Audiovox Electronics Group Posts 70% Q1 Sales Jump

HAUPPAUGE, N.Y.— Increased sales in sound and CE product lines, in addition to $15.7 million in revenue related to Audiovox Germany, acquired as part of the Recoton purchase, helped the Audiovox Electronics Group (AEC) record a fiscal first quarter year-over-year 70 percent sales increase.

Sales for AEC in the three months, ended Feb. 29, hit $136.5 million, up from $80.3 million in the year-ago period. The electronics segment has posted year-over-year gains in every quarter over the past three years, said Audiovox.

Especially pleased with the "strong" growth of the AEC segment, specifically in CE product lines, John Shalam, chairman, president/CEO, said, "We were able to post higher sales and profits in the first quarter despite the fact that the first fiscal quarter is typically our slowest in terms of sales."

First quarter sales of CE products climbed 121 percent, reaching $36.5 million, compared with $16.5 million in the same quarter a year ago. CE was up considerably due to new product lines introduced in 2003, primarily DVD players and flat-panel TVs.

Sales in the sound category jumped 303 percent in the first quarter, reaching $50.3 million vs. $12.5 million in the same three months last year. The sales rise was attributed primarily to contributions from the newly acquired brands of Jensen, Acoustic Research, Advent, Magnate, Mac Audio and Heco, as well as from satellite radio. "Strategic acquisitions made in the sound category are beginning to have an impact on our top-line performance," said Shalam.

The third segment of AEC, mobile electronics, leaned to the down side, with sales dipping 3 percent in the first quarter to $49.5 million, compared with $51.1 million in the same three months a year earlier. The slide was attributed to a drop-off in post-holiday sales of video-in-a-bag products, but Audiovox did not expect this to be a trend moving forward.

The company's AEC enjoyed a 56.6 percent gross profit increase, reaching $21.3 million, up from $13.6 million year-on-year. AEC pre-tax income more than doubled in the first quarter to $5.2 million from $2.5 million.

The company's majority owned subsidiary, Audiovox Communications Corp. (ACC) recorded sales of $240.3 million in the first quarter, an 11 percent increase over the $216.6 million attained the previous year.

Unit sales of wireless headsets rose 5.6 percent in the first period to about 1.26 million, up from 1.19 million a year earlier. The rise was due primarily to new product introductions of camera phones with CDMA 1x technology.

Average first-quarter selling price for Audiovox handsets jumped to $179 per unit, due to higher selling prices of new product introductions. This compares to $171 year-over year.

Audiovox said it remains in discussions regarding the potential sale of its wireless ACC subsidiary.

Consolidated first quarter Audiovox sales came in at $376.9 million, compared with $296.8 million in the previous year. Consolidated net income hit $1.9 million in the first three months, up from $1.2 million year-on-year.

Gross profit margin in the first quarter fell slightly to 8.3 percent from 8.6 percent, as both the AEC and ACC segments experienced a decline. This drop was due primarily to lower margins on older phone models, DVD players and FRS radios, as well as increased sales of lower margin CE products.

While margins for both groups declined, the change in mix of sales between wireless and CE has affected the consolidated margins in a favorable way, in that traditionally higher-margin CE represented a larger percentage of consolidated sales.

Expenses during the first quarter increased to 7.6 percent of sales, compared with a year-over-year 7.1 percent. Major components of the increase were attributed to commissions, advertising and salaries.