UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended May 31, 2001
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Commission file number 0-28839
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AUDIOVOX CORPORATION
- ----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-1964841
- ------------------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 Marcus Blvd., Hauppauge, New York 11788
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (631) 231-7750
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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 X No
------- -------
Number of shares of each class of the registrant's Common Stock outstanding as
of the latest practicable date.
Class Outstanding at July 9, 2001
--------------------------------------------------------------------
Class A Common Stock 20,621,338 Shares
Class B Common Stock 2,260,954 Shares
1
AUDIOVOX CORPORATION
I N D E X
Page
Number
PART I FINANCIAL INFORMATION
ITEM 1 Financial Statements:
Consolidated Balance Sheets at November 30,
2000 and May 31, 2001 (unaudited) 3
Consolidated Statements of Operations for the
Three and Six Months Ended May 31, 2000
and May 31, 2001 (unaudited) 4
Consolidated Statements of Cash Flows
for the Six Months Ended May 31, 2000
and May 31, 2001 (unaudited) 5
Notes to Consolidated Financial Statements 6-13
ITEM 2 Management's Discussion and Analysis of
Financial Operations and Results of
Operations 14-31
PART II OTHER INFORMATION
ITEM 4 Submission of Matters to a Vote of Security Holders 32
ITEM 6 Exhibits and Reports on Form 8-K 32
SIGNATURES 33
2
AUDIOVOX CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share data)
November 30, May 31,
2000 2001
--------- ---------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 6,431 $ 3,654
Accounts receivable, net 279,402 198,650
Inventory, net 140,065 236,916
Receivable from vendor 5,566 9,204
Prepaid expenses and other current assets 6,830 7,033
Deferred income taxes, net 12,244 12,824
--------- ---------
Total current assets 450,538 468,281
Investment securities 5,484 8,048
Equity investments 11,418 13,240
Property, plant and equipment, net 27,996 26,882
Excess cost over fair value of assets acquired and other intangible assets, net 5,098 4,920
Other assets 2,325 1,462
--------- ---------
$ 502,859 $ 522,833
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 61,060 $ 38,106
Accrued expenses and other current liabilities 62,569 50,453
Income taxes payable 6,274 --
Bank obligations 8,104 6,621
Notes payable 5,868 5,384
Current installment of long-term debt 486 --
--------- ---------
Total current liabilities 144,361 100,564
Bank obligations 15,000 81,625
Deferred income taxes, net 972 1,950
Capital lease obligation 6,260 6,246
Deferred compensation 2,208 4,098
--------- ---------
Total liabilities 168,801 194,483
--------- ---------
Minority interest 3,555 2,140
--------- ---------
Stockholders' equity:
Preferred stock, liquidation preference of $2,500 2,500 2,500
Common stock:
Class A; 60,000,000 authorized; 20,291,046 and 20,605,846 issued at
November 30, 2000 and May 31, 2001, respectively, 19,528,554 and
19,695,459 outstanding at November 30, 2000 and May 31, 2001,
respectively 204 207
Class B convertible; 10,000,000 authorized; 2,260,954 issued and
outstanding 22 22
Paid-in capital 248,468 250,784
Retained earnings 90,371 84,671
Accumulated other comprehensive loss (5,058) (4,587)
Treasury stock, at cost, 762,492 and 910,387 Class A common stock at
November 30, 2000 and May 31, 2001, respectively (6,004) (7,387)
--------- ---------
Total stockholders' equity 330,503 326,210
--------- ---------
Commitments and contingencies
Total liabilities and stockholders' equity $ 502,859 $ 522,833
========= =========
See accompanying notes to consolidated financial statements.
3
AUDIOVOX CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
For the Three and Six Months Ended May 31, 2000 and May 31, 2001
(In thousands, except share and per share data)
(unaudited)
Three Months Ended Six Months Ended
May 31, May 31, May 31, May 31,
2000 2001 2000 2001
------------ ------------ ------------ ------------
Net sales $ 381,634 $ 276,131 $ 721,790 $ 606,879
Cost of sales (including an inventory write-
down to market of $13,500 in 2001) 344,503 265,587 649,791 566,495
------------ ------------ ------------ ------------
Gross profit 37,131 10,544 71,999 40,384
------------ ------------ ------------ ------------
Operating expenses:
Selling 10,952 7,192 21,310 16,963
General and administrative 11,952 10,577 22,544 21,711
Warehousing and assembly 5,216 5,956 10,053 11,302
------------ ------------ ------------ ------------
Total operating expenses 28,120 23,725 53,907 49,976
------------ ------------ ------------ ------------
Operating income (loss) 9,011 (13,181) 18,092 (9,592)
------------ ------------ ------------ ------------
Other income (expense):
Interest and bank charges (1,668) (1,453) (4,307) (2,459)
Equity in income of equity investments, net 789 1,191 1,779 2,561
Gain on sale of investments 1,943 -- 2,274 --
Gain on hedge of available-for-sale securities 750 -- 750 --
Other, net 246 531 1,255 601
------------ ------------ ------------ ------------
Total other income (expense), net 2,060 269 1,751 703
------------ ------------ ------------ ------------
Income (loss) before provision for (recovery of)
income taxes 11,071 (12,912) 19,843 (8,889)
Provision for (recovery of) income taxes 4,160 (4,649) 7,631 (3,191)
------------ ------------ ------------ ------------
Net income (loss) $ 6,911 $ (8,263) $ 12,212 $ (5,698)
============ ============ ============ ============
Net income (loss) per common share (basic) $ 0.32 $ (0.38) $ 0.58 $ (0.26)
============ ============ ============ ============
Net income (loss) per common share (diluted) $ 0.30 $ (0.38) $ 0.54 $ (0.26)
============ ============ ============ ============
Weighted average number of common shares
outstanding (basic) 21,851,543 21,920,990 20,896,115 21,787,738
============ ============ ============ ============
Weighted average number of common shares
outstanding (diluted) 23,398,551 21,920,990 22,481,811 21,787,738
============ ============ ============ ============
See accompanying notes to consolidated financial statements.
