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, 2023


☐	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 6, 2023
Class A Common Stock		20,384,193 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, 2023 (unaudited) and February 28, 2023	3
	Unaudited Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended August 31, 2023 and 2022	5
	Unaudited Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended August 31, 2023 and 2022	6
	Unaudited Consolidated Statements of Cash Flows for the Six Months Ended August 31, 2023 and 2022	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	46
Item 4	CONTROLS AND PROCEDURES	46

PART II	OTHER INFORMATION

Item 1	LEGAL PROCEEDINGS	47
Item 1A	RISK FACTORS	47
Item 2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	47
Item 6	EXHIBITS	48
SIGNATURES		49

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, 2023			February 28, 2023
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	5,934		$	6,134
Accounts receivable, net of allowances of $2,005 and $2,515 at August 31, 2023 and February 28, 2023, respectively		62,184			82,753
Inventory		174,195			175,129
Receivables from vendors		338			112
Due from GalvanEyes LLC (Note 20)		2,500			—
Prepaid expenses and other current assets		19,816			19,817
Income tax receivable		1,079			1,076
Total current assets		266,046			285,021
Investment securities		934			1,053
Equity investment		21,663			22,018
Property, plant and equipment, net		45,931			47,044
Operating lease, right of use assets		3,397			3,632
Goodwill		64,297			65,308
Intangible assets, net		86,473			90,437
Deferred income tax assets		1,209			1,218
Other assets		3,067			3,720
Total assets	$	493,017		$	519,451
Liabilities, Redeemable Equity, Redeemable Non-Controlling Interest, and Stockholders' Equity
Current liabilities:
Accounts payable	$	36,786		$	35,099
Accrued expenses and other current liabilities		40,036			41,856
Income taxes payable		1,593			2,276
Accrued sales incentives		18,598			21,778
Contingent consideration, current (Note 2)		4,500			4,500
Final arbitration award payable (Note 23)		45,987			43,388
Contract liabilities, current		3,520			3,990
Current portion of long-term debt		500			500
Total current liabilities		151,520			153,387
Long-term debt, net of debt issuance costs		41,213			37,513
Finance lease liabilities, less current portion		366			63
Operating lease liabilities, less current portion		2,390			2,509
Deferred compensation		934			1,053
Deferred income tax liabilities		4,599			4,855
Other tax liabilities		875			966
Prepaid ownership interest in EyeLock LLC due to GalvanEyes LLC (Note 20)		9,817			7,317
Other long-term liabilities		2,146			2,947
Total liabilities		213,860			210,610
Commitments and contingencies (Note 23)
Redeemable equity (Note 8)		4,064			4,018
Redeemable non-controlling interest (Note 2)		(2,093	)		232
Stockholders' equity:
Preferred stock:
No shares issued or outstanding (Note 19)		—			—
Common stock:
Class A, $.01 par value, 60,000,000 shares authorized, 24,553,184 and 24,538,184 shares issued and 20,543,609 and 21,167,527 shares outstanding at August 31, 2023 and February 28, 2023, respectively		246			246
Class B Convertible, $.01 par value, 10,000,000 shares authorized, 2,260,954 shares issued and outstanding at both August 31, 2023 and February 28, 2023		22			22
Paid-in capital		297,043			296,577
Retained earnings		77,320			97,997
Accumulated other comprehensive loss		(17,654	)		(18,680	)
Less: Treasury stock, at cost, 4,009,575 and 3,370,657 shares of Class A Common Stock at August 31, 2023 and February 28, 2023, respectively		(37,257	)		(30,285	)
Less: Redeemable equity		(4,064	)		(4,018	)
Total VOXX International Corporation stockholders' equity		315,656			341,859
Non-controlling interest		(38,470	)		(37,268	)
Total stockholders' equity		277,186			304,591
Total liabilities, redeemable equity, redeemable non-controlling interest, and stockholders' equity	$	493,017		$	519,451

See accompanying notes to unaudited consolidated financial statements.

