UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended May 31, 1995
Commission file number 1-9532
AUDIOVOX CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-1964841
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 Marcus Blvd., Hauppauge, New York 11788
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 231-7750
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 X No
Number of shares of each class of the registrant's Common Stock
outstanding as of the latest practicable date.
Class Outstanding at June 21, 1995
Class A Common Stock 6,777,788 Shares
Class B Common Stock 2,260,954 Shares
<PAGE>
AUDIOVOX CORPORATION
I N D E X
Page
Number
PART I FINANCIAL INFORMATION
ITEM 1 Financial Statements:
Consolidated Balance Sheets at
November 30, 1994 and May 31, 1995
(unaudited) 3
Consolidated Statements of Operations
for the Three Months and Six Months
ended May 31, 1994 and May 31, 1995
(unaudited) 4
Consolidated Statements of Cash Flows
for the Six Months ended May 31, 1994
and May 31, 1995 (unaudited) 5
Notes to Consolidated Financial Statements 6-8
ITEM 2 Management's Discussion and Analysis of
Financial Operations and Results of
Operations 9-18
PART II OTHER INFORMATION
ITEM 4 Submission of Matters to a Vote of
Security Holders 19
ITEM 6 Reports on Form 8-K 20-21
SIGNATURES 22
<PAGE>
AUDIOVOX CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
<TABLE>
November 30, May 31,
1994 1995
(unaudited)
Assets
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 5,495 $ 4,300
Accounts receivable, net 94,242 74,851
Inventory, net 83,430 127,293
Prepaid expenses and other current assets 6,065 11,603
Deferred income taxes 2,247 3,014
Restricted cash - 6,259
Total current assets 191,479 227,320
Restricted cash 6,559 -
Property, plant and equipment, net 6,180 6,271
Equity investments 25,902 29,081
Debt issuance costs, net 4,840 4,843
Excess cost over fair value of assets
acquired and other intangible assets, net 1,032 1,011
Other assets 3,106 2,912
$ 239,098 $ 271,438
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 21,088 $ 16,204
Accrued expenses and other current liabilities 13,063 14,761
Income taxes payable 834 551
Bank obligations 1,084 1,922
Documentary acceptances - 9,836
Current installments of long-term debt 159 5,621
Total current liabilities 36,228 48,895
Bank obligations 29,100 52,900
Deferred income taxes 5,945 6,467
Long-term debt, less current installments 75,653 71,020
Total liabilities 146,926 179,282
Minority interest 138 195
Stockholders' equity:
Preferred stock 2,500 2,500
Common Stock:
Class A 68 68
Class B 22 22
Paid-in capital 39,715 42,787
Retained earnings 50,254 47,018
92,559 92,395
Cumulative foreign currency translation
and adjustment (525) (434)
Total stockholders' equity 92,034 91,961
Commitments and contingencies
$ 239,098 $ 271,438
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
AUDIOVOX CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except share and per share data)
<TABLE>
Three Months Ended Six Months Ended
May 31, May 31,
1994 1995 1994 1995
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $ 116,272 $ 105,811 $ 231,609 $ 237,201
Cost of sales 94,594 86,541 187,753 195,344
Gross profit 21,678 19,270 43,856 41,857
Operating expenses:
Selling 7,223 8,084 14,708 17,140
General and administrative 8,893 8,772 16,291 17,969
Warehousing, assembly
and repair 2,333 2,365 4,401 4,835
18,449 19,221 35,400 39,944
Operating income 3,229 49 8,456 1,913
Other income (expenses):
Interest and bank charges (1,482) (2,661) (3,006) (4,711)
Equity in income of equity
investments 773 1,215 1,459 2,402
Management fees and related income 221 320 431 716
Gain on sale of equity investment - - 27,783 -
Gain on public offering of equity
investment - - 10,565 -
Expense related to issuance of
warrants - (2,921) - (2,921)
Other, net (302) (242) (609) (556)
(790) (4,289) 36,623 (5,070)
Income (loss) before provision for
(recovery of) income taxes and
cumulative effect of a change in an
accounting principle 2,439 (4,240) 45,079 (3,157)
Provision (recovery of) for income taxes 1,002 (467) 19,479 79
Income (loss) before cumulative effect