4
AUDIOVOX CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six Months Ended May 31, 2000 and May 31, 2001
(In thousands)
(unaudited)
May 31, May 31,
2000 2001
-------- --------
Cash flows from operating activities:
Net income (loss) $ 12,212 $ (5,698)
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Gain on hedge of available-for-sale securities (750) --
Depreciation and amortization 1,777 2,119
Provision for bad debt expense 572 331
Equity in income of equity investments, net (1,779) (2,561)
Minority interest 402 (382)
Gain on sale of investments (2,274) --
Deferred income tax (expense) benefit (1,498) 124
Gain on disposal of property, plant and equipment, net (4) (1)
Changes in:
Accounts receivable 35,076 80,347
Receivable from vendor (3,627) (3,638)
Inventory (56,507) (96,956)
Accounts payable, accrued expenses and other current liabilities (4,009) (34,903)
Income taxes payable 924 (6,274)
Deferred compensation 2,240 1,890
Investment securities - trading (2,240) (1,890)
Prepaid expenses and other, net (802) 733
-------- --------
Net cash used in operating activities (20,287) (66,759)
-------- --------
Cash flows from investing activities:
Purchases of property, plant and equipment, net (9,322) (1,342)
Net proceeds from sale of investment securities 12,957 --
Proceeds from distribution from equity investment 927 709
Proceeds from transfer of shares from equity investment 922 --
-------- --------
Net cash provided by (used in) investing activities 5,484 (633)
-------- --------
Cash flows from financing activities:
Net (repayments) borrowings of bank obligations (67,727) 65,221
Payment of dividend to minority shareholder of subsidiary (859) (1,034)
Net repayments under documentary acceptances (1,994) --
Principal payments on capital lease obligation (9) (14)
Proceeds from exercise of stock options and warrants 509 2,320
Repurchase of Class A common stock -- (1,382)
Net proceeds from follow-on offering 96,623 --
Issuance of notes payable 6,068 --
Principal payments on subordinated debentures -- (486)
-------- --------
Net cash provided by financing activities 32,611 64,625
-------- --------
Effect of exchange rate changes on cash (31) (10)
-------- --------
Net increase (decrease) in cash 17,777 (2,777)
Cash at beginning of period 5,527 6,431
-------- --------
Cash and cash equivalents at end of period $ 23,304 $ 3,654
======== ========
See accompanying notes to consolidated financial statements.
5
AUDIOVOX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three and Six Months Ended May 31, 2000 and May 31, 2001
(Dollars in thousands, except share and per share data)
(1) Basis of Presentation
The accompanying consolidated financial statements were prepared in
accordance with generally accepted accounting principles and include
all adjustments, which include only normal recurring adjustments,
which, in the opinion of management, are necessary to present fairly
the consolidated financial position of Audiovox Corporation and
subsidiaries (the Company) as of November 30, 2000 and May 31, 2001,
the consolidated statements of operations for the three and six month
periods ended May 31, 2000 and May 31, 2001, and the consolidated
statements of cash flows for the six month periods ended May 31, 2000
and May 31, 2001. The interim figures are not necessarily indicative
of the results for the year.
Accounting policies adopted by the Company are identified in Note 1 of
the Notes to Consolidated Financial Statements included in the
Company's 2000 Annual Report filed on Form 10-K. Certain
reclassifications have been made to the 2000 consolidated financial
statements in order to conform to the 2001 presentation.
(2) Supplemental Cash Flow Information
The following is supplemental information relating to the consolidated
statements of cash flows:
Six Months Ended
May 31, May 31,
2000 2001
------- -------
Cash paid during the period:
Interest (excluding bank charges) $3,503 $1,392
Income taxes $7,662 $2,037
During the six months ended May 31, 2000 and May 31, 2001, the Company
recorded a net unrealized holding (loss) gain relating to
available-for-sale marketable securities, net of deferred taxes, of
$(7,102) and $420, respectively, as a component of accumulated other
comprehensive loss.
6
AUDIOVOX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
During the quarter ended May 31, 2001, 314,800 warrants were exercised
and converted into 314,800 shares of common stock.
(3) During 1997, the Company's Board of Directors approved the
repurchase of up to 1,000,000 shares of the Company's Class A Common
Stock. In 1999, the Company's Board of Directors approved to increase
the repurchase program to 1,563,000 shares of the Company's Class A
common stock. During the six months ended May 31, 2001, 147,895 shares
were repurchased for an aggregate amount of $1,382.
(4) Net Income (Loss) Per Common Share
A reconciliation between the numerators and denominators of the basic
and diluted income (loss) per common share is as follows:
Three Months Ended Six Months Ended
May 31, May 31, May 31, May 31,
2000 2001 2000 2001
----------- ------------- ---------- --------
Net income (loss) (numerator for basic
income per share) $ 6,911 $ (8,263) $ 12 ,212 $ (5,698)
Interest on 6 1/4% convertible subordinated
debentures, net of tax 7 -- 16 5
----------- ------------- ---------- -------------
Adjusted net income (loss) (numerator for
diluted income per share) $ 6,918 $ (8,263) $ 12,228 $ (5,693)
============ ============= ============ =============
Weighted average common shares
(denominator for basic income per
share) 21,851,543 21,920,990 20,896,115 21,787,738
Effect of dilutive securities:
6 1/4% convertible subordinated
debentures 42,146 -- 49,887 --
Employee stock options and stock
warrants 1,500,904 -- 1,527,005 --
Employee stock grants 3,958 -- 8,804 --
----------- ------------- ---------- -------------
Weighted average common and potential
common shares outstanding
(denominator for diluted income per
share) 23,398,551 21,920,990 22,481,811 21,787,738
=========== ============ ========== =============
Basic income (loss) per share $ 0.32 $ (0.38) $ 0.58 $ (0.26)
============ =========== ============ ==========
Diluted income (loss) per share $ 0.30 $ (0.38) $ 0.54 $ (0.26)
============ =========== ============ ==========
7
AUDIOVOX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
There were no anti-dilutive stock options or stock warrants for the
three and six months ended May 31, 2000. Stock options and warrants
totaling 2,789,504 and 2,177,252 for the three and six months ended May
31, 2001, respectively, were not included in the net loss per common
share calculation because their effect would have been anti-dilutive.
(5) Comprehensive Income (Loss)
---------------------------
The accumulated other comprehensive loss of $5,058 and $4,587 at
November 30, 2000 and May 31, 2001, respectively, on the accompanying
consolidated balance sheets is the net accumulated unrealized gain
(loss) on the Company's available-for-sale investment securities of
$(190) and $230 at November 30, 2000 and May 31, 2001, respectively,
and the accumulated foreign currency translation adjustment of $(4,868)
and $(4,817) at November 30, 2000 and May 31, 2001, respectively.
