UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 [fee required]
For the fiscal year ended November 30, 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 Number)
150 Marcus Blvd., Hauppauge, New York 11788
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 231-7750
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of each class: Which Registered
Class A Common Stock $.01 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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 requirement
for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K (Sec 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. (X)
Fiscal 1995 Compared to Fiscal 1994
Activation commissions decreased by approximately $9.3
million, or 19.4%, for fiscal 1995 compared to fiscal 1994. This
decrease was primarily attributable to fewer new cellular
subscriber activations and partially due to the net reduction of 61
retail outlets operated by the Company. The number of activation
commissions decreased 15.5% over fiscal 1994. This decrease in
commission revenue was further affected by a 4.7% decrease in
average activation commissions paid to the Company. Residual
revenues on customer usage increased by approximately $776,000, or
19.4%, for fiscal 1995, compared to fiscal 1994, due primarily to
the addition of new subscribers to the Company's cumulative
subscriber base, despite a decrease in current year activations.
A majority of the residual income resides with the remaining 30
operating retail locations.
During fiscal 1994, the Company experienced dramatic growth in
its Quintex type retail operations. This growth reflected the
large increases in cellular telephone sales experienced in the
domestic U.S.
During this period, the Company had favorable contracts with
several of the major cellular carriers. To capitalize on the
growth in the market during 1994, the Company embarked on an
expansion program to increase its retail presence in its designated
cellular markets. During fiscal 1995, beginning with the first
quarter, the market place in which the Quintex retail operations
conducted their business was adversely affected by several trends
These trends include a slow down in the growth of the cellular
market, a desire by the cellular carriers to lower their
acquisition costs with lower payments to its individual agents,
increased competition by mass merchandisers and the cellular
carriers direct sales force, and the overall economic conditions in
the U.S. domestic market. As a result of these trends, the Company
decided to reduce its retail presence by closing or disposing of
all unprofitable Quintex locations throughout the U.S. The result
of this plan was a reduction of outlets from 91 to 30. The cost of
this closing was approximately $4.0 million during fiscal 1995. Of
the $4.0 million charge to income, approximately $1.5 million is
related to inventory write-offs, $1.8 million is associated with
the lease buy-outs, employee severance pay, the write-off of
leasehold improvements and other fixed assets and $700,000 of
miscellaneous charges including co-op advertising, deactivation
allowances, and anticipated bad debts. The impact of this Quintex
reduction program was a decrease in revenue of approximately $21.0
million for fiscal 1995. The Company believes that these closures
will reduce revenue, as well as operating expenses, primarily in
occupancy costs, salaries and commissions, during fiscal 1996. The
Company will continue to review its remaining locations and will
close them if they do not remain profitable.
Liquidity and Capital Resources
On May 5, 1995, the Company entered into an amended and
restated Credit Agreement ("Credit Agreement") with five banks,
including Chemical Bank which acts as agent for the bank group,
which provides that the Company may obtain credit through direct
borrowings and letters of credit. The obligations of the Company
under the Credit Agreement continue to be guaranteed by certain of
the Company's subsidiaries and are secured by accounts receivable
and inventory of the Company and those subsidiaries. The
obligations are also secured by a pledge agreement entered into by
the Company for 1,075,000 shares of CellStar Common Stock.
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. The Credit
Agreement contains several covenants requiring, among other things,
a minimum level of net worth and working capital required to be
maintained at November 30, 1995 of $92.5 million and $125.0
million, respectively. As of November 30, 1995, the Company's
financial condition satisfied these requirements, however, did not
satisfy the covenant requiring net income of $2.5 million for the
year ended November 30, 1995. Non-compliance with this covenant
was waived. Subsequent to November 30, 1995, the Company amended
the Credit Agreement, effective December 22, 1995 and February 9,
1996, which provided for, among other things, increased interest
rates, which may be reduced under certain circumstances, and a
change in the criteria for and method of calculating certain
financial covenants in the future.
Notes to Consolidated Financial Statements
Note 8 - Equity Investments
In connection with the CellStar Offering, the Company granted
the Investor an option to purchase up to an aggregate of
1,500,000 shares of CellStar Common Stock owned by the
Company, which was exercised in full on June 1, 1995, at an
exercise price of $11.50 per share. As a result, the Company
recorded a gain, before provision for income taxes, of $8.4
million. This reduced the Company's ownership in CellStar
below 20% and, as such, the Company will no longer account for
CellStar under the equity method of accounting. The remaining
2,375,000 CellStar shares owned by the Company will be
accounted for as an investment in marketable equity securities
(Note 6).
The following table presents financial information relating to
CellStar for the years ended November 30, 1993, 1994 and 1995:
1993 1994 1995
(In Thousands)
Current assets $ 81,983 $170,285 $271,156
Non-current assets 7,911 16,069 43,765
Current liabilities 74,931 106,617 196,746
Non-current liabilities 7,214 3,095 6,880
Net sales 275,376 518,422 811,915
Gross profit 45,580 69,642 109,841
Net income 7,853 16,248 22,896
On August 29, 1994, the Company and Shintom each invested six
hundred million Japanese Yen (approximately $6.0 million) into
a newly-formed company, TALK. In exchange for their
investments, the Company and Shintom each received a 33%
ownership in TALK, the remaining 33% owned by others.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
March 26, 1996 BY:s/John J. Shalam
John J. Shalam, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dated indicated.
Signature Title Date
s/John J. Shalam President; March 26, 1996
John J. Shalam Chief Executive Officer
(Principal Executive
Officer) and Director
s/Philip Christopher Executive Vice President March 26, 1996
Philip Christopher and Director
s/Charles M. Stoehr Senior Vice President, March 26, 1996
Charles M. Stoehr Chief Financial Officer
(Principal Financial and
Accounting Officer) and
Director
s/Patrick M. Lavelle Director March 26, 1996
Patrick M. Lavelle
s/Martin Novick Director March 26, 1996
Martin Novick
s/Ann Boutcher Director March 26, 1996
Ann Boutcher
s/Gordon Tucker Director March 26, 1996
Gordon Tucker
s/Irving Halevy Director March 26, 1996
Irving Halevy