of a change in accounting for
income taxes 1,437 (3,773) 25,600 (3,236)
Cumulative effect of change in accounting
for income taxes - - (178) -
Net income (loss) $ 1,437 $ (3,773) $ 25,422 $ (3,236)
Income (loss) per common share
(primary):
Income (loss) before cumulative effect
of change in accounting for income
taxes $ 0.16 $ (0.42) $ 2.79 $ (0.36)
Cumulative effect of change in
accounting for income taxes - - $ 0.02 -
Net income (loss) $ 0.16 $ (0.42) $ 2.77 $ (0.36)
Income (loss) per common share (fully
diluted):
Income (loss) before cumulative
effect of change in accounting for
income taxes $ 0.15 $ (0.42) $ 2.24 $ (0.36)
Cumulative effect of change in
accounting for income taxes - - $ 0.02 -
Net income (loss) $ 0.15 $ (0.42) $ 2.22 $ (0.36)
Weighted average number of
common shares outstanding,
primary 9,148,777 9,038,742 9,162,020 9,038,742
Weighted average number of
common shares outstanding,
fully diluted 13,332,826 9,038,742 11,775,133 9,038,742
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
AUDIOVOX CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
Six Months Ended
May 31, May 31,
1994 1995
(unaudited) (unaudited)
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ 25,422 $ (3,236)
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 2,098 1,988
Provision for bad debt expense (176) 603
Equity in income of equity investments (1,459) (2,402)
Minority interest 76 57
Gain on sale of equity investment (27,783) -
Gain on public offering of equity investment (10,565) -
Provision for deferred income taxes 5,315 (245)
Provision for unearned compensation 198 151
Expense related to issuance of warrants - 2,921
Cumulative effect of change in accounting for
income taxes 178 -
Other non-cash charges to income 54 -
Changes in:
Accounts receivable 671 18,803
Inventory (12,652) (43,849)
Income taxes receivable 229 -
Accounts payable, accrued expenses
and other current liabilities (1,663) (3,190)
Income taxes payable (43) (280)
Prepaid expenses and other assets (1,291) (5,312)
Net cash used in operating activities (21,391) (33,991)
Cash flows from investing activities:
Purchases of property, plant and equipment, net (1,194) (1,290)
Notes receivable from equity investment 7,973 -
Net proceeds from sale of equity investment 29,434 -
Note receivable from vendor (6,000) -
Distribution from equity investment - 95
Payment for purchase of subsidiary (148) -
Net cash provided by (used in) investing
activities 30,065 (1,195)
Cash flows from financing activities:
Net (repayments) borrowings under line of
credit agreements (31,722) 24,638
Net (repayments) borrowings under documentary
acceptances (7,182) 9,836
Principal payments on long-term debt (17,412) -
Debt issuance costs (3,842) (642)
Proceeds from exercise of stock options 170 -
Principal payments on capital lease obligation (73) (130)
Proceeds from issuance of long-term debt 65,000 -
Proceeds from release of restricted cash - 300
Restricted cash securing stand-by letter of credit (6,953) -
Net cash (used in) provided by financing activities (2,014) 34,002
Effect of exchange rate changes on cash (5) (11)
Net increase (decrease) in cash and cash
equivalents 6,655 (1,195)
Cash and cash equivalents at beginning of period 1,372 5,495
Cash and cash equivalents at end of period $ 8,027 $ 4,300
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
AUDIOVOX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Six Months Ended May 31, 1994 and May 31, 1995
(1) The accompanying consolidated financial statements were
prepared in accordance with generally accepted accounting
principles and include all adjustments which, in the opinion of
management, are necessary to present fairly the consolidated
financial position of Audiovox Corporation and subsidiaries (the
"Company") as of November 30, 1994 and May 31, 1995 and the results
of operations and consolidated statement of cash flows for the six
month periods ended May 31, 1994 and May 31, 1995.
Accounting policies adopted by the Company are identified in
Note 1 of the Notes to Consolidated Financial Statements included
in the Company's 1994 Annual Report filed on Form 10-K.