The Company's total comprehensive income (loss) was as follows:
Three Months Six Months
Ended Ended
May 31, May 31,
2000 2001 2000 2001
------- ------- -------- -------
Net income (loss) $ 6,911 $(8,263) $ 12,212 $(5,698)
------- ------- -------- -------
Other comprehensive income (loss):
Foreign currency translation
adjustments (389) 18 457 51
Unrealized gain (loss) on securities:
Unrealized holding gain (loss)
arising during period, net of tax (6,223) 811 (7,102) 420
Less: reclassification adjustment
for gains realized in net income,
net of tax (1,207) -- (1,410) --
------- ------- -------- -------
Net unrealized gain (loss) (7,430) 811 (8,512) 420
------- ------- -------- -------
Other comprehensive gain (loss), net
of tax (7,819) 829 (8,055) 471
------- ------- -------- -------
Total comprehensive income (loss) $ (908) $(7,434) $ 4,157 $(5,227)
======= ======= ======== =======
8
AUDIOVOX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The change in the net unrealized gain (loss) arising during the period
presented above are net of tax (expense) benefit of $(4,554) and $497
for the three months ended May 31, 2000 and May 31, 2001, respectively,
and $(5,217) and $257 for the six months ended May 31, 2000 and May 31,
2001, respectively. The reclassification adjustment presented above is
net of tax expense of $736 for the three months ended May 31, 2000 and
$864 for the six months ended May 31, 2000. There was no
reclassification adjustment for the three and six months ended May 31,
2001.
(6) Segment Information
The Company has two reportable segments which are organized by
products: Wireless and Electronics. The Wireless segment markets
wireless handsets and accessories through domestic and international
wireless carriers and their agents, independent distributors and
retailers. The Electronics segment sells autosound, mobile electronics
and consumer electronics, primarily to mass merchants, power retailers,
specialty retailers, new car dealers, original equipment manufacturers
(OEM), independent installers of automotive accessories and the U.S.
military.
The Company evaluates performance of the segments based upon income
before provision for income taxes. The accounting policies of the
segments are the same as those for the Company as a whole. The Company
allocates interest and certain shared expenses, including treasury,
legal and human resources, to the segments based upon estimated usage.
Intersegment sales are reflected at cost and have been eliminated in
consolidation. A royalty fee on the intersegment sales, which is
eliminated in consolidation, is recorded by the segments and included
in other income (expense). Certain items are maintained at the
Company's corporate headquarters (Corporate) and are not allocated to
the segments. They primarily include costs associated with accounting
and certain executive officer salaries and bonuses and certain items
including investment securities, equity investments, deferred income
taxes, certain portions of excess cost over fair value of assets
acquired, jointly-used fixed assets and debt. The jointly-used fixed
assets are the Company's management information systems, which are used
by the Wireless and Electronics segments and Corporate. A portion of
the management information systems costs, including depreciation and
amortization expense, are allocated to the segments based upon
estimates made by management. During the six months ended May 31, 2000
and May 31, 2001, certain advertising costs were not allocated to the
segments. These costs pertained to an advertising campaign that was
intended to promote overall Company awareness, rather than individual
segment products.
9
AUDIOVOX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Segment identifiable assets are those which are directly used in or
identified to segment operations.
Elimin- Consolidated
Wireless Electronics Corporate ations Totals
Three Months Ended
May 31, 2000
Net sales $ 312,064 $ 69,570 -- -- $ 381,634
Intersegment sales (purchases) (1,069) 1,069 -- -- --
Pre-tax income 7,171 3,801 $ 99 -- 11,071
Three Months Ended
May 31, 2001
Net sales $ 200,657 $ 75,474 -- -- $ 276,131
Intersegment sales (purchases) (92) 92 -- -- --
Pre-tax income (loss) (15,769) 3,196 $ (339) -- (12,912)
Six Months Ended
May 31, 2000
Net sales $ 588,688 $133,102 -- -- $ 721,790
Intersegment sales (purchases) (2,146) 2,146 -- -- --
Pre-tax income 12,810 7,031 $ 2 -- 19,843
Total assets 310,510 100,623 333,691 $(241,519) 503,305
Six Months Ended
May 31, 2001
Net sales $ 465,799 $141,080 -- -- $ 606,879
Intersegment sales (purchases) (213) 213 -- -- --
Pre-tax income (loss) (12,445) 5,507 $ (1,951) -- (8,889)
Total assets 326,741 125,579 367,447 $(296,934) 522,833
(7) Audiovox Communications Corp. Dividend
In February 2000 and 2001, the Board of Directors of Audiovox
Communications Corp. (ACC), declared a dividend payable to its
shareholders, Audiovox Corporation, a 95% shareholder, and Toshiba
Corporation (Toshiba), a 5% shareholder. ACC paid Toshiba its
10
AUDIOVOX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
share of the dividend, which approximated $859 and $1,034 in the second
quarter of 2000 and the first quarter of 2001, respectively.
(8) Accounting for Derivative Instruments and Hedging Activities
On December 1, 2000, the Company adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities", which, as amended, is
effective for fiscal years beginning after June 15, 2000. This
statement establishes accounting and reporting standards for derivative
instruments and requires the recognition of all derivative instruments
as either assets or liabilities in the statement of financial position
based on their fair values. Changes in the fair values are required to
be reported in earnings or other comprehensive income depending on the
use of the derivative and whether it qualifies for hedge accounting.
Derivatives designated as effective cash flow hedges qualify for hedge
accounting and, therefore, changes in fair values are recognized in
other comprehensive income. Changes in fair values related to the
ineffective portion of cash flow hedges, as well as fair value hedges,
must be recognized immediately in earnings.
The Company uses derivative instruments primarily to manage exposures
related to foreign currency denominated receivables and payables. To
accomplish this, the Company uses certain contracts, primarily foreign
currency forward contracts, which minimize cash flow risks from changes
in foreign currency exchange rates. Implementation of SFAS No. 133 did
not have an impact on the Company's financial positions, results of
operations or liquidity. As of May 31, 2001, the Company did not have
any derivative instruments.
