VOXX INTERNATIONAL CORPORATION Forward-Looking Statements
Certain information in this Quarterly Report on Form 10-Q would constitute
forward-looking statements, including, but not limited to, information relating
to the future performance and financial condition of the Company, the impact of
the COVID-19 pandemic on our results of operations, the plans and objectives of
the Company's management, and the Company's assumptions regarding such
performance and plans that are forward-looking in nature and involve certain
risks and uncertainties. Actual results could differ materially from such
forward-looking information and could be exacerbated by the COVID-19 pandemic
and any worsening of the global business and economic environment as a result.
We begin Management's Discussion and Analysis of Financial Condition and Results
of Operations ("MD&A") with an overview of the business. This is followed by a
discussion of the Critical Accounting Policies and Estimates that we believe are
important to understanding the assumptions and judgments incorporated in our
reported financial results. In the next section, we discuss our results of
operations for the three and nine months ended November 30, 2021 compared to the
three and nine months ended November 30, 2020 . Next, we present EBITDA and
Adjusted EBITDA attributable to Voxx for the three and nine months ended
November 30, 2021 compared to the three and nine months ended November 30, 2020 ,
in order to provide a useful and appropriate supplemental measure of our
performance. We then provide an analysis of changes in our balance sheets and
cash flows and discuss our financial commitments in the sections entitled
"Liquidity and Capital Resources." We conclude this MD&A with a discussion of
"Related Party Transactions" and "Recent Accounting Pronouncements."
Unless specifically indicated otherwise, all amounts presented in our MD&A below are in thousands, except share and per share data.
Business Overview
VOXX International Corporation ("Voxx," "We," "Our," "Us" or the "Company") is a leading international manufacturer and distributor operating in theAutomotive Electronics , Consumer Electronics, and Biometrics industries. The Company has widely diversified interests, with more than 30 global brands that it has acquired and grown throughout the years, achieving a powerful international corporate image, and creating a vehicle for each of these respective brands to emerge with its own identity. We conduct our business through nineteen wholly-owned subsidiaries:Audiovox Atlanta Corp. ,VOXX Electronics Corporation ,VOXX Accessories Corp. ,VOXX German Holdings GmbH ("Voxx Germany"),Audiovox Canada Limited ,Voxx Hong Kong Ltd. ,Audiovox International Corp. , AudiovoxMexico ,S. de R.L. de C.V. ("Voxx Mexico"),Code Systems, Inc. ,Oehlbach Kabel GmbH ("Oehlbach"),Schwaiger GmbH ("Schwaiger"),Invision Automotive Systems, Inc. ("Invision"),Premium Audio Company LLC ("Klipsch"),Omega Research and Development, LLC ("Omega"),Voxx Automotive Corp. ,Audiovox Websales LLC ,VSM-Rostra LLC ("VSM"),VOXX DEI LLC , andVOXX DEI Canada, Ltd. (collectively, withVOXX DEI, LLC , "DEI"), as well as a majority owned subsidiary,EyeLock LLC ("EyeLock"). We market our products under the Audiovox® brand name and other brand names and licensed brands, such as 808®, Acoustic Research®, Advent®, Avital®, Car Link®, Chapman®, Clifford®, Code-Alarm®, Crimestopper™, Directed®, Discwasher®, Energy®, Heco®, Integra®, Invision®, Jamo®, Klipsch®, Mac Audio™, Magnat®, Mirage®, myris®, Oehlbach®, Omega®, Onkyo®, Pioneer®, Prestige®, Project Nursery®, Python®, RCA®, RCA Accessories, Rosen®, Rostra®, Schwaiger®, Smart Start®, Terk®,Vehicle Safety Automotive , Viper®, andVoxx Automotive , as well as private labels through a large domestic and international distribution network. We also function as an OEM ("Original Equipment Manufacturer") supplier to several customers, as well as market a number of products under exclusive distribution agreements, such asSiriusXM satellite radio products.
