10-Q 1 voxx-20230531.htm 10-Q 10-Q
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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 May 31, 2023

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) 645-7750

(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. YesNo

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). YesNo

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

 

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 July 6, 2023

Class A Common Stock

 

20,576,075 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 May 31, 2023 (unaudited) and February 28, 2023

 

3

 

 

Unaudited Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended May 31, 2023 and 2022

 

5

 

 

Unaudited Consolidated Statements of Stockholders’ Equity for the Three Months Ended May 31, 2023 and 2022

 

6

 

 

Unaudited Consolidated Statements of Cash Flows for the Three Months Ended May 31, 2023 and 2022

 

7

 

 

Notes to Unaudited Consolidated Financial Statements

 

8

Item 2

 

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

 

31

Item 3

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

42

Item 4

 

CONTROLS AND PROCEDURES

 

42

 

 

 

 

 

PART II

 

OTHER INFORMATION

 

 

 

 

 

 

 

Item 1

 

LEGAL PROCEEDINGS

 

43

Item 1A

 

RISK FACTORS

 

43

Item 2

 

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

43

Item 6

 

EXHIBITS

 

44

SIGNATURES

 

45

 

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)

 

 

 

May 31,
2023

 

 

February 28,
2023

 

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

5,235

 

 

$

6,134

 

Accounts receivable, net

 

 

65,249

 

 

 

82,753

 

Inventory

 

 

184,355

 

 

 

175,129

 

Receivables from vendors

 

 

135

 

 

 

112

 

Due from GalvanEyes LLC (Note 20)

 

 

1,250

 

 

 

 

Prepaid expenses and other current assets

 

 

20,401

 

 

 

19,817

 

Income tax receivable

 

 

2,054

 

 

 

1,076

 

Total current assets

 

 

278,679

 

 

 

285,021

 

Investment securities

 

 

898

 

 

 

1,053

 

Equity investment

 

 

22,038

 

 

 

22,018

 

Property, plant and equipment, net

 

 

46,298

 

 

 

47,044

 

Operating lease, right of use assets

 

 

3,449

 

 

 

3,632

 

Goodwill

 

 

64,960

 

 

 

65,308

 

Intangible assets, net

 

 

88,525

 

 

 

90,437

 

Deferred income tax assets

 

 

1,202

 

 

 

1,218

 

Other assets

 

 

2,892

 

 

 

3,720

 

Total assets

 

$

508,941

 

 

$

519,451

 

Liabilities, Redeemable Equity, Redeemable Non-Controlling Interest, and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

46,874

 

 

$

35,099

 

Accrued expenses and other current liabilities

 

 

41,220

 

 

 

41,856

 

Income taxes payable

 

 

1,884

 

 

 

2,276

 

Accrued sales incentives

 

 

17,662

 

 

 

21,778

 

Contingent consideration, current (Note 5)

 

 

4,500

 

 

 

4,500

 

Interim arbitration award payable (Note 23)

 

 

44,375

 

 

 

43,388

 

Contract liabilities, current

 

 

3,865

 

 

 

3,990

 

Current portion of long-term debt

 

 

1,568

 

 

 

500

 

Total current liabilities

 

 

161,948

 

 

 

153,387

 

Long-term debt, net of debt issuance costs

 

 

33,947

 

 

 

37,513

 

Finance lease liabilities, less current portion

 

 

31

 

 

 

63

 

Operating lease liabilities, less current portion

 

 

2,369

 

 

 

2,509

 

Deferred compensation

 

 

898

 

 

 

1,053

 

Deferred income tax liabilities

 

 

4,629

 

 

 

4,855

 

Other tax liabilities

 

 

854

 

 

 

966

 

Prepaid ownership interest in EyeLock LLC due to GalvanEyes LLC (Note 20)

 

 

8,567

 

 

 

7,317

 

Other long-term liabilities

 

 

2,216

 

 

 

2,947

 

Total liabilities

 

 

215,459

 

 

 

210,610

 

Commitments and contingencies (Note 23)

 

 

 

 

 

 

Redeemable equity (Note 8)

 

 

4,041

 

 

 