(9) Product Return
During the quarter ended February 28, 2001, Wireless refunded
approximately $21,000 to a customer, who is a wireless carrier, for the
return of approximately 97,000 tri-mode phones. During January 2001,
Wireless also purchased 93,600 of the same model of tri-mode phone for
a cost of $12.4 million. As a result of changes in the marketplace for
wireless products, the selling price of the phones has been reduced
below the original cost. The Company did not record a write-down on
these phones as they expected to receive a full refund or partial
credit from the manufacturer of the phones during the second quarter.
In April 2001, the Company received a credit from the manufacturer of
$12.4 million. The credit was applied against the carrying value of the
phones on hand which approximated 190,600 phones.
11
AUDIOVOX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(10) Inventory Write-Down
. During the quarter ended May 31, 2001, the Company recorded a charge of
$13.5 million to write-down its remaining inventory of analog mobile
telephones which approximated 300,000 units. The write-down was
recorded in response to current market conditions and a surplus of
supply that other manufacturers are trying to reduce through decreased
prices.
(11) Stock Warrants
During the quarter ended May 31, 2001, 314,800 of the Company's
remaining 344,800 stock warrants were exercised and converted into
314,800 shares of common stock. The remaining 30,000 warrants expired
during the quarter.
(12) Bond Repayment
During the quarter ended May 31, 2001, the Company paid $486 to the
remaining holders of the Company's subordinated convertible debentures.
There are no remaining debentures as of May 31, 2001.
(13) Sales/Leaseback Transaction
During the quarter ended May 31, 2000, the Company incorporated AX
Japan, Inc. (AX Japan), a wholly-owned subsidiary, with 60,000,000 Yen
(approximately $564). In April 2000, AX Japan purchased land and a
building (herein referred to as the Property) from Shintom Co., Ltd.
(Shintom) for 770,000,000 Yen (approximately $7,300) and entered into a
leaseback agreement whereby Shintom has leased the Property from AX
Japan for a one- year period. This lease is being accounted for as an
operating lease by AX Japan. Shintom is a stockholder who owns all of
the outstanding preferred stock of the Company and is a manufacturer of
products purchased by the Company through its equity investment, TALK
Corporation. The Company currently holds stock in Shintom and has
previously invested in Shintom convertible debentures.
Upon the expiration of six months after the transfer of the title to
the Property to AX Japan, Shintom had the option to repurchase the
Property or purchase all of the shares of stock of AX Japan. These
options could be extended for one additional six-month period.
12
AUDIOVOX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
In May, 2001, upon the expiration of the additional six-month period,
the Company and Shintom agreed to extend the lease for an additional
one-year period. In addition, Shintom was again given the option to
purchase the Property or shares of stock of AX Japan after the
expiration of a six-month period or extend the option for one
additional six-month period. AX Japan was also given the option to
delay the repayment of the loans for an additional six months if
Shintom extended its option for an additional six months.
(14) Debt Convenants
The Company maintains a revolving credit agreement with various
financial institutions. The credit agreement contains several
convenants requiring, among other things, minimum levels of pre-tax
income and minimum levels of net worth and working capital.
Additionally, the agreement includes restrictions and limitations on
payments of dividends, stock repurchases and capital expenditures.
During the quarter ended May 31, 2001, the Company was not in
compliance with its pre-tax income covenant and obtained a waiver for
the quarter ended May 31, 2001.
(15) Market Development Program
In connection with the decline in the analog market, a market
development program was terminated which resulted in a reversal of
approximately $2.7 million of accrued market development funds.
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company markets its products under the Audiovox brand as well as
private labels through a large and diverse distribution network both
domestically and internationally. The Company operates through two marketing
groups: Wireless and Electronics. Wireless consists of Audiovox Communications
Corp. (ACC), a 95%-owned subsidiary of Audiovox, and Quintex, which is a
wholly-owned subsidiary of ACC. ACC markets wireless handsets and accessories
primarily on a wholesale basis to wireless carriers in the United States and, to
a lesser extent, carriers overseas. Quintex is a small operation for the direct
sale of handsets, accessories and wireless telephone service, accounting for
4.9% of Wireless' sales for the six months ended May 31, 2001.
The Electronics Group consists of two wholly-owned subsidiaries, Audiovox
Electronics Corp. (AEC) and American Radio Corp., and three majority-owned
subsidiaries, Audiovox Communications (Malaysia) Sdn. Bhd., Audiovox Holdings
(M) Sdn. Bhd. and Audiovox Venezuela, C.A. The Electronics Group markets
automotive sound and security systems, electronic car accessories, home and
portable sound products, FRS radios, in-vehicle video systems, flat-screen
televisions, DVD players and navigation systems. Sales are made through an
extensive distribution network of mass merchandisers, power retailers and
others. In addition, the Company sells some of its products directly to
automobile manufacturers on an OEM basis.
The Company allocates interest and certain shared expenses to the marketing
groups based upon estimated usage. General expenses and other income items that
are not readily allocable are not included in the results of the two marketing
groups.
