John J. Shalam - Chairman of the Board
VOXX International Corp. (VOXX) Annual Shareholder Meeting July 24, 2013 10:00 AM ET
Good day, ladies and gentlemen, and welcome to the VOXX International Fiscal 2013 Annual Meeting.
I would now turn the call over to your host, Glenn Wiener. Please go ahead.
Gentlemen, please come to order. Welcome to VOXX International's annual meeting of shareholders. My name is Glenn Wiener and I'm President of GW Communications, the company's Investor Relations firm. And as customary, before getting started, I'd like to read our Safe Harbor language.
Except for historical information contained herein, statements made at this meeting that would constitute forward-looking statements may involve certain risks and uncertainties. All forward-looking statements made herein 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 changes in the company's business operations; our ability to keep pace with technological advances; significant competition in the automotive, premium audio and consumer accessories businesses; our relationships with key suppliers and customers; the quality and consumer acceptance of newly introduced products; market volatility; nonavailability of products; excess inventory; price and product competition; new product introductions; foreign-currency fluctuations and concerns regarding the European debt crisis; restricted debt covenants; the possibility of the 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 VOXX International Corporation and/or our officers and directors as a result of any restatement. Risk factors associated with our business, including some of the facts set forth herein, are detailed in the company's Form 10-K for the fiscal year ended February 28, 2013.
Now to the business at hand. May 31, 2013 has been set by the Board as the record date. All record shareholders on that date are entitled to vote on matters that come before this meeting. On or about June 10, 2013, notice and access in proxy cards were mailed to shareholders of record. The shareholders list, as of the record date, has been available for the past 10 days and can be inspected at the company's headquarters.
As of May 31, 2013, there were 21,603,679 shares of Class A common stock outstanding and 2,260,954 shares of Class B common stock outstanding. Based on the preliminary count of the votes cast, we are informed that there is a quorum present.
As you may know, each share of Class A common stock is entitled to vote -- to 1 vote and each share of Class B common stock is entitled to 10 votes. The Class A shareholders, voting as a class, are entitled to vote for the election of the number of directors, constituting at least 25% of the directors designated as Class A directors.
The Class A and Class B shareholders voting together are entitled to vote for the election of the balance of the directors and for all other matters properly presented to the meeting. If any shareholder has a comment on the matter presented to the meeting, please raise your hand, and Mr. Shalam will recognize you. Each speaker should give his or her name and the number of shares owned. We ask that you please focus your comment on the specific proposal in the proxy statement. We will allow time for questions-and-answers on other matters pertaining to the company after we have acted on the items set forth in the proxy material.
We will first address the issue in the proxy statement. Following that, John Shalam, Chairman of the Board, will open the floor to questions. Patrick M. Lavelle, President and Chief Executive Officer; and Michael Stoehr, Senior Vice President and Chief Financial Officer, will not be making presentations today. However, they are available for any questions thereafter.
In addition, [indiscernible], partner representing Grant Thornton LLP, the company's accounting firm, will also be available later to address appropriate questions from any shareholders. Proxy cards were sent out to all shareholders prior to the meeting. If anyone wishes to change his or her proxy vote, the ushers have ballots and will give you one. Please raise your hand if you would like a ballot.
The directors selected, Georgine Letande [ph] and Larry Canubus [ph], employees of VOXX International Corporation, as judges of the election. They are both present, have taken the oath of office and will count the ballot.
Nominees for the Board of Directors, please stand as I introduce you: Paul C. Kreuch, Jr., principal, Knightsbridge Advisors, Inc.; Peter A. Lesser, past President of X10 (USA) Inc.; Stan Glasgow, past Chairman and past President of Sony Electronics Inc.; Patrick M. Lavelle...
John J. Shalam
Excuse me, Glenn, unfortunately and regretfully, our new Director Stan Glasgow is not here at this morning and, due to complications with travel arrangements and cancellations at La Guardia and stuff like that, he will not be able to join us this morning. Thank you.
Okay. Patrick M. Lavelle, President and CEO of VOXX International Corporation; Charles M. Stoehr, Senior Vice President and Chief Financial Officer of VOXX International Corporation; Ari M. Shalam, Managing Director of RWN Real Estate partners LLC; Fred S. Klipsch, Chairman of the Klipsch Group, Inc.; and the last nominee for Director, is John J. Shalam, Chairman of the Board of VOXX.
The items described in the proxy statements are the: one, election of directors; and two, approval of the appointment of Grant Thornton LLP as the company's independent registered public accounting firm.