(2) The information furnished in this report reflects all
adjustments (which include only normal recurring adjustments) which
are, in the opinion of management, necessary for a fair statement
of the results for the interim period. The interim figures are not
necessarily indicative of the results for the year.
(3) Certain reclassifications have been made to the 1994
Consolidated Financial Statements to conform to the 1995
presentation.
(4) The following is supplemental information relating to the
consolidated statements of cash flows:
Six Months Ended
May 31,
1994 1995
(In thousands)
Cash paid during the period:
Interest (excluding bank
charges) $ 1,900 $ 3,950
Income taxes $14,037 $ 675
During 1995, the Company entered into a lease agreement to
acquire new computer equipment. As a result, a capital lease
obligation of $86 was incurred.
(5) The Financial Accounting Standards Board (FASB) has issued
Statement 115, "Accounting for Certain Investment in Debt and
Equity Securities" (Statement 115). This statement addresses the
accounting and reporting for investments in equity securities that
have readily determinable fair values and for all investments in
debt securities. Those investments are to be classified in three
categories and accounted for as follows: 1) debt securities that
<PAGE>
the enterprise has the positive intent and ability to hold to
maturity are classified as "held-to-maturity securities", 2) debt
and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as "trading
securities" and reported at fair value, with realized gains and
losses included in earnings, 3) debt and equity securities not
classified as either held-to-maturity securities or trading
securities are classified as "available-for-sale securities" and
reported at fair value, with unrealized gains and losses excluded
from earnings and reported in a separate component of shareholders'
equity. During the third quarter of fiscal 1995, the Company will
be required to implement Statement 115.
(6) Included in prepaid expenses and other current assets are
approximately $6.3 million of advances to suppliers to acquire
inventory at future schedule dates. Included in total advances to
suppliers is $4 million advanced to Shintom Co., Ltd, a stockholder,
who is also a vendor.
(7) On May 9, 1995, the Company issued 1,668,875 warrants in a
private placement, each convertible into one share of class A
common stock at $7 1/8, subject to adjustment under certain
circumstances. The warrants were issued to the beneficial holders,
as of June 3, 1994, of $57.6 million of the Company's 6 1/4%
convertible subordinated debentures due 2001 (the "Debentures"), in
exchange for a release of any claims such holders may have against
the Company, its agents, directors and employees in connection with
their investment in the Debentures. As a result, the Company
incurred warrant expense of $2.9 million and recorded a
corresponding increase to paid in capital. The warrants are not
exercisable (a) until the later of (x) May 9, 1996 and (y) the date
a registration statement with respect to the class A common stock
issuable upon exercise of the warrants has been filed and declared
effective by the Securities and Exchange Commission or (b) after
March 15, 2001, unless sooner terminated under certain
circumstances. The Company has also agreed to register the
warrants and the underlying common stock within one year of the
date of issuance pursuant to a registration rights agreement dated
as of May 9, 1995, between the Company and the purchasers of the
warrants.
John J. Shalam, Chief Executive Officer of the Company has granted
the Company an option to purchase 1,668,875 shares of class A
common stock from his personal holdings at the same price, plus the
tax impact, if any, should the exercise of this option be treated
as dividend income rather than capital gains to Mr. Shalam.
