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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 November 30, 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 January 8, 2020

Class A Common Stock

 

21,707,180 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 November 30, 2019 (unaudited) and February 28, 2019

 

3

 

 

Unaudited Consolidated Statements of Operations and Comprehensive (Loss) Income for the Three and Nine Months Ended November 30, 2019 and 2018

 

4

 

 

Unaudited Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended November 30, 2019 and 2018

 

5

 

 

Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended November 30, 2019 and 2018

 

6

 

 

Notes to Unaudited Consolidated Financial Statements

 

7

Item 2

 

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

 

32

Item 3

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

44

Item 4

 

CONTROLS AND PROCEDURES

 

44

 

 

 

 

 

PART II

 

OTHER INFORMATION

 

 

 

 

 

 

 

Item 1

 

LEGAL PROCEEDINGS

 

45

Item 1A

 

RISK FACTORS

 

45

Item 2

 

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

45

Item 6

 

EXHIBITS

 

46

SIGNATURES

 

47

 

 

 

 

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)

 

 

 

November 30,

2019

 

 

February 28,

2019

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

32,156

 

 

$

58,236

 

Accounts receivable, net

 

 

93,356

 

 

 

73,391

 

Inventory, net

 

 

111,089

 

 

 

102,379

 

Receivables from vendors

 

 

218

 

 

 

1,009

 

Prepaid expenses and other current assets

 

 

10,623

 

 

 

10,449

 

Income tax receivable

 

 

578

 

 

 

921

 

Total current assets

 

 

248,020

 

 

 

246,385

 

Investment securities

 

 

2,554

 

 

 

2,858

 

Equity investment

 

 

21,389

 

 

 

21,885

 

Property, plant and equipment, net

 

 

51,350

 

 

 

60,493

 

Operating lease, right of use asset

 

 

2,773

 

 

 

 

Goodwill

 

 

54,785

 

 

 

54,785

 

Intangible assets, net

 

 

114,006

 

 

 

119,449

 

Deferred income tax assets

 

 

78

 

 

 

79

 

Other assets

 

 

1,695

 

 

 

2,877

 

Total assets

 

$

496,650

 

 

$

508,811

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

34,445

 

 

$

31,143

 

Accrued expenses and other current liabilities

 

 

37,158

 

 

 

39,129

 

Income taxes payable

 

 

2,072

 

 

 

1,349

 

Accrued sales incentives

 

 

16,667

 

 

 

13,574

 

Current portion of long-term debt

 

 

1,165

 

 

 

10,021

 

Total current liabilities

 

 

91,507

 

 

 

95,216

 

Long-term debt, net of debt issuance costs

 

 

6,019

 

 

 

5,776

 

Finance lease liabilities, less current portion

 

 

855

 

 

 

516

 

Operating lease liabilities, less current portion

 

 

2,127

 

 

 

 

Deferred compensation

 

 

2,554

 

 

 

2,605

 

Deferred income tax liabilities

 

 

4,921

 

 

 

5,284

 

Other tax liabilities

 

 

1,125

 

 

 

1,332

 

Other long-term liabilities

 

 

2,401

 

 

 

2,981

 

Total liabilities

 

 

111,509

 

 

 

113,710

 

Commitments and contingencies (see Note 24)

 

 

 

 

 

 

 

 

Redeemable equity (see Note 7)

 

 

2,124

 

 

 

 

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 21,711,335 and 21,938,100 shares outstanding at November 30, 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 November 30, 2019 and February 28, 2019

 

 

22

 

 

 

22

 

Paid-in capital

 

 

298,760

 

 

 

296,946

 

Retained earnings

 

 

143,934

 

 

 

148,582

 

Accumulated other comprehensive loss

 

 

(18,511

)

 

 

(16,944

)

 

 

 

424,449

 

 

 

428,848

 

Less: Treasury stock, at cost, 2,594,859 and 2,168,094 shares of Class A Common Stock at November 30, 2019 and February 28, 2019, respectively

 

 

(23,216

)

 

 

(21,176

)

Less: Redeemable equity

 

 

(2,124

)

 

 

 

Total VOXX International Corporation stockholders' equity

 

 

399,109

 

 

 

407,672

 

Non-controlling interest

 

 

(16,092

)

 

 

(12,571

)

Total stockholders' equity

 

 

383,017

 

 

 

395,101

 

Total liabilities, redeemable equity, and stockholders' equity

 

$

496,650

 

 

$

508,811

 

 

See accompanying notes to unaudited consolidated financial statements.