COVID-19
DuringMarch 2020 , a global pandemic was declared by theWorld Health Organization and a National Emergency was declared by the President ofthe United States related to the rapidly growing outbreak of COVID-19. The pandemic has significantly impacted economic conditions inthe United States , as federal, state, and local governments reacted to the public health crisis, creating significant uncertainties inthe United States , as well as the global economy. In the interest of public health and safety,U.S. jurisdictions (national, state, and local) where our primary operations and those of many of our customers are located required mandatory business closures, capacity limitations, or other restrictions for those permitted to continue to operate or allowed to reopen since the initial shut-downs inMarch 2020 . As of the date of this filing, all of our operating locations are open. The Company's revenues have decreased for the three months endedNovember 30, 2021 , but have increased for the nine months endedNovember 30, 2021 as compared to the respective prior year periods. The impact of COVID-19 on the market is still rapidly changing and additional impacts to the business may arise that we are not aware of currently, which could have an adverse impact on revenues, results of operations, and cash flows for the 2022 fiscal year. We cannot predict whether, when, or 33 -------------------------------------------------------------------------------- the manner in which the conditions surrounding COVID-19 will change, including the ultimate duration and scope of the pandemic; the severity of the virus, including the emergence of new variants; the impact of the COVID-19 vaccines, including the speed at which they are disseminated and their effectiveness; the actions taken by governments to contain the virus or treat its impact; and how quickly and to what extent normal economic and operating conditions can resume. Due to the evolving situation, future results of the Company could be impacted in ways we are not able to predict today, including, but not limited to, non-cash write-downs and impairments; foreign currency fluctuations; potential adjustments to the carrying value of inventory; and the delayed collections of, or inability to collect accounts receivables. The Company continues to focus on cash flow and anticipates having sufficient resources to operate for the coming twelve-month period. InApril 2021 , the Company amended its Credit Facility in theU.S. in order to increase the maximum borrowing base thereunder and extend the maturity date of the Credit Facility toApril 2026 (see Note 16(a)).
Reportable Segments
The Company operates in three reportable segments based on our products and internal organizational structure. The operating segments consist ofAutomotive Electronics , Consumer Electronics, and Biometrics. See Note 22 to the Company's Consolidated Financial Statements for segment information.
Products included in these segments are as follows:
? mobile multi-media infotainment products, including overhead, seat-back, and
headrest systems;
? automotive security, vehicle access, and remote start systems;
? satellite radios, including plug and play models, and direct connect models;
? smart phone telematics applications; ? mobile interface modules; ? automotive power accessories; ? rear observation and collision avoidance systems; ? driver distraction products; ? power lift gates; ? turn signal switches; ? automotive lighting products; ? automotive sensing and camera systems; ? USB ports; ? cruise control systems; and ? heated seats.
Consumer Electronics products include:
? premium loudspeakers; ? architectural speakers; ? commercial speakers; ? outdoor speakers; ? wireless and Bluetooth speakers; ? home theater systems; ? business music systems; ? streaming music systems; ? receivers; ? on-ear and in-ear headphones; ? wired and wireless headphones and ear buds; ? Bluetooth headphones and ear buds; ? Soundbars; ? DLNA (Digital Living Network Alliance ) compatible devices; ? High-Definition Television ("HDTV") antennas; ? Wireless Fidelity ("WiFi") antennas; ? High-Definition Multimedia Interface ("HDMI") accessories; ? home electronic accessories such as cabling, power cords, and other connectivity products; ? performance enhancing electronics; ? TV universal remotes; ? flat panel TV mounting systems; ? karaoke products; ? infant/nursery products; 34
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? power supply systems and charging products; ? electronic equipment cleaning products; ? personal sound amplifiers; ? set-top boxes; and ? home and portable stereos.
Biometrics products include:
? iris identification products, and ? biometric security related products. We believe our segments have expanding market opportunities with certain levels of volatility related to domestic and international markets, new car sales, increased competition by manufacturers, private labels, technological advancements, discretionary consumer spending and general economic conditions. All of our products are subject to price fluctuations which could affect the carrying value of inventories and gross margins in the future. Macroeconomic factors, such as increases in the unemployment rate, have been pressured as a result of the COVID-19 pandemic and have created a challenging demand environment in some of our markets, the duration and severity of which we are still unable to predict. Our objective is to continue to grow our business by acquiring new brands, embracing new technologies, expanding product development, and applying this to a continued stream of new products that should increase gross margins and improve operating income. In addition, it is our intention to continue to acquire synergistic companies that would allow us to leverage our overhead, penetrate new markets and expand existing product categories through our business channels. Notwithstanding the above, if the appropriate opportunity arises, the Company will explore the potential divestiture of a product line or business. Acquisitions and Dispositions OnJuly 1, 2020 , the Company completed the acquisition of certain assets and liabilities, which comprise the aftermarket vehicle remote start and security systems and connected car solutions (telematics) business fromDirected LLC andDirected Electronics Canada Inc. (collectively, withDirected LLC , "Directed") (see Note 2). OnSeptember 8, 2021 , the Company's subsidiary,Premium Audio Company LLC ("PAC"), completed the transaction to acquire the home audio/video business of Onkyo Home Entertainment Corporation with its partner Sharp through the newly formed joint venture, Onkyo Technology KK (see Note 2).