(8) On May 5, 1995, the Company entered into the Second Amended
and Restated Credit Agreement ("Credit Agreement"). Under the
Credit Agreement, the Company may obtain credit through direct
borrowings, letters of credit and banker's acceptances. The
obligations of the Company under the Credit Agreement continue to
be guaranteed by certain of the Company's subsidiaries and will be
secured by accounts receivable and inventory of the Company and
<PAGE>
those subsidiaries. Availability of credit under the Credit
Agreement is in a maximum aggregate amount of $95 million is
subject to certain conditions and is based upon a formula taking
into account the amount and quality of its accounts receivable and
inventory.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated,
certain items from the Company's consolidated statements of
operations, expressed as percentages of net sales:
<TABLE>
Three Months Ended Six Months Ended
May 31, May 31,
1994 1995 1994 1995
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Gross Profit 18.6 18.2 18.9 17.6
Operating Expenses 15.8 18.2 15.3 16.8
Income (Loss) Before Provision
for (recovery of) Income Taxes
and cumulative effect of change
in accounting for income taxes 2.1 (4.0) 19.5 (1.3)
Cumulative effect of change in
accounting for income taxes - - 0.1 -
Net income (loss) 1.2 (3.6) 11.0 (1.4)
</TABLE>
Net sales by product line for the three month and six month periods
ended May 31, 1994 and May 31, 1995 are reflected in the following table:
<TABLE>
Three Months Ended Six Months Ended
May 31, May 31,
1994 1995 1994 1995
(In Millions)
<S> <C> <C> <C> <C>
Cellular Product - Wholesale $ 51.9 $ 46.4 $106.2 $118.0
Cellular Product - Retail 5.0 4.6 12.1 10.6
Activation Commissions 10.5 8.8 25.8 22.2
Residual Fees 1.1 1.1 1.8 2.2
Total Cellular 68.5 60.9 145.9 153.0
Automotive Sound Equipment 29.3 26.6 52.0 51.1
Automotive Security and Accessory
Equipment 17.8 18.3 31.3 33.1
Other 0.7 - 2.4 -
$116.3 $105.8 $231.6 $237.2
</TABLE>
RESULTS OF OPERATIONS
Net sales decreased $10.5 million or 9.0% and increased $5.6
million or 2.4% for the three and six month periods ended May 31,
1995 compared to the same periods last year. The decrease for the
quarter was attributable to decreases in cellular ($7.6 million or
<PAGE>
11.1%) and automotive sound equipment ($2.7 million or 9.2%).
These decreases were partially offset by an increase in automotive
accessories of $492,000 or 2.8%. The increase in net sales for the
six month period was in cellular ($7.1 million or 4.9%) and
automotive accessories ($1.8 million or 5.8%), partially offset by
decreases in automotive sound ($914,000 or 1.7%) and other ($2.4
million or 100%). The other category, comprised principally of
facsimile machines, has been discontinued. Both wholesale and
retail sales were down for the quarter versus last year, 5.5% and
24.6%, respectively. Year to date, wholesale sales were up 7.9%
while retail sales dropped 18.5%.
The decrease of $7.6 million in net sales in the cellular
product category for the quarter was due to a 29.7% decrease in
average unit selling prices, despite a 26.4% increase in unit
sales. On a year-to-date basis, net sales were up $7.1 million,
primarily due to an increase of 38.6% in unit sales, partially
offset by a 20.8% decrease in average unit selling prices.
Consumer preference for portable cellular telephones continued for
both the three and six months ended May 31, 1995 compared to the
same periods last year. The market for portable cellular
telephones continues to be very competitive. Average unit selling
prices for portable cellular telephones has decreased approximately
41% for both the three and six month periods ended May 31, 1995
compared to the same periods in 1994. Part of this decrease was
due to new product introductions at lower unit selling prices.
Cellular revenues for activations decreased $1.7 million (16.2%)
and $3.6 million (14.0%) for the three and six months ended May 31,
<PAGE>
1995, respectively, compared to last year. This decrease is
attributable to a corresponding decrease in new cellular subscriber
activations of 15.1% and 8.5%, respectively. Also contributing to
the decrease was the continuing decline in average activation fees
received by the Company from the carriers (2.3% and 5.7% for the
three and six month periods, respectively).
The decrease in net sales in the automotive sound category for
both the three and six month periods compared to the same periods
last year was primarily in the AV product line. This decrease was
partially offset by increases for the three and six month periods
in the Heavy Duty Sound, SPS, Private Label and Marine product
lines. Net sales in the Prestige Audio product line increased for
the six month period, but was down for the quarter versus last
year.
Automotive accessories experienced increased sales for both
the three months and six months ended May 31, 1995 compared to last
year. The increases were primarily in the Prestige and Hardgoods
product lines. These increases were offset by decreases in AA
security and cruise controls.
