form8k.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 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): May 15,
2009
AUDIOVOX
CORPORATION
(Exact
name of registrant as specified in its charter)
Delaware
|
|
0-28839
|
(State
or other jurisdiction of incorporation)
|
|
(Commission
File Number
|
13-1964841
|
(I.R.S.
Employer Identification No.)
|
180 Marcus Blvd., Hauppauge, New
York
|
|
11788
|
(Address
of principal executive officers)
|
|
(Zip
Code)
|
Registrant's
telephone number, including area code (631) 231-7750
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of file following
provisions:
[
] Written communications pursuant to
Rule 425 under the Securities Act (17 CFR 230.425)
[
] Soliciting material pursuant to Rule
14a-12 under the Exchange Act (17 CFR 240.14a-12)
[
] Pre-commencement communications
pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
[
] Pre-commencement communications
pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(e))
Page 1 of
2
Item
2.02
|
Results
of Operations and Financial
Condition.
|
On May
14, 2009, Audiovox Corporation (the “Company”) issued a press release announcing
its earnings for the quarter and year ended February 28, 2009. A copy
of the release is furnished as Exhibit 99.1 attached hereto.
On May
15, 2008, at 10:00 am EST the Company held a conference call to discuss its
financial results for the quarter and year ended February 28,
2009. The Company has prepared a transcript of that conference call,
a copy of which is furnished herewith as Exhibit 99.2.
The
information furnished under Items 2.02 and 8.01, including Exhibits 99.1 and
99.2, shall not be deemed to be filed for the purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, and will not be incorporated by
reference into any registration statement filed under the Securities Act of
1933, as amended, unless specifically identified therein as being incorporated
therein by reference.
99.1
|
Press
Release dated May 14, 2009, relating to Audiovox Corporation’s
earnings release for the quarter and year ended February 28, 2009
(furnished herewith).
|
99.2
|
Transcript
of conference call held on May 15, 2009 at 10:00 am EST (furnished
herewith).
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
AUDIOVOX CORPORATION
(Registrant)
Date: May
18,
2009 BY: /s/ Charles M.
Stoehr
Charles M. Stoehr
Senior Vice President and
Chief Financial Officer
Page 2 of
2
ex99-1.htm
Audiovox
Corporation Reports Fiscal 2009 Fourth Quarter and Year-End Results
HAUPPAUGE,
N.Y., May 14, 2009 /PRNewswire-FirstCall via COMTEX/ -- Audiovox Corporation
(Nasdaq: VOXX). Audiovox Corporation today announced results for its fiscal 2009
fourth quarter and year-ended February 28, 2009.
Fiscal
Year Comparisons
Net sales
for the 2009 fiscal year ended February 28, 2009 were $603.1 million, an
increase of approximately $11.7 million or 2.0%, as compared to net sales of
$591.4 million reported for the 2008 fiscal year ended February 29,
2008.
Electronics
sales, which include both mobile and consumer electronics were $449.4 million in
fiscal 2009, an increase of 2.8% as compared to $437.0 million reported in
fiscal 2008. This increase was primarily related to higher sales of consumer
electronics products, particularly new product categories under the RCA brand,
increases in the Company's OEM business and, in its International operations in
Venezuela and Mexico as compared to the prior year. Offsetting this increase,
were lower sales of mobile electronics products as result of the global economic
downturn, lower car sales and the financial difficulties of the automakers,
which intensified in the fiscal fourth quarter of 2009. As a percentage of net
sales, Electronics represented 74.5% of sales in fiscal 2009 as compared to
73.9% in the comparable fiscal year period.
Accessories
sales for the 2009 fiscal year ended February 28, 2009 were $153.7 million, a
decrease of 0.4% as compared to $154.3 million reported in the comparable fiscal
year period. The small decline in Accessories sales is primarily related to the
overall economic environment. As a percentage of net sales, Accessories
represented 25.5% and 26.1% of net sales for the periods ended February 28, 2009
and February 29, 2008, respectively.
Gross
margins for the fiscal year ended February 28, 2009 were 16.6% compared to 18.8%
in the prior fiscal year. Gross profit and gross profit margins were positively
impacted by price increases instituted in the second half of fiscal 2009 to
offset higher transportation and distribution costs, as well as higher gross
margins in certain consumer electronics lines. However, these increases were
negatively impacted by a mark down of $2.9 million related to the exit of the
portable navigation category, and $3.9 million in charges related to customer
bankruptcies.
On a pro
forma basis, excluding the $2.9 million mark down for the exit of the navigation
business and the bankruptcy related charges of $3.9 million, gross profit and
gross profit margin would have been $107.1 million and 17.8%,
respectively.
The
Company reported operating expenses of $153.7 million for the fiscal year ended
February 28, 2009, an increase of $46.8 million, compared to $106.9 million
reported in the comparable fiscal year period. The increase in operating expense
is principally due to an impairment charge on goodwill and intangibles of $38.8
million. Overhead net of this charge increased by $8.0 million and of this
increase, $4.0 million is related to non-standard charges such as IP settlement,
other legal fees, increased allowance for doubtful accounts due to bankruptcy
provisions and expenses related to an overhead reduction program. The other $4.0
million increase in overhead was principally related to the Thomson A/V and
Technuity acquisitions. These increases were partially offset by declines in
selling expenses including salaries, commissions and reductions in officer
salaries. The Company implemented expense and workforce reduction plans to
decrease total operating expenses, the complete effect of which will be felt in
fiscal 2010.
Net loss
for fiscal 2009 was $71.0 million which included a $15.0 operating loss, $38.8
million in goodwill and intangible impairment charges, $15.0 million in deferred
tax valuation and $2.2 in other expenses.
The
Company reported a net loss of $71.0 million or a loss per diluted share of
$3.11 compared to net income of $8.5 million or net income per diluted share of
$0.37 in the fiscal year ended February 29, 2008.
Included
in fiscal year 2008 was a gain of $1.7 million related to a derivative legal
settlement and which is accounted for in discontinued operations.
On a pro
forma basis, excluding the impact of the non-standard charges, the Company would
have recorded a loss for the year of $4.5 million or a loss of $0.20 per diluted
share.
Patrick
Lavelle, President and CEO stated, "For the first nine months of our fiscal
year, we operated our business at a near break-even level, despite pressures on
sales and margins as well as increased expenses driven by rising energy costs
and a deteriorating marketplace. Those pressures intensified during our fourth
quarter as our channel partners experienced a slow-down in sell through at
retail that resulted in post holiday inventory overhang. This in turn, pushed
back the timing of certain, new promotions. In addition, the auto sector, which
had been weak all year, slowed even further amidst fears of potential
bankruptcies."
Lavelle
continued, "I am not pleased with the operating loss we posted and the ensuing
impairment charges that loss triggered. However, most of the difficulties we
faced this year were driven by forces beyond our control, in particular the
bankruptcies of key vendors and customers, rising oil prices that drove up
transportation and manufacturing costs, and the near collapse of the automotive
industry that has resulted in the bankruptcy of Chrysler and the potential
bankruptcy of GM."
