Audiovox Corporation Reports Fiscal 2012 Second Quarter Results 10/11/11 Audiovox Corporation Reports Fiscal 2012 Second Quarter Results 39.6 KB Audiovox Corporation Reports Fiscal 2012 Second Quarter Results- 2Q12 sales up 22.5% with the addition of Klipsch and OEM growth; gross margins up 650 basis points - 2Q12 operating income of $7.7 million vs. $0.2 million in 2Q11 - 2Q12 EBITDA of $9.8 million vs. $3.6 million in 2Q11, a $6.2 million improvement - Company on track to meet EBITDA forecast of $42 millionHAUPPAUGE, N.Y., Oct. 11, 2011 /PRNewswire via COMTEX/ --Audiovox Corporation (NASDAQ: VOXX), today announced financial results for its fiscal 2012, second quarter and six months ended August 31, 2011. Commenting on the Company's performance, Pat Lavelle, President and CEO stated, "Through the first half of the year, our business is primarily tracking to plan. Our automotive OEM business continues to grow. Our international operations are performing well, despite weakness in some European countries, and our Klipsch acquisition is meeting plan with a lot of potential to grow in the years ahead. Additionally, car sales over the past few months have rebounded and all signs are pointing to continued strength. Like most in our industry, we continue to be impacted by a slow retail environment and there are some concerns as we enter the all-important holiday season, as many retailers remain cautious in their buying. However, given our performance year-to-date, the strength in our margins, and good management of our expenses and resources, we remain on track to meet our income and EBITDA forecasts for the year. Equally important, we feel good about the next few years as we have a host of new and innovative products coming to market which should fuel growth for our Company, while we continue to generate cash, pay down our debt, and improve our balance sheet." Net sales for the second quarter of fiscal 2012, were $158.3 million, an increase of 22.5% compared to net sales of $129.3 million reported in the comparable year ago period. For the six month period ended August 31, 2011, net sales were $323.7 million, an increase of 24.7% as compared to net sales of $259.6 million for the six month period ended August 31, 2010. For the three and six month periods ended August 31, 2011, Electronics sales were $126.7 million and $259.0, an increase of 33.1% and 36.5%, respectively over the comparable prior year periods. Accessories sales were $31.6 million and $64.7 million, a decrease of 7.2% and 7.5%, respectively. For both periods, the Electronics Group was favorably impacted by the addition of Klipsch, improvements in the automotive OEM channel, both domestically and abroad, and increases in the Company's international operations, particularly in the automotive and accessories categories. Offsetting these increases were lower sales of consumer electronics products and select groups in the audio category, as well as lower sales of accessory products attached to TV sales in the U.S. As a percentage of net sales, Electronics represented 80% of the net sales for the three and six months ended August 31, 2011, and Accessories represented the remaining 20% for these periods. The gross margin for the three months ended August 31, 2011 was 27.7%, an increase of 650 basis points as compared to 21.2% for the three months ended August 31, 2010. For the comparable six month periods, the gross margin was 27.0% as compared to 21.0%. Gross margins for both the three and six month periods were favorably impacted by the addition of high-end audio product lines, higher sales of OEM products, better margins in the Company's existing product lines, new product introductions, the Klipsch acquisition, and lower sales in our fulfillment business. Operating expenses increased by $8.9 million and $20.1 million for the three and six months ended August 31, 2011 to $36.2 million and $75.9 million, respectively, from $27.3 million and $55.8 million, respectively in the comparable prior year periods. The increase in total operating expenses was due primarily to overhead from the Klipsch acquisition, which accounted for $9.6 million and $19.2 million during the three and six months ended August 31, 2011, respectively. Core overhead, excluding the addition of expenses associated with Klipsch and acquisition-related costs, declined by $0.9 million and $0.6 million for the same periods noted above. The Company continues to monitor its expense structure and identify synergies within its existing businesses. The Company reported operating income of $7.7 million for the second quarter of fiscal 2012, compared to operating income of $0.2 million in the comparable year ago period. For the six month period ended August 31, 2011, the Company reported operating income of $11.6 million as compared to an operating loss of $1.3 million for the period ended August 31, 2010, a $12.9 million improvement. Net income for the three month period ended