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 November 30, 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 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

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VOXX International Corporation and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share data)


	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.

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.

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)


	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	)		(3,783	)		320,331
Net income (loss)		—