Lavelle
concluded, "Throughout the year, we took steps to combat the ever shifting
economic situation; knowing that those adjustments to our business model would
not only help us weather the storm but also, help us emerge stronger and better
positioned to take advantage of the market as it recovers. We continue to
develop new products, rationalizing our portfolio behind the key brands of
Audiovox, RCA, Jensen, Energizer and Acoustic Research. Our products are placed
in more retail outlets than ever before. We have put in place expense cuts and
workforce reductions that have reduced 2010 operating expenses by over $23
million. We remain nearly debt free and have almost $70 million in cash to fund
operations, pursue acquisitions and partnerships and grow this company
profitably in the years ahead."
Fiscal
Fourth Quarter Comparisons
Total net
sales for the fourth quarter ended February 28, 2009 were $115.7 million, a
decrease of 11.9% as compared to $131.3 million in the fourth quarter ended
February 29, 2008.
Accessory
sales, which represented 37.7% of net sales for the three months ended February
28, 2009, were $43.6 million compared to $35.5 million or 27.0% of net sales in
the prior year period, an increase of $8.1 million or 22.9%. The sales increase
was primarily due to higher antenna sales in preparation for the digital TV
switch as well as the addition of several new retail partners that resulted in
new sales.
Gross
margins decreased from 18.8% in the fiscal fourth quarter ended February 29,
2008 to 11.9% in the comparable fiscal period in 2009. Gross profit and gross
profit margins were impacted by $2.4 million in related provisions as a result
of customer bankruptcies, increased defective and warranty charges and an
additional charge as a result of the slow holiday sales season.
Operating
expenses were $66.9 million for the three months ended February 28, 2009,
compared to $28.2 million for the three months ended February 29, 2008. Included
in the fiscal fourth quarter were non-standard charges of $38.8 million in
impairment charges and $2.2 million in legal fees and allowances for
bankruptcies. During the fiscal fourth quarter operating expenses declined in
salaries and general administrative expenses.
The
Company reported a loss from continuing operations of $53.2 million for the
three months ended February 28, 2009 compared to a loss from continuing
operations of $1.8 million in the comparable year-ago period. Net loss for the
2009 fiscal fourth quarter was $70.0 million or a loss per diluted share of
$3.06 compared to a net loss of $2.2 million or a loss per diluted share of
$0.08 for the three months ended February 29, 2008.
On a pro
forma basis, excluding the impact of the non standard charges, the company would
have recorded a loss for the fiscal 2009 fourth quarter $8.0 million or a loss
per diluted share of $0.35.
Conference
Call Information
The
Company will be hosting its conference call on Friday, May 15, 2009 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: 800-798-2801; international number: 617-614-6205; pass code:
39306309). 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: 44811104).
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 28,
2009.
Contact:
Glenn Wiener, GW Communications
Tel:
212-786-6011 / Email: gwiener@GWCco.com
Tables
Attached -
Audiovox
Corporation and Subsidiaries
Consolidated
Balance Sheets
February
28, 2009 and February 29, 2008
(In
thousands, except share data)
|
|
February
28,
|
|
|
February
29,
|
|
|
|
2009
|
|
|
2008
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
69,504 |
|
|
$ |
39,341 |
|
Accounts
receivable, net
|
|
|
104,896 |
|
|
|
112,688 |
|
Inventory
|
|
|
125,301 |
|
|
|
155,748 |
|
Receivables
from vendors
|
|
|
12,195 |
|
|
|
29,358 |
|
Prepaid
expenses and other current assets
|
|
|
17,973 |
|
|
|
13,780 |
|
Deferred
income taxes
|
|
|
354 |
|
|
|
7,135 |
|
Total
current assets
|
|
|
330,223 |
|
|
|
358,050 |
|
|
|
|
|
|
|
|
|
|
Investment
securities
|
|
|
7,744 |
|
|
|
15,033 |
|
Equity
investments
|
|
|
13,118 |
|
|
|
13,222 |
|
Property,
plant and equipment, net
|
|
|
19,903 |
|
|
|
21,550 |
|
Goodwill
|
|
|
- |
|
|
|
23,427 |
|
Intangible
assets
|
|
|
88,524 |
|
|
|
101,008 |
|
Deferred
income taxes
|
|
|
221 |
|
|
|
- |
|
Other
assets
|
|
|
1,563 |
|
|
|
746 |
|
Total
assets
|
|
$ |
461,296 |
|
|
$ |
533,036 |
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
41,796 |
|
|
$ |
24,433 |
|
Accrued
expenses and other current liabilities
|
|
|
32,575 |
|
|
|
38,575 |
|
Income
taxes payable
|
|
|
2,665 |
|
|
|
5,335 |
|
Accrued
sales incentives
|
|
|
7,917 |
|
|
|
10,768 |
|
Deferred
income taxes
|
|
|
1,459 |
|
|
|
- |
|
Bank
obligations
|
|
|
1,467 |
|
|
|
3,070 |
|
Current
portion of long-term debt
|
|
|
1,264 |
|
|
|
82 |
|
Total
current liabilities
|
|
|
89,143 |
|
|
|
82,263 |
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
5,896 |
|
|
|
1,621 |
|
Capital
lease obligation
|
|
|
5,531 |
|
|
|
5,607 |
|
Deferred
compensation
|
|
|
2,559 |
|
|
|
4,406 |
|
Other
tax liabilities
|
|
|
2,572 |
|
|
|
4,566 |
|
Deferred
tax liabilities
|
|
|
4,657 |
|
|
|
6,057 |
|
Other
long term liabilities (see Note 3)
|
|
|
10,436 |
|
|
|
5,003 |
|
Total
liabilities
|
|
|
120,794 |
|
|
|
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, 22,424,212 and 22,414,212
shares issued, 20,604,460 and 20,593,660 shares
outstanding at February 28, 2009 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
|
|
|
22 |
|
|
|
22 |
|
Paid-in
capital
|
|
|
274,464 |
|
|
|
274,282 |
|
Retained
earnings
|
|
|
91,513 |
|
|
|
162,542 |
|
Accumulated
other comprehensive (loss) income
|
|
|
(7,325 |
) |
|
|
4,847 |
|
Treasury
stock, at cost, 1,819,752 and 1,820,552 shares of Class A common stock at
February 28, 2009 and February 29, 2008, respectively
|
|
|
(18,396 |
) |
|
|
(18,404 |
) |
Total
stockholders' equity
|
|
|
340,502 |
|
|
|
423,513 |
|
Total
liabilities and stockholders' equity
|
|
$ |
461,296 |
|
|
$ |
533,036 |
|
Audiovox
Corporation and Subsidiaries
Consolidated
Statements of Operations
Quarter
and Year Ended February 28, 2009 and February 29, 2008
(In
thousands, except share and per share data)
|
|
Three
|
|
|
Three
|
|
|
|
|
|
|
|
|
|
Months
|
|
|
Months
|
|
|
Year
|
|
|
Year
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
February
28,
|
|
|
February
29,
|
|
|
February
28,
|
|
|
February
29,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$ |
115,666 |
|
|
$ |
131,269 |
|
|
$ |
603,099 |
|
|
$ |
591,355 |
|
Cost
of sales