4,018

 

Redeemable non-controlling interest (Note 2)

 

 

(62

)

 

 

232

 

Stockholders' equity:

 

 

 

 

 

 

Preferred stock:

 

 

 

 

 

 

No shares issued or outstanding (Note 19)

 

 

 

 

 

 

Common stock:

 

 

 

 

 

 

Class A, $.01 par value, 60,000,000 shares authorized, 24,538,184 and 24,538,184 shares issued and 20,796,440 and 21,167,527 shares outstanding at May 31, 2023 and February 28, 2023, respectively

 

 

246

 

 

 

246

 

Class B Convertible, $.01 par value, 10,000,000 shares authorized, 2,260,954 shares issued and outstanding at both May 31, 2023 and February 28, 2023

 

 

22

 

 

 

22

 

Paid-in capital

 

 

296,835

 

 

 

296,577

 

Retained earnings

 

 

87,259

 

 

 

97,997

 

Accumulated other comprehensive loss

 

 

(18,503

)

 

 

(18,680

)

Less: Treasury stock, at cost, 3,741,744 and 3,370,657 shares of Class A Common Stock at May 31, 2023 and February 28, 2023, respectively

 

 

(34,398

)

 

 

(30,285

)

Less: Redeemable equity

 

 

(4,041

)

 

 

(4,018

)

Total VOXX International Corporation stockholders' equity

 

 

327,420

 

 

 

341,859

 

Non-controlling interest

 

 

(37,917

)

 

 

(37,268

)

Total stockholders' equity

 

 

289,503

 

 

 

304,591

 

Total liabilities, redeemable equity, redeemable non-controlling interest, and stockholders' equity

 

$

508,941

 

 

$

519,451

 

 

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)

 

 

 

Three months ended
May 31,

 

 

 

2023

 

 

2022

 

Net sales

 

$

111,926

 

 

$

128,732

 

Cost of sales

 

 

84,346

 

 

 

95,493

 

Gross profit

 

 

27,580

 

 

 

33,239

 

Operating expenses:

 

 

 

 

 

 

Selling

 

 

11,166

 

 

 

12,285

 

General and administrative

 

 

19,486

 

 

 

19,130

 

Engineering and technical support

 

 

8,337

 

 

 

8,389

 

Acquisition costs

 

 

 

 

 

136

 

Total operating expenses

 

 

38,989

 

 

 

39,940

 

Operating loss

 

 

(11,409

)

 

 

(6,701

)

Other (expense) income:

 

 

 

 

 

 

Interest and bank charges

 

 

(1,546

)

 

 

(730

)

Equity in income of equity investee

 

 

1,616

 

 

 

1,588

 

Interim arbitration award (see Note 23)

 

 

(986

)

 

 

(986

)

Other, net

 

 

(701

)

 

 

(2,110

)

Total other expense, net

 

 

(1,617

)

 

 

(2,238

)

Loss before income taxes

 

 

(13,026

)

 

 

(8,939

)

Income tax benefit

 

 

(1,321

)

 

 

(1,092

)

Net loss

 

 

(11,705

)

 

 

(7,847

)

Less: net loss attributable to non-controlling interest

 

 

(967

)

 

 

(1,320

)

Net loss attributable to VOXX International Corporation and Subsidiaries

 

$

(10,738

)

 

$

(6,527

)

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

238

 

 

 

(1,494

)

Derivatives designated for hedging

 

 

(60

)

 

 

87

 

Pension plan adjustments

 

 

(1

)

 

 

32

 

Other comprehensive income (loss), net of tax

 

 

177

 

 

 

(1,375

)

Comprehensive loss attributable to VOXX International Corporation and Subsidiaries

 

$

(10,561

)

 

$

(7,902

)

Loss per share - basic: Attributable to VOXX International Corporation and Subsidiaries

 

$

(0.45

)

 

$

(0.27

)

Loss per share - diluted: Attributable to VOXX International Corporation and Subsidiaries

 

$

(0.45

)

 

$

(0.27

)

Weighted-average common shares outstanding (basic)

 

 

23,795,718

 

 

 

24,412,462

 

