PR Newswire
HAUPPAUGE, N.Y., Oct. 10, 2017
HAUPPAUGE, N.Y., Oct. 10, 2017 /PRNewswire/ -- VOXX International Corporation (NASDAQ: VOXX), today announced financial results for its Fiscal 2018 second quarter ended August 31, 2017.
On August 31, 2017, the Company completed its sale of Hirschmann Car Communication GmbH and its subsidiaries ("Hirschmann") to a subsidiary of TE Connectivity Ltd. ("TE"). The consideration received by the Company was €148.5 million. The purchase price, at the exchange rate as of the close of business on August 31, 2017, was approximately $177.0 million and is subject to adjustment based upon the final working capital. VOXX International (Germany) GmbH, the Company's German wholly-owned subsidiary, was the selling entity in this transaction.
Due to the fact that the selling entity was VOXX International (Germany) GmbH, there are certain expenses and related income that are reported in VOXX International Corporation's continuing operations. The Hirschmann business is now accounted for in discontinued operations. Additional details can be found in the Company's Form 10-Q which will be filed with the Securities and Exchange Commission today.
Pat Lavelle, President and Chief Executive Officer of VOXX International Corporation stated, "The sale of Hirschmann has strengthened our balance sheet, enabled us to pay down the majority of our debt while maintaining a healthy cash position, and provides us with additional availability under our facilities to implement our strategy. We continue to focus on driving organic growth and better efficiencies within our business, while pursuing accretive acquisitions that will enable us to leverage overhead, drive sales and position us for sustainable profitability."
Second Quarter Performance Review
The following information includes financial results from continuing operations for the three-month period ended August 31, 2017 and August 31, 2016.
Net sales for the Fiscal 2018 second quarter were $113.5 million, a decrease of $4.9 million or 4.1% as compared to $118.3 million reported in the comparable year-ago period.
The gross margin for the Fiscal 2018 second quarter came in at 25.0% as compared to 27.4% for the same period last year, a decrease of 240 basis points.
Operating expenses for the Fiscal 2018 second quarter were $38.7 million as compared to $34.6 million in the Fiscal 2017 second quarter, an increase of $4.1 million or 11.9%. The year-over-year increase in operating expenses was primarily related to higher advertising and marketing expenses, higher expenses related to the implementation of a new payroll and time and attendance system, and an increase in headcount in certain business units to support expected sales growth. Additionally, the Company incurred severance expense due to restructuring activities across certain business segments. These increases were partially offset by a decline in occupancy costs related to the consolidation of the Company's shared services into one location, which was completed during the Fiscal 2017 fourth quarter. The increase in engineering and technical support expenses was primarily timing related in support of new OEM programs which will be launching in the Fiscal 2018 third and fourth quarters.
Total other expenses for the three months ended August 31, 2017 were $6.1 million as compared to $0.04 million in total other income in the comparable year-ago period. In the Fiscal 2018 second quarter, the Company recorded a $1.4 million gain related to its investment in RxNetworks, which was sold to a third party, and also accounted for net foreign currency losses of $7.4 million. Included in the foreign currency losses for the Fiscal 2018 second quarter are losses on forward contracts totaling $6.6 million incurred in conjunction with the sale of Hirschmann. These represented the biggest changes in total other (expenses) income for the comparable second quarter periods.
The Company reported a net loss from continuing operations of $19.8 million, and net income from discontinued operations, net of tax of $34.9 million, resulting in net income of $15.0 million for the Fiscal 2018 second quarter. This compares to net income from continuing operations of $3.5 million, which includes an income tax benefit of $5.5 million, and a net loss from discontinued operations, net of tax of $2.2 million. This resulted in net income of $1.3 million for the Fiscal 2017 second quarter. The year-over-year improvement in net income was $13.8 million when comparing the three months ended August 31, 2017 and August 31, 2016, respectively.
