Hauppauge, N.Y. – Audiovox reported a reduced net loss but double digit reduction in sales for its fiscal second quarter ended Aug. 31, due in part to a decline in satellite radio sales.
The company reported net sales for quarter of $97.4 million, a decrease of 20.8 percent compared to $122.9 million reported in the comparable prior year quarter. Net loss from continuing operations for the fiscal 2006 second quarter was $1.6 million. This compares to a net loss from continuing operations of $3.6 million in the comparable prior year period. Including discontinued operations, Audiovox reported a net loss of $2 million in the quarter as compared to a net loss of $3.7 million in the similar 2005 period.
Mobile electronics sales, which represented 69.2 percent of net sales, were $67.4 million, a decrease of 14.2 percent compared to sales of $78.6 million reported in the comparable prior year period. This decrease was due primarily to a decline in satellite radio sales as the company no longer sells Sirius plug-and-play units and the voluntary suspension of sales of the Audiovox XM Express product.
Audiovox has resumed shipments of XM Express products following the resolution of that model with the Federal Communications Commission (FCC). Additionally, Mobile Electronics sales were adversely impacted by the continued decline of SUV sales and the insolvency of one of the company’s vendors. In the comparable prior year period, Mobile Electronics comprised 63.9 percent of net sales.
Consumer electronics, which represented 30.8 percent of sales, were $30 million, a decrease of 32.3 percent compared to net sales of $44.4 million reported in the comparable period last year. This decline is a direct result of price erosion in the LCD TV and portable DVD categories and the decision by Audiovox to eliminate low margin retail programs and focus on selling higher margin products. In the fiscal second quarter ended Aug. 31, CE sales comprised 36.1 of net sales.
Gross margins for the period were 16.2 percent compared to 10 percent reported in the prior year period. The increase in gross margins is related to higher margins earned in the mobile video category, a refocused effort to improve margins throughout our product portfolio and more effective buying programs and inventory management.
Patrick Lavelle, president/CEO of Audiovox stated, “As a result of the FCC issue, we experienced sales weakness this quarter. However, the FCC matter has been resolved and we expect to have all of our retail partners fully stocked for the holiday season. We have a number of new XM products, in addition to XM Express planned for introduction in the second half of the year that will help us achieve our goal of becoming the number one XM satellite radio supplier. Additionally, the insolvency of one of our car audio supplier’s adversely impacted our sales and margins. Had these two events not occurred, I believe we would have achieved our internal sales targets and reached modest profits for the quarter.”
Audiovox changed its fiscal year from Nov. 30 to Feb. 28. As such, fiscal 2006 second quarter results were compared to the prior year period ended Aug. 31, 2005, which was the company’s fiscal 2005 third quarter.
