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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, 2023

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 8, 2024

Class A Common Stock

 

20,337,009 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, 2023 (unaudited) and February 28, 2023

 

3

 

 

Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Nine Months Ended November 30, 2023 and 2022

 

5

 

 

Unaudited Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended November 30, 2023 and 2022

 

6

 

 

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

 

47

Item 4

 

CONTROLS AND PROCEDURES

 

47

 

 

 

 

 

PART II

 

OTHER INFORMATION

 

 

 

 

 

 

 

Item 1

 

LEGAL PROCEEDINGS

 

48

Item 1A

 

RISK FACTORS

 

48

Item 2

 

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

48

Item 6

 

EXHIBITS

 

49

SIGNATURES

 

50

 

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,
2023

 

 

February 28,
2023

 

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

10,393

 

 

$

6,134

 

Accounts receivable, net of allowances of $2,165 and $2,515 at November 30, 2023 and February 28, 2023, respectively

 

 

91,631

 

 

 

82,753

 

Inventory

 

 

146,244

 

 

 

175,129

 

Receivables from vendors

 

 

1,668

 

 

 

112

 

Due from GalvanEyes LLC (Note 21)

 

 

2,547

 

 

 

 

Prepaid expenses and other current assets

 

 

20,259

 

 

 

19,817

 

Income tax receivable

 

 

1,354

 

 

 

1,076

 

Total current assets

 

 

274,096

 

 

 

285,021

 

Investment securities

 

 

909

 

 

 

1,053

 

Equity investment

 

 

21,523

 

 

 

22,018

 

Property, plant and equipment, net

 

 

45,857

 

 

 

47,044

 

Operating lease, right of use assets

 

 

3,082

 

 

 

3,632

 

Goodwill

 

 

64,122

 

 

 

65,308

 

Intangible assets, net

 

 

84,760

 

 

 

90,437

 

Deferred income tax assets

 

 

1,209

 

 

 

1,218

 

Other assets

 

 

2,831

 

 

 

3,720

 

Total assets

 

$

498,389

 

 

$

519,451

 

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

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

35,818

 

 

$

35,099

 

Accrued expenses and other current liabilities

 

 

41,073

 

 

 

41,856

 

Income taxes payable

 

 

170

 

 

 

2,276

 

Accrued sales incentives

 

 

24,036

 

 

 

21,778

 

Contingent consideration, current (Note 2)

 

 

 

 

 

4,500

 

Final arbitration award payable (Note 24)

 

 

46,738

 

 

 

43,388

 

Contract liabilities, current

 

 

3,341

 

 

 

3,990

 

Current portion of long-term debt

 

 

500

 

 

 

500

 

Total current liabilities

 

 

151,676

 

 

 

153,387

 

Long-term debt, net of debt issuance costs

 

 

47,088

 

 

 

37,513

 

Finance lease liabilities, less current portion

 

 

319

 

 

 

63

 

Operating lease liabilities, less current portion

 

 

2,192

 

 

 

2,509

 

Deferred compensation

 

 

909

 

 

 

1,053

 

Deferred income tax liabilities

 

 

4,777

 

 

 

4,855

 

Other tax liabilities

 

 

768

 

 

 

966

 

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

 

 

9,817

 

 

 

7,317

 

Other long-term liabilities

 

 

2,120

 

 

 

2,947

 

Total liabilities

 

 

219,666

 

 

 

210,610

 

Commitments and contingencies (Note 24)

 

 

 

 

 

 

Redeemable equity (Note 8)

 

 

4,087

 

 

 

4,018

 

Redeemable non-controlling interest (Note 2)

 

 

(2,691

)

 

 

232

 

Stockholders' equity:

 

 

 

 

 

 

Preferred stock:

 

 

 

 

 

 

No shares issued or outstanding (Note 20)

 

 

 

 

 

 

Common stock:

 

 

 

 

 

 

Class A, $.01 par value, 60,000,000 shares authorized, 24,558,184 and 24,538,184 shares issued and 20,332,009 and 21,167,527 shares outstanding at November 30, 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 November 30, 2023 and February 28, 2023

 

 

22

 

 

 

22

 

Paid-in capital

 

 

297,220

 

 

 

296,577

 

Retained earnings

 

 

79,232

 

 

 

97,997

 

Accumulated other comprehensive loss

 

 

(17,405

)

 

 

(18,680

)

Less: Treasury stock, at cost, 4,226,175 and 3,370,657 shares of Class A Common Stock at November 30, 2023 and February 28, 2023, respectively

 

 

(38,940

)

 

 

(30,285

)

Less: Redeemable equity

 

 

(4,087

)

 

 

(4,018

)

Total VOXX International Corporation stockholders' equity

 

 

316,288

 

 

 

341,859

 

Non-controlling interest

 

 

(38,961

)

 

 

(37,268

)

Total stockholders' equity

 

 

277,327

 

 

 

304,591

 

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

 

$

498,389

 

 

$

519,451

 

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,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net sales

 

$

135,260

 

 

$

143,055

 

 

$

360,828

 

 

$

397,492

 

Cost of sales

 

 

98,918

 

 

 

105,918

 

 

 

268,281

 

 

 

297,859

 

Gross profit

 

 

36,342

 

 

 

37,137

 

 

 

92,547

 

 

 

99,633

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling

 

 

10,967

 

 

 

11,413

 

 

 

32,154

 

 

 

35,563

 

General and administrative

 

 

15,944

 

 

 

15,920

 

 

 

52,621

 

 

 

53,903

 

Engineering and technical support

 

 

7,063

 

 

 

7,171

 

 

 

23,257

 

 

 

23,844

 

Acquisition costs

 

