Quarterly Report (10-q)

Date : 10/10/2019 @ 8:23PM
Source : Edgar (US Regulatory)
Stock : VOXX International Corporation (VOXX)
Quote : 4.8481  0.0181 (0.37%) @ 4:08PM

Quarterly Report (10-q)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 31, 2019

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 0-28839

 

VOXX International Corporation

(Exact name of registrant as specified in its charter)

 

 

Delaware

(State or other jurisdiction of

incorporation or organization)

 

13-1964841

(IRS Employer Identification No.)

2351 J Lawson Blvd., Orlando, Florida

(Address of principal executive offices)

 

32824

(Zip Code)

 

 

 

(800) 654-7750

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class:

Trading Symbol:

Name of Each Exchange on which Registered

Class A Common Stock $.01 par value

VOXX

The Nasdaq Stock Market LLC

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes    No   

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes    No   

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company, as defined in Rule 12b-2 of the Exchange Act.:

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

Number of shares of each class of the issuer's common stock outstanding as of the latest practicable date.

 

Class

 

As of October 9, 2019

Class A Common Stock

 

21,929,788 Shares

Class B Common Stock

 

2,260,954 Shares

 

 

 


 

VOXX International Corporation and Subsidiaries

Table of Contents

 

 

 

 

 

Page

PART I

 

FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1

 

FINANCIAL STATEMENTS

 

 

 

 

Consolidated Balance Sheets at August 31, 2019 (unaudited) and February 28, 2019

 

3

 

 

Unaudited Consolidated Statements of Operations and Comprehensive (Loss) Income for the Three and Six Months Ended August 31, 2019 and 2018

 

5

 

 

Unaudited Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended August 31, 2019 and 2018

 

6

 

 

Unaudited Consolidated Statements of Cash Flows for the Six Months Ended August 31, 2019 and 2018

 

7

 

 

Notes to Unaudited Consolidated Financial Statements

 

8

Item 2

 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

33

Item 3

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

45

Item 4

 

CONTROLS AND PROCEDURES

 

45

 

 

 

 

 

PART II

 

OTHER INFORMATION

 

 

 

 

 

 

 

Item 1

 

LEGAL PROCEEDINGS

 

46

Item 1A

 

RISK FACTORS

 

46

Item 2

 

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

46

Item 6

 

EXHIBITS

 

47

SIGNATURES

 

48

 

 

 

 

2


 

PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

VOXX International Corporation and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share data)

 

 

 

August 31,

2019

 

 

February 28,

2019

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

39,294

 

 

$

58,236

 

Accounts receivable, net

 

 

68,371

 

 

 

73,391

 

Inventory, net

 

 

114,568

 

 

 

102,379

 

Receivables from vendors

 

 

366

 

 

 

1,009

 

Prepaid expenses and other current assets

 

 

9,605

 

 

 

10,449

 

Income tax receivable

 

 

1,239

 

 

 

921

 

Total current assets

 

 

233,443

 

 

 

246,385

 

Investment securities

 

 

2,518

 

 

 

2,858

 

Equity investment

 

 

21,688

 

 

 

21,885

 

Property, plant and equipment, net

 

 

59,864

 

 

 

60,493

 

Operating lease, right of use asset

 

 

2,301

 

 

 

 

Goodwill

 

 

54,785

 

 

 

54,785

 

Intangible assets, net

 

 

115,769

 

 

 

119,449

 

Deferred income tax assets

 

 

78

 

 

 

79

 

Other assets

 

 

1,937

 

 

 

2,877

 

Total assets

 

$

492,383

 

 

$

508,811

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

33,844

 

 

$

31,143

 

Accrued expenses and other current liabilities

 

 

36,352

 

 

 

39,129

 

Income taxes payable

 

 

1,099

 

 

 

1,349

 

Accrued sales incentives

 

 

10,948

 

 

 

13,574

 

Current portion of long-term debt

 

 

6,665

 

 

 

10,021

 

Total current liabilities

 

 

88,908

 

 

 

95,216

 

Long-term debt, net of debt issuance costs

 

 

5,958

 

 

 

5,776

 

Finance lease liabilities, less current portion

 

 

974

 

 

 

516

 

Operating lease liabilities, less current portion

 

 

1,762

 

 

 

 

Deferred compensation

 

 

2,517

 

 

 

2,605

 

Deferred income tax liabilities

 

 

4,015

 

 

 

5,284

 

Other tax liabilities

 

 

1,128

 

 

 

1,332

 

Other long-term liabilities

 

 

2,481

 

 

 

2,981

 

Total liabilities

 

 

107,743

 

 

 

113,710

 

Commitments and contingencies (see Note 24)

 

 

 

 

 

 

 

 

Redeemable equity (see Note 7)

 

 

1,770

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock:

 

