Q2 2003 Audiovox Corporation Earnings Call
July 7, 2003
OPERATOR: Good afternoon. Good morning, Ladies and Gentlemen. Welcome to the
Audiovox's Fiscal Second Quarter 2003 Financial Results Conference Call. My name
is Rob. I'll be the operator today. Throughout this conference, your lines will
be on listen-only. If you require assistance from an operator at any time,
please key star then zero on your touch-tone phone and we will be happy to help
you. At this time, I'd like to turn the conference over to Mr. Glenn Wiener. Mr.
Wiener, you may now begin.
GLENN WIENER, DIRECTOR INVESTOR RELATIONS, AUDIOVOX: Good morning and thank you
for joining us today in Audiovox's Fiscal 2003 Second Quarter Conference Call
for the period ended May 31st, 2003. If you haven't received a copy of last
week's announcement issued after market on June 30, you may visit the company's
Web site at www.audiovox.com or contact me at 212-786-6011 following the call.
As the operator mentioned, today's call is being Webcast (INAUDIBLE), a replay
of which will be available a few hours following the call and will last for one
week. Before getting started, I'd like to read the Safe Harbor language.
Except for historical information contained herein, statements made on today's
call and in today's Webcast that would constitute forward-looking statements may
involve certain risks and uncertainties. All forward-looking statements made are
based on currently available information and the company assumes no
responsibility to update any such forward- looking statements. The following
factors, among others, may cause actual results to differ materially from the
results suggested in the forward-looking statements.
The factors include, but are not limited to, risks that may result from our
ability to keep pace with technological advances; significant competition in the
wireless; mobile and consumer electronics businesses; the quality and consumer
acceptance of newly introduced products; relationships with key suppliers and
customers; market volatility; non- availability of products; excess inventory;
price and product competition; new product introductions. The possibility of
that review of our prior filings by the SEC may result in changes to our
financial statements. And the possibility that stockholders or regulatory
authorities may initiate proceedings against Audiovox and/or our officers and
directors as a result of any risk(ph) statements.
Risk factors associated with our business, including some of the factors set
forth herein, are detailed in the company's Form 10-K for the fiscal fourth
quarter and the year ended November 30, 2002 and its Form 10-Q for the three
months ended May 31, 2003.
At this time, I'd like to introduce John Shalam, Chairman, President and Chief
Executive Officer of Audivox - John.
JOHN SHALAM, PRESIDENT & CEO, AUDIOVOX: Thank you very much, Glenn. Good
morning, ladies and gentlemen, and thank you for joining us to discuss our
second quarter results.
This morning, in addition to my own remarks, Michael Stoehr, our CFO, will
discuss our financial results with you. And Philip Christopher and Pat Lavelle,
CEOs of our operating subsidiaries, will then walk you through the development
at their respective companies this past quarter and what's in store for the
remainder of the year.
First, let me discuss our revenues.
We reported a modest increase over last quarter and versus the prior year
period, coming in at $301 million(ph). While sales in our wireless group were
off slightly this past quarter, I'd like to point out that for the six-month
period we're at 27% ahead of where we were at this time last year. And we're
excited about the second half of the year, as we have several new products
planned for introduction towards the end of the third quarter and into the
fourth.
On the electronics front we had our best quarter ever, with record revenues of
almost $112 million. That's almost 40
Exhibit 99.1
percent higher than our first quarter results and 23 percent higher than the
second quarter last year. Demand for our products, particularly in mobile video
and consumer electronics, remains strong. And we believe the company is on track
to lead internal forecasts.
As for profits, we reported net income of $2.1 million and basic income for
common share of 10 cents. Both groups recorded sequential gains and profits.
Although off from last year's figures, our net income and earnings per share
were up considerably from our first fiscal quarter. And if market variables
continue, we anticipate further increases in the second half of the year. Please
bear in mind that income in this period last year was positively effective by
the Toshiba purchase of 25% of our wireless subsidiary.
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. The economy appears to be improving,
and demand for our products is encouraging.
