UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): July 15, 2004
AUDIOVOX CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 0-28839 13-1964841
(State or other jurisdiction (Commission (IRS Employer Identification
of Incorporation) File Number) Number)
150 Marcus Boulevard, Hauppauge, New York 11788
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (631) 231-7750
NONE
(Former name or former address, if changed since last report)
Exhibit Index on Page 4
Page 1 of 4
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
Exhibit No. Description
99.1 Press Release, dated July 15, 2004
ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On July 15, 2004, Audiovox Corporation issued a press release reporting
fiscal second quarter 2004 results. A copy of the press release is attached
hereto as Exhibit 99.1.
Exhibit Index on Page 4
Page 2 of 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AUDIOVOX CORPORATION
Dated: July 15, 2004 By:/s/ John J. Shalam
--------------------------------------------
John J. Shalam
President and Chief Executive Officer
Exhibit Index on Page 4
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EXHIBIT INDEX
Exhibit No. Description
99.1 Press Release, dated July 15, 2004 announcing results for fiscal
second quarter 2004.
Exhibit Index on Page 4
Page 4 of 4
FOR IMMEDIATE RELEASE
AUDIOVOX CORPORATION REPORTS FISCAL SECOND QUARTER 2004 RESULTS
o Fiscal second quarter 2004 sales increase 45.6%, driven by demand for both
electronics and wireless product offerings
o Basic Earnings per share of $0.17 compared to $0.10 in the comparable prior
period
Hauppauge, NY, July 15, 2004 . . . Audiovox Corporation (NASDAQ: VOXX) today
announced results for its fiscal second quarter ended May 31, 2004.
Net sales for the second quarter of fiscal 2004 were $438.2 million, an increase
of 45.6% over $301.0 million reported in the comparable fiscal 2003 period. Net
income for the three months ended May 31, 2004 was approximately $3.7 million as
compared to $2.1 million in the comparable period in 2003. Earnings per share
for the fiscal second quarter of 2004 were $0.17 basic and $0.16 diluted
compared to $0.10 basic and $0.09 diluted in the fiscal second quarter of 2003.
Net income was positively affected by strong sales in both divisions partially
offset by decreased gross margins and increased operating expenses to fund
growth.
Audiovox Electronics Corp. (AEC) reported net sales of $148.0 million, an
increase of approximately 32.3% versus $111.9 million reported in the comparable
period last year. This increase was largely due to increased sales in the mobile
electronics and sound product lines as well as sales of $12.7 million related to
Audiovox Germany, which was formed in July 2003.
Sales for Mobile Electronics products increased 13.9% to $84.4 million as
compared to $74.1 million reported in the fiscal second quarter of 2003. This
increase was due primarily to increases in sales of mobile video products.
Fiscal second quarter sales in the Sound category increased 349.3% to $44.6
million versus $9.9 million in the comparable prior year period. Sound sales
were positively impacted by increased sales of $10.4 million in the satellite
radio product line and $12.7 million of Audiovox Germany sales. Consumer
Electronics sales decreased 31.6% to $19.0 million versus $27.8 million in the
comparable 2003 period as a result of increased competition within the DVD
category. The Company does not expect the decrease in Consumer Electronics sales
to be a future trend.
The Company's majority owned subsidiary, Audiovox Communications Corporation
(ACC) posted net sales of $290.2 million, an increase of 53.4% as compared to
$189.1 million reported in the second fiscal quarter last year. Unit sales of
wireless handsets increased 43.9% to approximately 1.596 million, up from 1.109
million in the second quarter of fiscal 2003. This increase was primarily due to
sales of product featuring camera and color displays with CDMA 1x technology.
Exhibit 99.1
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Audiovox Corporation Reports Fiscal Second Quarter 2004 Results
Page 2 of 7
The average selling prices of the company's handsets increased to $170 per unit
for the three months ended May 31, 2004 from $161 in the fiscal second quarter
last year due to higher selling prices of newly-introduced models.
Commenting on the quarter's performance, John Shalam, Chairman, President and
CEO of Audiovox Corporation stated, "I am pleased with the results of this past
quarter, in particular the continued growth of AEC. Over the past several years,
we have focused on the expansion of both our manufacturing relationships and
distribution channels with the major retailers, mass merchants and OEMs. Our
product introductions have included portable DVDs, flat panel TVs and satellite
radio - all new categories for us. The results speak for themselves as the
Electronics Company has consistently delivered to both our top and bottom line
performance, posting year-over-year gains in every quarter since 2000. This past
quarter was no different, as AEC saw its sales increase over 32% while
generating more than two thirds of our overall gross profit."
