period ended November 30, 2008, gross margins were 19.9% compared to 19.1% during the period ended November 30, 2007. Gross margins were positively impacted by several factors, including price increases instituted in the second quarter of fiscal 2009 to offset increased warehouse, shipping, warranty and product costs and higher gross margins experienced in the consumer electronics category. Offsetting this increase were lower sales of accessory products, which typically carry higher gross margins than core electronics products.

The Company reported operating expenses of $27.2 million for the three months ended November 30, 2008, a decline of $2.1 million or 7.3%, compared to $29.4 million reported in the comparable period last year. As a percentage of net sales, operating expenses decreased to 14.0% for the three months ended November 30, 2008 from 16.0% in the comparable fiscal 2008 period. The decrease in total operating expenses is primarily due to our expense and workforce reduction programs partially offset by $4.3 million of costs related to the acquired Technuity and RCA Audio/Video operations. Core operating expenses were down 21.1% in the comparable fiscal third quarters, from $29.1 million to $23.0 million.

 

Nine Months Results

Total net sales for the nine month period ended November 30, 2008 were $487.4 million, an increase of 5.9% compared to net sales of $460.1 million in the nine month period ended November 30, 2007.

 

Electronics sales for the fiscal 2009 nine month period, which represented 77.4% of net sales, were $377.4 million, up 10.6% compared to $341.2 million, or 74.2% of net sales in the comparable fiscal 2008 period. This increase was primarily due to sales generated from the RCA Audio/Video operations, increases in the electronics sales of the Company's international operations in Mexico and Venezuela and increases in OEM business. These increases were partially offset by declines in mobile audio/video product lines as a result of an overall decline in the U.S. economy, lower consumer demand for electronics products and a decline in vehicle sales. Accessories sales, which represented 22.6% of net sales for the nine months ended November 30, 2008 were $110.1 million compared to $118.9 million or 25.8% of net sales in the prior year period, a decline of 7.4%. This decrease was primarily due to a decline in demand for consumer electronics products as a result of the overall decline in the U.S. economy, partially offset by sales generated from the acquired Technuity operations.

 

Gross margins decreased by 100 basis points from 18.8% during the first nine months of fiscal 2008 to 17.8% in the first nine months of fiscal 2009. Gross margins were unfavorably impacted by higher energy costs, transportation expenses, labor and material costs and foreign exchange increases versus the U.S. dollar. To offset these higher costs, the Company implemented price increases in the 2009 second fiscal quarter but did not realize the effect until the period ended November 30, 2008. Additionally, during the 2009 fiscal first quarter, the Company exited the portable navigation business, resulting in a charge of $2.9 million. Excluding the impact of this charge, gross margins for the comparative nine months periods was up slightly.

 

Operating expenses increased $8.1 million or 10.3% to $86.8 million for the nine months ended November 30, 2008, from $78.7 million for the nine months ended November 30, 2007. The increase in total operating expenses is due to incremental costs of $12.3 million related to the acquired Technuity and RCA Audio/Video operations, higher professional fees, direct labor, and general and administrative salaries and related benefits, partially offset by decreased commissions, trade show, travel and entertainment expenses and lower officer salaries. Operating expenses for the nine months ended November 30, 2007 included a $1.0 million benefit related to a call/put option previously granted to certain employees as a result of the call/put liability calculation.

 

As a percentage of net sales, operating expenses increased to 17.8% for the fiscal 2009 nine month period compared to 17.1% in the comparable prior year period. Core operating expenses declined $4.9 million or 6.2% from $78.4 million in the fiscal 2008 nine month period to $73.6 million in the comparable nine month period of fiscal 2009.

 

The Company reported a pre-tax loss from continuing operations of $426,000 for the nine months ended November 30, 2008. Net loss for the nine month period ended November 30, 2008 was $1.0 million or a loss of $0.04 per diluted share compared to net income of $10.6 million or earnings per diluted share of $0.47 in the comparable period ended November 30, 2007. Net income for the fiscal 2008 period ended November 30, 2007 was favorably impacted by $2.1 million in income from discontinued operations as a result of a derivative legal settlement.

 

Conference Call Information

The Company will be hosting its conference call on Monday, January 12 at 10:00 a.m. EST. 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: 800-299-7098; international number: 617-801-9715; pass code: 93097657). 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: 53837599).

 

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, clock radios, portable DVD players, extended range two-way radios, 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, RCA, Jensen, Acoustic Research, Energizer, Advent, Code Alarm, TERK, Prestige and SURFACE 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 29, 2008 and Form 10-Q for the fiscal third quarter ended November 30, 2008.

