- 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).
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