Net income attributable to VOXX International Corporation was $17.1 million for the Fiscal 2018 second quarter as compared to net income attributable to VOXX International Corporation of $3.0 million for the Fiscal 2017 second quarter. Taking into account foreign currency translation adjustments, derivatives designated for hedging, pension plan adjustments and unrealized holding losses on available-for-sale investment securities, net of tax, comprehensive income attributable to VOXX International Corporation was $39.3 million as compared to $2.3 million for the three-month periods ended August 31, 2017 and August 31, 2016, respectively. On an earnings per share basis, both basic and diluted, the Company reported earnings per share attributable to VOXX International Corporation of $0.71 for the Fiscal 2018 second quarter as compared to $0.12 for the Fiscal 2017 second quarter.
The Company reported Earnings before interest, taxes, depreciation and amortization ("EBITDA") of $29.4 million and negative Adjusted EBITDA of $1.4 million for the Fiscal 2018 second quarter. This compares to EBITDA of $6.7 million and Adjusted EBITDA of $6.9 million for the comparable year-ago period.
Balance Sheet Update
For the period ended August 31, 2017, the Company had cash and cash equivalents of $45.8 million as compared to cash and cash equivalents of $1.0 million reported as of February 28, 2017, an increase of $44.9 million. The Company's total debt of $18.7 million as of August 31, 2017 declined by $91.8 million as of February 28, 2017 as the Company used the net proceeds from the sale of Hirschmann to reduce the majority of its total debt position. Total long-term debt, net of debt issuance costs as of August 31, 2017 was $8.8 million as compared to $97.7 million as of February 28, 2017, an increase of $88.9 million. Further details can be found in Footnote 15 of the Company's Form 10-Q which will be filed shortly with the Securities and Exchange Commission.
Mr. Lavelle continued, "We're anticipating a stronger second half of Fiscal 2018 based on a number of new products coming to market. We have three new rear-seat entertainment programs which will enhance our Automotive business; new products and improved distribution within our Premium Audio group; and several new products under 808 Audio, Project Nursery, Singtrix and RCA that should lead to growth. Overall, we believe VOXX is well positioned to generate profitability in the second half of the year, with a much stronger platform as we move into Fiscal 2019."
Conference Call and Webcast Information
VOXX International will be hosting its conference call on Wednesday, October 11, 2017 at 10:00 a.m. ET. Interested parties can participate by visiting www.voxxintl.com, and clicking on the webcast in the Investor Relations section or via teleconference (toll-free number: 877-303-9079; international: 970-315-0461 / conference ID: 94408456).
Non-GAAP Measures
EBITDA, Adjusted EBITDA and Diluted Adjusted EBITDA per common share are not financial measures recognized by GAAP. EBITDA represents net income (loss) attributable to VOXX International Corporation, computed in accordance with GAAP, before interest expense and bank charges, taxes, and depreciation and amortization. Adjusted EBITDA represents EBITDA adjusted for stock-based compensation expense, gains on the sale of discontinued operations, losses on forward contracts, and investment gains. Depreciation, amortization and stock-based compensation are non-cash items. Diluted Adjusted EBITDA per common share represents the Company's diluted earnings per common share based on Adjusted EBITDA.
We present EBITDA, Adjusted EBITDA and Diluted Adjusted EBITDA per common share in this Form 10-Q because we consider them to be useful and appropriate supplemental measures of our performance. Adjusted EBITDA and diluted adjusted earnings per common share help us to evaluate our performance without the effects of certain GAAP calculations that may not have a direct cash impact on our current operating performance. In addition, the exclusion of certain costs or gains relating to non-recurring events allows for a more meaningful comparison of our results from period-to-period. These non-GAAP measures, as we define them, are not necessarily comparable to similarly entitled measures of other companies and may not be an appropriate measure for performance relative to other companies. EBITDA, Adjusted EBITDA and Diluted Adjusted EBITDA per common share should not be assessed in isolation from, are not intended to represent, and should not be considered to be more meaningful measures than, or alternatives to, measures of operating performance as determined in accordance with GAAP.