|
|
|
101,931 |
|
|
|
106,595 |
|
|
|
502,831 |
|
|
|
480,027 |
|
Gross
profit
|
|
|
13,735 |
|
|
|
24,674 |
|
|
|
100,268 |
|
|
|
111,328 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
|
|
|
6,907 |
|
|
|
9,168 |
|
|
|
33,505 |
|
|
|
35,703 |
|
General
and administrative
|
|
|
18,866 |
|
|
|
16,067 |
|
|
|
70,870 |
|
|
|
61,220 |
|
Goodwill
and intangible asset impairment
|
|
|
38,814 |
|
|
|
- |
|
|
|
38,814 |
|
|
|
- |
|
Engineering
and technical support
|
|
|
2,303 |
|
|
|
2,973 |
|
|
|
10,522 |
|
|
|
9,983 |
|
Total
operating expenses
|
|
|
66,890 |
|
|
|
28,208 |
|
|
|
153,711 |
|
|
|
106,906 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
(loss) income
|
|
|
(53,155 |
) |
|
|
(3,534 |
) |
|
|
(53,443 |
) |
|
|
4,422 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and bank charges
|
|
|
(379 |
) |
|
|
(40 |
) |
|
|
(1,817 |
) |
|
|
(2,127 |
) |
Equity
in income of equity investee
|
|
|
50 |
|
|
|
663 |
|
|
|
975 |
|
|
|
3,590 |
|
Other,
net
|
|
|
(2,044 |
) |
|
|
1,265 |
|
|
|
(1,669 |
) |
|
|
4,709 |
|
Total
other income (expenses), net
|
|
|
(2,373 |
) |
|
|
1,888 |
|
|
|
(2,511 |
) |
|
|
6,172 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)
income from continuing operations before income taxes
|
|
|
(55,528 |
) |
|
|
(1,646 |
) |
|
|
(55,954 |
) |
|
|
10,594 |
|
Income
tax benefit (expense)
|
|
|
(14,493 |
) |
|
|
(139 |
) |
|
|
(15,075 |
) |
|
|
(3,848 |
) |
Net (loss)
income from continuing operations
|
|
|
(70,021 |
) |
|
|
(1,785 |
) |
|
|
(71,029 |
) |
|
|
6,746 |
|
Net
(loss) income from discontinued operations, net of tax (see Note
2)
|
|
|
- |
|
|
|
(392 |
) |
|
|
0 |
|
|
|
1,719 |
|
Net
(loss) income
|
|
$ |
(70,021 |
) |
|
$ |
(2,177 |
) |
|
$ |
(71,029 |
) |
|
$ |
8,465 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) per common share (basic):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From
continuing operations
|
|
$ |
(3.06 |
) |
|
$ |
(0.08 |
) |
|
$ |
(3.11 |
) |
|
$ |
0.29 |
|
From
discontinued operations
|
|
|
- |
|
|
|
(0.02 |
) |
|
|
- |
|
|
|
0.08 |
|
Net
income (loss) per common share (basic)
|
|
$ |
(3.06 |
) |
|
$ |
(0.10 |
) |
|
$ |
(3.11 |
) |
|
$ |
0.37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) per common share (diluted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From
continuing operations
|
|
$ |
(3.06 |
) |
|
$ |
(0.08 |
) |
|
$ |
(3.11 |
) |
|
$ |
0.29 |
|
From
discontinued operations
|
|
|
- |
|
|
|
(0.02 |
) |
|
|
- |
|
|
|
0.08 |
|
Net
income (loss) per common share (diluted)
|
|
$ |
(3.06 |
) |
|
$ |
(0.10 |
) |
|
$ |
(3.11 |
) |
|
$ |
0.37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
common shares outstanding (basic)
|
|
|
22,865,405 |
|
|
|
22,854,614 |
|
|
|
22,860,402 |
|
|
|
22,853,482 |
|
Weighted-average
common shares outstanding (diluted)
|
|
|
22,863,670 |
|
|
|
22,863,670 |
|
|
|
22,860,402 |
|
|
|
22,876,162 |
|
This
earnings release includes information presented on a pro forma basis. These pro
forma financial measures are considered "non-GAAP" financial measures within the
meaning of the Securities and Exchange Commission Regulation G. The Company
believes that this presentation of pro forma results provide useful information
to both management and investors by excluding specific items that the Company
believes are not indicative of core operating results. The presentation of this
additional information should not be considered in isolation or as a substitute
for results prepared in accordance with accounting principles generally accepted
in the United States. The reconciliation set forth below is provided in
accordance with Regulation G and reconciles the pro forma financial measure with
the most directly comparable GAAP based financial measure.
Audiovox
Corporation and Subsidiaries
Reconciliation
of GAAP Net (loss) income from continuing operations for the three months and
year to date Period Ended February 28, 2009 to the Pro Forma net (loss)
income
(In
thousands, except share and per share data)
(unaudited)
|
|
Three
|
|
|
|
|
|
|
Months
|
|
|
Year
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
February
28,
|
|
|
February
28,
|
|
|
|
2009
|
|
|
2009
|
|
|
|
|
|
|
|
|
GAAP
net (loss) income from continuing operations
|
|
$ |
(70,021 |
) |
|
$ |
(71,030 |
) |
Non-recurring
Adjustments:
|
|
|
|
|
|
|
|
|
Goodwill
& Intangible Asset Impairment
|
|
|
38,814 |
|
|
|
38,814 |
|
Bankruptcy
costs of customers & vendors
|
|
|
6,474 |
|
|
|
6,474 |
|
Increased
professional fees due to IP settlements and other legal
charges
|
|
|
2,250 |
|
|
|
2,250 |
|
Discontinued
Portable Navigation
|
|
|
- |
|
|
|
2,900 |
|
Severance
& Overhead reduction program
|
|
|
- |
|
|
|
1,000 |
|
Deferred
tax valuation
|
|
|
14,493 |
|
|
|
15,075 |
|
Non-recurring
adjustments
|
|
|
62,031 |
|
|
|
66,513 |
|
|
|
|
|
|
|
|
|
|
Pro
forma net (loss) income from continuing operations
|
|
|
(7,990 |
) |
|
|
(4,516 |
) |
|
|
|
|
|
|
|
|
|
GAAP
net (loss) income per common share, diluted
|
|
$ |
(3.06 |
) |
|
$ |
(3.11 |
) |
Pro
forma net (loss) income per common share, diluted
|
|
$ |
(0.35 |
) |
|
$ |
(0.20 |
) |
|
|
|
|
|
|
|
|
|
GAAP
Weighted-average common shares outstanding, diluted
|
|
|
22,865,405 |
|
|
|
22,860,402 |
|
Pro
forma Weighted-average common shares outstanding, diluted
|
|
|
22,865,405 |
|
|
|
22,860,402 |
|
ex99-2.htm
Final
Transcript
|
|
Conference
Call Transcript
VOXX
- Q4 2009 Audiovox Corporation Earnings Conference Call
Event
Date/Time: May 15, 2009 /
02:00PM GMT
|
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Final
Transcript
May
15, 2009 / 02:00PM GMT, VOXX - Q4 2009 Audiovox Corporation Earnings
Conference Call
|
CORPORATE
PARTICIPANTS
Glenn
Wiener
GW
Communications - IR
Patrick
Lavelle
Audiovox
Corp. - President, CEO
Michael
Stoehr
Audiovox
Corp. - SVP, CFO
John
Shalam
Audiovox
Corp. - Chairman of the Board
CONFERENCE
CALL PARTICIPANTS
Jim
Barrett
CL
King & Associates - Analyst
Richard
Greenberg
Donald
Smith & Co. - Analyst
Dan
Thomason
Harbor
Management - Analyst
Mike
Neary
Neary
Asset Management - Analyst
PRESENTATION
Good day,
ladies and gentlemen, and welcome to Audiovox's conference call. My name is Dan
and I'll be your coordinator for today. At this time all participants are in
listen-only mode. We will conduct a question-and-answer session towards the end
of this conference. (Operator Instructions). As a reminder, this conference is
being recorded for replay purposes. I would now like to turn the call over to
your host for today's call, Mr. Glenn Wiener. Please proceed.