 

 

 

 

 

 

 

No shares issued or outstanding (see Note 20)

 

 

 

 

 

 

Common stock:

 

 

 

 

 

 

 

 

Class A, $.01 par value, 60,000,000 shares authorized, 24,306,194 and 24,106,194 shares issued and 21,929,788 and 21,938,100 shares outstanding at August 31, 2019 and February 28, 2019, respectively

 

 

244

 

 

 

242

 

Class B Convertible, $.01 par value, 10,000,000 shares authorized, 2,260,954 shares issued and outstanding at both August 31, 2019 and February 28, 2019

 

 

22

 

 

 

22

 

Paid-in capital

 

 

298,289

 

 

 

296,946

 

Retained earnings

 

 

141,470

 

 

 

148,582

 

Accumulated other comprehensive loss

 

 

(18,231

)

 

 

(16,944

)

 

 

 

421,794

 

 

 

428,848

 

Less: Treasury stock, at cost, 2,376,406 and 2,168,094 shares of Class A Common Stock at August 31, 2019 and February 28, 2019, respectively

 

 

(22,159

)

 

 

(21,176

)

Less: Redeemable equity

 

 

(1,770

)

 

 

 

Total VOXX International Corporation stockholders' equity

 

 

397,865

 

 

 

407,672

 

Non-controlling interest

 

 

(14,995

)

 

 

(12,571

)

Total stockholders' equity

 

 

382,870

 

 

 

395,101

 

3


 

Total liabilities, redeemable equity, and stockholders' equity

 

$

492,383

 

 

$

508,811

 

 

See accompanying notes to unaudited consolidated financial statements.

 

4


 

VOXX International Corporation and Subsidiaries

Unaudited Consolidated Statements of Operations and Comprehensive (Loss) Income

(In thousands, except share and per share data)

 

 

 

Three months ended

August 31,

 

 

Six months ended

August 31,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net sales

 

$

90,246

 

 

$

108,867

 

 

$

183,700

 

 

$

209,722

 

Cost of sales

 

 

66,477

 

 

 

77,804

 

 

 

133,922

 

 

 

150,982

 

Gross profit

 

 

23,769

 

 

 

31,063

 

 

 

49,778

 

 

 

58,740

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling

 

 

8,701

 

 

 

9,604

 

 

 

18,582

 

 

 

20,298

 

General and administrative

 

 

17,782

 

 

 

17,038

 

 

 

35,207

 

 

 

33,150

 

Engineering and technical support

 

 

5,035

 

 

 

6,070

 

 

 

10,842

 

 

 

11,981

 

Intangible asset impairment charges (see Note 10)

 

 

 

 

 

9,814

 

 

 

 

 

 

9,814

 

Total operating expenses

 

 

31,518

 

 

 

42,526

 

 

 

64,631

 

 

 

75,243

 

Operating loss

 

 

(7,749

)

 

 

(11,463

)

 

 

(14,853

)

 

 

(16,503

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and bank charges

 

 

(887

)

 

 

(1,117

)

 

 

(1,884

)

 

 

(2,217

)

Equity in income of equity investee

 

 

1,265

 

 

 

1,637

 

 

 

2,705

 

 

 

3,451

 

Investment gain (see Note 3)

 

 

775

 

 

 

 

 

 

775

 

 

 

 

Impairment of Venezuela investment properties (see Note 18)

 

 

 

 

 

(3,473

)

 

 

 

 

 

(3,473

)

Other, net

 

 

547

 

 

 

252

 

 

 

2,191

 

 

 

913

 

Total other income (expense), net

 

 

1,700

 

 

 

(2,701

)

 

 

3,787

 

 

 

(1,326

)

Loss before income taxes

 

 

(6,049

)

 

 

(14,164

)

 

 

(11,066

)

 

 

(17,829

)

Income tax expense (benefit)

 

 

1,115

 

 

 

8,338

 

 

 

(1,530

)

 

 

7,225

 

Net loss

 

 

(7,164

)

 

 

(22,502

)

 

 

(9,536

)

 

 

(25,054

)

Less: net loss attributable to non-controlling interest

 

 

(1,200

)

 

 

(1,699

)

 

 

(2,424

)

 

 

(3,312

)

Net loss attributable to VOXX International Corporation

 

$

(5,964

)

 

$

(20,803

)

 

$

(7,112

)

 

$

(21,742

)

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(215

)

 

 

(50

)

 

 

(1,026

)

 

 

(2,070

)

Derivatives designated for hedging

 

 

(177

)

 

 

50

 

 

 

(284

)

 

 

492

 

Pension plan adjustments

 

 

9

 

 

 

1

 

 

 

23

 

 

 

37

 

Unrealized holding gain on available-for-sale investment securities, net of tax

 

 

 

 

 

 