 

Tables to Follow

 

                          Audiovox Corporation and Subsidiaries
                             Consolidated Balance Sheets
                        (In thousands, except per share data)

                                                  November 30,  February 29,
                                                     2008          2008
    Assets                                       (unaudited)
    Current assets:
     Cash and cash equivalents                       $13,925     $39,341
     Accounts receivable, net                        159,594     112,688
     Inventory                                       149,321     155,748
     Receivables from vendors                         20,618      29,358
     Prepaid expenses and other current assets        12,585      13,780
     Deferred income taxes                             7,198       7,135
       Total current assets                          363,241     358,050

    Investment securities                              8,559      15,033
    Equity investments                                13,068      13,222
    Property, plant and equipment, net                20,615      21,550
    Goodwill                                          29,098      23,427
    Intangible assets                                 93,797     101,008
    Deferred income taxes                              2,128           -
    Other assets                                       1,658         746
      Total assets                                  $532,164    $533,036

    Liabilities and Stockholders' Equity

    Current liabilities:
     Accounts payable                                $43,014     $24,433
     Accrued expenses and other current
      liabilities                                     34,728      38,575
     Income taxes payable                                141       5,335
     Accrued sales incentives                         12,633      10,768
     Bank obligations                                  2,018       3,070
     Current portion of long-term debt                 1,294          82
       Total current liabilities                      93,828      82,263

    Long-term debt                                     5,944       1,621
    Capital lease obligation                           5,551       5,607
    Deferred compensation                              3,312       4,406
    Other tax liabilities                              4,740       4,566
    Deferred tax liabilities                               -       6,057
    Other long term liabilities                        4,198       5,003
      Total liabilities                              117,573     109,523

    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, 22,424,992 and 22,414,212 shares
      issued,  20,604,460 and 20,593,660 shares
       outstanding at November 30, 2008 and
      February 29, 2008, respectively                    224         224
     Class B convertible, $.01 par value;
      10,000,000 shares authorized, 2,260,954
      shares issued and outstanding at November
      30, 2008 and February 29, 2008, respectively        22          22
        Paid-in capital                              274,484     274,282
        Retained earnings                             161,532     162,542
        Accumulated other comprehensive income        (3,275)      4,847
        Treasury stock, at cost, 1,819,752 and
         1,820,552 shares of Class A common stock at
         November 30, 2008 and February 29, 2008,
         respectively                                (18,396)    (18,404)
    Total stockholders' equity                       414,591     423,513
    Total liabilities and stockholders' equity      $532,164    $533,036



                         Audiovox Corporation and Subsidiaries
                        Consolidated Statement of Operations
           For the Three and Nine Months Ended November 30, 2008 and 2007
                        (In thousands, except per share data)
                                    (unaudited)
                               Three Months Ended         Nine Months Ended
                                   November 30,               November 30,
                               2008            2007        2008        2007

    Net sales              $195,642        $183,563    $487,433    $460,085
    Cost of sales           156,684         148,572     400,900     373,431
    Gross profit             38,958          34,991      86,533      86,654

    Operating expenses:
     Selling                  8,370           9,828      26,598      26,534
     General and
      administrative         16,500          16,948      52,004      45,153
     Engineering and
      technical support       2,436           2,600       8,219       7,010
       Total operating
        expenses             27,306          29,376      86,821      78,697

    Operating income
     (loss)                  11,652           5,615        (288)      7,957

    Other income
     (expense):
     Interest and bank
      charges                  (453)           (723)     (1,439)     (2,087)
     Equity in income of
      equity investees         (484)          1,011         926       2,927
     Other, net                 (10)            816         375       3,444
       Total other income,
        net                    (947)          1,104        (138)      4,284

    Income (loss) from
     continuing operations
     before income taxes     10,705           6,719        (426)     12,241
    Income tax expense
     (benefit)                4,180           2,039         582       3,709
    Net income (loss)
     from continuing
     operations               6,525           4,680      (1,008)      8,532

    Net income from
     discontinued
     operations, net of
     tax                          -               -           -       2,111

    Net income (loss)        $6,525          $4,680     ($1,008)    $10,643

    Net income (loss)
     per common share
     (basic):
     From continuing
      operations              $0.29           $0.20      ($0.04)      $0.38
     From discontinued
      operations                  -               -           -        0.09
    Net income (loss)
     per common share
     (basic)                  $0.29           $0.20      ($0.04)      $0.47

    Net income (loss)
     per common share
     (diluted):
     From continuing
      operations              $0.29           $0.20      ($0.04)      $0.38
     From discontinued
      operations                  -               -           -        0.09
    Net income (loss)
     per common share
     (diluted)                $0.29           $0.20      ($0.04)      $0.47

    Weighted-average
     common shares
     outstanding
     (basic)             22,864,668      22,852,781  22,858,777  22,853,108
    Weighted-average
     common shares
     outstanding
     (diluted)           22,867,235      22,857,355  22,858,777  22,880,263

 

Contact: Glenn Wiener, GW Communications

Tel: 212-786-6011 / Email: This email address is being protected from spambots. You need JavaScript enabled to view it.