Glenn
Wiener - GW Communications -
IR
Thank you
and good morning. Welcome to Audiovox's fiscal 2009 fourth-quarter and year-end
conference call. Today's call is being webcast from our website,
www.Audiovox.com, and is under the investor relations section. With us today are
Patrick Lavelle, President and Chief Executive Officer; Michael Stoehr, Senior
Vice President and Chief Financial Officer; and John Shalam, Chairman of the
Board. Before turning the call over to Pat I'd like to read our Safe Harbor
language.
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Final
Transcript
May
15, 2009 / 02:00PM GMT, VOXX - Q4 2009 Audiovox Corporation Earnings
Conference Call
|
Except
for historical information contained herein, statements made on today's call and
on today's webcast that would constitute forward-looking statements may involve
certain risks and uncertainties. All forward-looking statements made are based
on currently available information. The Company assumes no responsibility to
update any such forward-looking statements.
The
following factors, among others, may cause actual results to differ materially
from the results suggested in these forward-looking statements. These factors
include but are not limited to -- risks that result from changes in the
Company's core business operations or ability to keep pace with technology
advances; significant competition in the mobile and consumer electronics
business and accessory business; relationships with key suppliers and customers;
quality and consumer acceptance of our newly introduced products; market
volatility; non-availability of product; excess inventory; price and product
competition; new product introductions and the possibility that a review of our
prior filings by the SEC may result in changes to our financial statements; and
the possibility that stock holders or regulatory authorities may initiate
proceedings against the Company and/or our officers and directors as a result of
any numerous statements or their actions.
Risk factors with our business, including some of the factors set
forth herein, are detailed in our Form 10-K which was filed yesterday after
market close. With that said I'd like to now turn the call over to Pat
Lavelle.
Patrick
Lavelle - Audiovox Corp. -
President, CEO
Thank
you, Glenn, and good morning, everyone. A lot has changed since our last
conference call. Unfortunately the momentum that we had from our strong third
quarter was impacted by global economic turmoil and a string of events that
arose in our fourth quarter that we simply could not overcome. Weakening retail
sales; severely depressed automotive sales, markdowns driven by customer and
vendor bankruptcies, and several non-cash charges related to goodwill and
intangibles severely cut into fourth quarter and resulted in an annual
loss.
In a few
moments Michael will cover the quarter and the year-end numbers. My focus this
morning will be on the events and the issues that impacted our results and my
thoughts on the immediate future.
Through
the first nine months of the fiscal year we operated at near breakeven. And
despite the faltering economy, which led to lower sales versus our initial
forecast, we stayed even by quickly adjusting overheads to match sales
throughout the year and by making aggressive cuts over the past few months.
Overall we cut approximately $23 million from our overhead during the here and
we will realize the full effect of those reductions during fiscal
2010.
These
cuts include a combination of salary, staff and program reductions as well as
consolidation of certain services that both maximize productivity and reduce
expenses. Additionally, in an effort to increase margins and compensate for
higher shipping, warehouse and transportation costs, we instituted price
increases which took effect in the second half of the year.
As I
indicated on my last call, we had significant sell-in for the holiday season. In
fact, we were better placed at retail than any time in our history with more
SKUs at more retailers than ever before. However, the economic climate and lower
consumer spending created a poor retail environment that left virtually every
one of our retailers with heavy post-holiday inventory.
This has
had a major impact on our fourth-quarter consumer sales and it continues to
affect our first quarter as certain program launches were pushed back so
retailers could clear the last of their holiday stock. The good news is that
retailers, for the most part, have moved that inventory and have begun
restocking for spring and summer promotions.
On the
automotive side, we were severely impacted by the continuing year-over-year
decline of car sales both at our OEM customers and in our aftermarket car dealer
programs. Unfortunately sales of new vehicles continue to be depressed and we
are anticipating lower levels for the balance of the year. The uncertainty
surrounding the Chrysler bankruptcy and the current situation at GM, along with
the targeted dealership reduction programs will not allow for a rebound in car
sales this year. Fortunately we believe we can offset some of these negatives
with some of our new product introductions with Qualcomm's FLO TV, her Sony
PlayStation and Sirius XM.
The
fourth-quarter bankruptcy of Circuit City affected our results in a number of
ways. Reported fourth-quarter sales were down considerably without contributions
from Circuit, our third-largest customer. In addition, we purchased a put option
to protect us in the event of a Circuit bankruptcy which, despite the heavy
cost, allowed us to protect receivables for up to $10 million. Finally, we took
certain inventory write-downs to move goods that were destined for sale at
Circuit during the quarter.
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May
15, 2009 / 02:00PM GMT, VOXX - Q4 2009 Audiovox Corporation Earnings
Conference Call
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In
addition to Chrysler and Circuit we had to weather the bankruptcy of two Asian
vendors who could not navigate the downturn. Deteriorating economic conditions
escalated during the fourth quarter and, while I believe the business was
managed effectively as we were able to increase annual sales to $603 million and
hold pricing in this climate, we nonetheless posted a loss of $15 million for
the year after non-cash impairment and valuation charges.
Within
that loss there were a number of one-time charges that we do not expect to
repeat -- $6.4 million in expenses related to bankruptcies; $2.9 million
reported earlier this year for the discontinuance of our NAV line; $2.3 million
in IP settlements, provisions and related legal fees; and $1 million in
severance and related restructuring charges. The total reported loss was
approximately $71 million, nearly $54 million was non-cash impairment charges
related to goodwill, intangibles and deferred tax valuations.
On the
positive side, we increased our cash position by $31 million year over year and
built it to approximately $70 million as of the end of our fiscal year. This
gives us sufficient resources to manage our business through this economic
cycle.