About VOXX International Corporation
VOXX International Corporation (NASDAQ: VOXX) has grown into a worldwide leader in the Automotive, Consumer Electronics, Consumer Accessories and Premium Audio industries. Today, the Company has an extensive distribution network that includes power retailers, mass merchandisers, 12-volt specialists and many of the world's leading automotive manufacturers. The Company has an international footprint and a growing portfolio, which comprises over 30 trusted domestic and global brands. Among the Company's brands are Klipsch®, RCA®, Invision®, Jensen®, Audiovox®, Terk®, Acoustic Research®, Advent®, Code Alarm®, Car Connection®, 808®, AR for Her®, Prestige®, EyeLock, Jamo®, Energy®, Mirage®, Mac Audio®, Magnat®, Heco®, Schwaiger®, and Oehlbach®. For additional information, please visit our Web site at www.voxxintl.com.
Safe Harbor Statement
Except for historical information contained herein, statements made in this release that would constitute forward-looking statements may involve certain risks and uncertainties. All forward-looking statements made in this release are based on currently available information and the Company assumes no responsibility to update any such forward-looking statements. The following factors, among others, may cause actual results to differ materially from the results suggested in the forward-looking statements. The factors include, but are not limited to risks that may result from changes in the Company's business operations; our ability to keep pace with technological advances; significant competition in the automotive, premium audio and consumer accessories businesses; our relationships with key suppliers and customers; quality and consumer acceptance of newly introduced products; market volatility; non-availability of product; excess inventory; price and product competition; new product introductions; foreign currency fluctuations and concerns regarding the European debt crisis; restrictive debt covenants; the possibility that the review of our prior filings by the SEC may result in changes to our financial statements; and the possibility that stockholders or regulatory authorities may initiate proceedings against VOXX International Corporation and/or our officers and directors as a result of any restatements. Risk factors associated with our business, including some of the facts set forth herein, are detailed in the Company's Form 10-K for the fiscal year ended February 28, 2017.
Company Contact:
Glenn Wiener, President
GW Communications
Tel: 212-786-6011
Email: [email protected]
- Tables to Follow –
VOXX International Corporation and Subsidiaries | ||||||||
Consolidated Balance Sheets | ||||||||
(In thousands, except share and per share data) | ||||||||
August 31, 2017 |
February 28, 2017 | |||||||
Assets |
(unaudited) |
|||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ |
45,821 |
$ |
956 |
||||
Accounts receivable, net |
70,956 |
79,971 |
||||||
Inventory, net |
142,053 |
122,352 |
||||||
Receivables from vendors |
617 |
634 |
||||||
Prepaid expenses and other current assets |
23,543 |
12,332 |
||||||
Income tax receivable |
1,644 |
1,596 |
||||||
Assets held for sale, current |
— |
55,507 |
||||||
Total current assets |
284,634 |
273,348 |
||||||
Investment securities |
8,763 |
10,388 |
||||||
Equity investments |
21,340 |
21,926 |
||||||
Property, plant and equipment, net |
66,197 |
65,589 |
||||||
Goodwill |
53,916 |
53,905 |
||||||
Intangible assets, net |
153,403 |
154,939 |
||||||
Deferred income taxes |
23 |
23 |
||||||
Other assets |
6,541 |
1,699 |
||||||
Assets held for sale, non-current |
— |
86,669 |
||||||
Total assets |
$ |