 

 

 

 

 

 

 

 

 

 

136

 

Restructuring expenses

 

 

101

 

 

 

303

 

 

 

2,168

 

 

 

532

 

Total operating expenses

 

 

34,075

 

 

 

34,807

 

 

 

110,200

 

 

 

113,978

 

Operating income (loss)

 

 

2,267

 

 

 

2,330

 

 

 

(17,653

)

 

 

(14,345

)

Other (expense) income:

 

 

 

 

 

 

 

 

 

 

 

 

Interest and bank charges

 

 

(1,892

)

 

 

(1,460

)

 

 

(5,011

)

 

 

(3,101

)

Equity in income of equity investee

 

 

1,101

 

 

 

2,022

 

 

 

3,958

 

 

 

5,373

 

Final arbitration award (see Note 24)

 

 

(752

)

 

 

(986

)

 

 

(3,350

)

 

 

(2,958

)

Other, net

 

 

156

 

 

 

460

 

 

 

(1,497

)

 

 

(3,169

)

Total other (expense) income, net

 

 

(1,387

)

 

 

36

 

 

 

(5,900

)

 

 

(3,855

)

Income (loss) before income taxes

 

 

880

 

 

 

2,366

 

 

 

(23,553

)

 

 

(18,200

)

Income tax expense (benefit)

 

 

97

 

 

 

(3,988

)

 

 

(54

)

 

 

(5,788

)

Net income (loss)

 

 

783

 

 

 

6,354

 

 

 

(23,499

)

 

 

(12,412

)

Less: net loss attributable to non-controlling interest

 

 

(1,129

)

 

 

(1,067

)

 

 

(3,609

)

 

 

(3,090

)

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

 

$

1,912

 

 

$

7,421

 

 

$

(19,890

)

 

$

(9,322

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

279

 

 

 

957

 

 

 

1,337

 

 

 

(2,665

)

Derivatives designated for hedging

 

 

(29

)

 

 

78

 

 

 

(55

)

 

 

264

 

Pension plan adjustments

 

 

(1

)

 

 

(19

)

 

 

(7

)

 

 

53

 

Other comprehensive income (loss), net of tax

 

 

249

 

 

 

1,016

 

 

 

1,275

 

 

 

(2,348

)

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

 

$

2,161

 

 

$

8,437

 

 

$

(18,615

)

 

$

(11,670

)

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

 

$

0.08

 

 

$

0.30

 

 

$

(0.85

)

 

$

(0.38

)

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

 

$

0.08

 

 

$

0.30

 

 

$

(0.85

)

 

$

(0.38

)

Weighted-average common shares outstanding (basic)

 

 

23,270,834

 

 

 

24,389,375

 

 

 

23,510,578

 

 

 

24,408,541

 

Weighted-average common shares outstanding (diluted)

 

 

23,467,022

 

 

 

24,621,359

 

 

 

23,510,578

 

 

 

24,408,541

 

 

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, 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 income, 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

 

Net income (loss)

 

 

 

 

 

 

 

 

1,912

 

 

 

 

 

 

(491

)

 

 

 

 

 

 

 

 

1,421

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

249

 

 

 

 

 

 

 

 

 

 

 

 

249

 

Repurchase of 216,600 shares of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,683

)

 

 

 

 

 

(1,683

)

Stock-based compensation expense

 

 

 

 

 

177

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(23

)

 

 

154

 

Balances at November 30, 2023

 

$

268

 

 

$

297,220

 

 

$

79,232

 

 

$

(17,405

)

 

$

(38,961

)

 

$

(38,940

)

 

$

(4,087

)

 

$

277,327

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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)

 

 

 

 

 

 

 

 

7,421

 

 

 

 

 

 

(482

)

 

 

 

 

 

 

 

 

6,939

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

1,016

 

 

 

 

 

 

 

 

 

 

 

 

1,016

 

Repurchase of 277,961 shares of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,775

)

 

 

 

 

 

(2,775

)

Stock-based compensation expense

 

 

 

 

 

145

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(213

)

 

 

(68

)

Balances at November 30, 2022

 

$

268

 

 

$

296,456

 

 

$

117,251

 

 

$

(19,851

)

 

$

(36,772

)

 

$

(27,913

)

 

$

(3,996

)

 

$

325,443

 

 

See accompanying notes to unaudited consolidated financial statements.

6


 

VOXX International Corporation and Subsidiaries

Unaudited Consolidated Statements of Cash Flows

 

 

 

 

Nine months ended
November 30,

 

 

 

 

2023

 

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

 

$

(23,499

)

 

 

$

(12,412

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

9,445

 

 

 

 

9,924

 

Amortization of debt discount

 

 

 

300

 

 

 

 

190

 

Bad debt expense (recovery)

 

 

 

65

 

 

 

 

(125

)

Reduction in the carrying amount of the right of use asset

 

 

 

1,038

 

 

 

 

1,132

 

Gain on forward contracts

 

 

 

 

 

 

 

(60

)

Equity in income of equity investees

 

 

 

(3,958

)

 

 

 

(5,373

)

Distribution of income from equity investees

 

 

 

4,453

 

 

 

 

4,277

 

Deferred income tax (benefit) expense

 

 

 

(116

)

 

 

 

1

 

Non-cash compensation adjustment

 

 

 

(143

)

 

 

 

(63

)

Stock based compensation expense

 

 

 

643

 

 

 

 

407

 

(Gain) loss on disposal of property, plant, and equipment

 

 

 

(31

)

 

 

 

11

 

Gain on sale of intangible asset

 

 

 

(450

)

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

 

(8,585

)

 

 

 

11,851

 

Inventory

 

 

 

29,593