 

 

 

 

 

24

 

Other comprehensive (loss) income, net of tax

 

 

(383

)

 

 

1

 

 

 

(1,287

)

 

 

(1,517

)

Comprehensive loss attributable to VOXX International Corporation

 

$

(6,347

)

 

$

(20,802

)

 

$

(8,399

)

 

$

(23,259

)

Loss per share - basic: Attributable to VOXX International Corporation

 

$

(0.24

)

 

$

(0.85

)

 

$

(0.29

)

 

$

(0.89

)

Loss per share - diluted: Attributable to VOXX International Corporation

 

$

(0.24

)

 

$

(0.85

)

 

$

(0.29

)

 

$

(0.89

)

Weighted-average common shares outstanding (basic)

 

 

24,481,477

 

 

 

24,355,791

 

 

 

24,457,482

 

 

 

24,355,791

 

Weighted-average common shares outstanding (diluted)

 

 

24,481,477

 

 

 

24,355,791

 

 

 

24,457,482

 

 

 

24,355,791

 

 

See accompanying notes to unaudited consolidated financial statements.

5


 

VOXX International Corporation and Subsidiaries

Unaudited Consolidated Statements of Stockholders' Equity

(In thousands, except share and per share data)

 

 

 

Class A

and Class B

Common

Stock

 

 

Paid-in

Capital

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Non-

controlling

Interests

 

 

Treasury

Stock

 

 

Redeemable Equity

 

 

Total

Stock-

holders'

Equity

 

Balances at February 28, 2019

 

$

264

 

 

$

296,946

 

 

$

148,582

 

 

$

(16,944

)

 

$

(12,571

)

 

$

(21,176

)

 

$

-

 

 

$

395,101

 

Net loss

 

 

 

 

 

 

 

 

(1,148

)

 

 

 

 

 

(1,224

)

 

 

 

 

 

 

 

 

(2,372

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

(904

)

 

 

 

 

 

 

 

 

 

 

 

(904

)

Stock-based compensation expense

 

 

 

 

 

159

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

159

 

Balances at May 31, 2019

 

 

264

 

 

 

297,105

 

 

 

147,434

 

 

 

(17,848

)

 

 

(13,795

)

 

 

(21,176

)

 

 

-

 

 

 

391,984

 

Net loss

 

 

 

 

 

 

 

 

(5,964

)

 

 

 

 

 

(1,200

)

 

 

 

 

 

 

 

 

(7,164

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

(383

)

 

 

 

 

 

 

 

 

 

 

 

(383

)

Stock-based compensation expense

 

 

2

 

 

 

1,184

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,025

)

 

 

161

 

Reclassifications of stockholders' equity to redeemable equity (see Note 7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(745

)

 

 

(745

)

Repurchase of 208,312 shares of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(983

)

 

 

 

 

 

(983

)

Balances at August 31, 2019

 

$

266

 

 

$

298,289

 

 

$

141,470

 

 

$

(18,231

)

 

$

(14,995

)

 

$

(22,159

)

 

$

(1,770

)

 

$

382,870

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at February 28, 2018

 

$

278

 

 

$

296,395

 

 

$

194,673

 

 

$

(14,222

)

 

$

(5,830

)

 

$

(21,176

)

 

$

-

 

 

$

450,118

 

Net loss

 

 

 

 

 

 

 

 

(939

)

 

 

 

 

 

(1,613

)

 

 

 

 

 

 

 

 

(2,552

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

(1,518

)

 

 

 

 

 

 

 

 

 

 

 

(1,518

)

Adjustment to common stock

 

 

(14

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14

)

Stock-based compensation expense

 

 

 

 

 

107

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

107

 

Balances at May 31, 2018

 

 

264

 

 

 

296,502

 

 

 

193,734

 

 

 

(15,740

)

 

 

(7,443

)

 

 

(21,176

)

 

 

-

 

 

 

446,141

 

Net loss

 

 

 

 

 

 

 

 

(20,803

)

 

 

 

 

 

(1,699

)

 

 

 

 

 

 

 

 

(22,502

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Adjustment to common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

127

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

127

 

Balances at August 31, 2018

 

$

264

 

 

$

296,629

 

 

$

172,931

 

 

$

(15,739

)

 

$

(9,142

)

 

$

(21,176

)

 

$

-

 

 

$

423,767

 

 

See accompanying notes to unaudited consolidated financial statements.