Gross margins declined for the quarter to 18.2% from 18.6% for
the same period in 1994. For the six months ended May 31, 1995,
gross margins declined to 17.6% from 18.9% for the same period last
year. The decline in margins was primarily in the cellular and
automotive sound categories, partially offset by an increase in the
margins of automotive accessories. Gross margins in the wholesale
business declined for both the three and six month periods ended
May 31, 1995 compared to last year. Retail margins, however,
improved for both the quarter and six months ended versus 1994.
<PAGE>
The decrease in cellular margins is a result of the decline in
the selling price of portable telephones due to increased
competition and the introduction of lower-priced products. The
portable cellular telephone line accounted for the majority of this
decrease. During the second quarter, the Company accrued
approximately $700,000 of anticipated tax refunds paid on ozone
depleting chemicals which positively impacted gross margins.
Automotive sound margins decreased from 20.3% to 17.1% and
from 20.5% to 19.5% for the three and six month periods ended May
31, 1994 compared to 1995. The decrease in automotive sound margins
was primarily in the AV product line, partially offset by increases
in the Marine and Heavy Duty Sound product lines. Automotive
accessory margins increased to 28.2% and 28.3% from 27.5% and 27.7%
for the three and six month periods ended May 31, 1995 and 1994,
respectively. These increases were primarily in the Prestige and
Hardgoods product lines, partially offset by a decrease in margins
in AA security products.
The Company continues to operate in a highly competitive
environment and believes that competition will continue to
intensify in the future. Increased price competition relating to
products and services provided to the Company's retail customers on
behalf of cellular carriers may result in downward pressure on the
Company's retail gross profit margins.
Total operating expenses increased by approximately $772,000
or 4.2% and $4.5 million or 12.8% for the three and six month
periods ended May 31, 1995 compared to the respective periods in
<PAGE>
1994. Of this increase, $286,000 (37.0%) and $2.4 million (52.8%)
was experienced in the wholesale business and $486,000 (63.0%) and
$2.1 million (47.2%) was in the retail business. Warehousing,
assembly and repair expenses increased by $32,000 or 1.4% and
$434,000 or (9.9%) for the three and six month periods ended May
31, 1995, due to increases in field warehousing costs, principally
due to increased inventory levels, partially offset by reductions
in warehouse production expenses. Selling expenses increased by
$860,000 or 11.9% and $2.4 million or 16.5% ($525,000 and $698,000
in wholesale; $335,000 and $1.7 million in retail) for the three
and six month periods ended May 31, 1995 over the prior year's
comparable period due to increases in advertising, salesmen's
salaries, and payroll taxes and benefits, partially offset by a
decrease in commissions. General and administrative expenses
decreased by $121,000 or 1.4% and increased $1.7 million or 10.3%
for the three and six month periods ended May 31, 1995 over the
respective periods in 1994, resulting from increases in occupancy
costs, professional fees and provision for bad debt. The Company
has increased its provision for bad debt based upon its evaluation
of its accounts receivable considering current and potential market
conditions. There was also an increase in costs associated with
the Company's overseas buying offices.
Interest expense and bank charges increased by $1.2 million or
79.5% and $1.7 million or 56.7% for the three and six month periods
ended May 31, 1995, compared to the respective periods of 1994 as
a result of an increase in interest costs from increased borrowing
to support higher levels of inventory purchases. Management fees
<PAGE>
and related income and equity in income from joint venture
investments increased by approximately $540,000 and decreased
approximately $9.3 million for the three and six month periods
ended May 31, 1995, as compared to the same periods of 1994,
principally due to 1994's increase in the carrying value of the
investment in CellStar Corporation ("CellStar") after their public
offering.
Other expenses increased $2.9 million for both the three and
six month periods ended May 31, 1995 compared to the same periods
last year due to the cost to the Company associated with the
issuance of stock warrants for no monetary consideration to certain
holders of the Company's convertible subordinated debentures. This
one-time, non-cash charge to earnings is offset by a $2.9 million
increase in paid in capital. Therefore, there is no effect on
total shareholders' equity.
For the three months ended May 31, 1995, the Company recorded
an income tax recovery of $467,000 and an income tax provision of
$79,000 for the six months ended May 31, 1995 as compared to income
tax provisions of $1.0 million and $19.7 million in 1994,
respectively. The provision for 1994 was higher due to the
aforementioned CellStar transaction and higher operating profits.