Critical Accounting Policies and Estimates
The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses reported in those financial statements. These judgments can be subjective and complex, and consequently, actual results could differ from those estimates. Our most critical accounting policies and estimates relate to revenue recognition; accrued sales incentives; expected credit losses on accounts receivable; inventory valuation; valuation of long-lived assets; valuation and impairment assessment of goodwill, trademarks, and other intangible assets; warranties; stock-based compensation; recoverability of deferred tax assets; and the reserve for uncertain tax positions at the date of the consolidated financial statements. A summary of the Company's critical accounting policies is identified in Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's Form 10-K for the fiscal year endedFebruary 28, 2021 . During Fiscal 2021, there were significant changes to the global economic situation as a consequence of the COVID-19 pandemic that could continue during Fiscal 2022. It is possible that this could cause changes to estimates in the future as a result of the financial circumstances of the markets in which the Company operates, the price of the Company's publicly traded equity in comparison to the Company's carrying value, and the health of the global economy. Such changes to estimates could potentially result in impacts that would be material to the Company's consolidated financial statements, particularly with respect to the fair value of the Company's reporting units in relation to potential goodwill impairment and the fair value of long-lived assets in relation to potential impairment. SinceFebruary 28, 2021 , there have been no changes in our critical accounting policies.
Results of Operations
As you read this discussion and analysis, refer to the accompanying Unaudited Consolidated Statements of Operations and Comprehensive (Loss) Income, which present the results of our operations for the three and nine months endedNovember 30, 2021 and 2020.
The following tables set forth, for the periods indicated, certain statements of
operations data for the three and nine months ended
35
--------------------------------------------------------------------------------Net Sales November 30, 2021 2020 $ Change % Change Three Months Ended Automotive Electronics$ 61,589 $ 61,488 $ 101 0.2 % Consumer Electronics 129,733 139,039 (9,306 ) (6.7 )% Biometrics 355 343 12 3.5 % Corporate 194 195 (1 ) (0.5 )% Total net sales$ 191,871 $ 201,065 $ (9,194 ) (4.6 )% Nine Months Ended Automotive Electronics$ 150,007 $ 111,397 $ 38,610 34.7 % Consumer Electronics 320,805 288,545 32,260 11.2 % Biometrics 813 703 110 15.6 % Corporate 415 439 (24 ) (5.5 )% Total net sales$ 472,040 $ 401,084 $ 70,956 17.7 %Automotive Electronics sales represented 32.1% of the net sales for the three months endedNovember 30, 2021 , compared to 30.6% in the prior year period and remained relatively flat with an increase of$101 for the three months endedNovember 30, 2021 , as compared to three months endedNovember 30, 2020 . The Company's OEM rear seat entertainment sales experienced a net increase of approximately$3,700 for the three months endedNovember 30, 2021 , primarily as a result of the start of new rear seat entertainment programs with Ford and Stellantis that were not present in the prior year. This was offset by a decline in sales for one of the Company's rear-seat entertainment programs that ended during the quarter. Sales of OEM automotive safety electronics products also increased approximately$1,400 as a result of rebounding sales following the COVID-19 shut-downs of automotive manufacturers in the prior year. As an offset to these increases, the Company experienced decreases in sales of both aftermarket security and safety electronics products, as well as satellite radios of approximately$1,900 ,$1,300 and$1,200 , respectively, for the three months endedNovember 30, 2021 , as a result of inventory shortages that have negatively affected the Company's ability to fulfill orders, as well as due to the fact that some customers purchased product earlier in the year to avoid future stock outages in light of worldwide issues with shipping container shortages and chip shortages. Additionally, sales of aftermarket rear seat entertainment products decreased approximately$400 due to product delays.Automotive Electronics sales represented 31.8% of the net sales for the nine months endedNovember 30, 2021 , compared to 27.8% in the prior year period and increased$38,610 for the nine months endedNovember 30, 2021 , as compared to the nine months endedNovember 30, 2020 . The primary driver of the sales increase in this segment was sales of aftermarket security products related to the Company's DEI subsidiary, established in connection