VOXX International Corporation and Subsidiaries

Unaudited Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share data)


	Three months ended August 31,						Six months ended August 31,
	2023			2022			2023			2022
Net sales	$	113,642		$	125,705		$	225,568		$	254,437
Cost of sales		85,017			96,448			169,363			191,941
Gross profit		28,625			29,257			56,205			62,496
Operating expenses:
Selling		10,021			11,865			21,187			24,150
General and administrative		17,250			18,853			36,677			37,983
Engineering and technical support		7,857			8,284			16,194			16,673
Acquisition costs		—			—			—			136
Restructuring expenses		2,008			229			2,067			229
Total operating expenses		37,136			39,231			76,125			79,171
Operating loss		(8,511	)		(9,974	)		(19,920	)		(16,675	)
Other (expense) income:
Interest and bank charges		(1,573	)		(911	)		(3,119	)		(1,641	)
Equity in income of equity investee		1,241			1,763			2,857			3,351
Final arbitration award (see Note 23)		(1,612	)		(986	)		(2,598	)		(1,972	)
Other, net		(952	)		(1,519	)		(1,653	)		(3,629	)
Total other expense, net		(2,896	)		(1,653	)		(4,513	)		(3,891	)
Loss before income taxes		(11,407	)		(11,627	)		(24,433	)		(20,566	)
Income tax expense (benefit)		1,170			(708	)		(151	)		(1,800	)
Net loss		(12,577	)		(10,919	)		(24,282	)		(18,766	)
Less: net loss attributable to non-controlling interest		(1,513	)		(703	)		(2,480	)		(2,023	)
Net loss attributable to VOXX International Corporation and Subsidiaries	$	(11,064	)	$	(10,216	)	$	(21,802	)	$	(16,743	)
Other comprehensive income (loss):
Foreign currency translation adjustments		820			(2,128	)		1,058			(3,622	)
Derivatives designated for hedging		34			99			(26	)		186
Pension plan adjustments		(5	)		40			(6	)		72
Other comprehensive income (loss), net of tax		849			(1,989	)		1,026			(3,364	)
Comprehensive loss attributable to VOXX International Corporation and Subsidiaries	$	(10,215	)	$	(12,205	)	$	(20,776	)	$	(20,107	)
Loss per share - basic: Attributable to VOXX International Corporation and Subsidiaries	$	(0.47	)	$	(0.42	)	$	(0.92	)	$	(0.69	)
Loss per share - diluted: Attributable to VOXX International Corporation and Subsidiaries	$	(0.47	)	$	(0.42	)	$	(0.92	)	$	(0.69	)
Weighted-average common shares outstanding (basic)		23,462,575			24,423,577			23,629,147			24,418,020
Weighted-average common shares outstanding (diluted)		23,462,575			24,423,577			23,629,147			24,418,020

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, 2023 and 2022

(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 Interest			Treasury Stock			Redeemable Equity			Total Stock- holders' Equity
Balances at February 28, 2023	$	268	$	296,577		$	97,997		$	(18,680	)	$	(37,268	)	$	(30,285	)	$	(4,018	)	$	304,591
Net loss		—		—			(10,738	)		—			(649	)		—			—			(11,387	)
Other comprehensive income, net of tax		—		—			—			177			—			—			—			177
Repurchase of 371,087 shares of common stock		—		—			—			—			—			(4,113	)		—			(4,113	)
Stock-based compensation expense		—		258			—			—			—			—			(23	)		235
Balances at May 31, 2023		268		296,835			87,259			(18,503	)		(37,917	)		(34,398	)		(4,041	)		289,503
Net loss		—		—			(11,064	)		—			(553	)		—			—			(11,617	)
Prior period adjustment (Note 2)		—		—			1,125			—			—			—			—			1,125
Other comprehensive loss, net of tax		—		—			—			849			—			—			—			849
Repurchase of 267,831 shares of Class A common stock		—		—			—			—			—			(2,859	)		—			(2,859	)
Stock-based compensation expense		—		208			—			—			—			—			(23	)		185
Balances at August 31, 2023		268		297,043			77,320			(17,654	)		(38,470	)		(37,257	)		(4,064	)		277,186


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		—		—			—			—