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Audiovox Sales Rise 5%, Reports Loss

Hauppauge, N.Y. — Audiovox recorded a 5 percent increase in its fiscal fourth quarter consolidated sales, rising to $156.3 million, from $148.8 million in the year-ago period.

However, the company reported a consolidated net loss for the three months, ended Nov. 30, coming in at a negative $10.3 million, compared with positive net income of $66.3 million in the same quarter in 2004. The current quarterly loss includes charges for closing of the company’s Malaysia operations, while the fourth quarter in 2004 includes a gain of $67 million from the sale of the company’s cellular group.

Mobile electronics, which represented 59.5 percent of Audiovox net sales in the fourth quarter, reported revenue of $93.2 million, about flat with the $92.8 million recorded in the comparable period the previous year.

Mobile electronics sales were impacted by the reduction of selling prices in satellite radio plug-n-play units; certain discontinued mobile video products; increased presence by original equipment manufacturers; and the ongoing shift from video-in-a-bag systems to lower cost, less featured portable DVD players, said the company.

Offsetting these declines in mobile electronics, said Audiovox, were stronger sales of Jensen-brand mobile multi-media products and increased sales from company subsidiaries Terk and Code.

The Audiovox CE business, which accounted for 40.4 percent of company sales in the fourth quarter, saw revenue rise 12.7 percent, hitting $63.1 million, up from $56 million year-on-year. The dollar figure marked the highest three month sales total for CE products in Audiovox history, said the company. The increase was due primarily to higher sales of LCD flat-panel TVs and portable DVD products.

Patrick Lavelle, president/CEO, said, “2005 was a challenging year for Audiovox. Two of our major product categories underwent transformations and we added several new products and categories into the mix, which resulted in us evaluating all aspects of our business.

“In addition,” continued Lavelle, “with the divestiture of cellular, the subsequent changes to our corporate structure, we were faced with many operational hurdles.”

Despite the negatives in 2005, Lavelle reports continued strong demand for LCD televisions and portable DVD products in its CE segment, and similar positive news for satellite radio and Jensen multi-media products in mobile.

“We secured new business models in the satellite radio and portable DVD product categories,” said Lavelle, “which should mitigate our exposure from future price erosion and product life-cycle concerns that marked the third and fourth quarters.”

Gross margin for the fourth quarter dropped to 6.2 percent, from a year-ago 16.2 percent, due primarily to the impact of the discontinuance of aftermarket products and product lines, low or no margin on select satellite radio plug-n-play units and increased CE sales of traditionally lower-margin products. The decline was partially offset by higher margins from the Terk, Jensen and Code product lines, as well as LCD televisions, said the company.

Operating expenses for the fourth quarter decreased 20.2 percent, to $23.2 million, from a year-on-year $29 million.

For the 12 months, Audiovox consolidated sales decreased 4.3 percent, reaching $539.7 million, down from $563.7 million in 2004. Mobile electronics sales, 62.9 percent of overall business, dropped 15.8 percent for the year, to $339.4 million, from $403.2 million the prior year. CE sales jumped 24.9 percent for the year, to $200.4 million, from $160.5 million the previous 12 months.

The company reported a 12-month consolidated net loss of $9.6 million, including a $2.1 million charge, compared with $77.2 million in net income the prior year, including the $67 million gain from the sale of its wireless group.

Gross margin for the year decreased to 11.3 percent, compared with a year-on-year 15.9 percent, while operating expenses for the 12 months reached $88.5 million, a decline of 2.8 percent year-over-year, from $91.1 million.

Audiovox is changing its fiscal year-end from the current Nov. 30, to Jan. 28. The company intends to file a 10-K transition report for the three months ended Feb. 28.