Make no
mistake fiscal 2010 is going to be a challenge. Sales continue to be affected by
the events I outlined. However, we are starting to see a bottom and, with the
introduction of some of our new programs, we will begin to reverse the negative
impact of the recession. New products and spring retail programs should help us
get back to projected sales levels and on a considerably lower cost basis as the
complete effect of our reduction plans take hold.
I expect
to see a ramp up sequentially in the second quarter with the big season coming
in our fiscal third quarter. Critical for us will be sell-through and, despite
that caution, I also have reason for optimism when I look at our longer-term
potential. We continue to do everything we can to deliver successful results
and, despite cutting costs, we have not strayed from our stated objectives of
investing in technology and delivering the latest consumer driven mobile,
consumer and accessory products.
As you
know, this past year we developed partnerships with Sony PlayStation and
Qualcomm's FLO TV that deliver proven consumer preferences. They should help
drive sales and enhance our number one brand position in the mobile
entertainment category.
Our
integrated Sony PlayStation rear seat entertainment system will launch early in
the third quarter and in time for the holiday season. FLO TV service will launch
through our Expeditor channel in the fall and we're targeting retail
introduction shortly there after. Both these alliances should boost sales and
contribute to margin improvement.
Our
program with Sirius XM will solidify our position as the number one provider of
satellite radio products in the aftermarket. As I said last quarter, we expect
to double satellite radio sales this year.
We've
been successful in our brand strategy of increasing our retail presence and
growing business with many of our key accounts. So when consumers get back to
the stores and start abiding we will have strong representation.
We have
nearly 60 new products scheduled for delivery over the next couple of months
from our mobile and consumer groups and another 200 from the accessory group. We
entered the key selling season ready with one of the best assortments in our
history. Our RCA Small Wonder line of digital camcorders launches with the
Webslinger EZ209 leading the way. A brand-new line of high function RCA clock
radios and acoustic research Internet radios arrive in stores in the next 60
days.
New
products in our MP3 and digital voice lines arrive in June. Several new Jensen
multimedia products set to be delivered to one of our largest customers add to
our market-leading product line. A brand-new line of [Bowie] look-alike mobile
multimedia systems will also arrive in time for new car introductions this
season.
Adding to
my optimism is the strong fourth-quarter growth in our accessory business, up
23%, that has continued into our first quarter driven by our new line of digital
antennas that have captured number one market share. We have several significant
new customers and in September plan to introduce our new Xsight line of high end
TV remotes that will deliver in time for holiday sales.
Among our
goals this year is to generate free cash flow and manage the cash on hand
prudently to run our business and pursue acquisitions that make sense, ones that
will grow the top line and allow us to leverage much of the fixed overhead we
have. We believe there are opportunities that have developed as a result of the
economic downturn and they may become more attractive over the coming
year.
Last
quarter my closing remarks were positive about our third quarter with caution
about what may lay ahead. I am afraid that no amount of caution could have
prepared us for some of the extreme events that marked the fourth quarter. The
continued demise of the overall global market has caused us to adjust quickly
and we have. I believe we've structured this business accordingly and made some
very, very difficult cuts. But we also focused on what we think will be sound
business decisions for the future.
I'm not
happy with losses, no one is. But when things do turn I am confident
shareholders will be rewarded for their patience. I'd like to thank you for your
time today and your continued support and with that I'd like to turn the call
over to Michael.
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Final
Transcript
May
15, 2009 / 02:00PM GMT, VOXX - Q4 2009 Audiovox Corporation Earnings
Conference Call
|
Michael Stoehr - Audiovox Corp. - SVP,
CFO
Thanks,
Pat. Good morning, everyone. I would like to start my presentation with a
discussion of the fourth quarter as there were several challenges we faced in
the quarter, all of which occurred in rapid succession. We will discuss impacts
on revenue, effects on gross profit and overhead, results of valuation tests and
a discussion on anticipated liquidity position as of the fourth quarter with a
view for the remainder of fiscal 2010, and finally a brief summary of events for
our year-end 2009.
Net sales
were $115.6 million in the fourth quarter, a decline of 12% versus the
comparable quarter last year. Electronic sales were $72.1 million versus $95.8
million, a decline of 24.8%. The decline in electronics was due to lower
consumer goods sales as our customers experienced a slow holiday season and did
not reorder during the fourth quarter as they sold through their
inventory.
Our
consumer goods sales declined principally in DVDs and digital products.
Offsetting these declines were higher sales in our clock radios and voice
recorders. The decline in consumer group was 48%. The decline in our electronic
group was also due to lower mobile electronic sales. As a result of the economic
uncertainties during the fourth quarter and a large decline in not only domestic
but foreign vehicle sales, the group experienced a decline in sales in all
product categories such as audio and security. This group's sales were down
29%.
Our
international sales increased by 15% as a result of sales increases in Mexico
and Asia, the results of our recent acquisitions. We also experienced sales
increases in Venezuela. These increases were partially offset by a decline of
sales in our German and European operations.
Our
accessory group had sales of $43.6 million for the fourth quarter, an increase
of 23% compared to $35.5 million last year. This was a result of increased
digital antenna sales, new customers and new product coming on
stream.
Gross
profit and gross profit margins -- our gross margins, based on product costs,
increased due to our recent price increases during the quarter. We took several
charges to the cost of our product. They were -- one, a bankruptcy at a retail
customer left us with inventory we purchased for them. We decided to mark down
the products to move them; this charge was $2.4 million.
As a
result of the slow holiday season we did not get the reorders as forecasted by
our customers and had excess inventory in a specific model which we increased
our LCM reserve by $800,000. With the large decline in auto sales we further
increased inventory LCM reserves by $2.2 million for inventory related to this
category of distribution. Our defective and future warranty charges increased by
$2.2 million fourth quarter '09 versus '08 mainly due to the full year of the
Thomson A/V acquisition.
Offsetting
some of the previously mentioned charges was a decline in our warehouse and
assembly costs as a result of our overhead reduction plans. Our gross margin for
the fourth quarter was 11.9% versus 18.8% last quarter. If we try and normalize
the quarter for the events mentioned it would have been 18.4%.
Overhead
for the quarter was $66.8 million versus $28.2 million last year. The following
items impacted the quarter's overhead. One, impairment charges, $38.8 million.
Due to the market value of the Company in relation to the equity value we
conducted a 142 review of the Company's goodwill and intangible assets. The
assumptions used to conduct the tests were impacted by a higher discount rate
and lower multiples. As a result we had an impairment charge for goodwill of $29
million and a $9.8 million charge for intangibles.
Two, for
the quarter we had increased professional fees which resulted in non-standard
charges of $2.3 million. This relates to IP settlements, legal action and other
miscellaneous charges.
Three, we
had an increase in our allowance for doubtful accounts as a result of the recent
Chrysler bankruptcy which was $500,000 and an increase due to a small amount of
Circuit post-petition for about $223,000.
To
summarize, to pro forma the impact of these non-standard charges had on our
overhead, which we reported at $66.8 million, the non-standard charges I
mentioned equaled $41.8 million. Our pro forma overhead would have been $25
million for the quarter versus $28.2 million last year, a decline of $3.2
million. This comes from declines in our selling expenses and engineering and
technical support.
