10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended May 31, 2022

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file number: 0-28839

 

VOXX International Corporation

(Exact name of registrant as specified in its charter)

 

Delaware

(State or other jurisdiction of

incorporation or organization)

 

13-1964841

(IRS Employer Identification No.)

2351 J Lawson Blvd., Orlando, Florida

(Address of principal executive offices)

 

32824

(Zip Code)

 

 

 

(800) 645-7750

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class:

Trading Symbol:

Name of Each Exchange on which Registered

Class A Common Stock $.01 par value

VOXX

The Nasdaq Stock Market LLC

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesNo

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YesNo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

Number of shares of each class of the issuer's common stock outstanding as of the latest practicable date.

 

Class

 

As of July 8, 2022

Class A Common Stock

 

21,675,966 Shares

Class B Common Stock

 

2,260,954 Shares

 


 

VOXX International Corporation and Subsidiaries

Table of Contents

 

 

 

 

 

Page

PART I

 

FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1

 

FINANCIAL STATEMENTS

 

 

 

 

Consolidated Balance Sheets at May 31, 2022 (unaudited) and February 28, 2022

 

3

 

 

Unaudited Consolidated Statements of Operations and Comprehensive Income for the Three Months Ended May 31, 2022 and 2021

 

5

 

 

Unaudited Consolidated Statements of Stockholders’ Equity for the Three Months Ended May 31, 2022 and 2021

 

6

 

 

Unaudited Consolidated Statements of Cash Flows for the Three Months Ended May 31, 2022 and 2021

 

7

 

 

Notes to Unaudited Consolidated Financial Statements

 

8

Item 2

 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

33

Item 3

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

44

Item 4

 

CONTROLS AND PROCEDURES

 

44

 

 

 

 

 

PART II

 

OTHER INFORMATION

 

 

 

 

 

 

 

Item 1

 

LEGAL PROCEEDINGS

 

45

Item 1A

 

RISK FACTORS

 

45

Item 2

 

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

45

Item 6

 

EXHIBITS

 

46

SIGNATURES

 

47

 

2


 

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VOXX International Corporation and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share data)

 

 

 

May 31,
2022

 

 

February 28,
2022

 

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

5,733

 

 

$

27,788

 

Accounts receivable, net

 

 

82,645

 

 

 

105,625

 

Inventory

 

 

181,187

 

 

 

174,922

 

Receivables from vendors

 

 

217

 

 

 

363

 

Prepaid expenses and other current assets

 

 

19,602

 

 

 

21,340

 

Income tax receivable

 

 

749

 

 

 

734

 

Total current assets

 

 

290,133

 

 

 

330,772

 

Investment securities

 

 

1,222

 

 

 

1,231

 

Equity investment

 

 

22,010

 

 

 

21,348

 

Property, plant and equipment, net

 

 

49,813

 

 

 

49,794

 

Operating lease, right of use asset

 

 

4,255

 

 

 

4,464

 

Goodwill

 

 

72,507

 

 

 

74,320

 

Intangible assets, net

 

 

97,541

 

 

 

101,450

 

Deferred income tax assets

 

 

39

 

 

 

40

 

Other assets

 

 

3,577

 

 

 

3,245

 

Total assets

 

$

541,097

 

 

$

586,664

 

Liabilities, Redeemable Equity, Redeemable Non-Controlling Interest, and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

54,113

 

 

$

76,665

 

Accrued expenses and other current liabilities

 

 

46,923

 

 

 

54,659

 

Income taxes payable

 

 

1,545

 

 

 

2,714

 

Accrued sales incentives

 

 

20,427

 

 

 

23,755

 

Interim arbitration award payable (see Note 24)

 

 

40,431

 

 

 

39,444

 

Contract liabilities, current

 

 

4,218

 

 

 

4,373

 

Current portion of long-term debt

 

 

500

 

 

 

2,406

 

Total current liabilities

 

 

168,157

 

 

 

204,016

 

Long-term debt, net of debt issuance costs

 

 

14,858

 

 

 

9,786

 

Finance lease liabilities, less current portion

 

 

39

 

 

 

78

 

Operating lease liabilities, less current portion

 

 

3,067

 

 

 

3,298

 

Deferred compensation

 

 

1,222

 

 

 

1,231

 

Contingent consideration, less current portion (see Note 2)

 

 

5,001

 

 

 

5,750

 

Deferred income tax liabilities

 

 

4,330

 

 

 

5,300

 

Other tax liabilities

 

 

913

 

 

 

1,083

 

Prepaid ownership interest in EyeLock LLC due to GalvanEyes LLC (see Note 21)

 

 

3,692

 

 

 

2,451

 

Other long-term liabilities

 

 

3,279

 

 

 

3,508

 

Total liabilities

 

 

204,558

 

 

 

236,501

 

Commitments and contingencies (see Note 24)

 

 

 

 

 

 

Redeemable equity (see Note 8)

 

 

3,450

 

 

 

3,550

 

Redeemable non-controlling interest (see Note 2)

