UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
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(IRS Employer Identification No.) |
(Address of principal executive offices) |
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(Zip Code) |
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( (Registrant's telephone number, including area code) |
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Securities registered pursuant to Section 12(b) of the Act: |
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Title of each class: |
Trading Symbol: |
Name of Each Exchange on which Registered |
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.
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).
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. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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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 |
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As of July 8, 2024 |
Class A Common Stock |
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Class B Common Stock |
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VOXX International Corporation and Subsidiaries
Table of Contents
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PART I |
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Item 1 |
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Consolidated Balance Sheets at May 31, 2024 (unaudited) and February 29, 2024 |
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3 |
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5 |
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6 |
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Unaudited Consolidated Statements of Cash Flows for the Three Months Ended May 31, 2024 and 2023 |
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7 |
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8 |
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Item 2 |
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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33 |
Item 3 |
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44 |
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Item 4 |
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44 |
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PART II |
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Item 1 |
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46 |
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Item 1A |
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46 |
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Item 2 |
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46 |
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Item 6 |
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47 |
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48 |
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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)
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May 31, |
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February 29, |
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(unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net of allowances of $ |
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Inventory |
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Receivables from vendors |
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Due from , current (Note 21) |
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Prepaid expenses and other current assets |
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Income tax receivable |
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Total current assets |
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Investment securities |
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Equity investments |
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Property, plant and equipment, net |
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Operating lease, right of use assets |
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Goodwill |
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Intangible assets, net |
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Due from , less current portion (Note 21) |
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Deferred income tax assets |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities, Redeemable Equity, Redeemable Non-Controlling Interest, and Stockholders' Equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Income taxes payable |
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Accrued sales incentives |
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Contract liabilities, current |
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Current portion of long-term debt |
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Total current liabilities |
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Long-term debt, net of debt issuance costs |
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Finance lease liabilities, less current portion |
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Operating lease liabilities, less current portion |
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Deferred compensation |
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Deferred income tax liabilities |
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Other tax liabilities |
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Prepaid ownership interest in EyeLock LLC due to GalvanEyes LLC (Note 21) |
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Other long-term liabilities |
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Total liabilities |
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(Note 24) |
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Redeemable equity: Class A, $ |
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Redeemable non-controlling interest (Note 2) |
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( |
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( |
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Stockholders' equity: |
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Preferred stock: |
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Common stock: |
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Class A, $ |
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Class B Convertible, $ |
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Paid-in capital |
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Retained earnings |
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Accumulated other comprehensive loss |
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( |
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( |
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Less: Treasury stock, at cost, |
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( |
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( |
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Total VOXX International Corporation stockholders' equity |
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Non-controlling interest |
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( |
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( |
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Total stockholders' equity |
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Total liabilities, redeemable equity, redeemable non-controlling interest, and stockholders' equity |
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$ |
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$ |
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3
See accompanying notes to unaudited consolidated financial statements.
4
VOXX International Corporation and Subsidiaries
Unaudited Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share data)
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Three months ended |
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2024 |
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2023 |
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Net sales |
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$ |
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$ |
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Cost of sales |
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Gross profit |
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Operating expenses: |
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Selling |
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General and administrative |
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Engineering and technical support |
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Restructuring expenses |
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Total operating expenses |
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Operating loss |
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Other (expense) income: |
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Interest and bank charges |
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( |
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Equity in income of equity investees |
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Final arbitration award |
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( |
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Other, net |
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( |
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( |
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Total other expense, net |
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( |
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( |
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Loss before income taxes |
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( |
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( |
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Income tax benefit |
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( |
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( |
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Net loss |
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( |
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Less: net loss attributable to non-controlling interest |
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( |
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Net loss attributable to VOXX International Corporation and Subsidiaries |
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$ |
( |
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$ |
( |
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Other comprehensive income (loss): |
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Foreign currency translation adjustments |
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Derivatives designated for hedging |
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( |
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( |
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Pension plan adjustments |
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( |
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Other comprehensive income, net of tax |
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Comprehensive loss attributable to VOXX International Corporation and Subsidiaries |
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$ |
( |
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$ |
( |
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Loss per share - basic: Attributable to VOXX International Corporation and Subsidiaries |
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$ |
( |
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$ |
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Loss per share - diluted: Attributable to VOXX International Corporation and Subsidiaries |
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$ |
( |
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$ |
( |
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Weighted-average common shares outstanding (basic) |
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Weighted-average common shares outstanding (diluted) |
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See accompanying notes to unaudited consolidated financial statements.