First, we will consider the election of directors. The nominees set forth in the proxy statement are now before the meeting. Do any shareholders have any questions that specifically relates to matters bearing on the election of directors?
If there are no questions or comments, and we have not received any further nominations, I now declare the nominations and the polls closed. If anyone has any ballots, please hand them to the ushers now.
Prior to this meeting, I was advised by the election judges that based on the proxies received prior to the meeting, all the directors were elected. There were 19,600,867 shares of Class A common stock voting and 22,609,540 shares of Class B common stock voting. There were 4,133,526 broker non-votes for each of the directors, which are not contained in the following totals. The preliminary votes for the election of directors were as follows: there are 13,925,533 Class A shareholder votes for Paul C. Kreuch, Jr., as the Director and 1,541,808 votes were withheld; there were 14,026,461 Class A shareholder votes for Peter A. Lesser as a Director and 1,440,880 votes were withheld; there were 14,112,021 Class A shareholder votes for Stan Glasgow as a Director and 1,355,320 votes were withheld. The highest number of Class A shareholder votes withheld in the forthgoing nominees was 1,541,808. There were 32,042,004 votes for John J. Shalam as Director and 6,034,877 votes were withheld. There were 32,521,368 votes for Patrick M. Lavelle as Director and 5,555,513 votes were withheld. There were 30,720,211 votes for Charles M. Stoehr as a Director and 7,356,670 votes were withheld. There were 32,021,262 votes for Ari M. Shalam as a Director and 6,055,619 votes were withheld. There were 32,038,855 votes for Fred S. Klipsch as a Director and 6,038,026 votes were withheld. The highest number of Class A and Class B shareholder votes withheld from any nominee was 7,356,670. And at this time, I would like to congratulate the Board of Directors on their election today. Congratulations.
The next proposal deals with the ratification of the appointment of Grant Thornton LLP as the company's independent accountants. That matter is now before the meeting. I'd also like to reference that John Desmond is present today, a partner with Grant Thornton and, now, partners on our account. Do any shareholders have any questions which specifically relate to the ratification of the appointment of Grant Thornton LLP as the company's independent accountants?
If there are no questions or comments, I would now declare the polls closed.
There were 41,835,171 Class A and B shareholder votes for the appointment of Grant Thornton LLP as the company's accountants for the fiscal year ended February 28, 2014. There were 188,617 votes against the appointment and 186,619 abstentions. The final results of the vote will be contained in the ballot of proxy, which will be annexed to the minutes of this meeting and recorded in the Form 8-K filing. We'll be pleased to send the results to any shareholder who may request them.
Ladies and gentlemen, this now concludes the formal portion of our meeting. And I'd like to turn the meeting over to our Chairman, John Shalam. John?
John J. Shalam
Thank you, Glenn, and good morning, and welcome to our fiscal 2013 meeting of stockholders.
This past year has been one of the best in our company's history despite continued concerns for the global economy, and I am truly proud of what we have accomplished. I believe the foundation we have put in place will position VOXX for great things in the years to come.
I would like to start this morning's proceedings by congratulating each of our board members on their reelection today. Pat, Mike, Paul, Peter, Ari and Fred, thank you for all that you continued to do in helping us build a world-class organization and for your tireless dedication and support. I would like to welcome our newly elected Director, Stan Glasgow, to our board, although he's not here, but still will play an important role in guiding this corporation in the future. He has over 40 years of global consumer electronics and related industry experience, having most recently worked for Sony Electronics, serving both as President and Chairman of Sony America as well as a Senior Adviser to their Entrepreneurship and Innovation group. Many of us have worked with Stan for years as he served on the Executive Board of the Consumer Electronics Association. And now, he will be a major asset to our Board. Congratulations and we look forward to working with Stan and to the contributions that he will be doing for VOXX.
Please allow me a moment to personally thank Philip Christopher and Dennis McManus, 2 individuals I've had the pleasure of working with for many years. Both of these men have played significant roles in helping us shape and execute our strategy, most notably during the years when we were a leader in cellular communications. Since the divestiture of our cellular group, they have continued to provide invaluable counsel and leadership to our company helping us as we made 10 acquisitions and grew our market presence across all our product lines. We are a different company today and, I believe, in a better position as a result. On behalf of the board, management team and all VOXX employees, I want to thank you and wish you both nothing but continued success in the years ahead.
Finally, I would also like to congratulate Grant Thornton on their appointment as our auditors. We have enjoyed a strong working relationship for years and we greatly appreciate the support you have given us, and look forward to working with you over the coming years. And as Glenn advised, John Desmond, who's the managing partner, is here today with us. And if any of you have any questions or concerns, please feel free to speak to him.
