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Audiovox Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: October 10, 2012 04:00PM
Audiovox Corp. (VOXX) filed Quarterly Report for the period ended 2012-08-31.
Highlight of Business Operations:Effective December 1, 2011, Audiovox Corporation changed its name to VOXX International Corporation ("Voxx," "We," "Our," "Us" or the "Company"). The Company believes that the name VOXX International would be a name that better represents the widely diversified interests of the Company, and the more than 30 global brands it has acquired and grown throughout the years, achieving a powerful international corporate image and creating a vehicle for each of these respective brands to emerge with its own identity. Voxx is a leading international distributor in the accessory, mobile and consumer electronics industries. On March 14, 2012, the Company acquired Car Communication Holding GmbH and its worldwide subsidiaries, a recognized tier-1 supplier of communications and infotainment solutions, primarily to the automotive industry. We conduct our business through nineteen wholly-owned subsidiaries: American Radio Corp., Audiovox Electronics Corporation (“AEC”), VOXX Accessories Corp., Audiovox Consumer Electronics, Inc. (“ACE”), Audiovox German Holdings GmbH (“Audiovox Germany”), Audiovox Venezuela, C.A., Audiovox Canada Limited, Audiovox Hong Kong Ltd., Audiovox International Corp., Audiovox Mexico, S. de R.L. de C.V. (“Audiovox Mexico”), Technuity, Inc., Code Systems, Inc., Oehlbach Kabel GmbH ("Oehlbach"), Schwaiger GmbH (“Schwaiger”), Invision Automotive Systems, Inc. (“Invision”), Klipsch Holding LLC ("Klipsch"), Car Communication Holding GmbH ("Hirschmann") and Omega Research and Development, LLC ("Omega") and Audiovox Websales LLC. We market our products under the Audiovox® brand name, other brand names and licensed brands, such as Acoustic Research®, Advent®, Car Link®, Code-Alarm®, Energy®, Excalibur®, Heco®, Hirschmann Car Communication®, Incaar™, Invision®, Jamo®, Jensen®, Klipsch®, Mac Audio™, Magnat®, Mirage®, Oehlbach®, Prestige®, RCA®, Schwaiger®, and Terk®, as well as private labels through a large domestic and international distribution network. We also function as an OEM ("Original Equipment Manufacturer") supplier to several customers and presently have one reportable segment (the "Electronics Group"), which is organized by product category.
Electronic sales represented 81.5% and 80.1% of the net sales for the three and six months ended August 31, 2012, respectively, compared to 80.0% in both of the prior year periods. For the three and six months ended August 31, 2012, approximately $39,580 and $76,192, respectively of the increase in sales from this product group was the result of our recent acquisition of Hirschmann. In addition, the electronics group experienced increases in its OEM manufacturing lines in the three and six months ended August 31, 2012 due to the launch of new programs with Ford and Nissan in the second quarter of Fiscal 2013, as well as new mobile product offerings and sales of headphones by our Klipsch group. OEM increases were partially offset during the six months ended August 31, 2012 by decreases due to remote start sales, which were affected early in the fiscal year by a warmer winter, as well as by the conclusion of Ford's production program for headrest DVD systems in the first quarter of Fiscal 2013. Electronic sales increases were also offset during the three and six months ended August 31, 2012 by a decline in sales of consumer electronics products including camcorders, clock radios, digital players and digital voice recorders as a result of declines in demand and the exiting of certain products; a decline in satellite fulfillment sales; and a decline in our audio product line. The audio decline is partially offset by sales related to new product introductions, such as sales of slot machine speakers and mobile iPod and iPad interfaces.
Accessory sales represented 18.5% and 19.9% of our net sales for the three and six months ended August 31, 2012, respectively, compared to 20.0% in both of the prior year periods. The increase in the accessories group was primarily related to sales of new wireless speaker products, increased sales of antennas as a result of the Summer Olympics as well as changes in consumer demand, increased sales of portable power lines due to the growing predominance of electronic devices in consumer homes, as well as improved sales in our international markets due primarily to the increase in digital receiver sales in Germany as a result of the shutdown of analog signals in the country during the first quarter of Fiscal 2013.
Gross margins, which increased by 80 and 30 basis points for the three and six months ended August 31, 2012, respectively, were positively impacted primarily by the increased sales in OEM related products, as well as sales as a result of the Hirschmann acquisition . These increases were partially offset by the unfavorable swings between hedged costs and related sales, as well as increased freight costs in Audiovox Germany; decreases in camcorder, digital player and digital voice recorder sales; and the shift of warehouse facilities in Asia.
Operating expenses increased $11,636 and $19,361 for the three and six months ended August 31, 2012, respectively, from $36,210 and $75,922 in the comparable prior year periods. As a percentage of net sales, operating expenses increased to 25.0% and 24.7% as compared to 22.9% and 23.5% for the comparable prior year period. The increase in total operating expenses was due primarily to our recent acquisition of Hirschmann which accounted for $12,833 and $21,235 during the three and six months ended August 31, 2012, respectively. These increases were partially offset by reductions in depreciation expense, headcount reductions in select groups, reductions of commissions and bonuses as a result of lower net sales, not considering Hirschmann, reduced occupancy costs due to the purchase of the Klipsch headquarters in Indianapolis, IN, which had previously been leased, as well as lower professional fees, not considering Hirschmann, during the three months ended August 31, 2012, as a result of the conclusion of the MPEG lawsuit in June 2012.
Stocks Discussed: VOXX,