 

 

(227

)

 

 

511

 

Stockholders' equity:

 

 

 

 

 

 

Preferred stock:

 

 

 

 

 

 

No shares issued or outstanding (see Note 20)

 

 

 

 

 

 

Common stock:

 

 

 

 

 

 

Class A, $.01 par value, 60,000,000 shares authorized, 24,538,184 and 24,476,847 shares issued and 21,675,966 and 21,614,629 shares outstanding at May 31, 2022 and February 28, 2022, respectively

 

 

246

 

 

 

245

 

Class B Convertible, $.01 par value, 10,000,000 shares authorized, 2,260,954 shares issued and outstanding at both May 31, 2022 and February 28, 2022

 

 

22

 

 

 

22

 

Paid-in capital

 

 

296,175

 

 

 

300,453

 

Retained earnings

 

 

120,046

 

 

 

126,573

 

Accumulated other comprehensive loss

 

 

(18,878

)

 

 

(17,503

)

Less: Treasury stock, at cost, 2,862,218 shares of Class A Common Stock at both May 31, 2022 and February 28, 2022

 

 

(25,138

)

 

 

(25,138

)

Less: Redeemable equity

 

 

(3,450

)

 

 

(3,550

)

Total VOXX International Corporation stockholders' equity

 

 

369,023

 

 

 

381,102

 

Non-controlling interest

 

 

(35,707

)

 

 

(35,000

)

Total stockholders' equity

 

 

333,316

 

 

 

346,102

 

Total liabilities, redeemable equity, redeemable non-controlling interest, and stockholders' equity

 

$

541,097

 

 

$

586,664

 

 

3


 

See accompanying notes to unaudited consolidated financial statements.

4


 

VOXX International Corporation and Subsidiaries

Unaudited Consolidated Statements of Operations and Comprehensive (Loss) Income

(In thousands, except share and per share data)

 

 

 

Three months ended
May 31,

 

 

 

2022

 

 

2021

 

Net sales

 

$

128,732

 

 

$

137,060

 

Cost of sales

 

 

95,493

 

 

 

100,365

 

Gross profit

 

 

33,239

 

 

 

36,695

 

Operating expenses:

 

 

 

 

 

 

Selling

 

 

12,285

 

 

 

11,467

 

General and administrative

 

 

19,130

 

 

 

18,676

 

Engineering and technical support

 

 

8,389

 

 

 

6,232

 

Acquisition costs

 

 

136

 

 

 

676

 

Total operating expenses

 

 

39,940

 

 

 

37,051

 

Operating loss

 

 

(6,701

)

 

 

(356

)

Other (expense) income:

 

 

 

 

 

 

Interest and bank charges

 

 

(730

)

 

 

(528

)

Equity in income of equity investee

 

 

1,588

 

 

 

2,723

 

Interim arbitration award (see Note 24)

 

 

(986

)

 

 

 

Other, net

 

 

(2,110

)

 

 

442

 

Total other (expense) income, net

 

 

(2,238

)

 

 

2,637

 

(Loss) income before income taxes

 

 

(8,939

)

 

 

2,281

 

Income tax (benefit) expense

 

 

(1,092

)

 

 

484

 

Net (loss) income

 

 

(7,847

)

 

 

1,797

 

Less: net loss attributable to non-controlling interest

 

 

(1,320

)

 

 

(919

)

Net (loss) income attributable to VOXX International Corporation

 

$

(6,527

)

 

$

2,716

 

Other comprehensive (loss) income:

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(1,494

)

 

 

372

 

Derivatives designated for hedging

 

 

87

 

 

 

119

 

Pension plan adjustments

 

 

32

 

 

 

1

 

Other comprehensive (loss) income, net of tax

 

 

(1,375

)

 

 

492

 

Comprehensive (loss) income attributable to VOXX International Corporation

 

$

(7,902

)

 

$

3,208

 

(Loss) income per share - basic: Attributable to VOXX International Corporation

 

$

(0.27

)

 

$

0.11

 

(Loss) income per share - diluted: Attributable to VOXX International Corporation

 

$

(0.27

)

 

$

0.11

 

Weighted-average common shares outstanding (basic)

 

 

24,412,462

 

 

 

24,266,242

 

Weighted-average common shares outstanding (diluted)

 

 

24,412,462

 

 

 

24,925,974

 

 

See accompanying notes to unaudited consolidated financial statements.