The third and fourth quarters typically are strongest in terms of sales - should
be highlighted by the introduction of several new products with high-demand
consumer features. We expect to see continued growth in our mobile video and
consumer electronic units, and we have begun the process of integrating the
recently acquired (INAUDIBLE) into our marketing mix (INAUDIBLE). New products
in our portable DVD flat-screen TV and satellite radio lines will be in the
market shortly.
I'm proud of the dedicated efforts of the management team and employees here at
Audiovox, and I look forward to addressing your questions. Thank you again for
your continued support. At this time, I'll turn over the call to Michael Stoehr,
our CFO. Michael?
MICHAEL C. STOEHR, SENIOR VICE PRESIDENT & CFO, AUDIOVOX: Thank you, John. Good
morning, everyone.
Sales were 301 million for the second quarter of 2003 versus 297,000 last year.
Wireless sales were 189 million versus 206 million last year. These sales -
second quarter of 2002 were impacted by the introduction of our 9155, which did
spike up the May sales last year. Average selling prices this quarter were $161
versus $135 a unit second quarter 2003. Again, the higher-end digital product
we're selling, the color LCDs(ph) and PDAs, contributed to this increase in
ASPs. Electronic sales were 111 million versus 90 million - continued to
experience growth in (INAUDIBLE) DVDs, video, and other products offset some of
the declines in wireless.
Gross margins improved to 8.8-and-a-half% versus (INAUDIBLE)
Philip?
SHALAM: Philip?
STOEHR: Philip, you're on an open line - 8.5% versus 6.3% second quarter '02 as
there were no write-downs in the quarter and wireless margins improved as we are
bring - as we're selling the higher-end product.
Operating expenses declined by 1.5 million to $22 million as a result of lower
salaries, reductions (INAUDIBLE) provision for bad debts which was offset
partially by increases in our direct labor for increased shipping engineering
and also in professional fees.
Importantly, operating income increased from last year's loss of 5.4 million to
a second quarter operating income of three million or a swing of 8.4.
(INAUDIBLE) six months, we've had a $17 million swing to seven-and-a-half - to
approximately seven-and-a-half million versus a loss last year of 10.6.
As John had mentioned, other income declined by - declined by approximately 13
Exhibit 99.1
million. As a result, last year we had sold 20% of the shares - additional 20%
of shares in ACC(ph) to Toshiba and have recognized a gain of approximately
$14.2 million.
The after-tax income was 2.1 versus 3.6 this quarter versus quarter 2003.
Without the gain, we would have showed an 18-cents-a-share loss.
The AR(ph) balance was $160 million or 48 days on hand. This is better than 57
days and 219 million that we had last year at this quarter. Inventory was 172
million the end of this quarter versus $277 million last year again improvement
in both(ph) days on hand to 59 days.
Major reduction in our inventory was incurring in the wireless group. Inventory
balance as of May 31 was 85 million versus 215 million last year at this time.
It could be.(ph) Cash balance of the company reported was $24 million. This is
down slightly from the first quarter. If you take a look at the balance sheet,
you'll see that the receivables were up and inventory down. We subsequently
collected the cash in June and our cash balance at this point is $50 million,
book value of the company if $14.20.
Thanks a lot. John?
SHALAM: Thank you very much, Michael. I'd like to turn the call over now to
Philip Christopher who is the President of Audiovox Communications Corporation.
Philip, please go ahead.
PHILIP CHRISTOPHER, PRESIDENT & CEO, AUDIOVOX COMMUNICATIONS: Good morning,
everyone. I hope everyone can hear me and I'm traveling right now.
Can you hear me?
STOEHR: Yes, Philip.
CHRISTOPHER: Anyway, I'm on the way to Verizon and Virgin Mobile, two of our
largest accounts, so I have the opportunity to be speaking to you from the car
and I hope everything is clear.
As we spoke only a month ago when we reported the financial results of the
fiscal year 2002, which was a very difficult year. And of course first quarter
and second quarter showed an improvement. As Mike just announced to you, we have
reduced our inventory although our sales have not kept up to pace because of the
new products that are expected to be introduced very soon.