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Final
Transcript
May
15, 2009 / 02:00PM GMT, VOXX - Q4 2009 Audiovox Corporation Earnings
Conference Call
|
Other
expenses for the quarter increased by $3.6 million versus last year's quarter as
a result of the following. One, there was a charge of $1.9 million for costs
related to a vendor bankruptcy which occurred in the fourth quarter. We were
unable to get our merchandise from the vendor. And two, during fourth quarter
2008 we sold shares of an investment which did not repeat in fourth quarter
2009.
Deferred
tax valuation -- the Company conducted a review of its deferred tax assets and,
based on the results, a valuation reserve of $14.5 million was booked for the
fourth quarter. After all of the discussed expenses the Company reported a net
loss of $70 million, or $3.06 a share loss for the quarter.
To bring
some clarity to the fourth-quarter financial statements, adjusting this loss
with only non-cash valuation charges and nonstandard charges the quarter would
be -- and we reported a net loss of $70 million; we had an impairment goodwill
charge of $38.8 million; we had a different tax valuation charge of $14.5
million; we had bankruptcy costs at vendors of approximately $6.4 million;
increased professional fees of $2.3 million -- would bring the loss to the
quarter to $7.9 million or $0.35 a share.
We have
seen improvement in our overhead expenses and when these non-standard charges
clear we anticipate further improvements in overhead. Fiscal 2009 our sales were
$603 million versus $591 million last year, an increase of 2%. Our electronics
group had sales of $449 million, an increase of 2.8%, and our accessories group
had sales of $153 million, a decline of 4 basis points or basically
breakeven.
Gross
margins for the year were impacted by charges we took in the fourth quarter as
well as our exit of portable navigation. Adjusting our overhead of $153.7
million or $42.8 million of non-standard charges related to impairment,
severance programs, legal fees, allowance for doubtful accounts and two
bankruptcies, our overhead would have been $110.9 million versus $106.9 million
in fiscal 2008.
Our
second half-year overhead has declined versus the first half of the year. As
most of our non-standard charges took place in the fourth quarter, the only
remaining non-standard items we had was $2.9 million for portable NAV and $1
million for the severance program which took part in the early part of the year.
Our net loss for the year was $70 million or $3.11 per share. Adjusting for all
these non-standard charges our pro forma loss would have been $4.5 million or
$0.20 a share. There is a reconciliation of these pro formas in the
10-K.
Liquidity
and capital resources -- even though the Company has had a challenging year, we
increased our cash accounts from $39 million to a balance of approximately $70
million, an increase of $31 million. Accounts receivables terms are staying
within terms and our inventory terms have improved from last year.
During
the fourth quarter the Company entered into a contract with Sirius XM and
purchased inventory to start the program. This purchase of inventory accounts
for the large increase in the Accounts Payable shown on February 28, 2009 versus
February 29, 2008. This Accounts Payable has subsequently been paid down during
the first quarter. Our cash position today after the paydown of this receivable
balance is still $70 million and we anticipate over the next two months to build
this balance further.
Based
upon our customer forecasts, we have begun to purchase inventory to support
anticipated sales which will use some of this cash. Looking towards the third
quarter we anticipate we have adequate cash balances to support a seasonal
increase in sales which occurs in our third quarter. We have also paid down some
debt in Europe and have no outstandings in Venezuela or Mexico.
The
Company currently has a small $10 million credit facility which we use for
letters of credit. Our European company has facilities with German banks which
are more than adequate to support any growth they may have. I am pleased to
report our SOX audit was completed; there were no material or significant
deficiencies in any of our operations or financial controls.
It has
been a tough quarter for us with all that happened to the Company. But the
Company's balance sheet has been able to handle these unforeseen events. We have
the ability to grow as things improve. But I wish to caution everyone that we
are concerned about the current economy and will be extremely cautious as we
move forward this year. I'd like to turn the meeting back to Pat.
Patrick
Lavelle - Audiovox Corp. -
President, CEO
Okay,
Michael, thank you. If there are any questions?
QUESTION AND
ANSWER
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Final
Transcript
May
15, 2009 / 02:00PM GMT, VOXX - Q4 2009 Audiovox Corporation Earnings
Conference Call
|
Operator
(Operator
Instructions). Jim Barrett, CL King & Associates.
Jim
Barrett - CL King &
Associates - Analyst
Good
morning, everyone. Mike, I think these are questions for you. Can you first talk
about the growth you're seeing in your accessory business with the antennas? And
you mentioned that was, I think -- Pat, you mentioned was continuing into Q1 of
this year.
Patrick
Lavelle - Audiovox Corp. -
President, CEO
Yes.
Jim
Barrett - CL King &
Associates - Analyst
Does
that suggest that the gross margin should be relatively positive given the fact
I assume your accessories still have significantly higher margins?
Michael
Stoehr - Audiovox Corp. - SVP,
CFO
I
think -- what I'd like to do is not only the antennas but talk to the
accessories group as a whole. We have seen, as I've mentioned, and we've seen
increases not only in the digital antennas which have come up, but we've got new
customers coming on stream plus we do have new product coming in. So that margin
and that area have started to move.
Patrick
Lavelle - Audiovox Corp. -
President, CEO
One
thing, Jim, when you're looking at modeling, we are seeing an improvement in our
margins in the accessory group. But the program that we have with Sirius will
offset that increase. As you know, we're planning a substantial increase in
sales. And in many cases we work on a -- more or less a fulfillment type basis
with Sirius. So you'll see a drag on margins from some of those
sales.
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Final
Transcript
May
15, 2009 / 02:00PM GMT, VOXX - Q4 2009 Audiovox Corporation Earnings
Conference Call
|
Jim Barrett - CL King & Associates -
Analyst
Okay.
And as a rule of thumb, is your accessories business still about 1,000 basis
points higher gross margins than the consumer electronic business?
Michael
Stoehr - Audiovox Corp. - SVP,
CFO
Yes.
Jim
Barrett - CL King &
Associates - Analyst
Okay.
And, Mike, of the $23 million of overhead that you've been able to remove from
the system, assuming the economy recovers in a few years, how much of that
overhead reduction should we view as permanent as opposed to overhead that's
likely to come back in a normal operating environment?
Michael Stoehr
- Audiovox Corp. - SVP,
CFO
The bulk
of the overhead reduction that took place that we did was in personnel and
personnel-related costs and it was across the Company. So let's say as business
improves there is a gap that's always there that you can take on some
improvement to a certain point. Then after that you would have to start placing
more salespeople or more clericals or more warehouse people in the system. But
we can take some growth with the current staff that exists now. So you would
assume this year we pretty well can handle what's coming at us with what we
have.
Jim
Barrett - CL King &
Associates - Analyst
Right.
And although you may have touched upon in it, do you plan on any further
material overhead reductions in fiscal 2010?