14
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain statements
of operations data for the Company expressed as a percentage of net sales:
Percentage of Net Sales
Three Months Ended Six Months Ended
May 31, May 31, May 31, May 31,
2000 2001 2000 2001
------ ------ ------ ------
Net sales:
Wireless
Wireless products 79.5% 70.0% 79.2% 74.2%
Activation commissions 1.8 2.5 1.9 2.3
Residual fees 0.1 0.1 0.1 0.2
Other 0.4 0.1 0.4 0.1
------ ------ ------ ------
Total Wireless 81.8 72.7 81.6 76.8
------ ------ ------ ------
Electronics
Mobile electronics 10.0 13.5 9.7 11.7
Consumer electronics 2.8 8.5 2.5 6.4
Sound 5.1 5.1 5.9 4.9
Other 0.3 0.2 0.3 0.2
------ ------ ------ ------
Total Electronics 18.2 27.3 18.4 23.2
------ ------ ------ ------
Total net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 90.3 96.2 90.0 93.3
------ ------ ------ ------
Gross profit 9.7 3.8 10.0 6.7
Selling 2.9 2.6 3.0 2.8
General and administrative 3.1 3.8 3.1 3.6
Warehousing and assembly 1.4 2.2 1.4 1.9
------ ------ ------ ------
Total operating expenses 7.4 8.6 7.5 8.3
------ ------ ------ ------
Operating income (loss) 2.3 (4.8) 2.5 (1.6)
Interest and bank charges (0.4) (0.5) (0.6) (0.4)
Equity in income in equity investments, net 0.2 0.4 0.2 0.4
Gain on sale of investments 0.4 -- 0.3 --
Gain on hedge of available-for-sale securities 0.2 -- 0.1 --
Other, net 0.2 0.2 0.2 0.1
------ ------ ------ ------
Income (loss) before provision for (recovery of)
income taxes 2.9 (4.7) 2.7 (1.5)
Provision for (recovery of) income taxes 1.1 (1.7) 1.0 (0.6)
------ ------ ------ ------
Net income (loss) 1.8% (3.0)% 1.7% (0.9)%
====== ====== ====== ======
15
Consolidated Results
Three months ended May 31, 2000 compared to three months ended May 31, 2001
The net sales and percentage of net sales by marketing group and product
line for the three months ended May 31, 2000 and May 31, 2001 are reflected in
the following table:
Three Months Ended
May 31, 2000 May 31, 2001
------------ ------------
Net sales:
Wireless
Wireless products $303,363 79.5% $193,26 70.0%
Activation commissions 7,003 1.8 6,830 2.5
Residual fees 273 0.1 440 0.1
Other 1,425 0.4 123 0.1
-------- ---- -------- -----
Total Wireless 312,064 81.8 200,657 72.7
-------- ---- -------- -----
Electronics
Mobile electronics 38,168 10.0 37,156 13.5
Consumer electronics 10,874 2.8 23,597 8.5
Sound 19,498 5.1 14,154 5.1
Other 1,030 0.3 567 0.2
-------- ---- -------- -----
Total Electronics 69,570 18.2 75,474 27.3
-------- ---- -------- -----
Total $381,634 100.0% $276,131 100.0%
======== ====== ========= =====
Net sales for the second quarter of 2001 were $276,131, a decrease of
$105,503, or 27.6%, from 2000. The decrease in net sales was in the Wireless
Group which was slightly offset by an increase in the Electronics Group. Sales
from our international subsidiaries decreased from 2000 by approximately $360 or
5.3%. Gross margins were 3.8% in 2001 compared to 9.7% in 2000. The decrease in
gross margins was primarily due to $13,900 of charges, which includes both
realized losses and the write-down, relating to the Company's exit from the
analog market, with the exception of fixed-based cellular. The Company decided
to exit the analog market because of current market conditions, including a
decline in demand for analog phones and a surplus of supply created by other
16
manufacturers also attempting to sell-off analog inventories. Operating expenses
decreased to $23,725 from $28,120, a 15.6% decrease. As a percentage of sales,
operating expenses increased to 8.6% in 2001 from 7.4% in 2000. Operating loss
for 2001 was $(13,181) compared to operating income of $9,011 in 2000.
Six months ended May 31, 2000 compared to six months ended May 31, 2001
The net sales and percentage of net sales by marketing group and
product line for the six months ended May 31, 2000 and May 31, 2001 are
reflected in the following table:
Six Months Ended
May 31, 2000 May 31, 2001
----------------- --------------------
Net sales:
Wireless
Wireless products $571,331 79.2% $450,496 74.2%
Activation commissions 13,739 1.9 14,117 2.3
Residual fees 757 0.1 901 0.2
Other 2,861 0.4 285 0.1
-------- ---- ------- -----
Total Wireless 588,688 81.6 465,799 76.8
-------- ---- ------- -----
Electronics
Mobile electronics 69,932 9.7 70,975 11.7
Consumer electronics 18,509 2.5 38,836 6.4
Sound 42,509 5.9 30,001 4.9
Other 2,152 0.3 1,268 0.2
-------- ---- ------- -----
Total Electronics 133,102 18.4 141,080 23.2
-------- ---- ------- -----
Total $721,790 100.0% $606,879 100.0%
======== ==== ======= =====
(16) Net sales for the first six months of 2001 were $606,879, a decrease of
$114,911, or 15.9%, from 2000. The decrease in net sales was in the
Wireless Group which was slightly offset by an increase in the
Electronics Group. During the first quarter of 2001, a carrier
17
customer returned 97,000 tri-mode phones for $21,000 (See Note 9 to the
accompanying consolidated financial statements for additional
information). Sales from our international subsidiaries decreased from
2000 by approximately $340 or 2.7%. Gross margins were 6.7% in 2001
compared to 10.0% in 2000. The decrease in gross margins was primarily
due to $13,900 of charges relating to the Company's exit from the
analog market, with the exception of fixed-based cellular. Operating
expenses decreased to $49,976 from $53,907, a 7.3% decrease. As a
percentage of sales, operating expenses increased to 8.3% in 2001 from
7.5% in 2000. Operating loss for 2001 was $(9,592) compared to
operating income of $18,092 in 2000.
18
Wireless Results
Three months ended May 31, 2000 compared to three months ended May 31, 2001
The following table sets forth for the periods indicated certain
statements of operations data for the Wireless Group as expressed as a
percentage of net sales:
Three Months Ended
May 31, 2000 May 31, 2001
------------------ ------------------
Net sales:
Wireless products $ 303,363 97.2% $ 193,264 96.3%
Activation commissions 7,003 2.2 6,830 3.4
Residual fees 273 0.1 440 0.2
Other 1,425 0.5 123 0.1
--------- ----- --------- -----
312,064 100.0% 200,657 100.0%
Gross profit 22,350 7.2 (4,283) (2.1)
Total operating expenses 13,016 4.2 9,514 4.8
--------- ----- --------- -----
Operating income (loss) 9,334 3.0 (13,797) (6.9)
Other expense (2,163) (0.7) (1,972) (1.0)
--------- ----- --------- -----
Pre-tax income (loss) $ 7,171 2.3% $ (15,769) (7.9)%
========= ===== ========= =====
Net sales were $200,657 in the second quarter of 2001, a decrease of
$111,407, or 35.7%, from last year. Unit sales of wireless handsets decreased by
506,000 units in 2001, or 26.7%, to approximately 1,390,000 units from 1,896,000
units in 2000. This decrease was primarily due to decreased sales of both analog
and digital handsets which was due to delayed digital product acceptances by our
customers. The average selling price of handsets decreased to $132 per unit in
2001 from $153 per unit in 2000. The number of new wireless subscriptions
processed by Quintex increased 8.6% in 2001, but with a corresponding decrease
in activation commissions of approximately $173 in 2001. The average commission
received by Quintex per activation decreased 10.2% from 2000. Gross profit
margins decreased to (2.1%) in 2001 from 7.2% in 2000, primarily
19
due to the $13,900 of charges relating to the Company's exit from the analog
market, with the exception of fixed-based cellular. The Company decided to exit
the analog market because of current market conditions, including a decline in
demand for analog phones and a surplus of supply created by other manufacturers
also attempting to sell-off analog inventories. Gross profit margins also
decreased due to delayed introductions of newer, higher-priced models, strong
competition in the marketplace and closeout of older models. This also reflects
the competitive nature of the wireless marketplace and pricing pressures
associated with supporting various wireless carrier programs. Operating expenses
decreased to $9,514 from $13,016. Selling expenses decreased from last year,
primarily in divisional marketing. In connection with the decline in the analog
market, a market development program was terminated which resulted in a reversal
of approximately $2.7 million of accrued market development funds. In addition,
due to slowdown in the marketplace, the termination of analog programs and the
write-down, market development funds were reduced. Such decreases were partially
offset by increases in salesmen's salaries, payroll benefits and travel. General
and administrative expenses decreased from 2000, primarily in salaries, office
expenses and occupancy costs. Warehousing and assembly expenses increased during
2001 from last year, primarily in temporary personnel expenses. Operating loss
for 2001 was $(13,797) compared to last year's operating income of $9,334.
