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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 November 30, 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 January 6, 2023

Class A Common Stock

 

21,360,266 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 November 30, 2022 (unaudited) and February 28, 2022

 

3

 

 

Unaudited Consolidated Statements of Operations and Comprehensive Income for the Three and Nine Months Ended November 30, 2022 and 2021

 

5

 

 

Unaudited Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended November 30, 2022 and 2021

 

6

 

 

Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended November 30, 2022 and 2021

 

9

 

 

Notes to Unaudited Consolidated Financial Statements

 

10

Item 2

 

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

 

35

Item 3

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

50

Item 4

 

CONTROLS AND PROCEDURES

 

50

 

 

 

 

 

PART II

 

OTHER INFORMATION

 

 

 

 

 

 

 

Item 1

 

LEGAL PROCEEDINGS

 

51

Item 1A

 

RISK FACTORS

 

51

Item 2

 

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

51

Item 6

 

EXHIBITS

 

52

SIGNATURES

 

53

 

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)

 

3


 

 

 

November 30,
2022

 

 

February 28,
2022

 

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

8,477

 

 

$

27,788

 

Accounts receivable, net

 

 

91,882

 

 

 

105,625

 

Inventory

 

 

192,996

 

 

 

174,922

 

Receivables from vendors

 

 

138

 

 

 

363

 

Prepaid expenses and other current assets

 

 

20,397

 

 

 

21,340

 

Income tax receivable

 

 

7,943

 

 

 

734

 

Total current assets

 

 

321,833

 

 

 

330,772

 

Investment securities

 

 

1,167

 

 

 

1,231

 

Equity investment

 

 

22,444

 

 

 

21,348

 

Property, plant and equipment, net

 

 

47,903

 

 

 

49,794

 

Operating lease, right of use asset

 

 

3,905

 

 

 

4,464

 

Goodwill

 

 

72,375

 

 

 

74,320

 

Intangible assets, net

 

 

92,993

 

 

 

101,450

 

Deferred income tax assets

 

 

38

 

 

 

40

 

Other assets

 

 

3,748

 

 

 

3,245

 

Total assets

 

$

566,406

 

 

$

586,664

 

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

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

48,734

 

 

$

76,665

 

Accrued expenses and other current liabilities

 

 

44,486

 

 

 

54,659

 

Income taxes payable

 

 

2,080

 

 

 

2,714

 

Accrued sales incentives

 

 

25,466

 

 

 

23,755

 

Interim arbitration award payable (see Note 23)

 

 

42,403

 

 

 

39,444

 

Contract liabilities, current

 

 

3,796

 

 

 

4,373

 

Current portion of long-term debt

 

 

500

 

 

 

2,406

 

Total current liabilities

 

 

167,465

 

 

 

204,016

 

Long-term debt, net of debt issuance costs

 

 

45,860

 

 

 

9,786

 

Finance lease liabilities, less current portion

 

 

94

 

 

 

78

 

Operating lease liabilities, less current portion

 

 

2,735

 

 

 

3,298

 

Deferred compensation

 

 

1,167

 

 

 

1,231

 

Contingent consideration, less current portion (see Note 2)

 

 

5,209

 

 

 

5,750

 

Deferred income tax liabilities

 

 

5,228

 

 

 

5,300

 

Other tax liabilities

 

 

929

 

 

 

1,083

 

Prepaid ownership interest in EyeLock LLC due to GalvanEyes LLC (see Note 20)

 

 

6,068

 

 

 

2,451

 

Other long-term liabilities

 

 

3,144

 

 

 

3,508

 

Total liabilities

 

 

237,899

 

 

 

236,501

 

Commitments and contingencies (see Note 23)

 

 

 

 

 

 

Redeemable equity (see Note 8)

 

 

3,996

 

 

 

3,550

 

Redeemable non-controlling interest (see Note 2)

 

 

(932

)

 

 

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 21,398,005 and 21,614,629 shares outstanding at November 30, 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 November 30, 2022 and February 28, 2022

 

 

22

 

 

 

22

 

Paid-in capital

 

 

296,456

 

 

 

300,453

 

Retained earnings

 

 

117,251

 

 

 

126,573

 

Accumulated other comprehensive loss

 

 

(19,851

)

 

 

(17,503

)

Less: Treasury stock, at cost, 3,140,179 and 2,862,218 shares of Class A Common Stock at November 30, 2022 and February 28, 2022, respectively

 

 

(27,913

)

 

 

(25,138

)

Less: Redeemable equity

 

 

(3,996

)

 

 

(3,550

)

Total VOXX International Corporation stockholders' equity

 

 

362,215

 

 

 

381,102

 

Non-controlling interest

 

 

(36,772

)

 

 

(35,000

)

Total stockholders' equity

 

 

325,443

 

 

 

346,102

 

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

 

$

566,406

 

 

$

586,664

 

See accompanying notes to unaudited consolidated financial statements.