On June 14, 2004, the Company announced that it had reached a definitive
agreement to sell selected wireless assets and certain liabilities (excluding
its receivables, inter-company accounts payable, income taxes payable,
subordinated debt and certain accrued expenses) to UTStarcom, Inc. (NASDAQ:
UTSI) for a total purchase price of $165.1 million in cash, subject to certain
post closing adjustments. The transaction is expected to close in the fourth
quarter of this year subject to certain closing conditions including regulatory
and third party approvals. This announcement follows the decision by Audiovox to
exit the wireless business and focus its energy on expanding its presence in the
consumer electronics industry.
Shalam continued, "As we look ahead, we are focused on several objectives. We
continue to build the Audiovox brand and have our sights set on making our
company a major force in the consumer electronics industry. We have begun to
realize gains from some of our past successful acquisitions, including Code-
Alarm and the many brands including Jensen and Acoustic Research that were
purchased last year. Upon closing of the UTStarcom deal, Audiovox will have a
strong balance sheet, significant cash on hand, access to capital and the
support infrastructure in place to fuel our growth and further enhance the
Audiovox family of brands whether through new products or acquisitions."
Gross Profit
Consolidated gross profit margins for the fiscal second quarter of 2004
decreased to 7.4% from 8.5% in the fiscal second quarter last year, driven
primarily by increased sales and lower gross profit margins in the Wireless
group over the comparable period in 2003. ACC's gross profit margin decreased
from 5.0% in the fiscal second quarter last year to 3.7% in the fiscal second
quarter of 2004, primarily due to increased price competition within the
wireless industry. As a result, older phone models are sold at lower prices due
to short product life cycles and are negatively impacted by introductions of new
phones with enhanced technology. AEC's gross profit margin remained steady at
14.5%.
Exhibit 99.1
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Audiovox Corporation Reports Fiscal Second Quarter 2004 Results
Page 3 of 7
Operating Expenses and Operating Income
Operating expenses increased $4.4 million to $27.0 million for the three months
ended May 31, 2004, as compared to $22.6 million in the second fiscal quarter of
2003. Audiovox Germany accounted for $3.1 million, or approximately 70% of the
increase in operating expenses for the quarter. Major components of this
increase were in direct labor, advertising, insurance and office salaries and
were seen primarily in the Electronics Group as a result of recent acquisitions
and general business growth. As a percentage of net sales, operating expenses
decreased to 6.1% versus 7.5% in the comparable period last year.
Wireless operating expenses increased approximately $0.4 million during the
fiscal second quarter of 2004, however, as a percentage of their net sales,
decreased to 2.6% compared to 3.9% in the fiscal second quarter of 2003.
Electronics operating expenses increased approximately $3.9 million due to
stronger demand for the company's electronics product offering and the
operations of Audiovox Germany, which commenced as a result of the Recoton
acquisition. As a percentage of AEC's net sales, operating expenses increased to
10.3% in the fiscal second quarter versus 10.1% in the comparable prior period.
Operating income for the three months ended May 31, 2004 was $5.5 million,
compared to $3.1 million in the prior year period. The increase in operating
income can be attributed mostly to the Electronics group, who posted operating
income of $6.3 million as compared to $4.9 million in the fiscal second quarter
last year. The Wireless group recorded operating income of $3.2 million versus
$2.1 million in the comparable prior period.
Balance Sheet-Selected Items
Accounts receivable as of May 31, 2004 was $209.6 million compared to $183.8
million as of February 29, 2004 and $266.4 million at November 30, 2003.
Inventory as of May 31, 2004 was $276.5 million versus $265.9 million at the end
of the first fiscal quarter of 2004 and $219.7 million at November 30, 2003. ACC
and AEC inventory levels as of May 31, 2004 were $129.2 million and $147.3
million, respectively. The Company's stockholders equity as of May 31, 2004 was
$330.8 million.