20
Six months ended May 31, 2000 compared to six months ended May 31, 2001
The following table sets forth for the periods indicated certain
statements of operations data for the Wireless Group as expressed as a
percentage of net sales:
Six Months Ended
May 31, 2000 May 31, 2001
------------------ ------------------
Net sales:
Wireless products $ 571,331 97.1% $ 450,496 96.7%
Activation commissions 13,739 2.3 14,117 3.0
Residual fees 757 0.1 901 0.2
Other 2,861 0.5 285 0.1
--------- ----- --------- -----
588,688 100.0% 465,799 100.0%
Gross profit 43,310 7.4 11,684 2.5
Total operating expenses 25,427 4.3 21,362 4.6
--------- ----- --------- -----
Operating income (loss) 17,883 3.1 (9,678) (2.1)
Other expense (5,073) (0.9) (2,767) (0.6)
--------- ----- --------- -----
Pre-tax income (loss) $ 12,810 2.2% $ (12,445) (2.7)%
========= ===== ========= =====
Net sales were $465,799 for the six months ended May 31, 2001, a decrease
of $122,889, or 20.9%, from last year. Unit sales of wireless handsets decreased
by 618,000 units in 2001, or 16.5%, to approximately 3,134,000 units from
3,752,000 units in 2000. This decrease was attributable to decreased sales of
both analog and digital handsets which was due to delayed digital product
acceptances by our customers. Additionally, a carrier customer returned 97,000
tri-mode phones for approximately $21,000. (See Note 9 to the accompanying
consolidated financial statements for additional information.) The average
selling price of handsets decreased to $137 per unit in 2001 from $147 per unit
in 2000. The number of new wireless subscriptions processed by Quintex
21
increased 13.4% in 2001, with a corresponding increase in activation commissions
of approximately $348 in 2001. The average commission received by Quintex per
activation decreased 9.6% from 2000. Gross profit margins decreased to 2.5% in
2001 from 7.4% in 2000, primarily due to the $13,900 of charges relating to the
Company's exit from the analog market, with the exception of fixed-based
cellular. Gross profit margins also decreased due to delayed introductions of
newer, higher-priced models, strong competition in the marketplace and closeout
of older models. This also reflects the competitive nature of the wireless
marketplace and pricing pressures associated with supporting various wireless
carrier programs. Operating expenses decreased to $21,362 from $25,427. Selling
expenses decreased from last year, primarily in divisional marketing. In
connection with the decline in the analog market, a market development program
was terminated which resulted in a reversal of approximately $2.7 million of
accrued market development funds. Such decreases were partially offset by
increases in commissions, payroll benefits and travel. General and
administrative expenses decreased from 2000, primarily in bad debt expense and
office expenses. Warehousing and assembly expenses increased during 2001 from
last year, primarily due to an increase in temporary personnel. Operating loss
for 2001 was $(9,678) compared to last year's operating income of $17,883.
Management believes that the wireless industry will continue to be
extremely competitive in both price and technology. As the growth in the
wireless marketplace has slowed, carrier customer purchasing practices have
changed and pricing pressures have intensified. This could affect gross margins
and the carrying value of inventories in the future. As the market for digital
products becomes more competitive and if the market for analog phones continues
to decline, the Company may be required to adjust the carrying value of its
inventory and inventory returned in the future.
22
Industry and financial market forecasts call for slower growth in the global
handset market. Currently, there is a global surplus of handsets, both at
manufacturer and carrier levels. Though this over-supply situation is abating,
it may continue to impact the Company in the future. There is also the potential
for shortages in the availability of certain wireless components and parts which
may affect our vendors' ability to provide handsets to us on a timely basis,
which may result in delayed shipments to our customers and decreased sales.
Electronics Results
Three months ended May 31, 2000 compared to three months ended May 31, 2001
The following table sets forth for the periods indicated certain statements
of operations data and percentage of net sales by product line for the
Electronics Group:
Three Months Ended
May 31, 2000 May 31, 2001
---------------- ----------------
Net sales:
Mobile electronics $ 38,168 54.9% $ 37,156 49.2%
Consumer electronics 10,874 15.6 23,597 31.3
Sound 19,498 28.0 14,154 18.8
Other 1,030 1.5 567 0.7
-------- ----- -------- -----
Total net sales 69,570 100.0 75,474 100.0
Gross profit 14,983 21.5 14,818 19.6
Total operating expenses 10,649 15.3 11,375 15.1
-------- ----- -------- -----
Operating income 4,334 6.2 3,443 4.5
Other expense (533) (0.7) (247) (0.3)
-------- ----- -------- -----
Pre-tax income $ 3,801 5.5% $ 3,196 4.2%
======== ===== ======== =====
Net sales increased $5,904 compared to last year, an increase of 8.5%.
