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Audiovox Q4 Sales Slide 21.4%

2/14/2005 09:03:00 AM Eastern

Hauppauge, N.Y. — Despite competitive pressures and continued price erosion in two key components of its business — mobile audio and portable DVD players — the electronics group (AEC) at Audiovox posted sales of $149.5 million, its second-best fiscal fourth quarter historically.

However, these results from continuing operations were 21.4 percent below the same three months in 2003, at $190.3 million, due to a decline in the mobile video and DVD business.

Net income for the fourth quarter, ended last Nov. 30, hit $66.3 million, compared with $7.3 million in the same three months in the year-ago period. However, fourth-quarter net income was favorably impacted by a $67 million gain from the sale of the company’s discontinued cellular business. Looking at continuing operations, Audiovox posted a fourth-quarter loss of $2.3 million, compared with a gain of $5.7 million year-over-year.

Mobile electronics sales reached $93.4 million in the fourth quarter, a decline of 17.5 percent, compared with the same three months in 2003. This was due primarily to lower sales of video-in-a-bag business, as a result of a 30 percent drop in prices as the category matured, and increased competition from low-priced portable DVD players. In addition, sales of mobile video overhead systems were affected by lower SUV sales, combined with an increased presence by OEMs. The decline was partially offset by increased satellite radio sales.

Consumer electronics sales in the fourth quarter dropped 27.1 percent year-on-year. The decline was primarily based on price erosion and increased competition for portable DVD products. The decline was partially offset by an increase in flat-panel TVs, as well as increased sales from Jensen, Magnate, MacAudio, Heco, Acoustic Research and Advent consumer products.

Gross margin in the fourth quarter reached 16 percent, down from 17.7 percent in the same quarter a year earlier. Margins were impacted by price erosion of mobile video products and portable DVD players.

Consolidated operating expenses climbed $3.8 million in the fourth quarter, hitting $29.5 million, compared with $25.7 million the previous year. The increase was driven primarily by indirect costs related to the divestiture of the company’s cellular business.

Fourth-quarter operating expenses for AEC were $20 million, down 2.1 percent, compared with the $20.4 million in the same three months in 2003. The decrease was due to a decline in commissions as a result of the drop in net sales. Even though sales and margins for the AEC were lower in the fourth quarter, the group reported pre-tax income of $3.3 million in the period.

Audiovox said satellite radio sales more than doubled in the fourth quarter over the previous year, as the technology enjoyed growing consumer awareness.

“In January 2005, we announced the acquisition of Terk Technologies, which brings with it significant satellite radio products and technology,” said John Shalam, chairman/CEO.

“We believe this acquisition will help solidify our position and enhance out product portfolio in the emerging category. Additionally, recently acquired brands — Jensen, Advent, Acoustic Research and Code Alarm — all performed up to or better than expectations and posted year-over-year gains,” Shalam said.

Consolidated 12-month sales hit $567.1 million, up from $517.7 million in 2003. Mobile electronics sales were $405.7 million for the 12 months, a 14.2 percent rise over the same period the previous year. CE sales for the 12 months were $161.4 million, about flat with 2003.

For the 12 months, consolidated net income reached $77.2 million, compared with $11.2 million in 2003. This also was favorably impacted by the $67 million gain from sale of the cellular business. Net income from continuing operations for the 12 months was about break-even, compared with $8 million year-on-year.

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