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Audiovox Sales Slide 7.3%, Reports Net Loss

10/12/2005 08:33:00 AM Eastern

Hauppauge, N.Y. — Mobile electronics sales, which represented 64 percent of net sales at Audiovox during the company’s fiscal third quarter, dropped 21.3 percent, putting a damper on overall company three month sales, which decreased 7.3 percent, to $122.9 million from a year-ago $32.6 million.

Net loss from continuing operations in the third quarter, ended Aug. 31, was $3.6 million, compared with net income of $37,000 in the comparable prior-year period. Overall net loss for the three months reached $3.7 million, compared with net income of $5.3 million year-on-year.

Mobile electronics sales in the third quarter were reported at $78.6 million, down from the $99.8 million recorded in the same time from a year earlier. The decline was primarily related to the reduction of selling prices in satellite radio plug-and-play units and certain discontinued mobile video products, said Audiovox.

The company took an inventory write-down of $3.8 million, as previously announced, to reflect current market conditions in the satellite radio category, which has seen prices of plug-and-play units fall by about 50 percent.

Offsetting these declines were stronger sales in the company’s Jensen-brand autosound products, Terk products and the introduction of mobile video systems.

Consumer electronics, which represented 36 percent of Audiovox net sales in the third quarter, recorded sales of $44.4 million in the three months, a 35.2 percent rise, compared with the $32.8 million taken in during the same three months last year. The company attributed this increase primarily to higher sales of LCD flat-panel televisions and portable DVD products.

“The unexpected decline in satellite radio, coupled with the ongoing shift in the mobile video category, negatively impacted both our top- and bottom-line results this quarter,” said Patrick Lavelle, president/CEO. “Overall mobile video sales continue to be effected by the shift from the video in a bag systems to lower priced portable DVD players.”

Lavelle also said, despite the negatives, “We believe that mobile video will remain a viable sales category for us in the future although at a reduced level. In fact, our margins on installed mobile video products should reach more normal levels in the future.”

Looking at satellite radio, Lavelle said, “We are looking to restructure our business model in this category in order to mitigate our exposure to drastic price fluctuations. Other lines — including our LCD TVs, portable DVDs, Jensen-branded mobile multimedia products and new mobile video systems recently introduced — continue to perform well.”

Gross margin in the third quarter declined primarily due to the satellite radio write-down, increased CE sales at traditionally lower margins and the lower margins associated wit the remaining sales of discontinued mobile video products. The decline was partially offset by higher margins from the company’s Terk and Jensen product lines.

Operating expenses in the quarter decreased 3.6 percent to $21.3 million, from $22.1 million year-on-year.

For the nine months, Audiovox sales decreased 7.6 percent, down to $383.4 million, from $414.8 million in the same period the prior year. Mobile electronics, which represented 64.2 percent of net sales, came in at $246.2 million, down 20.7 percent from the $310.4 million reported in the year-ago period. CE sales were $137.2 million for the nine months, up 31.4 percent from the $104.5 million recorded year-on-year.

Including discontinued operations, net income for the nine months was $705,000, down from $10.9 million the prior year. Gross margin was 13.3 percent, compared with 15.8 percent in the same nine months last year. Net income from continuing operations was $1.6 million, down from the previous year’s $2.3 million.

Operating expenses for the nine months reached $65.4 million, an increase of 5.3 percent over the $62.1 million reported year-over-year.

Lavelle reported Audiovox is actively seeking strategic acquisitions, investing in the company’s infrastructure to maximize efficiencies and developing new products, which are expected to enhance its position in the mobile and CE categories.

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