Audiovox 2nd Qtr. CE Sales Double
By Jeff Malester -- TWICE, 7/25/2005
Hauppauge, N.Y. — Higher sales of LCD flat-panel televisions helped fiscal second-quarter sales at the consumer electronics segment of Audiovox more than double, climbing 103 percent to $51.6 million from a year-ago $25.4 million.
Sales of portable DVD players declined during the same three months, due to ongoing price erosion. The CE segment accounted for 35.7 percent of net sales during the period.
The mobile electronics segment at Audiovox, which accounted for 64.3 percent of net sales in the second quarter, ended May 31, did not fare as well as CE, with sales in the period sliding 23.5 percent to $93 million, down from a year-on-year $121.5 million. The company cited lower mobile video sales for the drop. The category has been under pressure from lower SUV sales, increased OE presence and price erosion in the aftermarket, as previously reported.
Consolidated net sales were about flat for the second quarter, edging downward 1.6 percent to $144.5 million, compared with $146.9 million in the same three months in 2004.
Net income from continuing operations reached $5.8 million in the second quarter, up from last year's $1.6 million. Including discontinued operations, net income for the period hit $5.6 million, compared with a year-on-year $3.7 million. Net income was favorably impacted by a tax benefit of $3.5 million during the second three months of 2005.
“Our second quarter sales were in line with earlier projections, and margins are beginning to trend higher as we have worked through the mobile inventory and have begun shipments of some of the new products in both our mobile and CE divisions,” said John Shalam, chairman.
Gross margin for the second quarter climbed to 15.8 percent, up from the 14.6 percent reported in the same period a year earlier. The increase primarily is due to higher margin from the Terk Technologies product line and an increase in CE margin as a result of the higher LCD television sales. Terk was acquired last January.
“We also are well into some of the expense reductions we outlined at the end of the year and will continue the process, which should bring us to our previously announced goal of a 5 percent operating margin by the fourth quarter,” Shalam said.
During a conference call to analysts, Patrick Lavelle, newly named president/CEO of Audiovox Corp., underscored the “soft” first half, mainly with mobile electronics products, and that the company is “adjusting to changes” in this product category as it improves margins and moves through excess inventory. He underlined the ongoing shift to CE products as mobile video has declined, citing a 29 percent second-quarter audio increase, namely Jensen car audio, as well as sales from the Terk line.
New from Audiovox in the second half, said Lavelle, will be about nine products, among which are 12-inch and 15-inch overhead all-in-one rear entertainment systems, a two-way remote start with text in security products, two plug-and-play for XM and three for Sirius shipping in the fourth quarter and a portable multimedia GPS navigation system shipping in the fourth quarter.
Audiovox will continue to pinpoint its growing LCD flat-screen TV business toward regional retailers, such as P.C. Richard and BrandsMart, where the company is competitive, has a well-respected brand and is a good value play, said Lavelle. “We have a niche and the regionals respond well,” he said.
Audiovox said it recently started shipments of its new Mobile Video Shuttle systems, and it expects this product to improve overall mobile electronics category sales. Satellite radio sales increased during the second quarter, and the mobile electronics group experienced additional sales from Terk.
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