Weighted-average common shares outstanding (diluted)

 

 

23,795,718

 

 

 

24,412,462

 

 

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, 2023 and 2022

(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
Interest

 

 

Treasury
Stock

 

 

Redeemable Equity

 

 

Total
Stock-
holders'
Equity

 

Balances at February 28, 2023

 

$

268

 

 

$

296,577

 

 

$

97,997

 

 

$

(18,680

)

 

$

(37,268

)

 

$

(30,285

)

 

$

(4,018

)

 

$

304,591

 

Net loss

 

 

 

 

 

 

 

 

(10,738

)

 

 

 

 

 

(649

)

 

 

 

 

 

 

 

 

(11,387

)

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

177

 

 

 

 

 

 

 

 

 

 

 

 

177

 

Repurchase of 371,087 shares of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,113

)

 

 

 

 

 

(4,113

)

Stock-based compensation expense

 

 

 

 

 

258

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(23

)

 

 

235

 

Balances at May 31, 2023

 

 

268

 

 

 

296,835

 

 

 

87,259

 

 

 

(18,503

)

 

 

(37,917

)

 

 

(34,398

)

 

 

(4,041

)

 

 

289,503

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at February 28, 2022

 

$

267

 

 

$

300,453

 

 

$

126,573

 

 

$

(17,503

)

 

$

(35,000

)

 

$

(25,138

)

 

$

(3,550

)

 

$

346,102

 

Net loss

 

 

 

 

 

 

 

 

(6,527

)

 

 

 

 

 

(707

)

 

 

 

 

 

 

 

 

(7,234

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

(1,375

)

 

 

 

 

 

 

 

 

 

 

 

(1,375

)

Cash settlement of market stock units upon vesting of 80% of award

 

 

 

 

 

(4,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,000

)

Net settlement of 61,337 shares of Class A Common Stock upon vesting of stock awards, net of withholding taxes

 

 

1

 

 

 

(404

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(403

)

Reclassification of stockholders' equity to redeemable equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(33

)

 

 

(33

)

Stock-based compensation expense

 

 

 

 

 

126

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

133

 

 

 

259

 

Balances at May 31, 2022

 

 

268

 

 

 

296,175

 

 

 

120,046

 

 

 

(18,878

)

 

 

(35,707

)

 

 

(25,138

)

 

 

(3,450

)

 

 

333,316

 

 

See accompanying notes to unaudited consolidated financial statements.

6


 

VOXX International Corporation and Subsidiaries

Unaudited Consolidated Statements of Cash Flows

 

 

 

 

Three months ended
May 31,

 

 

 

 

2023

 

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

 

$

(11,705

)

 

 

$

(7,847

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

3,247

 

 

 

 

3,117

 

Amortization of debt discount

 

 

 

96

 

 

 

 

63

 

Bad debt expense (recovery)

 

 

 

16

 

 

 

 

(70

)

Reduction in the carrying amount of the right of use asset

 

 

 

365

 

 

 

 

395

 

Gain on forward contracts

 

 

 

 

 

 

 

(63

)

Equity in income of equity investees

 

 

 

(1,616

)

 

 

 

(1,588

)

Distribution of income from equity investees

 

 

 

1,596

 

 

 

 

926

 

Deferred income tax benefit

 

 

 

(232

)

 

 

 

(935

)

Non-cash compensation adjustment

 

 

 

(154

)

 

 

 

(9

)

Stock based compensation expense

 

 

 

258

 

 

 

 

126

 

Gain on disposal of property, plant, and equipment

 

 

 

(33

)

 

 

 

 

Gain on sale of intangible asset

 

 

 

(450

)

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

 

17,401

 

 

 

 

22,105

 

Inventory

 

 

 

(9,321

)

 

 

 

(7,543

)

Receivables from vendors

 

 

 

(23

)

 

 

 

145

 

Prepaid expenses and other

 

 

 

(1,086

)

 

 

 

1,254

 

Investment securities-trading

 

 

 

154

 

 

 

 

9

 

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

 

 

 

8,220

 

 

 

 

(31,092

)

Income taxes payable

 

 

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