Audiovox Corporation (VOXX)

F3Q2011 Results (Qtr End November 30, 2010) Earnings Call

January 11, 2011 10:00 a.m. ET


Glenn Wiener - GW Communications

Patrick Lavelle - President, CEO

Michael Stoehr - SVP, CFO


Jim Barrett - CL King & Associates

Anthony Chiarenza - Key Equity Investors

Peter Mondejar - Tradelink Securities

Gary North - GS North Company

Mike Neary - Neary Asset Management



Good day, ladies and gentlemen, and welcome to the third quarter 2011 Audiovox Corporation earnings conference call. My name is Francine [ph] and I'm your operator for today.

At this time all participants are in listen-only mode. Later we will conduct a question-and-answer session. It at any time during the call you require assistance, please press star followed by 0 and we'll be happy to assist you.

I would now like to turn the presentation over to your host for today's call, Mr. Glenn Wiener. Sir, you may proceed.

Glenn Wiener

Thank you and welcome to Audiovox's fiscal 2011 third quarter results conference call. As you know, today's call is being webcast in our site,, and can be accessed from the Investor Relations section.

With us this morning at Pat Lavelle, President and CEO; Michael Stoehr, Senior Vice President and Chief Financial Officer; and John Shalam, Chairman of the Board.

Before we begin, I'd quickly like to remind everyone that except for historical information contained herein, statements made on today's call and webcast that would constitute forward-looking statements may involve certain risks and uncertainties. All forward-looking statements made are based on currently available information, and the company assumes no responsibility to update any such forward-looking statements. Risk factors associated with our business are detailed in the company's Form 10-K for the fiscal year ended February 28, 2010.

Thank you for joining us this morning. And I'd now like to turn the call over to Patrick Lavelle. Pat?

Patrick Lavelle

Thanks, Glenn, and good morning, everyone. I'd like to start by wishing everyone a happy and healthy new year and the best in 2011.

Yesterday we released our results for the fiscal third quarter, posting a sales increase of $7.5 million or 4.8%, along with 180-basis-point improvement in our gross profit margins. We also posted a $2.3 million increase in operating income and earnings per share of $0.17.

To summarize our performance and before I go into details, the U.S. economy still remains in flux and it's hampered our sales, primarily at retail. Our mobile business continues to increase with the uptick in car sales and our international business continues to grow as well. I firmly believe the U.S. economy will rebound, it's just a matter of time, and when it does, we expect the company to deliver both top and bottom line growth due to our strong product portfolio, new innovations, our retail presence, our aftermarket network, and nationwide distribution.

As I said, our third quarter sales were up, and for the year up $22 million or 5.6%. International sales were up and our domestic sales were aided by Invision, though there were many other mobile categories that experienced sales growth. All of our security groups delivered strong sales, and our total OEM business, without contribution from acquisitions, was up 26%. With Invision, our OEM business for the quarter almost tripled.

Our rear-seat entertainment systems, remote start and collision avoidance systems, and several of our multimedia products are in high demand both in the aftermarket and at the OE level, which bodes well for our future business with expected increase in car sales projected for next year. Early indications are for as many as 14 million cars and trucks next year.

The mobile group did experience some slow sales at retail in several of our categories, and of course we did not anniversary $4.7 million in sales from FLO TV. Overall our mobile business is much stronger today than at this time last year and there is no doubt that it will be a significant part of our top line growth moving forward. I will remind everyone, however, that our fourth quarter is typically the lowest period for car sales nationally.

Our consumer electronics and accessory business is where we continue to feel weakness most. Holiday sales for December did not reach expectations and industry-wide CE sales in particular were down 5%. Excluding smartphones and tablets, the decline was a lot steeper. The weakness in industry video sales also has a direct impact on our accessory products, particularly antennas, audio/video cables and remote controls. However, it's important to note that our margins were significantly higher in this fiscal year's 3Q than in last.

We believed, going into the holiday season, we did not believe it was going to be a robust year, and we chose not to participate in Black Friday promotions. We remain focus on managing our inventory position and limited potential exposures to write-off or markdowns.

Our international sales grew 3.6% and our margins were up over 100 basis points. Excluding the impact from our Schwaiger acquisition, sales were still up. Incaar posted nice top line improvements due to the start of OE programs to the BMW X3 and the Porsche Cayenne. I noted last quarter that Incaar was also awarded a program with Bentley which now will be rolling out in September of 2011.

For the fiscal nine-month period, our international business is up close to 22% even with the problems in Venezuela that we had talked about last quarter. Mike will address the steps that we are taking to protect our Venezuelan assets.

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