 

3


 

VOXX International Corporation and Subsidiaries

Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss)

(In thousands, except share and per share data)

 

 

 

Three months ended

November 30,

 

 

Nine months ended

November 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net sales

 

$

110,112

 

 

$

129,637

 

 

$

293,812

 

 

$

339,359

 

Cost of sales

 

 

78,648

 

 

 

90,714

 

 

 

212,570

 

 

 

241,696

 

Gross profit

 

 

31,464

 

 

 

38,923

 

 

 

81,242

 

 

 

97,663

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling

 

 

9,580

 

 

 

10,363

 

 

 

28,162

 

 

 

30,661

 

General and administrative

 

 

16,689

 

 

 

16,482

 

 

 

51,896

 

 

 

49,632

 

Engineering and technical support

 

 

5,059

 

 

 

6,368

 

 

 

15,901

 

 

 

18,349

 

Intangible asset impairment charges (see Note 10)

 

 

 

 

 

 

 

 

 

 

 

9,814

 

Total operating expenses

 

 

31,328

 

 

 

33,213

 

 

 

95,959

 

 

 

108,456

 

Operating income (loss)

 

 

136

 

 

 

5,710

 

 

 

(14,717

)

 

 

(10,793

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and bank charges

 

 

(751

)

 

 

(1,174

)

 

 

(2,635

)

 

 

(3,391

)

Equity in income of equity investee

 

 

967

 

 

 

1,695

 

 

 

3,672

 

 

 

5,146

 

Gain on sale of real property (see Note 19)

 

 

4,057

 

 

 

 

 

 

4,057

 

 

 

 

Investment gain (see Note 3)

 

 

 

 

 

 

 

 

775

 

 

 

 

Impairment of Venezuela investment properties (see Note 18)

 

 

 

 

 

 

 

 

 

 

 

(3,473

)

Other, net

 

 

(322

)

 

 

260

 

 

 

1,869

 

 

 

1,173

 

Total other income (expense), net

 

 

3,951

 

 

 

781

 

 

 

7,738

 

 

 

(545

)

Income (loss) before income taxes

 

 

4,087

 

 

 

6,491

 

 

 

(6,979

)

 

 

(11,338

)

Income tax expense (benefit)

 

 

2,720

 

 

 

(4,078

)

 

 

1,190

 

 

 

3,147

 

Net income (loss)

 

 

1,367

 

 

 

10,569

 

 

 

(8,169

)

 

 

(14,485

)

Less: net loss attributable to non-controlling interest

 

 

(1,097

)

 

 

(1,642

)

 

 

(3,521

)

 

 

(4,954

)

Net income (loss) attributable to VOXX International Corporation

 

$

2,464

 

 

$

12,211

 

 

$

(4,648

)

 

$

(9,531

)

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(295

)

 

 

(1,263

)

 

 

(1,321

)

 

 

(3,333

)

Derivatives designated for hedging

 

 

13

 

 

 

50

 

 

 

(271

)

 

 

542

 

Pension plan adjustments

 

 

2

 

 

 

20

 

 

 

25

 

 

 

57

 

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

 

 

 

 

 

 

 

 

 

 

 

24

 

Other comprehensive (loss) income, net of tax

 

 

(280

)

 

 

(1,193

)

 

 

(1,567

)

 

 

(2,710

)

Comprehensive income (loss) attributable to VOXX International Corporation

 

$

2,184

 

 

$

11,018

 

 

$

(6,215

)

 

$

(12,241

)