We are positioned right now to have a good second half in 2003 and much-improved
2004.
I know some of you had questions specifically regarding new products. At the
moment at Verizon we have the CDM- 8600 being tested. And it is our hope that
that will be approved and we will begin shipping in the month of July, our new
roll on color display form. Also at Verizon we have a bar type color display
form, the CDM-8400. That is now under consideration for approval and that is
scheduled for introduction in the month of August. The 8900, the camera form,
will be introduced sometime in September and it will be introduced not only to
Verizon but also to Tellis(ph) of Canada and to some other smaller carriers.
We also have two new media forms that are being introduced. Basically it's a
camera form with moving picture capability. These will be the first forms in the
market with the Amazon 6100 chip set. These two forms will be introduced to
Sprint and Verizon during the fourth quarter.
So overall between the results of the first half and the anticipated new
products in the second half, we are positioned to have an improvement during the
Exhibit 99.1
second half of the year. Right now we have reduced our inventory. Most of the
discontinued models have been sold. We still have some units that need to be
eliminated from our line, but from the third quarter forward, it's basically
going to be the new CDMA line. Basically the 86, 84, and 89 and then the 99,
four new products all with card display and two of them with camera capability.
In regards to Sharp, some of you have written to me regarding the Sharp
electronics and our GPMS. As you know, we are working with AT&T, T-Mobile, and
Cingular for a GPMS 850 megahertz to be introduced in the fourth quarter, late
fourth quarter. As you know, Borth(ph), Cingular, and AT&T have transitioned
from CDMA to GSM and GPRS. Actually, this transition has taken place already but
the high-end camouflage will be - will begin to be introduced during the fourth
quarter of this year. We are hoping that the short falls(ph) will be as
successful in North America as they are in Europe with Water front(ph) and with
other carriers in the European markets. The short falls(ph) will be shown(ph)
exclusively by Audiovox in North and South American. Some of the other products
that we are working on, as you know, we have success with our PDA Fear(ph) from
Toshiba and for the second generation, we will be introducing products made by
HTC of Taiwan utilizing Microsoft 2003 software. This introduction will take
place in the fourth quarter and some (INAUDIBLE) introductions to Sprint,
Verizon, and AT&T and we're also working with Team Mobile as well. So, that is
basically where we stand. I know the past two(ph) years have been very
difficult. The first half of this year I think was difficult as well. But we
were able to be still profitable during the past 2 quarters. The second half of
the year, is again, a continuation of the transition into the new products and
we look forward to maintaining our position in the CDMA and enter into the GPRS
GSM arena. So, that's about it. I'd be here to answer any questions that you may
have.
SHALAM: OK. Thank you very much Philip. Now I'd like to turn the call over to
Patrick Lavelle, who's President of Audiovox Electronics.
PATRICK LAVELLE, SENIOR VICE PRESIDENT, AUDIOVOX: Thank you John, and good
morning everyone. As I had indicated at our last conference call, we anticipated
the second quarter sales would be up substantially. The second quarter '03 was
our strongest quarter on record, both in sales and profitability. As John
indicated, net sales grew by 23% over the second quarter 2002 to approximately
$112 million. This is also 4.6% better than our previous records set in the
fourth quarter of '02. Sales for mobile video products led the way with an
increase of approximately 55% followed by consumer goods with an increase of 50%
over Q2, 2002. I'm happy to advise that our audio sales increased reversing the
downward trend we have seen over recent quarters. The category grew by 3.9%
driven primarily by an increase in satellite radio sales. Our security sales
dipped by 6% for the quarter over Q2 last year. As the mix of sales continues to
shift to remote start systems where we are affected more by the seasonal nature
of the category. That seasonal nature would be strong Fall and Winter sales and
weaker Spring and Summer sales. All in all, it was a successful quarter for us.
As I mentioned on our last - last month's call, one of our long-term objectives
is to have a broad distribution network in place to mitigate shocks to any one
segment of the market. Our market segments breakdown for the quarter was as
follows, and these percentages are consistent with past quarters. Mass merchants
and national chains represented approximately 54% of our turnover. Expeditors,
distributors and independents represented 36%, and original equipment
manufacturers represented 10% of sales. We only had one account that represented
10% or more of sales for the quarter, and that account totaled 15.5% of the
quarter's activity.