Mobile electronics sales decreased 2.7% compared to last year to $37,156,
primarily due to decreases in mobile video and security sales, partially offset
by increases in sales of Navigation products. Consumer electronics
23
sales increased 117% from last year due to increased sales of FRS radios,
portable DVD players and home stereo products. Automotive sound sales decreased
27.4% from last year to $14,154, primarily in the AV, SPS and Prestige Audio
product lines. Net sales in the Company's Malaysian subsidiary decreased from
last year by approximately 22.9% which reflects the slowing economy in the Far
East and the decline in OEM sales in Malaysia. The Company's Venezuelan
subsidiary experienced an increase of 22.5% in sales from last year primarily
from OEM. Gross margins of the Electronics Group were 19.6% in 2001 and 21.5% in
2000. The decrease in gross profit was across all product categories due to
increased competition. Operating expenses increased $726 from last year to
$11,375. However, as a percentage of sales, decreased to 15.1% from 15.3%.
Selling expenses increased from last year, primarily in commissions, advertising
and divisional marketing. General and administrative expenses decreased from
2000, primarily in payroll taxes and temporary personnel. Warehousing and
assembly expenses increased from 2000, primarily in direct labor and temporary
personnel. Operating income was $3,443 compared to last year's $4,334.
24
Six months ended May 31, 2000 compared to six months ended May 31, 2001
The following table sets forth for the periods indicated certain
statements of operations data and percentage of net sales by product line for
the Electronics Group:
Six Months Ended
May 31, 2000 May 31, 2001
----------------- -----------------
Net sales:
Mobile electronics $ 69,932 52.5% $ 70,975 50.3%
Consumer electronics 18,509 13.9 38,836 27.5
Sound 42,509 31.9 30,001 21.3
Other 2,152 1.7 1,268 0.9
--------- ----- --------- -----
Total net sales 133,102 100.0 141,080 100.0
Gross profit 28,892 21.7 28,689 20.3
Total operating expenses 20,930 15.7 22,508 15.9
--------- ----- --------- -----
Operating income 7,962 6.0 6,181 4.4
Other expense (931) (0.7) (674) (0.5)
--------- ----- --------- -----
Pre-tax income $ 7,031 5.3% $ 5,507 3.9%
========= ===== ========= =====
Net sales increased $7,978 compared to last year, an increase of 6.0%.
Mobile electronics sales increased 1.5% compared to last year to $70,975,
primarily due to increases in security and Navigation products, partially offset
by declines in sales of Protector Hardgoods. Consumer electronics sales also
increased 110% from last year due to increased sales of FRS radios, portable DVD
players and home stereo products. Automotive sound sales decreased 29.4% from
last year to $30,001, primarily in the AV product line. Net sales in the
Company's Malaysian subsidiary decreased from last year by approximately 15.3%.
The Company's Venezuelan subsidiary experienced an increase of 16.7% in sales
from last year. Gross margins of the Electronics Group were 20.3% in 2001 and
21.7% in 2000. Operating expenses increased $1,578 from last year to 15.9% of
sales up from last year's 15.7% of sales. Selling expenses increased from last
year,
25
primarily in commissions, advertising and divisional marketing. General and
administrative expenses increased from 2000, primarily in office salaries,
insurance and occupancy expenses. Warehousing and assembly expenses increased
from 2000, primarily in direct labor offset by a decrease in tooling. Operating
income was $6,181 compared to last year's $7,962.
The Company believes that the Electronics Group has an expanding market
with a certain level of volatility related to both domestic and international
new car sales. As the Company moves further into the Consumer Electronics
market, it may become susceptible to changes in overall economic conditions.
Also, certain of its products are subject to price fluctuations which could
affect the carrying value of inventories and gross margins in the future. The
Electronics Group may also experience additional competition in the mobile video
category as more competitors enter the market.
Other Income and Expense
Interest expense and bank charges decreased by $215 and $1,848 for the
three and six months ended May 31, 2001, respectively, compared to the same
period last year. The decrease in interest expense and bank charges is due to
lower outstanding debt and lower interest rates. Equity in income of equity
investments increased $402 and $782 for the three and six months ended May 31,
2001, respectively, as compared to the same period last year. For the three and
six months ended May 31, 2000 and 2001, Audiovox Specialty Applications, LLC
represented the majority of equity in income of equity investments. Other income
decreased from last year due to non-recurring transactions related to sale of
investments and hedge of available-for-sale securities.
26
Provision for Income Taxes
The effective tax (recovery) rate for the three and six months ended
May 31, 2001 was (36%) and (35.9%) compared to last year's 37.6% and 38.5% for
the comparable periods. The decrease in the effective tax rate was principally
due to changes in the proportion of domestic and foreign earnings and benefits
as a result of the losses incurred.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash position at May 31, 2001 decreased $2,777 from the
November 30, 2000 level. Operating activities used $66,759, primarily from an
increase of $96,956 in inventory and decreases in accounts payable and accrued
expenses of $34,903, partially offset by decreases in accounts receivable of
$80,347. Accounts receivable days on hand increased to 58 days at May 31, 2001
from 50 days at May 31, 2000. The increase in accounts receivable days on hand
was primarily in the Wireless Group and is due to delayed customer remittances.
Inventory days on hand increased from 54 days last year to 82 days this year.
The increase in inventory value and days on hand was primarily in the Wireless
Group, due to late product introductions. The growth in inventory in the
Wireless Group is the result of shipments received late in the quarter on the
newly-introduced tri- mode phone. Investing activities used $633, primarily from
the purchase of property, plant and equipment and partially offset by proceeds
received from an equity investment. Financing activities provided $64,625,
primarily from borrowings on the line of credit agreement, partially offset by
repurchases of Class A common stock.
The Company maintains a revolving credit agreement with various
financial institutions. The credit agreement provides for $250,000 of available
credit, including $15,000 for foreign currency
27
borrowings and expires July 27, 2004.
Under the credit agreement, the Company may obtain credit through
direct borrowings and letters of credit. The obligations of the Company under
the credit agreement are guaranteed by certain of the Company's subsidiaries and
is secured by accounts receivable, inventory and the Company's shares of ACC.
The Company's ability to borrow under its credit facility is a maximum aggregate
amount of $250,000, subject to certain conditions, based upon a formula taking
into account the amount and quality of its accounts receivable and inventory.
The credit agreement also allows for commitments up to $50,000 in forward
exchange contracts.