Income (loss) per share - basic: Attributable to VOXX International Corporation

 

$

0.10

 

 

$

0.50

 

 

$

(0.19

)

 

$

(0.39

)

Income (loss) per share - diluted: Attributable to VOXX International Corporation

 

$

0.10

 

 

$

0.50

 

 

$

(0.19

)

 

$

(0.39

)

Weighted-average common shares outstanding (basic)

 

 

24,418,313

 

 

 

24,355,791

 

 

 

24,458,926

 

 

 

24,355,791

 

Weighted-average common shares outstanding (diluted)

 

 

24,625,410

 

 

 

24,628,836

 

 

 

24,458,926

 

 

 

24,355,791

 

 

See accompanying notes to unaudited consolidated financial statements.

4


 

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

 

Net income (loss)

 

 

 

 

 

 

 

 

2,464

 

 

 

 

 

 

(1,097

)

 

 

 

 

 

 

 

 

1,367

 

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

(280

)

 

 

 

 

 

 

 

 

 

 

 

(280

)

Stock-based compensation expense

 

 

 

 

 

471

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(354

)

 

 

117

 

Repurchase of 218,453 shares of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,057

)

 

 

 

 

 

(1,057

)

Balances at November 30, 2019

 

$

266

 

 

$

298,760

 

 

$

143,934

 

 

$

(18,511

)

 

$

(16,092

)

 

$

(23,216

)

 

$

(2,124

)

 

$

383,017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Stock-based compensation expense

 

 

 

 

 

127

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

127

 

Balances at August 31, 2018

 

 

264

 

 

 

296,629

 

 

 

172,931

 

 

 

(15,739

)

 

 

(9,142

)

 

 

(21,176

)

 

 

-

 

 

 

423,767

 

Net income (loss)

 

 

 

 

 

 

 

 

12,211

 

 

 

 

 

 

(1,642

)

 

 

 

 

 

 

 

 

10,569

 

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

(1,193

)

 

 

 

 

 

 

 

 

 

 

 

(1,193

)

Stock-based compensation expense

 

 

 

 

 

159

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

159

 

Balances at November 30, 2018

 

$

264

 

 

$

296,788

 

 

$

185,142

 

 

$

(16,932

)

 

$

(10,784

)

 

$

(21,176

)

 

$

-

 

 

$

433,302

 

 

See accompanying notes to unaudited consolidated financial statements.

5


 

VOXX International Corporation and Subsidiaries

Unaudited Consolidated Statements of Cash Flows

 

 

 

 

Nine months ended

November 30,

 

 

 

 

2019

 

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

$

(8,169

)

 

 

$

(14,485

)

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

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

9,897

 

 

 

 

8,811

 

Amortization of debt discount

 

 

 

617

 

 

 

 

616

 

Intangible asset impairment charge

 

 

 

 

 

 

 

9,814

 

Bad debt expense

 

 

 

303

 

 

 

 

372

 

(Gain) loss on forward contracts

 

 

 

(347

)

 

 

 

132

 

Equity in income of equity investees

 

 

 

(3,672

)

 

 

 

(5,146

)

Distribution of income from equity investees

 

 

 

4,169

 

 

 

 

4,899

 

Deferred income tax (benefit) expense

 

 

 

(338

)

 

 

 

2,606

 

Non-cash compensation adjustment

 

 

 

(51

)

 

 

 

(840

)

Stock based compensation expense

 

 

 

1,816

 

 

 

 

393

 

Impairment of Venezuela investment properties

 

 

 

 

 

 

 

3,473

 

(Gain) loss on sale of property, plant and equipment

 

 

 

(3,788

)

 

 

 

15

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

 

(20,880

)

 

 

 

(5,709

)

Inventory

 

 

 

(9,353

)

 

 

 

(2,648

)

Receivables from vendors

 

 

 

790

 

 

 

 

24

 

Prepaid expenses and other

 

 

 

528

 

 

 

 

4,549

 

Investment securities-trading

 

 

 

304

 

 

 

 

903

 

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