Audiovox Posts Q2 Profit, 52% Sales Gain

by Steve Smith -- TWICE, 10/11/2007

Hauppauge, N.Y — Audiovox reported a 52.2 percent net sales gain and a profit for its fiscal second quarter, ended Aug. 31, led by accessories sales.

Net sales for the fiscal second quarter were $148.3 million, an increase of 52.2 percent compared with $97.4 million reported in the comparable prior-year quarter. Net income was $3.7 million compared to a net loss of $2 million in last year’s second quarter.

Audiovox has invested heavily in its accessories business this year.

Accessories

sales were $41.0 million, an increase of over 1,150 percent compared to sales of $3.3 million in the fiscal 2007 second quarter. This increase was primarily due to higher sales generated from the recently acquired Thomson and Oehlbach operations. As a percentage of net sales, accessories represented 27.7 percent compared to 3.3 percent in the comparable year-ago period.

Electronics sales, which include both mobile and consumer electronics were $107.3 million, an increase of 13.9 percent compared to $94.2 million reported the same time last year. This increase was due to higher audio sales specifically related to Jensen Mobile, Phase Linear and the company's satellite radio product lines as well as increases in the Code Alarm Security line. The company also experienced increased sales in its international operations in Germany and Venezuela.

Partially offsetting these increases were lower sales of consumer electronics products due to the continuing shortage of LCD panels, which continued to impact sales of LCD TVs, portable DVDs and digital picture frames. Additionally, a decline in certain OEM programs and lower sales of mobile video and aftermarket security products impacted top-line growth. As a percentage of net sales, Electronics represented 72.3 percent compared to almost 97 percent in the comparable fiscal 2007 quarter.

Gross margins for the period ended increased 300 basis points, to 19.2 percent, compared to 16.2 percent last year. Gross margins were favorably impacted by higher margins associated with the recently acquired companies as well as improved overall margins in the company’s core electronics business.

Operating expenses for the quarter were $24.6 million, an increase of 23.3 percent compared to $19.9 million reported in the comparable prior year period. This increase of $4.6 million is due to the recently acquired Thomson, Oehlbach and Incaar operations.

Pat Lavelle, president/CEO of Audiovox, stated, “I believe our results this quarter are reflective of our strategic plan to expand our business, reduce costs and improve services while delivering improved shareholder value.”

Lavelle continued, “Both our core electronics business and our newly established accessories group posted top-line growth and increased margins during the first six months of the year. This is especially encouraging given the declines in our electronics group over the past several quarters and the impact of the flat panel shortage. We're gearing up for a strong holiday season and believe our fiscal third-quarter results will continue to demonstrate that our strategy is working. We've acquired three businesses year-to-date, all of which are performing well and we remain active on the M&A front. Through organic growth and acquisition, I am confident that Audiovox will remain a market leader and I strongly believe that our collective efforts will result in enhanced value for our shareholders.”

For the first six months of the year Audiovox reported net sales of $276.5 million, an increase of 32.5 percent compared to $208.7 million reported in the comparable prior year period. Net income was $6 million compared to a net loss of $433,000 in the prior year.