As discussed in Note 5 to the financial statements, the
Financial Accounting Standards Board (FASB) has issued Statement
115, "Accounting for Certain Investment in Debt and Equity
Securities" (Statement 115). This statement addresses the
accounting and reporting for investments in equity securities that
have readily determinable fair values and for all investments in
<PAGE>
debt securities. As discussed in Liquidity and Capital Resources,
the Company sold 1,500,000 shares of CellStar common stock to Alan
H. Goldfield, President of CellStar, for $11.50 per share upon
exercise of an option for such shares by Mr. Goldfield. As a
result thereof, the Company's ownership percentage in CellStar was
reduced below 20% and, commencing in the third quarter, will no
longer account for its investment in CellStar under the equity
method of accounting. Based upon the closing market price of
CellStar on May 31, 1995, the increase to equity as required by
FASB 115 would have been in excess of $20 million, net of deferred
taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash position at May 31, 1995 was approximately
$1.2 million below the November 30, 1994 level. Operating
activities used approximately $34.0 million, primarily due to
increases in inventory and unprofitable operations, partially
offset by decreases in accounts receivable. Investing activities
used approximately $1.2 million, primarily for the purchase of
property, plant and equipment. Financing activities provided
approximately $34.0 million, primarily from an increase in bank
obligations under line of credit agreements and documentary
acceptances.
On May 5, 1995, the Company entered into the Credit Agreement
with five banks, including Chemical Bank which acts as agent for
the bank group, where the Company may obtain credit through direct
borrowings, letters of credit, and banker's acceptances. The
obligations of the Company under the Credit Agreement continue to
<PAGE>
be guaranteed by certain of the Company's subsidiaries and will be
secured by accounts receivable and inventory of the Company and
those subsidiaries. Availability of credit under the Credit
Agreement is in a maximum aggregate amount of $95.0 million, is
subject to certain conditions and is based upon a formula taking
into account the amount and quality of its accounts receivable and
inventory.
On May 9, 1995, the Company issued 1,668,875 warrants in a
private placement, with the underlying shares to be supplied from
the Chairman's personal stock holdings. Each warrant is
convertible into one share of class A common stock at $7 1/8,
subject to adjustment under certain circumstances. The warrants
were issued to the beneficial holders, as of June 3, 1994, of $57.6
million of the Company's 6 1/4% convertible subordinated
Debentures due 2001, in exchange for a release of any claims such
holder may have against the Company, its agents, directors and
employees in connection with their investment in the Debentures.
Each holder received 30 Warrants for each $1,000 of principal
amount of debentures, except for Oppenheimer & Co., Inc. which
received 25 warrants. The warrants are not exercisable (a) until
the later of (x) May 9, 1996 and (y) the date a registration
statement with respect to the class A common stock issuable upon
exercise of the warrants has been filed and declared effective by
the Securities and Exchange Commission or (b) after March 15, 2001,
unless sooner terminated under certain circumstances. The Company
has also agreed to register the warrants and the underlying common
stock within one year of the date of issuance pursuant to a
<PAGE>
registration rights agreement dated as of May 9, 1995, between the
Company and the purchasers of the warrants.
On May 9, 1995, John J. Shalam, Chief Executive Officer of the
Company, granted the Company an option to purchase 1,668,875 shares
of class A common stock from his personal holdings at the same
price plus the tax impact, if any, should the exercise of this
option be treated as dividend income rather than capital gains to
Mr. Shalam. The independent directors of the Company may elect to
issue shares from the Company instead of drawing on Mr. Shalam's
shares if such directors determine it is in the best interest of
the shareholders and the Company.
On June 2, 1995, the Company announced that Alan Goldfield,
Chairman and Chief Executive Officer of CellStar, one of the
Company's equity investments, had exercised his option, pursuant to
a December 3, 1993 agreement with the Company, to purchase 1.5
million shares of CellStar common stock from the Company at a price
of $11.50 per share. As a result of this transaction, the Company
received $17.25 million and still owns 2.375 million shares of
CellStar common stock or 12.79% ownership interest in CellStar.
