UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended August 31, 2000
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Commission file number 0-28839
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AUDIOVOX CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 13-1964841
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 Marcus Blvd., Hauppauge, New York 11788
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (631) 231-7750
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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
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Number of shares of each class of the registrant's Common Stock outstanding as
of the latest practicable date.
Class Outstanding at October 11, 2000
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Class A Common Stock 20,294,538 Shares
Class B Common Stock 2,260,954 Shares
1
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company markets its products under the Audiovox brand as well as
private labels through a large and diverse network both domestically and
internationally. The Company operates through two marketing groups: Wireless and
Electronics. The Wireless Group consists of Audiovox Communications Corp. (ACC),
a 95%-owned subsidiary of Audiovox, and Quintex, which is a wholly-owned
subsidiary of ACC. ACC markets wireless handsets and accessories primarily on a
wholesale basis to wireless carriers in the United States and, to a lesser
extent, carriers overseas. Quintex is a subsidiary for the direct sale of
handsets, accessories and wireless telephone service. For the first nine months
of 2000, sales through Quintex were $37,911 or 3.8 % of the Wireless Group
sales. Quintex receives activation commissions and residual fees from retail
sales, in addition to a monthly residual payment which is based upon a
percentage of a customer's usage.
The Electronics Group consists of wholly-owned subsidiaries, Audiovox
Electronics Corp. (AEC) and American Radio Corp., and three majority-owned
subsidiaries, Audiovox Communications (Malaysia) Sdn. Bhd., Audiovox Holdings
(M) Sdn. Bhd. and Audiovox Venezuela, C.A. The Electronics Group markets
automotive sound and security systems, electronic car accessories, home and
portable sound products, FRS radios and in-vehicle video systems. Sales are made
through an extensive distribution network of mass merchandisers, power retailers
and others. In addition, the Company sells some of its products directly to
automobile manufacturers on an OEM basis.
The Company allocates interest and certain shared expenses to the marketing
groups based upon estimated usage. General expenses and other income items that
are not readily allocable are not included in the results of the two marketing
groups.
2
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RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain statements
of income data for the Company expressed as a percentage of net sales:
<TABLE>
Percentage of Net Sales
Three Months Ended Nine Months Ended
August 31, August 31,
1999 2000 1999 2000
----- ----- ----- -----
Net sales:
Wireless
<S> <C> <C> <C> <C>
Wireless products 76.5% 84.1% 74.5% 81.1%
Activation commissions 1.6 1.7 2.3 1.8
Residual fees 0.3 0.1 0.4 0.1
Other 0.2 -- 0.6 0.2
----- ----- ----- -----
Total Wireless 78.7 85.8 77.8 83.2
----- ----- ----- -----
Electronics
Mobile electronics 9.7 7.6 11.2 8.8
Consumer electronics 3.2 2.5 2.9 2.5
Sound 8.1 3.9 7.7 5.1
Other 0.4 0.2 0.4 0.3
----- ----- ----- -----
Total Electronics 21.3 14.2 22.2 16.8
Total net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 88.1 90.9 88.0 90.4
----- ----- ----- -----
Gross profit 11.9 9.1 12.0 9.6
Selling 2.8 2.2 3.6 2.7
General and administrative 3.9 2.7 4.1 3.0
Warehousing, assembly and repair 1.3 1.0 1.4 1.1
----- ----- ----- -----
Total operating expenses 8.0 5.9 9.1 6.8
----- ----- ----- -----
Operating income 3.9 3.2 2.9 2.8