5


 

VOXX International Corporation and Subsidiaries

Unaudited Consolidated Statements of Stockholders' Equity

For the three months ended May 31, 2022 and 2021

(In thousands, except share and per share data)

 

 

 

Class A
and Class B
Common
Stock

 

 

Paid-in
Capital

 

 

Retained
Earnings

 

 

Accumulated
Other
Comprehensive
Loss

 

 

Non-
controlling
Interests

 

 

Treasury
Stock

 

 

Redeemable Equity

 

 

Total
Stock-
holders'
Equity

 

Balances at February 28, 2022

 

$

267

 

 

$

300,453

 

 

$

126,573

 

 

$

(17,503

)

 

$

(35,000

)

 

$

(25,138

)

 

$

(3,550

)

 

$

346,102

 

Net loss

 

 

 

 

 

 

 

 

(6,527

)

 

 

 

 

 

(707

)

 

 

 

 

 

 

 

 

(7,234

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

(1,375

)

 

 

 

 

 

 

 

 

 

 

 

(1,375

)

Cash settlement of market stock units upon vesting of 80% of award

 

 

 

 

 

(4,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,000

)

Net settlement of 61,337 shares of common stock upon vesting of stock awards, net of withholding taxes

 

 

1

 

 

 

(404

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(403

)

Reclassification of stockholders' equity to redeemable equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(33

)

 

 

(33

)

Stock-based compensation expense

 

 

 

 

 

126

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

133

 

 

 

259

 

Balances at May 31, 2022

 

 

268

 

 

 

296,175

 

 

 

120,046

 

 

 

(18,878

)

 

 

(35,707

)

 

 

(25,138

)

 

 

(3,450

)

 

 

333,316

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at February 28, 2021

 

$

267

 

 

$

300,402

 

 

$

148,906

 

 

$

(14,977

)

 

$

(31,351

)

 

$

(23,918

)

 

$

(3,260

)

 

$

376,069

 

Net income (loss)

 

 

 

 

 

 

 

 

2,716

 

 

 

 

 

 

(919

)

 

 

 

 

 

 

 

 

1,797

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

492

 

 

 

 

 

 

 

 

 

 

 

 

492

 

Settlement of 60,693 shares of Class A Common Stock upon vesting of stock awards, net of withholding taxes

 

 

 

 

 

(856

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(856

)

Stock-based compensation expense

 

 

 

 

 

236

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

34

 

 

 

270

 

Balances at May 31, 2021

 

 

267

 

 

 

299,782

 

 

 

151,622

 

 

 

(14,485

)

 

 

(32,270

)

 

 

(23,918

)

 

 

(3,226

)

 

 

377,772

 

 

See accompanying notes to unaudited consolidated financial statements.

6


 

VOXX International Corporation and Subsidiaries

Unaudited Consolidated Statements of Cash Flows

 

 

 

 

Three months ended
May 31,

 

 

 

 

2022

 

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net (loss) income

 

 

$

(7,847

)

 

 

$

1,797

 

Adjustments to reconcile net (loss) income to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

3,117

 

 

 

 

2,807

 

Amortization of debt discount

 

 

 

63

 

 

 

 

83

 

Bad debt (recovery) expense

 

 

 

(70

)

 

 

 

19

 

Reduction in the carrying amount of the right of use asset

 

 

 

395

 

 

 

 

341

 

(Gain) loss on forward contracts

 

 

 

(63

)

 

 

 

174

 

Equity in income of equity investees

 

 

 

(1,588

)

 

 

 

(2,723

)

Distribution of income from equity investees

 

 

 

926

 

 

 

 

2,845

 

Deferred income tax (benefit) expense

 

 

 

(935

)

 

 

 

318

 

Non-cash compensation adjustment

 

 

 

(9

)

 

 

 

(92

)

Stock based compensation expense

 

 

 

126

 

 

 

 

236

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

 

22,105

 

 

 

 

10,803

 

Inventory

 

 

 

(7,543

)

 

 

 

(5,827

)

Receivables from vendors

 

 

 

145

 

 

 

 

(80

)

Prepaid expenses and other

 

 

 

1,254

 

 

 

 

(1,223

)

Investment securities-trading

 

 

 

9

 

 

 

 

92

 

Accounts payable, accrued expenses, accrued sales incentives, contract liabilities, and other liabilities

 

 

 

(31,092

)

 

 

 

(26,777

)

Income taxes payable

 

 

 

(1,260

)

 

 

 

164

 

Net cash used in operating activities

 

 

 

(22,267

)

 

 

 

(17,043

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property, plant, and equipment

 

 

 

(1,383

)

 

 

 

(927

)

Issuance of promissory note

 

 

 

 

 

 

 

(3,000

)

Net cash used in investing activities

 

 

 

(1,383

)

 

 

 

(3,927

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Principal payments on finance lease obligation

 

 

 

(73

)

 

 

 

(114

)

Repayment of bank obligations

 

 

 

(24,499

)

 

 

 

(125

)

Borrowings on bank obligations

 

 

 

28,138

 

 

 

 

 

Deferred financing costs

 

 

 

 

 

 

 

(660

)

Settlement of market stock unit awards

 

 

 

(4,000

)

 

 

 

 

Withholding taxes paid on net issuance of stock award

 

 

 

(404

)

 

 

 

(856

)

Net cash used in financing activities

 

 

 

(838

)

 

 

 

(1,755

)

Effect of exchange rate changes on cash

 

 

 

2,433

 

 

 

 

31

 

Net decrease in cash and cash equivalents

 

 

 

(