Patrick Lavelle - Audiovox Corp. - President,
CEO
We're
going to look at the first-quarter results and make any determination. Right
now, like I said, we expect this $23 million to be realized during the year,
okay. One of the things that we do have is we do have some temporary payroll
cuts that we've put in place that may come back if we see things starting to
improve. But we're going to wait and see; the end of our first quarter is this
month so we'll look and see if we're hitting our numbers, our internal forecast
and then make any further adjustments from there.
Michael
Stoehr - Audiovox Corp. - SVP,
CFO
Jim,
the overhead of the Company, as we discussed, went from 1,033 to 812 which is
what the headcount is right now.
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Final
Transcript
May
15, 2009 / 02:00PM GMT, VOXX - Q4 2009 Audiovox Corporation Earnings
Conference Call
|
Jim
Barrett - CL King &
Associates - Analyst
1,033
to 812?
Michael
Stoehr - Audiovox Corp. - SVP,
CFO
Yes.
And we also, what we've done is, as Pat mentioned, we've also -- besides
reducing the headcount itself we reduced people's compensation by a certain
percentage, that goes for senior executives all the way down. And we've taken
some of the 401(k) charges off and everything else.
Patrick
Lavelle - Audiovox Corp. -
President, CEO
Right
now we have capacity to grow without adding much to the overhead. I would
estimate that we could probably grow this company to $700 million in sales
without really having any major increase to personnel or overhead.
Jim
Barrett - CL King &
Associates - Analyst
Okay.
That's promising. And Pat, my last question -- and although I think you touched
upon it briefly -- the Company is sitting on close to $70 million of cash. What
does the acquisition horizon look like considering what has happened
economically to the industry and to the economy?
Patrick
Lavelle - Audiovox Corp. -
President, CEO
As
I said, there are some opportunities that have presented themselves to us. And
we certainly are looking at the ones that are interesting and ones that make
sense to us. As I've stated in the past, I think you've seen how we conduct an
acquisition, we're not going to overpay, we're going to be looking for a
discount. But I do think the economic climate has created some opportunities
that we could take advantage of during the year.
Jim Barrett - CL King & Associates -
Analyst
Is
it reasonable to conclude that private equity is not competing with you in
evaluating these acquisition targets?
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Final
Transcript
May
15, 2009 / 02:00PM GMT, VOXX - Q4 2009 Audiovox Corporation Earnings
Conference Call
|
Patrick Lavelle
- Audiovox Corp. - President,
CEO
Well,
in some cases yes, but actually I would say in some of the deals that we are
looking at they're more strategic. So no, they're not private equity firms we're
up against.
Michael
Stoehr - Audiovox Corp. - SVP,
CFO
Sometimes
it's the size.
Jim
Barrett - CL King & Associates -
Analyst
Right.
Well, thank you both very much.
Richard
Greenberg, Donald Smith & Co.
Richard
Greenberg - Donald Smith &
Co. - Analyst
Pat,
just to start out with you, on the sales I'm sure you guys are not inclined to
give any guidance for the year. But just in a general sense, from what you're
seeing right now, do you think sales will be up this year versus last
year?
Patrick
Lavelle - Audiovox Corp. -
President, CEO
Again,
it is difficult to say. A good portion of our business is related to the car
business. We do have some positives, as I've indicated, that we do will offset
some of that weakness. But it depends on how weak the car sales really are.
We've got baked into our numbers between 9 million and 10 million new cars and
trucks sold this year.
And that
will give us a substantial reduction in our core mobile business, but like I
said, we have other programs that are coming in that would offset that. To the
extent, I really cannot say at this particular point. It's a little too early to
tell.
Richard
Greenberg - Donald Smith &
Co. - Analyst
And
then on gross margin, given what you said about the Sirius is lower margin, the
accessories are higher; just ballpark are we somewhere in the 18%
range?
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Final
Transcript
May
15, 2009 / 02:00PM GMT, VOXX - Q4 2009 Audiovox Corporation Earnings
Conference Call
|
Patrick
Lavelle - Audiovox Corp. -
President, CEO
I
think you can look at our -- the margins that we have run
historically.
Richard
Greenberg - Donald Smith &
Co. - Analyst
Okay.
Then you did $111 million in overhead costs last year. You had this $23 million,
some of which hit last year and some of which will still hit this
year.
Mike, are
we trying to -- talking $100 million, assuming you hit your target sales level,
whatever that is? Is that the ballpark number we should be targeting; is roughly
4 times the fourth-quarter level?
Michael
Stoehr - Audiovox Corp. - SVP,
CFO
Yes,
you are in the ballpark, Richard.
Richard
Greenberg - Donald Smith &
Co. - Analyst
Okay,
fine. And then just finally, and I know we've had this discussion many times
before. But the whole issue of how you look at your stock. And right now your
stock is at one-third of book, it's selling at less than half of working
capital. I know you guys want to grow the Company in acquisitions, but it all
has to be balanced versus what may be really the cheapest asset out there which
is your own company. There's not too many companies that have those kinds of
valuation statistics. Is there no way that you can find -- allocate any of that
cash towards buying back a little bit of stock?
John
Shalam - Audiovox Corp. -
Chairman of the Board
Rich,
we've had that -- this is John Shalam -- we've had that discussion many, many
times in the past. And you know our feelings about that; you know our strategy
and the strategic importance of maintaining strong cash reserves for purposes of
acquisition and diversification. And buying back stock really in a particular
case of a small company as we are has a very limit short-term impact. And in the
long run term you're better off preserving your cash and having it available for
opportunity to come up. That's my feeling and I don't think it's changed in the
last four years.
Richard
Greenberg - Donald Smith &
Co. - Analyst
Yes,
I would just point out, John, to me this is not a short-term impact. I'm just
trying to buy the cheapest asset around for the cheapest price. And when I would
see something at one-third or one-half or true underlying value -- that's the
reason you're buying it back because that adds value to the rest of the
shareholders. It really has nothing to do with trying to create a short-term
pop, that's not really what we're interested in; it's buying the cheapest thing
out there.
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Final
Transcript
May
15, 2009 / 02:00PM GMT, VOXX - Q4 2009 Audiovox Corporation Earnings
Conference Call
|
John
Shalam - Audiovox Corp. -
Chairman of the Board
Yes,
that's true, Rick. But what's going to really make the stock move is as the
economy begins to improve and as Pat's programs which he has outlined begin to
take hold and you start showing some earnings on the bottom line and quarter by
quarter, you'll see the stock perform the way that it should perform. That's
going to be based on strong fundamentals and a good outlook and not just on the
fact that we're buying back shares.
And I
think we can achieve that strategy and improve on that strategy by making some
good tactical acquisitions depending on what we're able to find and to put
together. That's going to accelerate the revenue and profitability of this
company and reflect itself in improved stock performance. Rick, I'm sorry, I
just don't see it any other way.
Richard
Greenberg - Donald Smith &
Co. - Analyst
Okay.
All right, thanks, guys.
[Dan
Thomason], [A-Audio].
Dan
Thomason - Harbor Management -
Analyst
Hi,
actually it's with [Harbor] Management. Could you please characterize any
remaining exposure you may have to Chrysler and GM in addition to what you've
already reserved for in the quarter?
