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Audiovox Posts Profit, Lower Sales For Year

5/15/2007 07:45:00 AM Eastern

Hauppauge, N.Y. — Audiovox reported a double-digit drop in net sales but posted a profit for its fiscal year, ended Feb. 28.

Net sales were $456.7 million, a decrease of 13.3 percent compared with $526.8 million reported in the comparable prior year period. Net income from continuing operations for the fiscal 2007 period was $3.7 million compared with a net loss from continuing operations of $5.8 million from the previous fiscal year.

Including discontinued operations, Audiovox reported net income of $2.9 million for fiscal 2007 vs. a net loss of $8.2 million for the prior year.

Mobile electronics represented 69.5 percent of net sales or $317.4 million. This was a decrease of 5.4 percent compared to sales of $335.5 million reported in the comparable prior-year period. The decline in mobile electronics sales was due to the absence of Rampage, Prestige and Video-in-a-Bag sales, product lines the company exited during fiscal 2006. Additionally, sales were adversely impacted by approximately five months of lost sales resulting from the voluntary suspension of XM Satellite Radio receivers due to an FCC block which has since been removed and lower average selling prices in select mobile multimedia lines. Offsetting these declines were higher sales of Phase Linear, Audiovox Germany, accessories and Code Systems, the company said.

Consumer electronics sales were $139.3 million, or 30.5 percent of total sales, a decrease of 27.2 percent compared with net sales of $191.3 million reported in the comparable period last year. The decline in sales is related to lower selling prices in the DVD, LCD and plasma TV categories, which were seen throughout the industry, the company said.

In anticipation of these pricing declines, Audiovox limited its exposure, which affected revenue, however it reduced inventory risk and resulted in higher gross profit margins in this category.

Gross margins for fiscal 2007 ended Feb. 28 were 17.4 percent compared with 11.5 percent reported in the comparable 2006 period. The improvement in gross profit margins is a direct result of higher margins in the mobile category and continued improvements in inventory management.

Pat Lavelle, president/CEO of Audiovox, stated, “This past year was a transition year in which we set out to realign our organization on all fronts. We went from a loss in 2005 to modest profits in 2006 and believe the company is in a much better position to improve overall profitability than we were last year. With the addition of the accessory business, most notably, the RCA brand worldwide, we now have an accessories group that should post sales of approximately $200 million and at higher gross margins than our traditional business lines.”

Audiovox will release three new XM plug and play receivers this year as well as an expanded selection of XM accessories which should result in an increase in its XM product sales for the year, according to Lavelle.

Audiovox also said it has completed the 90-day transition period for integrating the newly acquired Thomson accessories business into Audiovox’s infrastructure.Lavelle said Thomson products are now in Audiovox warehouses.He said phase one of the transition “has occurred on time and within budget, and sales are coming in right where we had predicted.”

In the fiscal fourth quarter, Audiovox reported net sales of $96.1 million, a decrease of 6.7 percent compared to $103.1 million reported in the comparable prior year quarter. Net loss from continuing operations for the fiscal 2007 fourth quarter was $305,000. This compares with net income from continuing operations of $367,000 in the comparable prior year period. Including discontinued operations, Audiovox reported a net loss of $485,000 in the quarter, ended Feb. 28, as compared with net income of $183,000 in the similar 2006 period.

Audiovox changed its fiscal year from Nov. 30 to Feb. 28. Annual results for the fiscal 2007 period were compared with the quarters ending May 31, Aug. 31 and Nov. 30, 2005, and Feb. 28, 2006, respectively. Additionally, fiscal 2007 fourth-quarter results were compared to the prior year period, ended Feb. 28, 2006, which was its fiscal 2006 transition period. - Amy Gilroy contributed to this story.

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