Six-Month Results
For the six month period ended May 31, 2004, the Company reported net sales of
$815.1 million, an increase of 36.3% over $597.8 million reported for the
comparable prior period. AEC posted net sales of $284.6 million, an increase of
48.1% over $192.2 million reported for the six month period ended May 31, 2003.
This increase was largely due to increased sales in the sound and consumer
electronics product lines as a result of new product introductions and the
addition of $28.5 million in sales by Audiovox Germany as well as increased
sales of $21.1 million from satellite radio. During the first six months of
fiscal 2004, sales of Mobile Electronics, Consumer Electronics and Sound
products increased 7.0%, 25.3% and 323.3%, respectively.
Exhibit 99.1
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Audiovox Corporation Reports Fiscal Second Quarter 2004 Results
Page 4 of 7
ACC posted net sales of $530.5 million, an increase of 30.8% over $405.7 million
for the comparable six month period last year. Unit sales of wireless handsets
increased 24.1% to approximately 2.9 million units from approximately 2.3
million units for the six month 2003 period. The average selling price of the
Company's handsets increased to $174 per unit for the six months ended May 31,
2004 from $166 per unit in 2003 due to higher selling prices of new product
introductions. As a percentage of net sales for the six- months ended May 31,
2004 period, ACC represented 65% of sales and AEC 35% compared to 68% and 32%
respectively, for the comparable period in fiscal 2003.
Both the Wireless and Electronics Groups experienced a decline in margins, as
the consolidated gross profit margin for the six months ended May 31, 2004 was
7.8%, compared to 8.5% in 2003. Margins in the Wireless Group were 3.9% compared
to 5.2% in 2003 and margins in the Electronics Group were 15.1% compared to
15.5% in 2003. This decrease in the Electronics Group was due to increased price
compression in electronics products sold through consumer channels, which carry
a lower gross margin as opposed to other product lines. Specifically, gross
margins were adversely impacted by the sale of older DVD players, flat panel
TV's and FRS radios as the selling price for these older items has declined as a
result of new product introductions within these categories. Even though margins
are down in both Groups, the change in the mix of sales between Wireless and
Electronics has affected the consolidated margins in a favorable way as
Electronics represented a higher percentage of year-over-year sales, and since
Electronics products typically carry higher gross profit margins than Wireless.
Operating expenses increased to $55.7 million for the six months ended May 31,
2004 as compared to $43.6 million in the comparable 2003 period. Audiovox
Germany accounted for approximately 60.0% of the increase. As a percentage of
net sales, operating expenses decreased to 6.8% for the six months ended May 31,
2004 from 7.3% in the six month 2003 period. Operating income for the six months
ended May 31, 2004 was $8.1 million compared to $7.5 million for the comparable
six month 2003 period.
As a result of strong sales in both divisions, net income for the six-months
ended May 31, 2004 was $5.5 million compared to $3.3 million for the six months
ended May 31, 2003. Net income per common share was $0.25 basic and diluted as
compared to $0.15 basic and diluted in the comparable six-months of fiscal 2003.
Conference Call
Audiovox Corporation will be hosting a results conference call later this
morning at 10:00 a.m. EDT. Interested parties may participate in a listen-only
mode via a real-time web cast by visiting the company's web site at
http://www.audiovox.com.
About Audiovox
Audiovox Corporation is an international leading company in consumer electronics
and communications. The Company conducts its business through subsidiaries and
markets its products both domestically and internationally under its own brands.
Exhibit 99.1
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Audiovox Corporation Reports Fiscal Second Quarter 2004 Results
Page 5 of 7
It also functions as an OEM (Original Equipment Manufacturer) supplier to
several customers. For additional information, please visit Audiovox on the Web
at http://www.audiovox.com.
Safe-Harbor Language
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 fourth quarter
and year ended November 30, 2003 and Form 10-Q for the fiscal second quarter
ended May 31, 2004.