Patrick
Lavelle - Audiovox Corp. -
President, CEO
Right
now we've taken the charge for the receivables that we had open with them.
Obviously we do have inventory. But we do believe that they will start up again
and that we will be able to sell that inventory, they'll get their DIP financing
and we'll be able to move that out. So we think at this particular point the
worst is over with Chrysler.
Dan
Thomason - Harbor Management -
Analyst
Okay,
thank you very much.
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Final
Transcript
May
15, 2009 / 02:00PM GMT, VOXX - Q4 2009 Audiovox Corporation Earnings
Conference Call
|
Mike
[Neary], [Neary] Asset Management.
Mike
Neary - Neary Asset Management
- - Analyst
Just
a question on acquisitions going forward. How does your experience with the
recent acquisitions we've done affect the values you've put on new things you
look at buying? We exchanged $100 million over the last two years for
intangibles and our revenues are basically flat with where they were a few years
ago and operating profits down. How do you -- is it just that things were more
expensive then and we paid a little more than we should have and now we're going
to buy things more cheaply? Or -- can you just give me a sense on how we can be
sure that new acquisitions really are going to be good deals for the
shareholders?
Patrick
Lavelle - Audiovox Corp. -
President, CEO
If
you look over what we acquired the different companies for over the past few
years, we have paid some very good prices, discounted prices against the value
of the businesses that we purchased. I think the problem that -- when one is
looking at the sales being flat, the economy has done a pretty good job in
knocking out the sales of some of the acquired companies as well. But the core
strength of each one of those acquisitions remain in place, the product
categories remain in place and the customer base does. So when we see a pickup
in the industry or a pickup in the economy where the consumer comes back to the
stores, I think you're going to see us ramp up very nicely.
Mike
Neary - Neary Asset Management
- - Analyst
But
when you look at buying these brands for more than their tangible book, what
about their businesses assures you that those intangibles really are worth what
they're worth? We just wrote off our goodwill which is a portion of that, but
when you buy these things for much more than book, how do you know that they're
actually worth the price that we pay?
Patrick
Lavelle - Audiovox Corp. -
President, CEO
Well,
obviously when you look at the price that you're paying and you look at what
you're and anticipating as far as generated sales and gross profits from the
operation that you're purchasing. Every deal that we looked at is accretive and
those are the fundamentals that we look at when we do an
acquisition.
The
goodwill doesn't really, in my estimation, enter into that decision. It really
is are the sales that we're picking up and the gross profit and the income
that's generated from that gross profit, along with our ability to leverage our
existing overhead so that we can reduce the overhead of the acquired company, is
that accretive? And is that business, as far as the categories that we're
picking up, do they have a lifecycle that will allow for a good return on our
investment? Those are the fundamentals that we look at when we do an
acquisition.
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Final
Transcript
May
15, 2009 / 02:00PM GMT, VOXX - Q4 2009 Audiovox Corporation Earnings
Conference Call
|
Mike
Neary - Neary Asset Management
- - Analyst
And
just review, what multiples did we use on the purchases we made on what we
assumed that they would do? And then obviously they didn't do that, but is that
just because of the economy and we can expect a pickup here in those and they'll
get to the multiples we thought? What are your thoughts on that?
Patrick
Lavelle - Audiovox Corp. -
President, CEO
Let
me give you -- our last acquisition that we did was Thomson's A/V Group where we
picked up approximately $150 million to $160 million in sales that we've stated.
And we picked up some good brand names in RCA. The netted cost to that for us
was under $10 million. So when you're generating that kind of sale and the
resulting gross profit from those $150 million in sales, that again is what
we're looking at.
So the
problem that we've had this year is that pretty much across every group, whether
it's our international group, our domestic group, North American or South
American and even our Asian groups have all been impacted by the slowdown in the
economy. Our internal forecast is for sales to be much greater than $603
million. And a lot of that -- a lot of those sales would have come from the
acquired company.
Mike
Neary - Neary Asset Management
- - Analyst
But
it does seem like the more recent acquisitions, Thomson, were done in much
better multiples than some of the earlier ones. Obviously we're getting more
deals like that.
Patrick
Lavelle - Audiovox Corp. -
President, CEO
I
would say that some of our most profitable deals have been our earliest ones;
our Code deal in 2002 has worked out very, very well. We bought a company with
sales in the $20 million range; I can tell you today sales are at least 35% --
running 35% above that and they're very profitable. I could also tell you that
the [record con] business has worked out very, very well for us when you include
our German operation and the sales that we've made domestically. So as far as
the multiples, there are really no multiples.
Mike
Neary - Neary Asset Management
- - Analyst
Okay.
Well, I hope you're right and I think you probably are. We buy these things at
more than book and then somehow when they get translated into Audiovox the
market says they're all worth less than book.
Patrick
Lavelle - Audiovox Corp. -
President, CEO
I
think that's a function of the economy and what's gone on. Most companies today
are taking impairment charges for their intangibles and goodwill and I think we
got caught up in that this year, more so that being the reason than the -- how
the acquisitions are doing.
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Final
Transcript
May
15, 2009 / 02:00PM GMT, VOXX - Q4 2009 Audiovox Corporation Earnings
Conference Call
|
Michael Stoehr - Audiovox Corp. - SVP,
CFO
Right.
And one of the things that are impacting all these 142 valuations is the changes
in the risk-free capital rates and multiples that you look at it -- there has
been quite a change.
Mike
Neary - Neary Asset Management
- - Analyst
Okay.
John
Shalam - Audiovox Corp. -
Chairman of the Board
But
as Pat pointed out, really, when we look at an acquisition we look at the
revenue of the company, the profitability of that company, what are the
synergies that we can derive, how can we improve our own balance sheet by
bringing that company in, and how can we improve our sales and our profits and
build it up. The rest of these are matters with goodwill and these are more
accounting [convention] that really don't impact the operation of the company on
a day-to-day basis and bring in more revenue or more sales or more
profits.
Mike
Neary - Neary Asset Management
- - Analyst
No,
I understand. But the only reason we had to write down the goodwill was because
the cash flows weren't there. I mean, we didn't have an operating profit from
these businesses that we acquired.
John
Shalam - Audiovox Corp. -
Chairman of the Board
Yes,
that's correct.
Mike
Neary - Neary Asset Management
- - Analyst
And
we had thought we would. And I know the economy is much worse than we had
thought.
John
Shalam - Audiovox Corp. -
Chairman of the Board
But
we still think we will and really that's what we need to be guided by as we
proceed.
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Final
Transcript
May
15, 2009 / 02:00PM GMT, VOXX - Q4 2009 Audiovox Corporation Earnings
Conference Call
|
Mike
Neary - Neary Asset Management
- - Analyst
I
understand. Thank you very much.Operator
At
this time there are no further questions in queue.
Patrick
Lavelle - Audiovox Corp. -
President, CEO
Okay,
if there are no further questions I'd like to thank all of you for attending
this morning and your interest in Audiovox. I hope you have a good day and enjoy
your weekend. Thank you.
Thank
you for your participation in today's conference. This concludes the
presentation. You may now disconnect. Good day.
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