Gain on issuance of subsidiary shares -- -- 0.5 --
Interest and bank charges (0.3) (0.2) (0.4) (0.5)
Income in equity investments, management
fees and related income, net 0.1 0.1 0.2 0.2
Gain on sale of investments -- -- 0.3 0.2
Gain on hedge of available-for-sale
securities -- 0.2 -- 0.1
Other (0.2) -- -- 0.1
----- ----- ----- -----
Income before provision for income taxes 3.5 3.3 3.5 3.0
Provision for income taxes 1.3 1.2 1.4 1.1
----- ----- ----- -----
Net income 2.2% 2.1% 2.1% 1.9%
===== ===== ===== =====
</TABLE>
3
<PAGE>
Consolidated Results
Three months ended August 31, 1999 compared to three months ended August 31,
2000
The net sales and percentage of net sales by marketing line and product
group for the three months ended August 31, 1999 and August 31, 2000 are
reflected in the following table:
<TABLE>
Three Months Ended
August 31, August 31,
1999 2000
------------------ -------------------
Net sales:
Wireless
<S> <C> <C> <C> <C>
Wireless products $227,105 76.5% $395,346 84.1%
Activation commissions 4,893 1.6 7,827 1.7
Residual fees 881 0.3 550 0.1
Other 516 0.2 -- --
-------- ------ -------- ------
Total Wireless 233,395 78.7 403,723 85.8
-------- ------ -------- ------
Electronics
Mobile electronics 28,802 9.7 35,534 7.6
Consumer electronics 9,352 3.2 11,692 2.5
Sound 24,049 8.1 18,319 3.9
Other 1,134 0.4 1,066 0.2
-------- ------ -------- -----
Total Electronics 63,337 21.3 66,611 14.2
-------- ------ -------- ------
Total $296,732 100.0% $470,334 100.0%
======== ====== ======== ======
</TABLE>
Net sales for the third quarter of 2000 were $470,334, an increase of
$173,602, or 58.5%, from 1999. The increase in net sales was in both the
Wireless and Electronics Groups. Sales from our international subsidiaries
increased slightly from 1999 by approximately $398 or 6.1%. Gross margins were
9.1% in 2000 compared to 11.9% in 1999. Operating expenses increased to $27,689
from $23,764, a 16.5% increase. However, as a percentage of sales, operating
expenses decreased to 5.9% in 2000 from 8.0% in 1999. Operating income for 2000
was $15,058 compared to $11,515 in 1999, an increase of $3,543 or 30.8%.
4
<PAGE>
Nine months ended August 31, 1999 compared to nine months ended August 31,
2000
The net sales and percentage of net sales by marketing line and product
group for the nine months ended August 31, 1999 and August 31, 2000 are
reflected in the following table:
<TABLE>
Nine Months Ended
August 31, August 31,
1999 2000
--------------------- --------------------
Net sales:
Wireless
<S> <C> <C> <C> <C>
Wireless products $ 558,043 74.5% $ 966,704 81.1%
Activation commissions 17,529 2.3 21,566 1.8
Residual fees 2,705 0.4 1,307 0.1
Other 4,039 0.6 2,833 0.2
---------- ------ ---------- ------
Total Wireless 582,316 77.8 992,410 83.2
---------- ------ ---------- ------
Electronics
Mobile electronics 84,195 11.2 105,466 8.8
Consumer electronics 21,487 2.9 30,280 2.5
Sound 58,044 7.7 60,830 5.1
Other 3,026 0.4 3,138 0.3
---------- ------ ---------- ------
Total Electronics 166,752 22.2 199,714 16.8
---------- ------ ---------- ------
Total $ 749,068 100.0% $1,192,124 100.0%
========== ====== =========== ======
</TABLE>
Net sales were $1,192,124 for 2000, an increase of $443,056, or 59.1%, from
1999. The increase in net sales was in both the Wireless and Electronics Groups.
Sales from our international subsidiaries increased from 1999 by approximately
$1,605 or 8.9%. Gross margins were 9.6% in 2000 compared to 12.0% in 1999.
Operating expenses increased to $81,597 from $68,283, a 19.5% increase. However,
as a percentage of sales, operating expenses decreased to 6.8% in 2000 from 9.1%
in 1999. Operating income for 2000 was $33,150 compared to $21,937 in 1999, an
increase of $11,213 or 51.1%.
5
<PAGE>
Wireless Results
Three months ended August 31, 1999 compared to three months ended August 31,
2000
The Wireless Group is composed of ACC and Quintex, both subsidiaries of the
Company.
The following table sets forth for the periods indicated certain income
statement data for the Wireless Group as expressed as a percentage of net sales:
<TABLE>
Three Months Ended
August 31, August 31,
1999 2000
------------------------ --------------------
Net sales:
<S> <C> <C> <C> <C>
Wireless products $ 227,105 97.3% $ 395,346 97.9%
Activation commissions 4,893 2.1 7,827 1.9
Residual fees 881 0.4 550 0.2
Other 516 0.2 -- --
---------- ------ ---------- ------
233,395 100.0% 403,723 100.0%
Gross profit 20,982 9.0 28,078 7.0
Total operating expenses 10,169 4.4 12,811 3.2
---------- ------ ---------- ------
Operating income 10,813 4.6 15,267 3.8
Other expense (1,338) (0.6) (1,190) (0.3)
---------- ------ ---------- ------
Pre-tax income $ 9,475 4.1% $ 14,077 3.5%
=========== ====== ========== ========
</TABLE>
Net sales were $403,723 in the third quarter of 2000, an increase of
$170,328, or 73.0%, from last year. Unit sales of wireless handsets increased by
934,000 units in 2000, or 60.8%, to approximately 2,471,000 units from 1,537,000
units in 1999. This increase was attributable to increased sales of digital
handsets, partially offset by a decrease in analog handsets. The average selling
price of handsets increased to $154 per unit in 2000 from $141 per unit in 1999.
The number of new wireless subscriptions processed by Quintex increased 60.3% in
2000, with a corresponding increase in activation commissions of approximately
$2,934 in 2000. The average commission received by Quintex per activation
remained the same from 1999. Unit gross profit
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<PAGE>
margins decreased to 5.5% in 2000 from 8.1% in 1999, reflecting the higher
average unit cost of the newer digital phones and lower margins associated with
analog handsets, partially offset by the increase in unit selling price. This
also reflects the competitive nature of the wireless marketplace and the
pressure of supporting various wireless carrier programs and promotions.
Operating expenses increased to $12,811 from $10,169. As a percentage of net
sales, however, operating expenses decreased to 3.2% during 2000 compared to
4.4% in 1999. Selling expenses increased from last year, primarily in divisional
marketing and commissions. General and administrative expenses increased from
1999, primarily in salaries and temporary personnel. Warehousing and assembly
expenses increased during 2000 from last year, primarily due to an increase in
direct labor. Operating income for 2000 was $15,267 compared to last year's
$10,813, and increase of $4,454 or 41.2%.
7
<PAGE>
Nine months ended August 31, 1999 compared to nine months ended August 31,
2000
The Wireless Group is composed of ACC and Quintex, both subsidiaries of the
Company.
The following table sets forth for the periods indicated certain income
statement data for the Wireless Group as expressed as a percentage of net sales:
<TABLE>
Nine Months Ended
August 31, August 31,
1999 2000
---------------------- -----------------------
Net sales:
<S> <C> <C> <C> <C>
Wireless products $ 558,043 95.8% $ 966,704 97.4%
Activation commissions 17,529 3.0 21,566 2.2
Residual fees 2,705 0.5 1,307 0.1
Other 4,039 0.7 2,833 0.3
--------- ------ --------- ------
582,316 100.0% 992,410 100.0%
Gross profit 53,164 9.1 71,388 7.2
Total operating expenses 31,789 5.5 38,238 3.9
--------- ------ --------- ------
Operating income 21,375 3.7 33,150 3.3
Other expense (3,935) (0.7) (6,264) (0.6)
--------- ------ --------- ------
Pre-tax income $ 17,440 3.0% $ 26,886 2.7%
========= ====== ========= ======
</TABLE>
Net sales were $992,410 for the nine months ended August 31, 2000, an
increase of $410,094, or 70.4%, from last year. Unit sales of wireless handsets
increased by 2,376,000 units in 2000, or 61.8%, to approximately 6,223,000 units
from 3,847,000 units in 1999. This increase was attributable to sales of digital
handsets. The addition of new suppliers also provided a variety of new digital,
wireless products that contributed to the sales increase. The average selling
price of handsets increased to $149 per unit in 2000 from $139 per unit in 1999.
The number of new wireless subscriptions processed by Quintex increased 34.8% in
2000, with a corresponding increase in activation commissions of approximately
$4,038 in 2000. The average commission
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received by Quintex per activation decreased by approximately 8.8% in 2000 from
1999. Unit gross profit margins decreased to 5.7% in 2000 from 7.8% in 1999,
reflecting the higher average unit cost of the newer portable phones, partially
offset by the increase in unit selling price. This also reflects the competitive
nature of the wireless marketplace and the pressure of supporting various
wireless carrier programs and promotions. Operating expenses increased to
$38,238 from $31,789. As a percentage of net sales, however, operating expenses
decreased to 3.9% during 2000 compared to 5.5% in 1999. Selling expenses
increased from last year, primarily in divisional marketing, trade show expense
and commissions. General and administrative expenses increased during 2000 from
1999, primarily in salaries, temporary personnel and bad debt expenses.
Warehousing and assembly expenses increased during 2000 from last year,
primarily in tooling expenses and direct labor. Operating income for 2000 was
$33,150 compared to last year's $21,375, an increase of $11,775 or 55.1%.
Management believes that the wireless industry is extremely competitive in
both price and technology. This could affect gross margins and the carrying
value of inventories in the future, particularly with the continuing shift to
digital technologies from analog. As the market for digital products becomes
stronger and if the market for analog phones continues to decline, the Company
may be required to adjust the carrying value of its remaining analog inventory.
In addition, the industry-wide shortage of certain wireless components and parts
may affect our vendors' ability to provide handsets to us on a timely basis,
which may result in delayed shipments to our customers.
9
<PAGE>
Electronics Results
Three months ended August 31, 1999 compared to three months ended August 31,
2000
The following table sets forth for the periods indicated certain income
statement data and percentage of net sales by product line for the Electronics
Group:
<TABLE>
Three Months Ended
August 31, August 31,
1999 2000
------------------------ -----------------------
Net sales
<S> <C> <C> <C> <C>
Mobile electronics $ 28,802 45.5% $ 35,534 53.3%
Consumer electronics 9,352 14.8 11,692 17.6
Sound 24,049 38.0 18,319 27.5
Other 1,134 1.8 1,066 1.6
-------- ----- -------- -----
Total net sales 63,337 100.0 66,611 100.0
Gross profit 14,304 22.6 14,680 22.0
Total operating expenses 10,333 16.3 11,013 16.5
-------- ----- -------- -----
Operating income 3,971 6.3 3,667 5.5
Other expense (726) (1.1) (140) (0.2)
-------- ----- -------- -----
Pre-tax income $ 3,245 5.1% $ 3,527 5.3%
======== ====== ======== =====
</TABLE>
Net sales increased $3,274 compared to last year, an increase of 5.2%.
Automotive sound sales decreased 23.8% from last year to $18,319, primarily in
the AV product line. Mobile electronics sales increased 23.4% compared to last
year to $35,534, primarily due to an increase in mobile video sales of
approximately $5,989, partially offset by declines in sales of Protector
Hardgoods. Consumer electronics sales also increased 25.0% from last year to
$11,692 due to increased sales of FRS and home stereo products. Net sales in the
Company's Malaysian subsidiary increased from last year by approximately $724 or
21.4%. The Company's Venezuelan subsidiary experienced a decrease of $154 or
5.2% in sales, from last year. Gross margins of the Electronics Group were 22.0%
in 2000 and 22.6% in 1999. Operating expenses increased $680 from last year to
16.5% of sales up from last year's 16.3% of sales. Selling expenses increased
10
<PAGE>
from last year, primarily in divisional marketing and trade show expense.
General and administrative expenses increased from 1999, primarily in salaries,
payroll taxes, depreciation, and office expenses. Warehousing and assembly
expenses increased from 1999, primarily in field warehousing, partially offset
by a decrease in direct labor. Operating income was $3,667 compared to last
year's $3,971, a decrease of $304 or 7.7%.