5
VOXX International Corporation and Subsidiaries
Unaudited Consolidated Statements of Stockholders' Equity
For the three months ended May 31, 2024 and 2023
(In thousands, except share and per share data)
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Class A |
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Paid-in |
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Retained |
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Accumulated |
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Non- |
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Treasury |
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Total |
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Balances at February 29, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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$ |
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Net (loss) income |
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— |
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— |
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( |
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— |
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( |
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— |
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( |
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Other comprehensive income, net of tax |
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— |
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— |
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— |
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— |
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— |
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Cancellation of EyeLock LLC ownership put option, net of shareholder receivable (see Note 21) |
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— |
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— |
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— |
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— |
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Cash settlement of market stock units upon vesting of remaining award |
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— |
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( |
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— |
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— |
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— |
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— |
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( |
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Repurchase of |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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Balances at May 31, 2024 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Balances at February 28, 2023 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Net loss |
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— |
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— |
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( |
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— |
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( |
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— |
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( |
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Other comprehensive income, net of tax |
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— |
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— |
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— |
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— |
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— |
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Repurchase of |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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Balances at May 31, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
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See accompanying notes to unaudited consolidated financial statements.
6
VOXX International Corporation and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
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Three months ended |
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2024 |
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2023 |
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Cash flows from operating activities: |
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Net loss |
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$ |
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$ |
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Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |
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Depreciation and amortization |
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Amortization of debt discount |
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Bad debt (recovery) expense |
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( |
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Reduction in the carrying amount of the right of use asset |
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Loss on contribution of assets to joint venture |
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- |
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Equity in income of equity investees |
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( |
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Distribution of income from equity investees |
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Deferred income tax benefit |
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( |
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( |
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Non-cash compensation adjustment |
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( |
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( |
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Stock based compensation expense |
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(Gain) loss on disposal of property, plant, and equipment |
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( |
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Gain on sale of intangible asset |
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( |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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Inventory |
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( |
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Receivables from vendors |
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( |
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Prepaid expenses and other |
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Investment securities-trading |
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Accounts payable, accrued expenses, accrued sales incentives, contract liabilities, and other liabilities |
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( |
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Income taxes payable |
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( |
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( |
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Net cash (used in) provided by operating activities |
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( |
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Cash flows from investing activities: |
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Purchases of property, plant, and equipment |
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( |
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( |
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Proceeds from sale of property, plant, and equipment |
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Net cash used in investing activities |
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( |
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( |
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Cash flows from financing activities: |
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Principal payments on finance lease obligation |
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( |
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( |
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Repayment of bank obligations |
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( |
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( |
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Borrowings on bank obligations |
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Deferred financing costs |
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( |
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Settlement of market stock unit awards |
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( |
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Purchase of treasury stock |
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( |
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( |
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Net cash used in financing activities |
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( |
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( |
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Effect of exchange rate changes on cash |
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Net decrease in cash and cash equivalents |
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( |
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( |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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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 as defined in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 270 for interim financial information, and in accordance with accounting principles generally accepted in the United States of America (“GAAP”), 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 due to seasonal variations in operating results and other factors. These unaudited consolidated financial statements do not include all disclosures associated with audited consolidated financial statements prepared in accordance with GAAP. 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 29, 2024. Certain amounts in the prior year have been reclassified to conform to the current year presentation.
We operate in
(2) Redeemable Non-Controlling Interest
On September 8, 2021, Onkyo Technology KK ("Onkyo"), a joint venture between the Company's subsidiary, Premium Audio Company LLC ("PAC"), and its partner Sharp Corporation ("Sharp"), completed a transaction to acquire certain assets of the home audio/video business of Onkyo Home Entertainment Corporation (“OHEC”). PAC owns
The Company has consolidated the financial results of Onkyo since the acquisition date for financial reporting purposes. The non-controlling interest has been classified as redeemable non-controlling interest outside of equity on the accompanying Consolidated Balance Sheets as the exercise of the put/call option is not within the Company’s control. The carrying value of the redeemable non-controlling interest of Onkyo cannot be less than the redemption amount, which is the amount Sharp will settle the put option for if exercised. Based upon the terms of the put/call option, the option remains exercisable in the event there is no redemption price, or if the redemption price is a negative amount, as determined by the redemption formula. In periods where the specific formula results in a negative amount, and thus no redemption value exists, no amounts would be paid to or received from the counterparty upon the exercise of the option. Adjustments to reconcile the carrying value to the redemption amount are recorded immediately to retained earnings and included in earnings per share. No adjustment was made to the carrying amount of the redeemable non-controlling interest at May 31, 2024 as the excess of the redemption amount over the carrying amount was minimal, or a negative amount. In the event the formulaic redemption price is positive and greater than the carrying amount of the redeemable non-controlling interest balance, an adjustment to the carrying amount of the non-controlling interest would be recorded.