594,817 |
$ |
668,486 |
||||
Liabilities and Stockholders' Equity |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ |
44,146 |
$ |
46,244 |
||||
Accrued expenses and other current liabilities |
49,227 |
32,110 |
||||||
Income taxes payable |
2,320 |
703 |
||||||
Accrued sales incentives |
13,033 |
13,154 |
||||||
Current portion of long-term debt |
6,770 |
9,215 |
||||||
Liabilities held for sale, current |
— |
28,641 |
||||||
Total current liabilities |
115,496 |
130,067 |
||||||
Long-term debt, net of debt issuance costs |
8,842 |
97,747 |
||||||
Capital lease obligation |
849 |
926 |
||||||
Deferred compensation |
3,624 |
3,844 |
||||||
Deferred income tax liabilities |
28,757 |
27,627 |
||||||
Other tax liabilities |
3,328 |
3,194 |
||||||
Other long-term liabilities |
3,389 |
2,125 |
||||||
Liabilities held for sale, non-current |
— |
11,641 |
||||||
Total liabilities |
164,285 |
277,171 |
||||||
Commitments and contingencies |
||||||||
Stockholders' equity: |
||||||||
Preferred stock: |
||||||||
No shares issued or outstanding |
— |
— |
||||||
Common stock: |
||||||||
Class A, $.01 par value, 60,000,000 shares authorized, 24,068,105 and 24,067,444 shares issued and 21,900,011 and 21,899,370 shares outstanding at August 31, 2017 and February 28, 2017, respectively |
256 |
256 |
||||||
Class B Convertible, $.01 par value, 10,000,000 shares authorized, 2,260,954 shares issued and outstanding |
22 |
22 |
||||||
Paid-in capital |
295,847 |
295,432 |
||||||
Retained earnings |
173,445 |
159,369 |
||||||
Accumulated other comprehensive loss |
(15,478) |
(43,898) |
||||||
Treasury stock, at cost, 2,168,094 and 2,168,074 shares of Class A Common Stock at August 31, 2017 and February 28, 2017, respectively |
(21,176) |
(21,176) |
||||||
Total VOXX International Corporation stockholders' equity |
432,916 |
390,005 |
||||||
Non-controlling interest |
(2,384) |
1,310 |
||||||
Total stockholders' equity |
430,532 |
391,315 |
||||||
Total liabilities and stockholders' equity |
$ |
594,817 |
$ |
668,486 |
VOXX International Corporation and Subsidiaries | ||||||||||||||||
Unaudited Consolidated Statements of Operations and Comprehensive Income | ||||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||
Three Months Ended |
Six Months Ended | |||||||||||||||
2017 |
2016 |
2017 |
2016 | |||||||||||||
Net sales |
$ |
113,470 |
$ |
118,325 |
$ |
228,293 |
$ |
232,225 |
||||||||
Cost of sales |
85,049 |
85,882 |
169,728 |
167,809 |
||||||||||||
Gross profit |
28,421 |
32,443 |
58,565 |
64,416 |
||||||||||||
Operating expenses: |
||||||||||||||||
Selling |
10,652 |
9,924 |
23,061 |
21,306 |
||||||||||||
General and administrative |
20,640 |
18,021 |
40,837 |
38,148 |
||||||||||||
Engineering and technical support |
7,383 |
6,609 |
14,037 |
14,655 |
||||||||||||
Total operating expenses |
38,675 |
34,554 |
77,935 |
74,109 |
||||||||||||
Operating loss |
(10,254) |
(2,111) |
(19,370) |
(9,693) |
||||||||||||
Other (expense) income: |
||||||||||||||||
Interest and bank charges |
(1,843) |
(1,729) |
(3,635) |
(3,293) |
||||||||||||
Equity in income of equity investees |
1,927 |
1,545 |
3,730 |
3,353 |
||||||||||||
Investment gain |
1,416 |
— |
1,416 |
— |
||||||||||||
Other, net |
(7,629) |
223 |
(8,636) |
(257) |
||||||||||||
Total other (expense) income, net |
(6,129) |
39 |
(7,125) |
(197) |
||||||||||||
Loss from continuing operations before income taxes |
(16,383) |
(2,072) |
(26,495) |
(9,890) |
||||||||||||
Income tax expense (benefit) from continuing operations |
3,465 |
(5,543) |
(3,963) |
(6,940) |
||||||||||||
Net (loss) income from continuing operations |
(19,848) |
3,471 |
(22,532) |
(2,950) |
||||||||||||