August 31, 2011 was $3.4 million or $0.15 per basic and diluted share as compared to net income of $0.6 million or earnings per basic and diluted share of $0.03 for the second quarter of fiscal 2011. For the six months ended August 31, 2011, net income was $5.9 million or $0.26 per share (basic) and $0.25 per share (diluted) as compared to net income of $1.8 million or earnings per basic and diluted share of $0.08 for the comparable six month period ended August 31, 2010. Adjusted net income for the three month period ended August 31, 2011 was $3.7 million or $0.16 per diluted share compared to $1.1 million or $0.05 per diluted share for the comparable year ago period. For the six month period ended August 31, 2011, adjusted net income was $7.1 million or $0.30 per diluted share compared to $1.9 million or $0.08 per diluted share for the comparable six month period. Earnings before interest, taxes, depreciation and amortization (EBITDA) for the second quarter of fiscal 2012, was $9.8 million as compared to EBITDA of $3.6 million for the comparable period in fiscal 2011. Adjusted EBITDA for the same periods was $10.1 million and $4.0 million, respectively. For the six month period ended August 31, 2011, EBITDA was $17.9 million and adjusted EBITDA was $19.9 million. This compares to EBITDA of $6.6 million and adjusted EBITDA of $7.5 million for the period ended August 31, 2010. Adjusted EBITDA for the three and six month period ended August 31, 2011 excludes stock-based compensation and Klipsch acquisition costs. A reconciliation of GAAP net income to Adjusted EBITDA can be found in the Company's Form 10-Q for the period ended August 31, 2011. Non-GAAP Measures Adjusted net income and adjusted EBITDA are not financial measures recognized by GAAP. Adjusted net income represents net income, computed in accordance with GAAP, before stock-based compensation expense, a tax refund, and costs relating to the Klipsch acquisition. Adjusted EBITDA represents net income, computed in accordance with GAAP, before interest expense, taxes, depreciation and amortization, stock-based compensation expense and costs relating to the Klipsch acquisition. Depreciation, amortization, and stock-based compensation expense are non-cash items. Adjusted net income per diluted share is calculated by dividing adjusted net income by diluted shares outstanding calculated in accordance with GAAP. We present adjusted net income and related per diluted share amounts as well as adjusted EBITDA in this release because we consider them to be useful and appropriate supplemental measures of our performance. Adjusted net income and related per diluted share amounts as well as adjusted EBITDA help us to evaluate our performance without the effects of certain GAAP calculations that may not have a direct cash impact on our current operating performance. In addition, the exclusion of costs relating to the Klipsch acquisition and the tax refund allows for a more meaningful comparison of our results from period-to-period. These non-GAAP measures, as we define them, are not necessarily comparable to similarly entitled measures of other companies and may not be appropriate measures for performance relative to other companies. Adjusted net income and adjusted EBITDA should not be assessed in isolation from or construed as a substitute for net income prepared in accordance with GAAP. Adjusted net income and adjusted EBITDA are not intended to represent, and should not be considered to be more meaningful measures than, or alternatives to, measures of operating performance as determined in accordance with GAAP. Conference Call Information The Company will be hosting its conference call on Wednesday, October 12, 2011 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: 800-561-2693; international number: 617-614-3523; pass code: 23810307). 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: 34359752). About Audiovox Audiovox Corporation (NASDAQ: VOXX) is a leading, global supplier of mobile and consumer electronics products. The Company is the number one high-end loudspeaker company in the world and is also a recognized leader in the marketing of automotive entertainment, vehicle security and remote-start systems. Its extensive distribution network includes power retailers and 12-volt specialists as well the major Original Equipment Manufacturers ("OEMs"), both domestically and abroad. The Company is also a recognized leader in the consumer electronics and accessories markets, selling to major retailers worldwide. Audiovox possesses a strong brand portfolio and its products rank among the top ten in almost every category in which they sell. Domestic brands include Audiovox®, Klipsch®, RCA®, Invision®, Jensen®, Omega®, Energizer®, Terk®, Acoustic Research®, Advent®, Code Alarm®, Prestige®, Excalibur® and SURFACE®. International brands include Klipsch®, Jamo®, Energy®, Mirage®, Mac Audio™, Magnat®, Heco®, Schwaiger®, Oehlbach® and Incaar™. Headquartered in Hauppauge, NY, Audiovox has two manufacturing facilities in the United States, several domestic sales and marketing affiliates, and a robust international footprint with offices in Europe, Asia, Canada, Mexico and Venezuela. 