6


 

VOXX International Corporation and Subsidiaries

Unaudited Consolidated Statements of Cash Flows

 

 

 

 

Six months ended

August 31,

 

 

 

 

2019

 

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

$

(9,536

)

 

 

$

(25,054

)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

6,587

 

 

 

 

5,925

 

Amortization of debt discount

 

 

 

411

 

 

 

 

411

 

Intangible asset impairment charge

 

 

 

 

 

 

 

9,814

 

Bad debt expense

 

 

 

104

 

 

 

 

103

 

(Gain) loss on forward contracts

 

 

 

(213

)

 

 

 

218

 

Equity in income of equity investees

 

 

 

(2,705

)

 

 

 

(3,451

)

Distribution of income from equity investees

 

 

 

2,903

 

 

 

 

3,263

 

Deferred income tax (benefit) expense

 

 

 

(1,276

)

 

 

 

6,080

 

Non-cash compensation adjustment

 

 

 

(88

)

 

 

 

(383

)

Stock based compensation expense

 

 

 

1,345

 

 

 

 

234

 

Impairment of Venezuela investment properties

 

 

 

 

 

 

 

3,473

 

Loss on sale of property, plant and equipment

 

 

 

18

 

 

 

 

13

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

 

4,386

 

 

 

 

9,285

 

Inventory

 

 

 

(12,791

)

 

 

 

(7,644

)

Receivables from vendors

 

 

 

641

 

 

 

 

136

 

Prepaid expenses and other

 

 

 

1,213

 

 

 

 

699

 

Investment securities-trading

 

 

 

340

 

 

 

 

508

 

Accounts payable, accrued expenses, accrued sales incentives and other liabilities

 

 

 

(3,475

)

 

 

 

(2,225

)

Income taxes payable

 

 

 

(738

)

 

 

 

(1,225

)

Net cash (used in) provided by operating activities

 

 

 

(12,874

)

 

 

 

180

 

Cash flows used in investing activities:

 

 

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

 

(1,332

)

 

 

 

(685

)

Proceeds from sale of property, plant and equipment

 

 

 

26

 

 

 

 

51

 

Issuance of notes receivable

 

 

 

 

 

 

 

(3,164

)

Net cash used in investing activities

 

 

 

(1,306

)

 

 

 

(3,798

)

Cash flows used in financing activities:

 

 

 

 

 

 

 

 

 

 

Principal payments on finance lease obligation

 

 

 

(310

)

 

 

 

(190

)

Repayment of bank obligations

 

 

 

(3,356

)

 

 

 

(1,490

)

Borrowings on bank obligations

 

 

 

 

 

 

 

1,487

 

Purchase of treasury stock

 

 

 

(983

)

 

 

 

 

Net cash used in financing activities

 

 

 

(4,649

)

 

 

 

(193

)

Effect of exchange rate changes on cash

 

 

 

(113

)

 

 

 

(3,738

)

Net decrease in cash and cash equivalents

 

 

 

(18,942

)

 

 

 

(7,549

)

Cash and cash equivalents at beginning of period

 

 

 

58,236

 

 

 

 

51,740

 

Cash and cash equivalents at end of period

 

 

$

39,294

 

 

 

$

44,191

 

 

See accompanying notes to unaudited consolidated financial statements.

 

7


 

VOXX International Corporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Amounts in thousands, except share and per share data)

(1)

Basis of Presentation

The accompanying unaudited interim consolidated financial statements of VOXX International Corporation and Subsidiaries ("Voxx" or the "Company") have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and in accordance with accounting principles generally accepted in the United States of America and include all adjustments (consisting of normal recurring adjustments), which, in the opinion of management, are necessary to present fairly the consolidated financial position, results of operations, changes in stockholders’ equity, and cash flows for all periods presented.  The results of operations are not necessarily indicative of the results to be expected for the full fiscal year or any interim period.  These unaudited consolidated financial statements do not include all disclosures associated with consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America. Accordingly, these statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto contained in the Company's Form 10-K for the fiscal year ended February 28, 2019.

Effective March 1, 2019, the Company revised its reportable segments to better reflect the way the Company now manages its business. To reflect management's revised perspective, the Company now classifies its operations in the following three reportable segments: Automotive Electronics, Consumer Electronics, and Biometrics. Prior year segment amounts have been reclassified to conform to the current presentation. See Note 22 for the Company's segment reporting disclosures.

(2)

Net (Loss) Income Per Common Share

Basic net (loss) income per common share, net of non-controlling interest, is based upon the weighted-average common shares outstanding during the period. Diluted net (loss) income per common share, net of non-controlling interest, reflects the potential dilution that would occur if common stock equivalent securities or other contracts to issue common stock were exercised or converted into common stock.

There are no reconciling items which impact the numerator of basic and diluted net (loss) income per common share.  A reconciliation between the denominator of basic and diluted net (loss) income per common share is as follows:

 

 

 

Three months ended

August 31,

 

 

Six months ended

August 31,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Weighted-average common shares outstanding (basic)

 

 

24,481,477

 

 

 

24,355,791

 

 

 

24,457,482

 

 

 

24,355,791

 

Effect of dilutive securities: