RECOTON AUDIO PURCHASE EXPECTED TO CLOSE TODAY—AUDIOVOX
Audiovox Senior Vp Patrick Lavelle told analysts in conference call Mon. that “we expect to close” on $40 million purchase of Recoton’s audio business today (Tues.). He said “things are moving along according to plan.” Audiovox agreed to buy Recoton’s audio business, which includes Acoustic Research, Advent and Jensen brands, out of bankruptcy, assuming $5 million in debt (CED June 4 p1). Acquisition was part of breakup of Recoton, which filed for bankruptcy in April (CED April 10 p1). It also sold its accessories business to Thomson, for $60 million.
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Lavelle said “customers and suppliers alike have expressed their desire to rebuild the Jensen, Acoustic Research and Advent sales in the U.S. and although there’s much work to be done, I am confident we will be able to establish solid business under these brands.”
Lavelle’s comments came as Audiovox executives discussed company results for 2nd quarter ended May 31. Although conference call wasn’t held until Mon., company released financial results late last month (CED July 2 p4). At that time, it said its income fell to $2.1 million from $3.7 million year ago despite revenue gain to $301 million from $297.3 million. Audiovox Electronics business sales increased to $111.9 million from $91 million.
Lavelle, also CEO-pres., Audiovox Electronics, said Mon. that company had expected 2nd quarter CE sales would “be up substantially” and it was “our strongest quarter on record both in sales and profitability.” He said “sales of mobile video products led the way with an increase of approximately 55%, followed by consumer goods with an increase of 50%” over 2002 2nd quarter.
Audiovox audio sales increased in quarter, he said, “reversing the downward trend we have seen over recent quarters,” growing “3.9%, driven primarily by an increase in satellite radio sales.” He later told analysts that distribution of company’s Sirius satellite radio products was “primarily through the independent electronics specialists” with “upwards of 60% of the [satellite radio] market [now] being handled by Circuit City and Best Buy,” both of which Audiovox does business with. Company currently has no OEM satellite radio business, he said. Lavelle said plug-and-play satellite radio unit most recently offered by Recoton under Jensen brand was “really obsolete at this particular point” and “anything that we do under the Jensen brand [in satellite radio] would probably be more in line with the new plug-and-play [product] that we will be introducing this month.”
Company continues its efforts to achieve broader distribution network “to mitigate shocks to any one segment of the market,” Lavelle said. He said 54% of 2nd-quarter electronics sales came from mass merchants and national chains, 36% from expediters, distributors and independents, 10% from OEMs. He said “only one account represented 10% or more of sales for the quarter” (15.5%) but didn’t name it.
Lavelle said “most of the new products introduced at the start of the year” at CES “are now delivering and helping to generate new business and better penetration.” He said company’s “new LCD TVs, just being received, should allow us to continue to grow our presence in the home.”
On mobile OEM front, Lavelle said company now supplied video products to Ford, Kia, Mazda, Toyota. For security products, it supplies products to Ford, Toyota and “recently won the Mazda and the Chrysler business,” he said. In audio, he said, “we do business with GM of Venezuela and Chrysler of Venezuela, although those sales are very quiet now due to the economic conditions in the country.” He said “we are constantly working on meeting new OEMs and trying to develop new programs” but “at this point it’s too early to tell what may be coming down next.” However, company has “a number of presentations in front of a number of OEMs” now, he said.
Audiovox executives also told analysts Mon. they were confident that 2nd half of year would be stronger for company overall than first half. CEO John Shalam said “the economy appears to be improving and demand for our products is encouraging.” He said company’s 3rd and 4th quarters -- “typically our strongest in terms of sales -- should be highlighted by the introduction of several new products with high-demand consumer features.” Shalam said new products in portable DVD and satellite radio lines would “be in the market shortly.” He said “our financial position remains strong and we move into July with a clean balance sheet, no outstanding borrowings and the flexibility in place to fund day-to-day operations and future growth.” Company said it still expected Electronics revenue to break $400 million mark for fiscal 2003.