Nine months ended August 31, 1999 compared to nine months ended August 31,
2000
The following table sets forth for the periods indicated certain income
statement data and percentage of net sales by product line for the Electronics
Group:
<TABLE>
Nine Months Ended
August 31, August 31,
1999 2000
---------------------- ----------------------
Net sales
<S> <C> <C> <C> <C>
Mobile electronics $ 84,195 50.5% $ 105,466 52.8%
Consumer electronics 21,487 12.9 30,280 15.2
Sound 58,044 34.8 60,830 30.5
Other 3,026 1.8 3,138 1.6
--------- ----- --------- -----
Total net sales 166,752 100.0 199,714 100.0
Gross profit 37,079 22.2 43,572 21.8
Total operating expenses 27,423 16.4 31,943 16.0
--------- ----- --------- -----
Operating income 9,656 5.8 11,629 5.8
Other expense (1,946) (1.2) (1,070) (0.5)
--------- ----- --------- -----
Pre-tax income $ 7,710 4.6% $ 10,559 5.3%
========= ===== ========= =====
</TABLE>
Net sales increased $32,962 compared to last year, an increase of 19.8%.
Automotive sound sales increased 4.8% from last year, primarily in AV and
Prestige Audio product categories. Mobile electronics sales increased 25.3% from
last year to $105,466, primarily due to an increase in mobile video sales of
approximately $25,581, partially offset by declines in
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Protector Hardgoods. Consumer electronics sales also increased 40.9% from last
year to $30,280 due to increased sales of FRS and home stereo products. Net
sales in the Company's Malaysian subsidiary increased from last year by
approximately $676 or 6.4%. The Company's Venezuelan subsidiary experienced an
increase of $1,132, or 16.9% in sales, over last year. Gross margins decreased
to 21.8% in 2000 from 22.2% in 1999. Operating expenses increased $4,520 from
last year. As a percentage of sales, however, operating expenses decreased to
16.0% from last year's 16.4%. Selling expenses increased from last year,
primarily in advertising and divisional marketing. General and administrative
expenses increased from 1999, primarily in occupancy costs, depreciation,
salaries and office expenses. Warehousing and assembly expenses increased from
1999, primarily in tooling and field warehousing, partially offset by a decrease
in direct labor. Operating income was $11,629 compared to last year's $9,656, an
increase of $1,973 or 20.4%.
The Company believes that the Electronics Group has an expanding market
with a certain level of volatility related to both domestic and international
new car sales. Also, certain of its products are subject to price fluctuations
which could affect the carrying value of inventories and gross margins in the
future. The Electronics Group may also experience additional competition in the
mobile video category as more competitors enter the market.
Other Income and Expense
Interest expense and bank charges increased by $166 and $2,501 for the
three and nine months ended August 31, 2000, respectively, compared to the same
periods last year. The increase in interest expense and bank charges is due to
higher average borrowings to finance increases in inventories and accounts
receivable. Equity in income of equity investments increased
12
<PAGE>
$132 and $609 for the three and nine months ended August 31, 2000, respectively,
compared to the same periods last year. For the nine months ended August 31,
2000, Audiovox Specialty Applications, LLC represents the majority of equity in
income of equity investments.
For the nine months ended August 31, 2000, the Company exercised its option
to convert Shintom debentures into shares of Shintom common stock. The Company
then sold the Shintom common stock, yielding net proceeds of $12,398 and gains
on the sale of investments of $1,850 for the nine months ended August 31, 2000,
respectively. For the three and nine months ended August 31, 2000, the Company
also sold 100,000 and 200,000 shares, respectively, of CellStar common stock,
yielding net proceeds of approximately $271 and $852, and a gain, net of taxes,
of approximately $70 and $333, respectively.
The Company had entered into an equity collar on September 26, 1997 to
hedge some of the unrealized gains associated with its investment in CellStar
and applied hedge accounting to this transaction. During 1998, the Company sold
its equity collar for $1,499, which resulted in a net gain on hedge of
available-for-sale securities of $929 which was reflected as a separate
component of stockholders' equity. In connection with the sale of the CellStar
shares, the Company recognized other income of $749 ($464 net of taxes) and
$1,499 ($929 net of taxes) for the three and nine months ended August 31, 2000,
respectively, representing the net gain on the hedge of the available-for-sale
securities.
