VOXX International Management Discusses Q4 2012 Results - Earnings Call Transcript

VOXX International (VOXX)

Q4 2012 Earnings Call

May 15, 2012 10:00 am ET

Executives

Glenn Wiener

Patrick M. Lavelle - Chief Executive Officer, President and Director

Charles Michael Stoehr - Chief Financial Officer, Principal Accounting Officer, Senior Vice President and Director

John J. Shalam - Chairman of the Board

Analysts

Matthew Spratford - Sidoti & Company, LLC

Michael Fawzy Malouf - Craig-Hallum Capital Group LLC, Research Division

R. Scott Tilghman - Caris & Company, Inc., Research Division

Presentation

Operator

Good morning, ladies and gentlemen. Welcome to the VOXX International Corporation Fiscal 2012 Fourth Quarter and Year-End Conference Call. My name is Chris, and I will be your conference moderator today. [Operator Instructions] And as a reminder, this conference is being recorded for replay purposes. And at this time, I would now like to turn the conference over to your presenter for today, Mr. Glenn Wiener. Sir, you may proceed.

Glenn Wiener

Thank you, Chris, and good morning. Welcome to Audiovox's Fiscal 2012 Fourth Quarter and Year-End Results Conference Call. Today's call is being webcast on our website, www.voxxintl.com, and can be accessed in the Investor Relations section. On today's call are Pat Lavelle, President and Chief Executive Officer; Michael Stoehr, Senior Vice President and Chief Financial Officer; and John Shalam, Chairman of the Board.

Before we begin, I 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 are made 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 29, 2012.

This time, I'd like to turn the call over to Pat.

Patrick M. Lavelle

Thank you, Glenn. Good morning, everyone, and thank you for joining us. My plan today is to focus primarily on our fiscal '12 results and discuss our outlook moving into fiscal 2013, especially now that the Hirschmann acquisition is in the mix. But before doing so, I'd like to cover our fourth quarter numbers as we met revenue targets and our bottom line came in above forecast.

On our last conference call in January, we guided EBITDA higher because we were confident in achieving our revenue targets and our gross margins were tracking better than anticipated. We also noted there was upside potential to that guidance, which I'm happy to say didn't materialize. In the fourth quarter, we had a higher-than-expected shift in our product mix, which was the combination of our results including the sales of Klipsch, which were not part of our last year's comparisons. And we had an overall mix improvement. Gross profit was also favorably impacted by the release of unearned market development funds and volume-incentive rebates that were the result of some customers not reaching their annual sales targets. These factors, combined, led to an increase in our gross profit margins above forecast, though overall, our margins continue to trend higher than they were last year.

We reported sales of $176.6 million, up over 27%. Our gross margins were 31.5%, up 640 basis points. We reported an $8.9 million improvement in operating income, and our EBITDA was $17.7 million versus $8.3 million in 4Q last year, a $9.4 million increase.

Looking back at the year, I'm proud of what we accomplished. We executed our strategy and built a strong foundation for growth in the coming years. We acquired Klipsch and Hirschmann over a 3-month period, 2 significant acquisitions that have changed the financial makeup of our company and significantly strengthened our product offering.

We expanded distribution and gaining new retail accounts and OEM customers and grew our footprint internationally. And we continue to shift our product mix into more sustainable growth categories, which should improve our ability to generate consistent returns.

In fiscal 2012, our sales were $707.1 million, up almost 26%. This increase was driven by the Klipsch acquisition, as well as an increase of 14.2% in our mobile OEM business year-over-year. Our aftermarket mobile business was up as well, though this was offset by lower sales of fulfillment products, which did not include sales from the discontinued FLO TV program, as well as lower satellite radio sales.

The Accessories business was virtually flat year-over-year, but we began to see an uptick in sales in the fourth quarter driven by new product introductions and additional placement at retail.

Finally, our international sales are up for all of our operating groups at approximately 18.7% year-over-year.

Our strategy, which I've outlined on past calls and in meetings with many of you, continues to focus on higher-margin product lines and technology-driven categories. To that end, in fiscal '12, we eliminated over $30 million of lower-margin commoditized products from our mix. This, coupled with lower fulfillment sales, the addition of Klipsch premium audio products and margin improvements across several of our other categories, resulted in gross profit margins of 28.7%, 660 basis points higher than last year.

Moving into fiscal '13, we are expecting higher fulfillment sales, which will likely skew margins down a bit, but result in higher gross profit for the company. We posted an operating profit of $43.9 million versus $9 million, an improvement of almost $35 million. And we reported earnings per diluted share of $1.10 versus $1 last year, but please note that fiscal '12 includes a tax expense of $13.2 million and fiscal '11 included a tax benefit of $10.5 million, a $23.7 million swing.

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