8
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Redeemable Non-controlling Interest |
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Balance at February 29, 2024 |
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$ |
( |
) |
Net loss attributable to non-controlling interest |
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( |
) |
Comprehensive income attributable to non-controlling interest |
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Foreign currency translation |
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Balance at May 31, 2024 |
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$ |
( |
) |
(3) Net Loss Per Common Share
Basic net loss per common share attributable to VOXX International Corporation is calculated by dividing net income attributable to Voxx, adjusted to reflect changes in the redemption value of redeemable non-controlling interest, by the weighted-average common shares outstanding during the period. The diluted net loss per common share computation 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.
A reconciliation between the denominator of basic and diluted net loss per common share is as follows:
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Three months ended |
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2024 |
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2023 |
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Weighted-average common shares outstanding (basic) |
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Effect of dilutive securities: |
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Restricted stock units, market stock units, and stock grants |
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Weighted-average common shares and potential common shares outstanding (diluted) |
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Restricted stock units, market stock units, and stock grants of
(4) Investment Securities
As of May 31, 2024, and February 29, 2024, the Company had the following investments:
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May 31, 2024 |
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Fair Value |
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Investment Securities |
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Marketable Equity Securities |
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Mutual funds |
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$ |
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Total Marketable Equity Securities |
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Total Investment Securities |
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$ |
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February 29, 2024 |
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Fair Value |
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Investment Securities |
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Marketable Equity Securities |
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Mutual funds |
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$ |
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Total Marketable Securities |
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Total Investment Securities |
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$ |
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9
Equity Securities
Mutual Funds
The Company’s mutual funds are held in connection with its deferred compensation plan, which was terminated on May 1, 2023, with payments of the remaining balance to be made to participating employees on June 1, 2024 and March 1, 2025. Changes in the carrying value of these securities are offset by changes in the corresponding deferred compensation liability.
(5) Fair Value Measurements and Derivatives
The Company applies the authoritative guidance on “Fair Value Measurements," which, among other things, requires enhanced disclosures about assets and liabilities that are measured and reported at fair value. This guidance establishes a hierarchal disclosure framework that prioritizes and ranks the level of market price observability used in measuring these assets and liabilities at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various assets and liabilities. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the assets and liabilities.
Assets and liabilities measured and reported at fair value are classified and disclosed in one of the following categories:
Level 1 - Quoted market prices in active markets for identical assets or liabilities.
Level 2 - Inputs other than Level 1 inputs that are either directly or indirectly observable.
Level 3 - Unobservable inputs developed using the Company's estimates and assumptions, which reflect those that market participants would use.
The following table presents financial assets and liabilities measured at fair value on a recurring basis at May 31, 2024:
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Fair Value Measurements at |
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Total |
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Level 1 |
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Level 2 |
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Level 3 |
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Assets: |
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Cash and money market funds |
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$ |
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$ |
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$ |
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$ |
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The following table presents financial assets and liabilities measured at fair value on a recurring basis at February 29, 2024:
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Fair Value Measurements at |
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Total |
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Level 1 |
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Level 2 |
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Level 3 |
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Assets: |
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Cash and money market funds |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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The carrying value of our other financial instruments did not differ materially from their estimated fair values at May 31, 2024 and February 29, 2024.
10
Derivative Instruments
The Company’s derivative instruments include an interest rate swap agreement and foreign currency contracts.