Net income (loss) from discontinued operations, net of tax (Note 2) |
34,931 |
(2,167) |
32,710 |
(1,866) |
||||||||||||
Net income (loss) |
15,083 |
1,304 |
10,178 |
(4,816) |
||||||||||||
Less: net loss attributable to non-controlling interest |
(2,023) |
(1,716) |
(3,898) |
(3,528) |
||||||||||||
Net income (loss) attributable to VOXX International Corporation |
$ |
17,106 |
$ |
3,020 |
$ |
14,076 |
$ |
(1,288) |
||||||||
Other comprehensive income (loss): |
||||||||||||||||
Foreign currency translation adjustments |
20,480 |
(680) |
27,839 |
3,516 |
||||||||||||
Derivatives designated for hedging |
(134) |
(21) |
(1,186) |
(512) |
||||||||||||
Pension plan adjustments |
1,810 |
6 |
1,690 |
(52) |
||||||||||||
Unrealized holding gain (loss) on available-for-sale |
81 |
(3) |
77 |
(8) |
||||||||||||
Other comprehensive income (loss), net of tax |
22,237 |
(698) |
28,420 |
2,944 |
||||||||||||
Comprehensive income attributable to VOXX International Corporation |
$ |
39,343 |
$ |
2,322 |
$ |
42,496 |
$ |
1,656 |
||||||||
Earnings (loss) per share - basic: |
||||||||||||||||
Continuing operations |
$ |
(0.74) |
$ |
0.21 |
$ |
(0.77) |
$ |
0.02 |
||||||||
Discontinued operations |
$ |
1.45 |
$ |
(0.09) |
$ |
1.35 |
$ |
(0.08) |
||||||||
Attributable to VOXX International Corporation |
$ |
0.71 |
$ |
0.12 |
$ |
0.58 |
$ |
(0.05) |
||||||||
Earnings (loss) per share - diluted: |
||||||||||||||||
Continuing operations |
$ |
(0.74) |
$ |
0.21 |
$ |
(0.77) |
$ |
0.02 |
||||||||
Discontinued operations |
$ |
1.45 |
$ |
(0.09) |
$ |
1.35 |
$ |
(0.08) |
||||||||
Attributable to VOXX International Corporation |
$ |
0.71 |
$ |
0.12 |
$ |
0.58 |
$ |
(0.05) |
||||||||
Weighted-average common shares outstanding (basic) |
24,160,680 |
24,160,324 |
24,160,502 |
24,160,324 |
||||||||||||
Weighted-average common shares outstanding (diluted) |
24,160,680 |
24,242,447 |
24,160,502 |
24,255,341 |
Reconciliation of GAAP Net Income (Loss) Attributable to VOXX International Corporation to EBITDA, Adjusted EBITDA and Diluted Adjusted EBITDA per Common Share | ||||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||
Three Months Ended |
Six Months Ended | |||||||||||||||
2017 |
2016 |
2017 |
2016 | |||||||||||||
Net income attributable to VOXX International Corporation |
$ |
17,106 |
$ |
3,020 |
$ |
14,076 |
$ |
(1,288) |
||||||||
Adjustments: |
||||||||||||||||
Interest expense and bank charges (1) |
1,730 |
1,722 |
3,406 |
3,310 |
||||||||||||
Depreciation and amortization (1) |
4,340 |
4,247 |
8,477 |
8,490 |
||||||||||||
Income tax expense (benefit) |
6,207 |
(2,261) |
2,144 |
(3,653) |
||||||||||||
EBITDA |
29,383 |
6,728 |
28,103 |
6,859 |
||||||||||||
Stock-based compensation |
157 |
188 |
299 |
363 |
||||||||||||
Gain on sale of discontinued operation |
(36,118) |
— |
(36,118) |
— |
||||||||||||
Loss on forward contracts attributable to sale of business |
6,618 |
— |
6,618 |
— |
||||||||||||
Investment gain |
(1,416) |
— |
(1,416) |
— |
||||||||||||
Adjusted EBITDA |
$ |
(1,376) |
$ |
6,916 |
$ |
(2,514) |
$ |
7,222 |
||||||||
Diluted income per common share attributable to |
$ |
0.71 |
$ |
0.12 |
$ |
0.58 |
$ |
(0.05) |
||||||||
Diluted Adjusted EBITDA per common share attributable to |
$ |
(0.06) |
$ |
0.29 |
$ |
(0.10) |
$ |
0.30 |
(1) |
For purposes of calculating Adjusted EBITDA for the Company, interest expense and bank charges, as well as depreciation and amortization have been adjusted in order to exclude the non-controlling interest portion of these expenses attributable to EyeLock LLC. |
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SOURCE VOXX International Corporation
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