For the quarter, we were successful in launching a number of programs that
helped drive the sales. Our Eddie Bauer program at Target stores met and is
meeting with good success and is outpacing all projections. Our GMRS radio
program with Wal-Mart is also meeting with good success, and early indications
are it will be a good performer for the balance of the year.
Additionally, we were approved as the vendor and won the contract to supply our
total arm remote start systems to Mazda for port(ph) install on selected
vehicles and also won a contract for Chrysler for their more car(ph) after
market program. We are fortunate that most of the new products introduced at the
start of the year at the CES show are now delivering and helping to generate new
business and better penetration. New mobile video bags, new overhead, more
competitively priced rear seat entertainment systems have met with good
acceptance.
In addition, in our mobile video we will roll out our custom headrest program
Exhibit 99.1
this month, which will give us additional sales in a segment of the market we
are not presently in. We continue to develop new products and remain aggressive
in maintaining our leading market share. In consumer electronics, our new LCD
TVs just being received should allow us to continue to grow our presence in the
home.
Finally, an update on our acquisition of Recoton Audio. We expect to close our
Recoton purchase tomorrow, and I can advise at this point things are moving
along according to plan. Customers and suppliers alike have expressed their
desire to rebuild the Jensen(ph) acoustic research and advent sales in the U.S.,
and although there is much work to be done, I am confident we will be able to
establish solid business under these grants.
As I stated, it was a successful and very active quarter. And I'm pleased with
the results. I look forward to the second half of the year, and I believe we
will meet or exceed our projections - John.
SHALAM: Thank you very much, Pat.
We will now - we're now ready to receive questions from any of you on the call.
Please go ahead.
OPERATOR: OK. Thank you, sir. Ladies and Gentlemen, if you wish to ask a
question at this time, please key star, one on your touch-tone phone. Once
again, if you wish to ask a question, simply key star, one on your touch-tone
phone.
Sir, your first question is from John Bucher from JKM.
JOHN BUCHER(ph), HARRIS, NESBIT, and GERARD(ph): Good morning. John Bucher with
Harris, Nesbit, Gerard(ph).
Michael, a question for you regarding the estimated revenue split for the second
half of the year between electronics and wireless. I know that you've got a
number of new handset launches that Philip outlined. What should we anticipate?
Is it likely that electronics will account for the 37% or so of revenues that it
did this past quarter?
STOEHR: Which quarter are you talking about, John?
BUCHER: The current quarter.
STOEHR: The current quarter?
BUCHER: The fiscal second quarter.
STOEHR: Oh, fiscal second quarter. Yes, it's going to run about the same for the
third quarter.
BUCHER: And you think that that might be a trend as we...
STOEHR: As we go into the fourth quarter, you'll see more wireless will take a
bigger percentage of the sales (INAUDIBLE) because the introduction of new
products and the semi-average(ph) selling price of that product being
introduced.
BUCHER: And regarding operating margin, do you have a target operating margin
that you're anticipating in the - in the second half of the year?
And then beyond that, if you can give whatever sort of objective that you're
shooting for for corporate operating margin.
STOEHR: John, at that - at this time, as you know, we don't - we do not give
that - those projections out - (INAUDIBLE) will be improvement over the first
Exhibit 99.1
half of the year.
BUCHER: And as far as a forecast for any part of the second half of the year,
can you elaborate in any way on your expectations financially?
STOEHR: I think John when he - his opening remarks and I think both Pat and
Philip also spoke to it that we assume the second half of this year will be much
stronger than the first half of the year.
BUCHER: Question for Philip regarding handsets. The - it looks like there's
increasingly the handsets are coming sort of bipolar in terms of their average
selling prices. You know, with the 9900 coming out and the 8900, the number of
(inaudbile) phones coming out plus I would imagine that there's, you know, still
a number of entry-level phones. Philip, is there any kind of update at all on
the entry-level low-cost CDMA phone that was anticipated to be shipping into
South America?