4


 

VOXX International Corporation and Subsidiaries

Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss)

(In thousands, except share and per share data)

 

 

 

Three months ended
November 30,

 

 

Nine months ended
November 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net sales

 

$

143,055

 

 

$

191,871

 

 

$

397,492

 

 

$

472,040

 

Cost of sales

 

 

105,918

 

 

 

140,167

 

 

 

297,859

 

 

 

346,455

 

Gross profit

 

 

37,137

 

 

 

51,704

 

 

 

99,633

 

 

 

125,585

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling

 

 

11,413

 

 

 

13,864

 

 

 

35,563

 

 

 

37,169

 

General and administrative

 

 

16,223

 

 

 

20,049

 

 

 

54,435

 

 

 

56,609

 

Engineering and technical support

 

 

7,171

 

 

 

9,706

 

 

 

23,844

 

 

 

23,824

 

Acquisition costs

 

 

 

 

 

287

 

 

 

136

 

 

 

3,279

 

Total operating expenses

 

 

34,807

 

 

 

43,906

 

 

 

113,978

 

 

 

120,881

 

Operating income (loss)

 

 

2,330

 

 

 

7,798

 

 

 

(14,345

)

 

 

4,704

 

Other (expense) income:

 

 

 

 

 

 

 

 

 

 

 

 

Interest and bank charges

 

 

(1,460

)

 

 

(730

)

 

 

(3,101

)

 

 

(1,840

)

Equity in income of equity investee

 

 

2,022

 

 

 

2,206

 

 

 

5,373

 

 

 

6,964

 

Interim arbitration award (see Note 23)

 

 

(986

)

 

 

(39,444

)

 

 

(2,958

)

 

 

(39,444

)

Other, net

 

 

460

 

 

 

(143

)

 

 

(3,169

)

 

 

675

 

Total other income (expense), net

 

 

36

 

 

 

(38,111

)

 

 

(3,855

)

 

 

(33,645

)

Income (loss) before income taxes

 

 

2,366

 

 

 

(30,313

)

 

 

(18,200

)

 

 

(28,941

)

Income tax benefit

 

 

(3,988

)

 

 

(641

)

 

 

(5,788

)

 

 

(374

)

Net income (loss)

 

 

6,354

 

 

 

(29,672

)

 

 

(12,412

)

 

 

(28,567

)

Less: net loss attributable to non-controlling interest

 

 

(1,067

)

 

 

(1,551

)

 

 

(3,090

)

 

 

(3,473

)

Net income (loss) attributable to VOXX International Corporation and Subsidiaries

 

$

7,421

 

 

$

(28,121

)

 

$

(9,322

)

 

$

(25,094

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

957

 

 

 

(1,835

)

 

 

(2,665

)

 

 

(2,797

)

Derivatives designated for hedging

 

 

78

 

 

 

184

 

 

 

264

 

 

 

466

 

Pension plan adjustments

 

 

(19

)

 

 

36

 

 

 

53

 

 

 

59

 

Other comprehensive income (loss), net of tax

 

 

1,016

 

 

 

(1,615

)

 

 

(2,348

)

 

 

(2,272

)

Comprehensive income (loss) attributable to VOXX International Corporation and Subsidiaries

 

$

8,437

 

 

$

(29,736

)

 

$

(11,670

)

 

$

(27,366

)

Income (loss) per share - basic: Attributable to VOXX International Corporation and Subsidiaries

 

$

0.30

 

 

$

(1.16

)

 

$

(0.38

)

 

$

(1.03

)

Income (loss) per share - diluted: Attributable to VOXX International Corporation and Subsidiaries

 

$

0.30

 

 

$

(1.16

)

 

$

(0.38

)

 

$

(1.03

)

Weighted-average common shares outstanding (basic)

 

 

24,389,375

 

 

 

24,289,909

 

 

 

24,408,541

 

 

 

24,279,084

 

Weighted-average common shares outstanding (diluted)

 

 

24,621,359

 

 

 

24,289,909

 

 

 

24,408,541

 

 

 

24,279,084

 

 

See accompanying notes to unaudited consolidated financial statements.

5


 

VOXX International Corporation and Subsidiaries

Unaudited Consolidated Statements of Stockholders' Equity

For the three and nine months ended November 30, 2022 and 2021

(In thousands, except share and per share data)

 

6


 

 

 

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

 

 

 

296,311

 

 

 

109,830

 

 

 

(20,867

)

 

 

(36,290

)

 

 

(25,138

)