Now on to the business at hand. In fiscal 2013, we reported sales of $835.6 million, an increase of over 18% compared to the prior year. This increase was the result of the Thorsten acquisition, gains in our domestic mobile OEM business and modest gains in our premium audio segment. Our consumer accessories business was down slightly, less than 1%, but I will note that this was partially a result of our strategy to exit lower margin product categories.
Overall, our domestic business was strong across-the-board and this helped to offset weakness in the overseas markets. As Pat has outlined in his teleconferences and meetings with investors, our strategy for the past few years has been to focus on increasing margins and entering more stable growth-oriented categories. We have done that. Our gross profit margins were 28.3% this past fiscal year and 28.7% in the year prior, up from 22% just a few years ago. Our margins for 2013 was slightly lower than the prior year, but did come in above our forecast. This year, we expect margins to increase to 28.8%, and our goal remains to continue to drive margins upwards with a near-term goal of 30%.
We reported net income of $22.5 million or $0.95 per diluted share as compared to $25.6 million or $1.10 in fiscal 2012. Our EBITDA was $60.4 million versus $54.8 million, an increase of $5.6 billion. And adjustments EBITDA, taking into account the number of factors which we have detailed in our 10-K filing and in our conference calls, was $67.5 million versus $60.7 million, that should read our adjusted EBITDA.
All in all, we faced significant difficulties in the Eurozone markets, but the strength of our domestic business and other profitable international operations allowed us to sustain market share and to grow in certain businesses and improve our cash flow. I am pleased with our fiscal '13 performance but still believe we can do and will do much better in the years ahead. While we have made great strides and are well positioned for growth, we are still facing economic challenges throughout Europe, and we'll continue to exit some lower margin categories. However, despite this we believe VOXX will show both top and bottom line improvements in fiscal '14. New contracts, expanded distribution and the new products coming to the market across all our segments: mobile, premium audio and consumer accessories will put us in a strong position to generate organic growth.
Additionally, the investments we've made in our infrastructure will help us lower our fixed costs, and capital expenditures should lessen, which will help improve both our cash flow and our balance sheet through the repayment of debt. And in fact, had we not acquired Hirschmann, we would have been in a position to pay down all of our debt from the Klipsch acquisition in less than 3 years' time and we would be well ahead of schedule. Our debt position has declined and, as our CFO, Michael Stoehr, outlined in the first quarter conference call, we expect to exit the year with $37 million in free cash flow and total debt well below $100 million and a leverage ratio of under 2x.
Today, we are a different company. We now manufacture 30% of our products. We have over 280 engineers on staff, developing new products. We've aligned with industry leaders such as QUALCOMM, AT&T, Sprint, Verizon and MCV. Our distribution, both domestically and internationally, has never been stronger in our company's history, and our relationships with global OEMs continues to expand. We are staying the course and executing our strategy, and I am proud of this team and of what we have accomplished.
I wish to thank each and every employee of VOXX International and of all our subsidiaries around the world for their unwavering commitment to our company. We could not have accomplished all that we have without you, and I wish to express my personal appreciation.
Thank you, again, for joining us today. And at this time, I will open the floor for questions. Do we have any questions, comments, recommendations, suggestions, complaints?
John J. Shalam
Yes, Marty Novick. Please stand up and state the number of shares you own in the VOXX. Hold on 1 second, we'll get you a microphone, nobody can hear you.
Martin Novick, 9,000 shares, VOXX International. You referred, John, to exiting some lower margin categories. Are you at liberty to say what they are and if these categories can be sold rather than just exited?
John J. Shalam
Clearly, when we say we're exiting a category, this means that we are continuing to sell the inventory that we own but we're not going to buy anymore of those products and we, eventually, will discontinue those lines because -- mostly because profit margins in those lines have become very small and the products have become very competitive and it's not that material to our future growth. I cite, as an example for you, the MP3 situation where the volume has dropped dramatically over the years, markets become very small, margins under a lot of pressure and this doesn't contribute anymore to our overall scheme.
Thank you, Marty, any more questions?
John J. Shalam
Well, if there are no further questions or comments, thank you again for coming to our meeting this morning. We appreciate your support and your interest in VOXX International, and I now declare the meeting closed.
Ladies and gentlemen, that concludes today's meeting and teleconference. We thank you for your continued support. If anyone has any follow-up, by all means, please contact their office. Operator, we can now end the call.
Ladies and gentlemen, this does conclude today's conference. You may all disconnect and have a wonderful day.
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