And what do you - what are your expectations for the net impact of handset ASPs
for the second half of the year?
CHRISTOPHER: Well, first of all, as I mentioned before, you have to take into
consideration that the approval process by the carriers is an extremely
difficult process and anything can happen. But we are pretty confident that the
CDMA8600(ph), which is the low-end color display phone, will be launched by -
actually launched by Western Wireless today, which is the first carrier. We
expect Verizon to launch sometime by beginning of August. United States Cellular
to also launch that phone, as well. We have that same phone being tested by
BellSouth International. And we do expect - and we have some very good
projections from BellSouth International and Verizon International.
This phone is a phone what will be sold somewhere around $189 to the carriers.
It's a - it's a phone that competes very well with the Motorola T720, which has
been out there gaining market share, plus the LG4400 color display phone, as
well.
We'd also compete against some of the other Nokia(ph) (INAUDIBLE) cell phones
that are in the market. The 8400, as I mentioned before, it's a bar-type color
display phone. And the 8400 will be introduced August and September. It is being
tested by Sprint. It would actually be the first (INAUDIBLE) made product that
will be sold to Sprint for the fourth quarter (INAUDIBLE) Verizon, (INAUDIBLE)
Mobility, Canada, BellSouth International, Verizon International, are also
testing the same unit.
The 8900 is a camera phone that is targeting to compete against the LU6000(ph)
and the Sanyo 8100 that is in the market right now. And it is expected to be
successful, as well.
The 9900 series is a 299-dial form. It's a high end product utilizing the
MSN-6100. It is being introduced as a media form. We do think it will do well at
Sprint and at Verizon, which are the only two carriers at the moment that can
support that type of phone on their network for the fourth quarter.
So we expect the average selling prices to improve because you have four models
that are being introduced at higher prices.
In regards to the lower end forms, it's basically some of the products that we
have in the market to date like the 9155. We are still selling to as being
phased out. The 8300, which is being sold to Verizon and that is being phased
out as well.
And in South America, John(ph), it's basically very competitive environment and
we are trying very, very hard to see what we could achieve between Qualcomm
electronics to try and introduce a new one form for the Latin American carriers.
I also think, and I mentioned before, that the GSM, GPLS introduction will not
affect our second half but it will definitely affect us very much in the fourth
quarter towards the end of the fourth quarter when we make the introduction of
Exhibit 99.1
the camera phone to AT&T. So I'm not sure I answered the question, John(ph), but
as best as - as best as I could I gave you the answer.
UNIDENTIFIED PARTICIPANT: Thank you very much, Philip. Are any of your handset
partners evaluating products that are based on chip sets besides the call com
chip set at this point?
CHRISTOPHER: No. The only chip sets available right now, it's Qualcomm and of
course Nokia's forms utilize the Nokia chip set, but our partners like
Uritel(ph) and Toshiba, I'm sure they are evaluating some of the chips that are
available. But I have to be honest with you, in order to stay in pace with the
demands of the carriers and the software that they need, we have to continue to
utilize the Qualcomm chip sets at the moment because it gives us the best
possibility of introducing products at a early and with the software that and
requirements of the carriers.
UNIDENTIFIED PARTICIPANT: Thank you. I've got one question for Patrick Lavelle
and then I'll get back in the queue. I was wondering if Patrick could update us
on the current OEM relationships that exist for Audiovox Electronics with mobile
video and audio products. And also he mentioned the Mazda and Chrysler wins. If
he could just highlight what products were included in those. And then the other
potential OEM wins that are on the horizon for the second half of the year.
LAVELLE: OK. John(ph), our winning with mobile video, we're currently supplying
Ford, Mazda, and KIA mobile video as well as Toyota of America and the two
independent Toyota ports, Southeast Toyota and Bell States Toyota. That's our
video program.
In security, we're supplying the two Toyota ports and under code alarm we enjoy
the Ford business and we recently won the Mazda and the Chrysler business for
the end of this year. That's probably when the programs will ship for the first
time.
In audio, 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.
Those are the OEM programs that we're currently providing product, or at least
have won a contract. We are constantly working on meeting new OEMs and trying to
develop new programs. At this point, it's too early to tell what maybe coming
down next, but we do have a number of presentations in front of a number of
OEMs.
UNIDENTIFIED PARTICIPANT: Thank you (INAUDIBLE) get back in queue, let somebody
else have a chance here.
SHALAM: OK. Thank you.
OPERATOR: Thank you sir. Once again, Ladies and Gentlemen, star one for any
questions. (audio gap)
SHALAM: John(ph), did you have any additional questions on the queue?
OPERATOR: Actually sir, I have Jason Yellan(ph), Cobalt Capital.
JASON YELLAN(ph), COBALT CAPITAL: Hi, it's Jason Yellan(ph) from Cobalt(ph).
Quick question for you guys on inventory. I guess, specifically in ACC and also
overall. There's a lot of improvement year-over-year. What - how should we think
about sort of the direction of inventory level as you are launching and prepare
to launch several new handset models in the second half?
STOEHR: The third quarter utisory(ph) levels will continue to contract. It will
build slightly in the fourth quarter.
YELLAN: Sounds good. Thank you.
OPERATOR: Thank you, sir. Once again, star one for any questions. OK. We'll go
back to Mr. Bucher.
Exhibit 99.1
BUCHER: Last conference call, Michael, I think you mentioned that your peak
balling(ph) requirements were probably around $60 million or so, or at least
that was the implication from some comments that you'd made ...
STOEHR: Yes.
BUCHER:... regarding line of credit. Do you think that's still is the case for -
now through the year-end of the fiscal year?
STOEHR: Yes John. It's probably going to be a little bit less. We actually, in
the few events that we stepped the lines down again another $25 million...
BUCHER: Right....because it's just - we're not using them and we saw a lot of
cash building up again. As the previous question that was asked, are we going to
see further cash out from inventory contractions in the third quarter, even with
the payment of about $38 million for the (INAUDIBLE) remaining balance on
(INAUDIBLE), we're still in a pretty good cash position. I think that's about
$60 million is where we will be.
And this is somewhat related to the previous question I asked just regarding
revenue mix between electronics and wireless, but do you still expect
electronics revenue to break the $400 million level marked for the fiscal 2003?
STOEHR: Yes, yes.
BUCHER: And if we were to take Philip's comprehensive reply just on the pipeline
here, do you think it's aggressive by the end of the fiscal year that we would -
if we were to be modeling handset ASPs at $175 level, or does that seem about
right?
STOEHR: For average selling price?
BUCHER: Yes. By the end of the fourth quarter - fiscal fourth quarter.
STOEHR: It'll be a little high, John.
BUCHER: It will be a little higher or it should be a little higher?
STOEHR: That would be a little high for an ASP.
BUCHER: OK.
STOEHR: I would see the ASPs low because the (INAUDIBLE) that Phil mentioned,
the mix that goes in would bring that ASP down a little bit.
BUCHER: Just sort of a qualitative general comment I wondered if you could give
some feedback on. It seems that you all are being much more selective in the
handset opportunities that you are pursuing. Would it be reasonable to expect
that you might have higher gross profit margins to get a little understanding
that Philip's already caviated(ph) that the testing process can have a lot of
speed bumps associated with it. But if you reach your expectations for new
handset launches, do you think that you'll see handset gross profit margin
improvement higher than historical levels?
STOEHR: If we take last year's history, as Philip mentioned, yes, they'll be
higher than historical levels. We were running about 1 or 2% last year. We
should move back up to some a little bit more normalized range.
BUCHER: Like 6 to 7%?
STOEHR: I wouldn't comment on that, John.
Exhibit 99.1
BUCHER: And the electronics gross margins in the last quarter were also a tad
lower than historicals. I know that it was explained. You know, there was some
OEM influence there. I'm just wondering what we should expect in the way of
electronics gross profitability.
