AUDIOVOX SEES $30 MILLION IN REVENUE COMING FROM EX-RECOTON ASSETS
Audiovox is forecasting U.S. sales exceeding $30 million from the stable of former Recoton brands it acquired a year ago including Jensen, Acoustic Research and Advent, Audiovox Electronics CEO Patrick Lavelle told analysts. The brands generated $13.9 million revenue the 6 months through May 31 -- led by Jensen, which has gained distribution for its Sirius satellite radio products at Wal-Mart and revived sales of car audio gear at AutoZone, Pep Boys and Target, he said.
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The reviving of Jensen sales at Wal-Mart were key for Audiovox. Wal-Mart dropped Jensen products as Recoton spiraled toward bankruptcy in late 2002. Audiovox acquired Recoton’s home audio brands, which also included Mac Audio and Magnat in Europe, for $40 million during a bankruptcy court auction in July 2003. Audiovox purchased the Acoustic Research, Advent and Jensen brands for about $20 million. Through May 31, Audiovox had received $15.3 million from the sale of merchandise and receivables it acquired in the deal along with earned license fees, according to the company’s 10Q filed with the SEC. Audiovox has a balance of $2.5 million in acquired assets it expects to liquidate for 1/2 its value, reducing the final acquisition cost to $3.3 million, Audiovox said.
The Advent and Acoustic Research brands, which are being applied to a range of products including speakers and flat-panel displays, will have “some impact” in the 2nd half of the year as Audiovox starts to receive new products, Lavelle said.
“We are now and will continue to work to revitalize the once formative Jensen, Acoustic Research and Advent product lines,” Audiovox CEO John Shalam told analysts. “We acquired these brands because we felt they complemented our existing product lineup, providing our customer base with a wide range of planned options within product categories.”
In Europe, the Mac Audio and Magnat brands -- which Audiovox acquired for $20 million plus the assumption of $5 million in debt -- generated $28 million revenue the 6 months ended May 31 and are forecast to post $60-$70 million for the year, Lavelle said. With the relaunch of Mac Audio and Magnat, Audiovox also has introduced products under its own brand, which represented about 10% of its revenues in Europe during the 6-month period.
Audiovox’s mobile video business posted a 4.5% revnue 2nd quarter despite a 26% drop in the average selling price of its “video bags,” which consist of a portable DVD player and a carrying case. Among the category’s key drivers was an mobile entertainment system that included a 10” LCD and new security and remote start programs with Best Buy and Circuit City, Audiovox said. Audiovox launched an exclusive program for its Code Alarm security and remote start products at Circuit City 2nd quarter, it said. Audiovox purchased Code Alarm for $6 million in 2002 and has since established an R&D center in Detroit and moved manufacturing to the Far East, company officials said. During the 6-month period, Code Alarm sales rose 38% to $11.5 million.
Audiovox also remains on schedule to complete the sale of its cellphone business to UTStarcom for $161 million by 4th quarter. Audiovox Communications Corp.’s revenue rose 2nd quarter to $290.2 million from $189.1 million a year ago. Cellphone sales jumped to 1.6 million units from 1.1 million a year earlier as the average sale price rose to $170 from $161. Audiovox benefited from intorducing a clamshell color display model for Virgin Mobile in March. The Virgin contract calls for shipments of 1.2 million units, the company said. Audiovox also shipped a cellphone/handheld PC, based on Microsoft’s Pocket PC operating system and marketed by AT&T Wireless.
Under terms of the sale to UTStarcom, Audiovox has agreed to buy the rest of Toshiba’s shares in its cellphone subsidiary for $13.5 million, which includes repayment of an $8.1 million subordinated note, according to an SEC filing. Audiovox Communications Corp. (ACC) CEO Philips Christopher will receive $4 million to terminate his employment and stock appreciation rights agreement, while a $5 million severance pool will be established for other employees. Shalam will receive a $1.9 million payment as part of a long-term incentive program established in May 2002 to compensate him if an agreement was reached with a 3rd party to buy a controlling stake in ACC, the filing states.
Overall, Audiovox reported 2nd-quarter net increased to $3.7 million from $2.1 million a year earlier as revenue rose to $438.2 million from $301 million. Audiovox Electronics sales jumped to $148 million from $111 million a year earlier. Audiovox Germany, which includes the Mac Audio and Magnat brands, posted $12.7 million in sales. Mobile electronics revenues increased to $84.4 million from $74.1 million, while those in the sound category rose to $44.6 million from $9.9 million. The increases in sound and mobile offset a decline in CE, where sales declined to $19 million from $27.8 million as a result of “increased competition” in the DVD category, the company said.