Company Contact: Public and Investor Relations Contact:
C. Michael Stoehr, SVP/CFO Glenn Wiener
Audiovox Corporation GW Communications
(631) 231-7750 (212) 786-6011 or gwiener@GWCco.com
- Tables to Follow -
Exhibit 99.1
AUDIOVOX CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings
For the Three and Six Months Ended May 31, 2003 and May 31, 2004
(In thousands, except share and per share data)
(unaudited)
Three Months Ended Six Months Ended
--------------------------- ---------------------------
May 31, May 31, May 31, May 31,
2003 2004 2003 2004
------------ ------------ ------------ ------------
Net sales $ 301,010 $ 438,199 $ 597,828 $ 815,083
Cost of sales 275,398 405,751 546,748 751,269
------------ ------------ ------------ ------------
Gross profit 25,612 32,448 51,080 63,814
------------ ------------ ------------ ------------
Operating expenses:
Selling 8,275 9,979 15,577 19,899
General and administrative 12,889 14,641 25,195 31,747
Warehousing and technical support 1,394 2,319 2,793 4,022
------------ ------------ ------------ ------------
Total operating expenses 22,558 26,939 43,565 55,668
------------ ------------ ------------ ------------
Operating income 3,054 5,509 7,515 8,146
------------ ------------ ------------ ------------
Other income (expense):
Interest and bank charges (1,013) (1,961) (2,118) (3,397)
Equity in income of equity investees 743 1,520 1,114 2,523
Other, net 571 447 (527) 1,299
------------ ------------ ------------ ------------
Total other income (expense), net 301 6 (1,531) 425
------------ ------------ ------------ ------------
Income before provision for income taxes and minority interest 3,355 5,515 5,984 8,571
Provision for income taxes 918 1,294 1,958 2,094
Minority interest expense (363) (544) (743) (930)
------------ ------------ ------------ ------------
Net income $ 2,074 $ 3,677 $ 3,283 $ 5,547
============ ============ ============ ============
Net income per common share (basic) $ 0.10 $ 0.17 $ 0.15 $ 0.25
============ ============ ============ ============
Net income per common share (diluted) $ 0.09 $ 0.16 $ 0.15 $ 0.25
============ ============ ============ ============
Weighted average number of common shares outstanding (basic) 21,834,099 21,950,898 21,834,099 21,936,577
============ ============ ============ ============
Weighted average number of common shares outstanding (diluted) 21,873,875 22,436,045 21,949,521 22,345,345
============ ============ ============ ============
Exhibit 99.1
AUDIOVOX CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share and per share data)
November 30, May 31,
2003 2004
---------- ----------
(unaudited)
Assets
Current assets:
Cash $ 4,702 $ 5,152
Accounts receivable, net 266,421 209,603
Inventory, net 219,664 276,526
Receivables from vendors 7,830 11,401
Prepaid expenses and other current assets 12,371 12,991
Deferred income taxes 9,531 7,854
--------- ---------
Total current assets 520,519 523,527
Investment securities 9,512 8,045
Equity investments 13,142 12,662
Property, plant and equipment, net 20,242 19,829
Excess cost over fair value of assets acquired 7,532 7,019
Intangible assets 8,043 8,043
Other assets 713 573
--------- ---------
$ 579,703 $ 579,698
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 94,864 $ 80,261
Accrued expenses and other current liabilities 42,816 38,037
Accrued sales incentives 21,894 11,466
Income taxes payable 13,218 11,277
Bank obligations 39,940 69,643
Current portion of long-term debt 3,433 2,747
--------- ---------
Total current liabilities 216,165 213,431
Long-term debt 18,289 15,719
Capital lease obligation 6,070 6,038
Deferred income taxes 3,178 1,645
Deferred compensation 5,280 6,185
--------- ---------
Total liabilities 248,982 243,018
--------- ---------
Minority interest 4,993 5,922
--------- ---------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $50 par value; 50,000 shares authorized and outstanding, liquidation
preference of $2,500 per share 2,500 2,500
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; 20,728,382 and
20,772,846 shares issued at November 30, 2003 and May 31, 2004,
respectively; and 19,655,645 and
19,701,889 shares outstanding at November 30, 2003 and May 31, 2004, respectively 207 208
Class B $.01 par value convertible; 10,000,000 shares authorized; 2,260,954 shares issued
and outstanding 22 22
Paid-in capital 252,104 252,752
Retained earnings 80,635 86,182
Accumulated other comprehensive loss (1,229) (2,409)
Treasury stock, at cost, 1,072,737 and 1,070,957 shares of Class A common stock at
November 30, 2003 and May 31, 2004, respectively (8,511) (8,497)
--------- ---------
Total stockholders' equity 325,728 330,758
--------- ---------
Total liabilities and stockholders' equity $ 579,703 $ 579,698
========= =========
Exhibit 99.1