The Company also recorded currency translation gain of $200 during the nine
months ended August 31, 2000.
13
<PAGE>
Provision for Income Taxes
The effective tax rate for the three and nine months ended August 31, 2000
was 35.5% and 37.1% compared to last year's 38.3% and 39.4%. These decreases
were principally due to changes in the proportion of domestic and foreign
earnings, utilization of a Canadian tax loss carryforward and benefits from
reduced state taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash position at August 31, 2000 increased $55,059 from the
November 30, 1999 level. Operating activities provided $60,630, primarily from a
decrease of $24,217 in accounts receivable and an increase in accounts payable
and accrued expenses of $31,425, partially offset by increases in inventory of
$13,626. Accounts receivable days on hand decreased to 42 days at August 31,
2000 from 47 days at August 31, 1999. Inventory days on hand increased from 28
days last year to 33 days this year. The increase in inventory value and days on
hand was primarily in the Wireless Group. The increase in accounts payable and
accrued expenses is primarily due to $43,874 received from a customer as a
prepayment for future product shipments (See Note 12). Investing activities
provided $5,160, primarily from the sale of investment securities, partially
offset by the purchase of property, plant and equipment (See Note 7). Financing
activities used $10,715, primarily from repayments on the line of credit
agreement, partially offset by the proceeds of the follow-on offering.
During the quarter ended May 31, 2000, the Company purchased land and a
building (the Property) located in Japan for approximately $7,300 from Shintom
Co., Ltd. (Shintom). The purchase of the Property was partially financed with
the proceeds of subordinated loans from third parties of approximately $6,068.
Concurrently with the purchase of the Property, the Company
14
<PAGE>
entered into a one year leaseback agreement with Shintom. The loans bear 5%
interest per annum, and principle is payable in equal monthly installments over
a six-month period beginning six months subsequent to the date of the loans (See
Note 7).
Effective December 20, 1999, the Company amended the credit agreement to
increase its maximum borrowings to $250,000. The amended and restated credit
agreement contains covenants requiring, among other things, minimum quarterly
and annual levels of pre-tax income and net worth. Further, the Company may not
incur a pre-tax loss in excess of $1,000 for any fiscal quarter and may not
incur a pre-tax loss for two consecutive fiscal quarters. In addition, the
Company must maintain a net worth base amount of $175,000, plus 50% of
consolidated net income for each fiscal year ending on or after November 30,
1999. Further, the Company must, at all times, maintain a debt to worth ratio of
not more than 1.75 to 1. The amended and restated credit agreement includes
restrictions and limitations on payments of dividends, stock repurchases and
capital expenditures. The amended and restated credit agreement expires on July
28, 2004.
The Company's ability to borrow under its credit facility is conditioned on
a formula that takes into account the amount and quality of its accounts
receivable and inventory. The Company's obligations under the credit agreement
are guaranteed by its subsidiaries and are secured by its accounts receivable
and inventory.
The Company also has revolving credit facilities in Malaysia to finance
additional working capital needs. The Malaysian credit facilities are partially
secured by the Company under two standby letters of credit expiring August 31,
2001 and one standby letter of credit expiring January 15, 2001 and are payable
upon demand or upon expiration. The obligations of the Company under the
Malaysian credit facilities are secured by the property and building in Malaysia
owned by Audiovox Communications Sdn. Bhd.
15
<PAGE>
The Company also has revolving credit facilities in Venezuela to finance
additional working capital needs. The Venezuelan credit facility is secured by
the Company under a standby letter of credit which expires on May 31, 2001 and
is payable upon demand or upon expiration of the standby letter of credit.