STOEHR: John, for modeling purposes, we mentioned in the Q that we put out - as
Pat mentioned, the mix changed with the retailers mass merchants on the consumer
goods. You're going to see him running that band. He doesn't shift too much out
of that band.
So you know what the high and low end is. You're right in the middle of that 16
to 17, 18%. Remember historically we had to re-class up a lot of expenses, which
changed some of the margins. So you'll see Pat in the 15, 17, somewhere in
there.
BUCHER: OK. Maybe another way to get at the very first question I asked then,
from an operating expense basis in the second half of the year of your fiscal
year, can you give us any sort of - for modeling purposes, should we keep
operating expenses about the same? Should we model them as the approximate same
percentage of revenues as the last quarter?
STOEHR: You will see operating expenses creep up on a dollar basis. You will
see, as we've mentioned, I think you asked me previously just for modeling
purposes - since we're going to publish this - is in the third quarter you're
going to see sales will contract. We won't(ph) have sequential growth from
second to third quarter. It's just the nature of the season that we're moving
into. You will see an up-tick in the fourth quarter.
As for overhead, you're going to run it in a band again. You're not going to get
too out of whack with the percentage of sales that you're looking at now. There
is a degree of fixed expenses in the company.
BUCHER: OK. And...
STOEHR: And also, include we're going to be bringing in some overhead for
Recoton. Not massive, but it will pick up a couple of thousand dollars here.
BUCHER: OK. Are you giving any - I know Mr. Shalam's...
STOEHR: A couple of tens of thousands of dollars, John. I'm sorry.
BUCHER: Say again?
STOEHR: A couple of tens of thousands of dollars, not a couple thousand.
BUCHER: OK. OK, thank you very much.
STOEHR: OK.
OPERATOR: OK. Thank you, sir. Your next question is from Lewis Sepulveda(ph)
from Reinbech(ph).
LEWIS SEPULVEDA(ph), REINBECH(ph): How are you doing? This question is for Pat
Lavelle. How are the series(ph) satellite radios being distributed through
retail, OEM or both? And did or does Jensen(ph) make any satellite radios?
LAVELLE: OK. The distribution is primarily through the independent electronics
specialists. I would think the numbers are still upwards of 60% percent of the
market in being handled by Circuit City and Best Buy. We have programs with both
Circuit and Best Buy. As far as OEM business, we do no OEM business with
satellite radio.
Exhibit 99.1
SEPULVEDA: OK. And then Jensen(ph). Did they make any satellite radios?
LAVELLE: Yes. Jensen(ph) had a satellite radio plug-in play unit that is really
obsolete at this particular point. Anything we do under the Jensen(ph) brand
would probably be more in line with the new plug-in play that we will be
introducing this month.
SEPULVEDA: OK, thank you.
LAVELLE: You're welcome.
OPERATOR: OK, thank you, sir. Once again, John Bucher from (INAUDIBLE).
BUCHER: Patrick, regarding your GPS and in-dash navigation systems. Do you have
any OEM - do you expect to have any OEM opportunities in the future there? And
just how would you characterize unit growth for the - for the retrofit
(INAUDIBLE) distribution channel area?
LAVELLE: OK. No, we do not have any OEM business for the navigation programs,
and as far as the navigation business in the aftermarket, it is a - it's a slow
build. It is a product that we like to say is being driven by the - from the top
down, meaning that the car manufacturers are really exposing navigation to the
masses and as the prices start to drift downwards, you would see the aftermarket
sales pick up. OK? The addition of new product that we have coming as far as DVD
base systems which allow much, much more information on one disk should help
drive our sales in the aftermarket. But at present, we have no navigation
business with OEMs.
BUCHER: Thank you very much.
LAVELLE: You're welcome.
OPERATOR: OK, thank you, sir. Sir, there are no further questions for you at
this time.
SHALAM: OK, if there are no further questions, I want to thank all of you for
joining us on our earnings conference today, and we appreciate your interest in
the company and your continuing support. Thank you.
OPERATOR: OK, thank you, sir. Thank you, ladies and gentlemen. This brings your
conference call to a close. Please feel free to disconnect your lines at any
time.
Exhibit 99.1