The Company’s interest rate swap agreement hedges interest rate exposure related to the outstanding balance of its Florida Industrial Revenue Bonds ("the Florida Mortgage"), with monthly payments due through March 2026. The swap agreement locks the interest rate on the debt at
Foreign currency contracts are utilized by our German subsidiary to hedge a portion of their U.S. Dollar company’s inventory purchases when management views them to be advantageous. The valuation of our foreign currency options is performed based on foreign exchange rates and yield curves built from observable market parameters and, where applicable, on Black Scholes or local volatility models calibrated to available volatility quotes (Level 2). During Fiscal 2024, the Company entered into forward foreign currency contracts which have notional U.S. Dollar equivalent amounts aggregating $
Financial Statement Classification
The following table discloses the fair value as of May 31, 2024 and February 29, 2024 of the Company’s derivative instruments:
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Derivative Assets and Liabilities |
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Fair Value |
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Account |
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May 31, 2024 |
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February 29, 2024 |
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Derivative instruments |
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Foreign currency contracts designated as cash flow hedges |
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Prepaid expenses and other current assets |
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$ |
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$ |
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Interest rate swap agreements designated as cash flow hedges |
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Other assets |
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Total derivatives |
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$ |
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$ |
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Cash Flow Hedges
The change in the fair value of hedging derivative instruments that are expected to be highly effective and have been designated and qualify as cash flow hedges are recorded to Other comprehensive loss. During the same period or periods during which the hedged transaction affects earnings, the amounts recorded in Other comprehensive loss are reclassified to earnings and presented in the same income statement line item as the effect of the hedged item. The change in fair value of the derivative instruments that do not qualify for hedge accounting and have not been designated as cash flow hedges are included in other (expense) income on the accompanying Unaudited Consolidated Statements of Operations and Comprehensive Loss immediately.
The gain or loss on the Company’s interest rate swap is recorded in Other comprehensive loss and subsequently reclassified into Interest and bank charges in the period in which the hedged transaction affects earnings. As of May 31, 2024,
The net income (loss) recognized in Other comprehensive income (loss) for foreign currency contracts is expected to be recognized in Cost of sales during the next twelve months.
11
Activity related to cash flow hedges recorded during the three months ended May 31, 2024 and 2023 was as follows:
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Three months ended |
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May 31, 2024 |
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Pretax Gain |
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Pretax Loss |
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Cash flow hedges |
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$ |
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$ |
( |
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Interest rate swaps |
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Three months ended |
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May 31, 2023 |
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Pretax Loss |
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Pretax Gain (Loss) |
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Cash flow hedges |
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Foreign currency contracts |
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$ |
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$ |
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Interest rate swaps |
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( |
) |
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(6) Accumulated Other Comprehensive Loss
The Company’s accumulated other comprehensive loss consists of the following:
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Foreign |
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Pension plan |
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Derivatives |
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Total |
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Balance at February 29, 2024 |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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Other comprehensive income before reclassifications |
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Reclassified from accumulated other comprehensive loss |
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( |
) |
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( |
) |
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Net current-period other comprehensive income (loss) |
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( |
) |
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Balance at May 31, 2024 |
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$ |
( |
) |
|
$ |
( |
) |
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$ |
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$ |
( |
) |
|
For the three months ended May 31, 2024, the Company recorded other comprehensive (loss) income, net of associated tax impact of $(
The other comprehensive (loss) income before reclassification related to foreign currency translation gains of $
12
(7) Supplemental Cash Flow Information
The following is supplemental information relating to the Unaudited Consolidated Statements of Cash Flows:
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Three months ended |
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2024 |
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|
2023 |
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Non-cash investing and financing activities: |
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Recording of redeemable equity |
|
$ |
|
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$ |
( |
) |
|
Investment in BioCenturion LLC |
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Cancellation of EyeLock LLC ownership put option |
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Reclassification of shareholder receivable to equity |
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Recording of excise tax attributable to treasury stock repurchases |
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Right of use assets obtained in exchange for operating lease obligations |
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Cash paid for amounts included in the measurement of lease liabilities: |
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Operating cash flows from operating leases |
|
$ |
|
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$ |
|
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Operating cash flows from finance leases |
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Finance cash flows from finance leases |
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Cash paid during the period: |
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Interest (excluding bank charges) |
|
$ |
|
|
$ |
|
||
Income taxes (net of refunds) |
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(8) Accounting for Stock-Based Compensation
The Company has various stock-based compensation plans, which are more fully described in Note 1 of the Notes to the Consolidated Financial Statements contained in the Company’s Form 10-K for the fiscal year ended February 29, 2024.
Restricted stock awards are granted pursuant to the Company's 2012 Equity Incentive Plan (the "2012 Plan"). A restricted stock award is an award of common stock that is subject to certain restrictions during a specified period. Restricted stock awards are independent of option grants and are subject to forfeiture if employment terminates for a reason other than death, disability, or retirement prior to the release of the restrictions.
The Company's Omnibus Equity Incentive Plan was established in 2014 (the "2014 Plan"). Pursuant to the 2014 Plan, Restricted Stock Units ("RSUs") may be awarded by the Company to any individual who is employed by, provides services to, or serves as a director of the Company or its affiliates. RSUs vest on the later of
Grant of Shares to President and Chief Executive Officer
On July 8, 2019, the Board of Directors approved a
13