In February 2000, the Company completed a follow on offering of 3,565,000
Class A common shares at a price to the public of $45.00 per share. Of the
3,565,000 shares sold, the Company offered 2,300,000 shares and 1,265,000 shares
were offered by selling shareholders. Audiovox received approximately $96,573
after deducting expenses. The Company used these net proceeds to repay a portion
of amounts outstanding under their revolving credit facility, any portion of
which can be reborrowed at any time. The Company did not receive any of the net
proceeds from the sale of shares by the selling shareholders.
The Company believes that it has sufficient liquidity to satisfy its
anticipated working capital and capital expenditure needs through November 30,
2000 and for the reasonable foreseeable future.
Recent Accounting Pronouncements
In June 1999 and June 2000, respectively, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral
of the "Effective Date of FASB Statement No. 133" and SFAS No. 138, "Accounting
for Certain Derivative Instruments and Certain Hedging Activities". SFAS 137 and
138 amend SFAS 133, "Accounting for Derivative Instruments and Hedging
Activities," which was issued in June 1998. SFAS 137 deferred the effective date
of SFAS 133 to all fiscal quarters of fiscal years beginning after June 15,
2000.
16
<PAGE>
SFAS 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measures those instruments at fair value. Management of the Company
has not yet determined the impact, if any, that the implementation of SFAS 133
will have on its financial position, results of operations or liquidity.
On December 3, 1999, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin No. 101 - "Revenue Recognition in Financial
Statements" (SAB No. 101). SAB No. 101 provides the SEC staff's views in
applying generally accepted accounting principles to revenue recognition in the
financial statements. SAB No. 101B delayed the implementation date for
registrants to adopt the accounting guidance contained in SAB No. 101 by no
later than the fourth fiscal quarter of the fiscal year beginning after December
15, 1999. Management of the Company does not believe that applying the
accounting guidance of SAB No. 101 will have a material effect on its financial
position or results of operations.
In May 2000, the Emerging Issues Task Force issued EITF-00-14 "Accounting
for Certain Sales Incentives". The issue addresses the recognition, measurement
and income statement classification for sales incentives offered voluntarily by
a vendor without charge to customers that can be used in, or that are
exercisable by a customer as a result of a single exchange transaction.
Implementation of the EITF is by no later than the fourth fiscal quarter of the
fiscal year beginning after December 15, 1999. Management has not determined the
impact, if any, that applying EITF-00-14 will have on the Company's financial
position or results of operations.
17
<PAGE>
During the quarter ended August 31, 2000, the Company implemented FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation", an interpretation of Accounting Principles Board Opinion No. 25
(Opinion 25). This interpretation clarifies the application of Opinion 25 for
certain issues. The effects of applying this interpretation are required to be
recognized on a prospective basis from July 1, 2000. Implementation of the FASB
interpretation did not have an impact on the Company's financial position
results of operations or liquidity.
Forward-Looking Statements
This quarterly report on Form 10-Q contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Words such as "may," "believe,"
"estimate," "expect," "plan," "intend," "project," "anticipate," "continues,"
"could," "potential," "predict" and similar expressions may identify
forward-looking statements. The Company has based these forward-looking
statements on its current expectations and projections about future events,
activities or developments. The Company's actual results could differ materially
from those discussed in or implied by these forward-looking statements.
Forward-looking statements include statements relating to, among other things:
o growth trends in the wireless, automotive and consumer electronic
businesses
o technological and market developments in the wireless, automotive and
consumer electronics businesses
o liquidity
o availability of key employees
o expansion into international markets
o the availability of new consumer electronic products
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These forward-looking statements are subject to numerous risks,
uncertainties and assumptions about the Company including, among other things:
o the ability to keep pace with technological advances
o significant competition in the wireless, automotive and consumer
electronics businesses
o quality and consumer acceptance of newly introduced products
o the relationships with key suppliers
o the relationships with key customers
o possible increases in warranty expense
o the loss of key employees
o foreign currency risks
o political instability
o changes in U.S. federal, state and local and foreign laws
o changes in regulations and tariffs
o seasonality and cyclicality
o inventory obsolescence and availability
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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: October 17, 2000
By:s/Charles M. Stoehr
------------------------------
Charles M. Stoehr
Senior Vice President and
Chief Financial Officer
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