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Audiovox Reports Net Loss, Higher Sales

5/15/2009 09:40:00 AM Eastern

Hauppauge, N.Y. — Audiovox reported a $71 million loss but higher sales in its fiscal year, ended Feb. 28.

Audiovox posted a net loss of $71 million, compared with net income of $8.5 million in the prior fiscal year. Included in fiscal year 2008 was a gain of $1.7 million related to a derivative legal settlement and which is accounted for in discontinued operations, the company said.

Net sales for the 2009 fiscal year were $603.1 million, an increase of 2 percent or $11.7 million, as compared with net sales of $591.4 million reported for the previous fiscal year.

Electronics sales, which include both mobile and consumer electronics, were $449.4 million in fiscal 2009, an increase of 2.8 percent as compared to $437.0 million reported in fiscal 2008. This increase was primarily related to higher sales of consumer electronics products, particularly new product categories under the RCA brand, and increases in the company's OEM business and in its international operations in Venezuela and Mexico as compared with the prior year, Audiovox said.

Offsetting this increase were lower sales of mobile electronics products as result of the global economic downturn, lower car sales and the financial difficulties of the automakers, which intensified in the fiscal fourth quarter of 2009. As a percentage of net sales, electronics represented 74.5 percent of sales in fiscal 2009, basically the same as the prior year.

Accessories sales for the fiscal year were $153.7 million, a decrease of 0.4 percent as compared with $154.3 million reported in the comparable fiscal year period. As a percentage of net sales, accessories represented 25.5 percent in fiscal 2009, again about the same as the prior fiscal year.

Pat Lavelle, president/CEO, stated, "For the first nine months of our fiscal year, we operated our business at a near break-even level, despite pressures on sales and margins as well as increased expenses driven by rising energy costs and a deteriorating marketplace. Those pressures intensified during our fourth quarter as our channel partners experienced a slow-down in sell-through at retail that resulted in post-holiday inventory overhang. This, in turn, pushed back the timing of certain, new promotions. In addition, the auto sector, which had been weak all year, slowed even further amidst fears of potential bankruptcies."

Lavelle cited "forces beyond our control” in creating the annual loss, in particular the bankruptcies of key vendors and customers, rising oil prices that drove up transportation and manufacturing costs, and the problems in the U.S. auto industry.

He added, "Throughout the year, we took steps to combat the ever shifting economic situation, knowing that those adjustments to our business model would not only help us weather the storm but also, help us emerge stronger and better positioned to take advantage of the market as it recovers. We continue to develop new products, rationalizing our portfolio behind the key brands of Audiovox, RCA, Jensen, Energizer and Acoustic Research. Our products are placed in more retail outlets than ever before. We have put in place expense cuts and workforce reductions that have reduced 2010 operating expenses by over $23 million.”

In the fourth quarter, ended Feb. 28 ,net sales were $115.7 million, a decrease of 11.9 percent, as compared with $131.3 million in the prior year’s fourth quarter.

Net loss for the 2009 fiscal fourth quarter was $70 million, compared to a net loss of $2.2 million for the previous year’s final quarter

Accessory sales, which represented 37.7 percent of net sales for the quarter, were $43.6 million, compared with $35.5 million in the prior year’s fourth quarter, an increase of 22.9 percent. The sales increase was primarily due to higher antenna sales in preparation for the digital TV switch as well as the addition of several new retail partners that resulted in new sales.

Audiovox now has about $70 million in cash and will continue its strategy of acquiring new companies, Lavelle said claiming that former acquisitions including that of Thomson’s RCA AV business and Code Systems have worked out well.

Audiovox said the RCA purchase for $19.7 million, after licensing sales, cost the company $10 million and resulted in $150 million of incremental sales.

“There are some opportunities that have presented themselves to us…I think the economic climate has created some opportunities that we could take advantage of during the year,” LaVelle said.

During an earnings call today, Audiovox also said it wrote down approximately $2.4 million due to the bankruptcy of a large retail customer, presumably referring to Circuit City. The company also wrote down about a $500,000 due to the Chrysler bankruptcy, but said, it believes it will be able to sell through that inventory as Chrysler reorganizes. “We think the worst is over with Chrysler,” Lavelle said.

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