SEC Filing : VOXX International

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10-Q

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 August 31, 2022


☐	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. Yes ☒No ☐

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). Yes ☒No ☐

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 October 7, 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 August 31, 2022 (unaudited) and February 28, 2022	3
	Unaudited Consolidated Statements of Operations and Comprehensive Income for the Three and Six Months Ended August 31, 2022 and 2021	5
	Unaudited Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended August 31, 2022 and 2021	6
	Unaudited Consolidated Statements of Cash Flows for the Six Months Ended August 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	48
Item 4	CONTROLS AND PROCEDURES	48

PART II	OTHER INFORMATION

Item 1	LEGAL PROCEEDINGS	49
Item 1A	RISK FACTORS	49
Item 2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	49
Item 6	EXHIBITS	50
SIGNATURES		51

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VOXX International Corporation and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share data)


	August 31, 2022			February 28, 2022
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	4,326		$	27,788
Accounts receivable, net		80,375			105,625
Inventory		192,931			174,922
Receivables from vendors		218			363
Prepaid expenses and other current assets		19,569			21,340
Income tax receivable		3,746			734
Total current assets		301,165			330,772
Investment securities		1,225			1,231
Equity investment		22,185			21,348
Property, plant and equipment, net		48,441			49,794
Operating lease, right of use asset		4,106			4,464
Goodwill		71,412			74,320
Intangible assets, net		94,599			101,450
Deferred income tax assets		38			40
Other assets		3,651			3,245
Total assets	$	546,822		$	586,664
Liabilities, Redeemable Equity, Redeemable Non-Controlling Interest, and Stockholders' Equity
Current liabilities:
Accounts payable	$	50,851		$	76,665
Accrued expenses and other current liabilities		43,966			54,659
Income taxes payable		2,178			2,714
Accrued sales incentives		20,840			23,755
Interim arbitration award payable (see Note 23)		41,417			39,444
Contract liabilities, current		4,224			4,373
Current portion of long-term debt		500			2,406
Total current liabilities		163,976			204,016
Long-term debt, net of debt issuance costs		36,321			9,786
Finance lease liabilities, less current portion		—			78
Operating lease liabilities, less current portion		2,924			3,298
Deferred compensation		1,225			1,231
Contingent consideration, less current portion (see Note 2)		4,494			5,750
Deferred income tax liabilities		5,084			5,300
Other tax liabilities		907			1,083
Prepaid ownership interest in EyeLock LLC due to GalvanEyes LLC (see Note 20)		4,921			2,451
Other long-term liabilities		3,177			3,508
Total liabilities		223,029			236,501
Commitments and contingencies (see Note 23)
Redeemable equity (see Note 8)		3,783			3,550
Redeemable non-controlling interest (see Note 2)		(321	)		511
Stockholders' equity:
Preferred stock:
No shares issued or outstanding (see Note 19)		—			—
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 August 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 August 31, 2022 and February 28, 2022		22			22
Paid-in capital		296,311			300,453
Retained earnings		109,830			126,573
Accumulated other comprehensive loss		(20,867	)		(17,503	)
Less: Treasury stock, at cost, 2,862,218 shares of Class A Common Stock at both August 31, 2022 and February 28, 2022		(25,138	)		(25,138	)
Less: Redeemable equity		(3,783	)		(3,550	)
Total VOXX International Corporation stockholders' equity		356,621			381,102
Non-controlling interest		(36,290	)		(35,000	)
Total stockholders' equity		320,331			346,102
Total liabilities, redeemable equity, redeemable non-controlling interest, and stockholders' equity	$	546,822		$	586,664

See accompanying notes to unaudited consolidated financial statements.

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 August 31,						Six months ended August 31,
	2022			2021			2022			2021
Net sales	$	125,705		$	143,109		$	254,437		$	280,169
Cost of sales		96,448			105,923			191,941			206,288
Gross profit		29,257			37,186			62,496			73,881
Operating expenses:
Selling		11,865			11,838			24,150			23,305
General and administrative		19,082			17,884			38,212			36,560
Engineering and technical support		8,284			7,886			16,673			14,118
Acquisition costs		—			2,316			136			2,992
Total operating expenses		39,231			39,924			79,171			76,975
Operating loss		(9,974	)		(2,738	)		(16,675	)		(3,094	)
Other (expense) income:
Interest and bank charges		(911	)		(582	)		(1,641	)		(1,110	)
Equity in income of equity investee		1,763			2,035			3,351			4,758
Interim arbitration award (see Note 23)		(986	)		—			(1,972	)		—
Other, net		(1,519	)		376			(3,629	)		818
Total other (expense) income, net		(1,653	)		1,829			(3,891	)		4,466
(Loss) income before income taxes		(11,627	)		(909	)		(20,566	)		1,372
Income tax (benefit) expense		(708	)		(217	)		(1,800	)		267
Net (loss) income		(10,919	)		(692	)		(18,766	)		1,105
Less: net loss attributable to non-controlling interest		(703	)		(1,003	)		(2,023	)		(1,922	)
Net (loss) income attributable to VOXX International Corporation	$	(10,216	)	$	311		$	(16,743	)	$	3,027
Other comprehensive (loss) income:
Foreign currency translation adjustments		(2,128	)		(1,334	)		(3,622	)		(962	)
Derivatives designated for hedging		99			163			186			282
Pension plan adjustments		40			22			72			23
Other comprehensive loss, net of tax		(1,989	)		(1,149	)		(3,364	)		(657	)
Comprehensive (loss) income attributable to VOXX International Corporation	$	(12,205	)	$	(838	)	$	(20,107	)	$	2,370
(Loss) income per share - basic: Attributable to VOXX International Corporation	$	(0.42	)	$	0.01		$	(0.69	)	$	0.12
(Loss) income per share - diluted: Attributable to VOXX International Corporation	$	(0.42	)	$	0.01		$	(0.69	)	$	0.12
Weighted-average common shares outstanding (basic)		24,423,577			24,281,220			24,418,020			24,273,731
Weighted-average common shares outstanding (diluted)		24,423,577			24,855,307			24,418,020			24,890,641

See accompanying notes to unaudited consolidated financial statements.

VOXX International Corporation and Subsidiaries

Unaudited Consolidated Statements of Stockholders' Equity

For the three and six months ended August 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 Class A 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
Net loss		—		—			(10,216	)		—			(583	)		—			—			(10,799	)
Other comprehensive loss, net of tax		—		—			—			(1,989	)		—			—			—			(1,989	)
Stock-based compensation expense		—		136			—			—			—			—			(333	)		(197	)
Balances at August 31, 2022		268