The credit agreement contains several covenants requiring, among other
things, minimum levels of pre-tax income and minimum levels of net worth and
working capital. Additionally, the agreement includes restrictions and
limitations on payments of dividends, stock repurchases and capital
expenditures. During the quarter ended May 31, 2001, the Company was not in
compliance with its pre-tax income covenant and obtained a waiver for the
quarter ended May 31, 2001.
The Company also has revolving credit facilities in Malaysia and
Venezuela to finance additional working capital needs. The Malaysian credit
facilities are partially secured by the Company under standby letters of credit
and are payable upon demand or upon expiration of the standby letters of credit.
The obligations of the Company under the Malaysian credit facilities are secured
by the property and building in Malaysia owned by Audiovox Communications Sdn.
Bhd. The Venezuelan credit facility is secured by the Company under a standby
letter of credit and is payable upon demand or upon expiration of the standby
letter of credit.
The Company believes that it has sufficient liquidity to satisfy its
anticipated working capital and capital expenditure needs through November 30,
2001 and for the reasonable foreseeable future.
28
Recent Accounting Pronouncements
On December 3, 1999, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin No. 101 - "Revenue Recognition in Financial
Statements" (SAB No. 101). SAB No. 101 provides the SEC staff's views in
applying generally accepted accounting principles to revenue recognition in the
financial statements. SAB No. 101 delayed the implementation date for
registrants to adopt the accounting guidance contained in SAB No. 101 by no
later than the fourth fiscal quarter of the fiscal year ending November 30,
2001. Management of the Company does not believe that applying the accounting
guidance of SAB No. 101 will have a material effect on its financial position or
results of operations.
In March 2000, the Emerging Issues Task Force issued EITF 99-19, "Reporting
Revenue Gross as a Principal verses Net as an Agent" (EITF 99-19). EITF 99-19
addresses whether a company should report revenue based on (a) the gross amount
billed to the customer because it has earned revenue from the sale of the goods
or services or (b) the net amount retained (that is, the amount billed to a
customer less the amount paid to a supplier) because it has earned a commission
or fee. The Task Force reached a consensus that whether a company should
recognize revenue at the gross amount billed or the net amount retained, as
defined above, because it has earned a commission or fee is a matter of judgment
that depends on the relevant facts and circumstances. The Task Force also gave
examples which should be considered in that evaluation. The consensus is
effective for the fourth quarter of the Company's fiscal year ending November
30, 2001. Upon application of the consensus, comparative financial statements
should be reclassified. The Company will adopt EITF 99-19 during the quarter
ended November 30, 2001. Management does not believe
29
that implementation of EITF 99-19 will have a material impact on the Company's
consolidated financial statements.
In April 2001, the Emerging Issues Task Force (EITF) reached a final
consensus on EITF Issue No. 00-25, "Vendor Income Statement Characterization of
Consideration Paid to a Reseller of the Vendor's Products," which requires that,
unless specific criteria are met, consideration from a vendor to a retailer
(e.g., "slotting fees", cooperative advertising arrangements, "buy downs", etc.)
be recorded as a reduction from revenue, as opposed to a selling expense. This
consensus is effective for fiscal quarters beginning after December 15, 2001.
Management of Company is in the process of assessing the impact that
implementing EITF Issue No. 00-25 will have on the consolidated financial
statements.
Forward-Looking Statements
This quarterly report on Form 10-Q contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Words such as "may," "believe,"
"estimate," "expect," "plan," "intend," "project," "anticipate," "continues,"
"could," "potential," "predict" and similar expressions may identify
forward-looking statements. The Company has based these forward-looking
statements on its current expectations and projections about future events,
activities or developments. The Company's actual results could differ materially
from those discussed in or implied by these forward-looking statements.
Forward-looking statements include statements relating to, among other things:
o growth trends in the wireless, automotive and consumer electronic
businesses
o technological and market developments in the wireless, automotive and
consumer electronics businesses
30
o liquidity
o availability of key employees
o expansion into international markets
o the availability of new consumer electronic products
These forward-looking statements are subject to numerous risks,
uncertainties and assumptions about the Company including, among other things:
o the ability to keep pace with technological advances
o significant competition in the wireless, automotive and consumer
electronics businesses
o quality and consumer acceptance of newly introduced products
o the relationships with key suppliers
o the relationships with key customers
o possible increases in warranty expense
o the loss of key employees
o foreign currency risks
o political instability
o changes in U.S. federal, state and local and foreign laws
o changes in regulations and tariffs
o seasonality and cyclicality
o inventory obsolescence, availability and price volatility due to
market conditions
31
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
The Annual Meeting of Stockholders of Audiovox Corporation ("the
Company") was held on May 3, 2001 at the Smithtown Sheraton, Seminar Room, 110
Vanderbilt Motor Parkway, Smithtown, New York.
Proxies for the meeting were solicited pursuant to Regulation 14 of the
Act on behalf of the Board of Directors to elect a Board of eight Directors.
There was no solicitation in opposition to the Board of Directors'
nominees for election as directors as listed in the Proxy Statement and all of
such nominees were elected. Class A nominee, Paul C. Kreuch, Jr. received
16,798,079 votes and 491,429 votes were withheld. Class A nominee, Dennis F.
McManus received 16,800,069 votes and 489,439 votes were withheld.
Class A and Class B nominee, John J. Shalam received 38,859,106 votes
and 1,039,942 votes were withheld. Class A and Class B nominee, Philip
Christopher received 38,845,508 votes and 1,053,540 votes were withheld. Class A
and Class B nominee, Charles M. Stoehr received 38,851,799 votes and 1,047,249
votes were withheld. Class A and Class B nominee, Patrick M. Lavelle received
38,850,750 votes and 1,048,298 votes were withheld. Class A and Class B nominee,
Ann M. Boutcher, received 38,909,945 votes and 989,102 votes were withheld.
Class A and Class B nominee, Richard A. Maddia received 38,929,100 votes and
969,948 votes were withheld
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
No reports were filed on Form 8-K for the quarter ended May 31, 2001.
32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AUDIOVOX CORPORATION
By:s/John J. Shalam
------------------------------
John J. Shalam
President and Chief
Executive Officer
Dated: July 16, 2001
By:s/Charles M. Stoehr
------------------------------
Charles M. Stoehr
Senior Vice President and
Chief Financial Officer
33