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, 2011 on file 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, 2011 February 28, 2011 Assets (unaudited) Current assets: Cash and cash equivalents $ 14,339 $ 98,630 Accounts receivable, net 117,703 108,048 Inventory, net 151,137 113,620 Receivables from vendors 6,746 8,382 Prepaid expenses and other current assets 8,722 9,382 Deferred income taxes 4,330 2,768 Total current assets 302,977 340,830 Investment securities 13,086 13,500 Equity investments 13,939 12,764 Property, plant and equipment, net 24,017 19,563 Goodwill 88,373 7,373 Intangible assets, net 176,847 99,189 Deferred income taxes 12 6,244 Other assets 4,114 1,634 Total assets $ 623,365 $ 501,097 Audiovox Corporation and Subsidiaries Consolidated Balance Sheets (In thousands, except share data) August 31, 2011 February 28, 2011 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 54,008 $ 27,341 Accrued expenses and other current liabilities 43,750 36,500 Income taxes payable 2,435 1,610 Accrued sales incentives 17,876 11,981 Deferred income taxes 417 399 Current portion of long-term debt 3,498 4,471 Total current liabilities 121,984 82,302 Long-term debt 55,349 5,895 Capital lease obligation 5,273 5,348 Deferred compensation 3,250 3,554 Other tax liabilities 1,788 1,788 Deferred tax liabilities 30,804 4,919 Other long-term liabilities 4,509 4,345 Total liabilities 222,957 108,151 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, 22,630,837 shares issued and 20,813,005 shares outstanding at August 31, 2011 and February 28, 2011 226 226 Class B convertible, $.01 par value; 10,000,000 shares authorized, 2,260,954 shares issued and outstanding at August 31, 2011 and February 28, 2011 22 22 Paid-in capital 278,272 277,896 Retained earnings 142,953 137,027 Accumulated other comprehensive (loss) (2,689) (3,849) Treasury stock, at cost, 1,817,832 shares of Class A common stock at August 31, 2011 and February 28, 2011 (18,376) (18,376) Total stockholders' equity 400,408 392,946 Total liabilities and stockholders' equity $ 623,365 $ 501,097 Audiovox Corporation and Subsidiaries Consolidated Statements of Operations (In thousands, except share and per share data) (unaudited) Three Months Ended August 31, Six Months Ended August 31, 2011 2010 2011 2010 Net sales $ 158,337 $ 129,297 $ 323,662 $ 259,611 Cost of sales 114,475 101,827 236,112 205,079 Gross profit 43,862 27,470 87,550 54,532 Operating expenses: Selling 11,199 7,623 23,103 16,452 General and administrative 20,765 16,032 43,418 33,362 Engineering and technical support 4,007 3,640 7,818 6,029 Acquisition-related costs 239 -- 1,583 -- Total operating expenses 36,210 27,295 75,922 55,843 Operating income (loss) 7,652 175 11,628 (1,311) Other (expense) income: Interest and bank charges (1,392) (479) (2,875) (920) Equity in income of equity investees 890 840 2,019 1,748 Other, net (1,227) 498 (746) 1,998 Total other (expense) income, net (1,729) 859 (1,602) 2,826 Income before income taxes 5,923 1,034 10,026 1,515 Income tax expense (benefit) 2,484 389 4,101 (249) Net income $ 3,439 $ 645 $ 5,925 $ 1,764 Net income per common share (basic) 0.15 $ 0.03 $ 0.26 $ 0.08 Net income per common share (diluted) $ 0.15 $ 0.03 $ 0.25 $ 0.08 Weighted-average common shares outstanding (basic) 23,073,959 22,893,161 23,073,959 22,890,174 Weighted-average common shares outstanding (diluted) 23,254,296 23,043,136 23,268,241 23,037,640 Audiovox Corporation and Subsidiaries GAAP Net Income to Adjusted Net Income For the three and six months ended August 31, 2011Reconciliation of GAAP to Adjusted Net Income Available to Common Shareholders Three Months Ended August 31, Six Months Ended August 31, 2011 2010 2011 2010 GAAP net income $ 3,439 $ 645 $ 5,925 $ 1,764 Adjustments: Klipsch acquisition costs 239 -- 1,583 -- Stock-based compensation 126 428 376 856 Discrete tax item -- -- -- (750) Tax effects of above adjustments (154) -- (826) -- Adjusted net income $ 3,650 $ 1,073 $ 7,058 $ 1,870 GAAP net income per common share, diluted $ 0.15 $ 0.03 $ 0.25 $ 0.08 Adjusted net income per common share, diluted $ 0.16 $ 0.05 $ 0.30 $ 0.08 Diluted weighted average number of shares (GAAP and adjusted) 23,254 23,043 23,268 23,038 Reconciliation of GAAP Net Income to Adjusted EBITDA Three Months EndedAugust 31, Six Months EndedAugust 31, 2011 2010 2011 2010 Net income $ 3,439 $ 645 $ 5,925 $ 1,764 Adjustments: Interest expense, net 1,392 479 2,875 920 Depreciation and amortization 2,467 2,042 4,999 4,192 Taxes 2,484 389 4,101 (249) EBITDA 9,782 3,555 17,900 6,627 Stock-based compensation 126 428 376 856 Klipsch acquisition costs 239 -- 1,583 -- Adjusted EBITDA $ 10,147 $ 3,983 $ 19,859 $ 7,483 SOURCE Audiovox Corporation