Unrelated to this announcement, the Company also announced that, as
a result of CellStar's withdrawal of 3.0 million shares of CellStar
common stock from registration with the Securities and Exchange
Commission, the Company was withdrawing its request to include
approximately 1.1 million shares of CellStar common stock held by
the Company in such registration statement. These shares are
included in the 2.375 million CellStar common shares still held by
the Company. The Company had the option to include such shares in
<PAGE>
the registration statement pursuant to the piggy-back registration
rights agreement between CellStar and the Company. CellStar
withdrew its Securities and Exchange Commission registration of
common stock when it obtained a firm commitment for a $125 million
credit facility underwritten by Texas Commerce National
Association.
The Company believes that is has sufficient liquidity to
satisfy its anticipated working capital and capital expenditure
needs through November 30, 1995 and for the reasonable foreseeable
future.
<PAGE>
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of Audiovox Corporation
("the Company") was held on May 10, 1995, at the Company's offices,
150 Marcus Boulevard, Hauppauge, New York.
Proxies for the meeting were solicited pursuant to Regulation
14 of the Act on behalf of the Board of Directors for the following
matters:
1. To elect a Board of eight Directors; and
2. to approve the adoption of a CEO Bonus Plan.
There was no solicitation in opposition to the Board of
Director's nominees for election as directors as listed in the
Proxy Statement and all of such nominees were elected. Class A
nominee Gordon Tucker received 6,549,754 votes and 143,753 votes
were withheld. Class A nominee Irving Halevy received 6,548,694
votes and 144,813 votes were withheld.
Each Class B nominee, John J. Shalam, Philip Christopher,
Charles M. Stoehr, Patrick M. Lavelle, Martin Novick and Ann M.
Boutcher, received 22,609,540 votes. No votes were withheld from
Class B nominees.
With respect to the proposal to approve the adoption of the
CEO Bonus Plan, a performance based compensation plan for the
Company's Chief Executive Officer designed to meet the requirements
for an exception from the limitations of Section 162(m) of the
Internal Revenue Code, 27,302,159 shares (93.1%) were voted FOR and
408,195 shares (1.4%) AGAINST. 35,094 shares abstained from
voting.
<PAGE>
Item 6. Reports on Form 8-K
On May 31, 1995, the Company filed a report on Form 8-K dated
May 5, 1995, which reported that:
(1) the Company had entered into the Second Amended and
Restated Credit Agreement whereby the Company's availability of
credit was increased to a maximum aggregate amount of $95.0 million
subject to certain conditions and based upon a formula taking into
account the amount and quality of the Company's accounts receivable
and inventory. The obligations of the Company continue to be
guaranteed by certain of its subsidiaries and are secured by
accounts receivable and inventory of the Company and those
subsidiaries; and
(2) the Company had issued 1,668,875 warrants in a private
placement under a warrant agreement, dated as of May 9, 1995 (the
"Warrant Agreement"), between the Company and Continental Stock
Transfer & Trust Company, as Warrant Agent. Each warrant is
convertible into one share of class A common stock at 7 1/8,
subject to adjustment under certain circumstances. The warrants
were issued to the beneficial holders as of June 3, 1994 of $57.6
million of the Company's 6-1/4% convertible subordinated debentures
due 2001, in exchange for a release of any claims such holder may
have against the Company. Each holder received 30 warrants for
each $1,000 of principal amount of debentures, except for
Oppenheimer & Co., Inc. which received 25 warrants.
On June 5, 1995, the Company filed a report on Form 8-K dated
June 2, 1995, which reported that Alan H. Goldfield, Chairman and
<PAGE>
Chief Executive Officer of CellStar, exercised his option to
purchase 1.5 million shares of CellStar common stock from the
Company at a price of $11.50 per share. As a result of this
transaction, the Company received gross proceeds of $17.25 million.
The Company continues to own 2.375 million shares of CellStar
common stock.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
AUDIOVOX CORPORATION
By:s/John J. Shalam
John J. Shalam
President and Chief
Executive Officer
Dated: June 30, 1995
By:s/Charles M. Stoehr
Charles M. Stoehr
Senior Vice President and
Chief Financial Officer
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