with the Company's acquisition inJuly 2020 . These sales increased approximately$20,100 for the nine months endedNovember 30, 2021 to a total of approximately$48,400 , as a result of nine full months of sales included for Fiscal 2022 as compared to five months during the comparable Fiscal 2021 year-to-date period. The Company's OEM rear seat entertainment sales experienced a net increase of approximately$12,700 during the nine months endedNovember 30, 2021 , as a result of the start of new rear seat entertainment programs with Nissan, Ford, and Stellantis that were not present in the prior year. This was offset by a decline in sales for one of the Company's rear-seat entertainment programs that ended during Fiscal 2022. Sales of OEM automotive safety electronics also increased approximately$6,900 for the nine months endedNovember 30, 2021 , as a result of rebounding sales following the COVID-19 shut-downs of automotive manufacturers. In addition, the Company's aftermarket security products, which include aftermarket remote starts, and aftermarket rear seat entertainment products increased by approximately$1,600 and$1,200 , respectively, for the nine months endedNovember 30, 2021 , due to rebounding sales following the prior year COVID-19 shut-downs, as well as due to current year component shortages that caused some customers to purchase product earlier in order to avoid future stock outages. Finally, aftermarket accessory products increased approximately$800 for the nine months endedNovember 30, 2021 due to the successful launch of new soundbars for club cars during the second quarter of the fiscal year. As an offset to these increases, the Company experienced net decreases in both aftermarket safety electronics and satellite radio sales during the nine months endedNovember 30, 2021 of approximately$3,000 and$1,600 , respectively, as a result of inventory shortages which have negatively affected the Company's ability to fulfill orders. Consumer Electronics sales represented 67.6% of our net sales for the three months endedNovember 30, 2021 , compared to 69.2% in the comparable prior year period and decreased$9,306 for the three months endedNovember 30, 2021 , as compared to the three months endedNovember 30, 2020 . The Company experienced a decrease in sales of its premium wireless speakers and home separate speakers, totaling approximately$12,600 during the three months endedNovember 30, 2021 due to vessel delays and shortages, as well as chip shortages, that have caused product backorders. Additionally, in the prior year period, 36 -------------------------------------------------------------------------------- there were high load in sales for the launch of the Company's premium wireless computer speakers at warehouse club channels that did not repeat in the current year. The Company also saw declines in sales of hook-up products, reception products, and remotes totaling approximately$2,700 during the three months endedNovember 30, 2021 which occurred due to the fact that these product sales increased significantly during the prior year COVID-19 shutdowns, as many people were working from home during this period. During the third quarter of Fiscal 2022, sales of these products have returned to normal levels. Additionally, the Company experienced a decrease in sales of its premium mobility products of approximately$1,500 as a result of stronger prior year sales of new product and current year production delays by certain vendors. Offsetting these sales decreases was an increase in sales ofOnkyo and Pioneer products of approximately$7,800 within the Company's 11Trading Company LLC subsidiary ("11TC"). 11TC began selling these products through distribution agreements during the third quarter of Fiscal 2021. In the third quarter of Fiscal 2022, the Company completed an acquisition of certain assets of the Onkyo Home Entertainment business with its joint venture partner, resulting in the establishment of the Company's Onkyo subsidiary and an increase in factory production and sales ofOnkyo and Pioneer products during the three months endedNovember 30, 2021 . Consumer Electronics sales represented 68.0% of our net sales for the nine months endedNovember 30, 2021 , compared to 71.9% in the comparable prior year period and increased$32,260 for the nine months endedNovember 30, 2021 , as compared to the nine months endedNovember 30, 2020 . The Company's 11TC subsidiary contributed to an increase in sales of approximately$25,500 for the nine months endedNovember 30, 2021 to a total of approximately$32,000 . 11TC began sellingOnkyo and Pioneer products through distribution agreements during the third quarter of Fiscal 2021 and during the third quarter of Fiscal 2022, the Company completed an acquisition of certain assets of the Onkyo Home Entertainment business with its joint venture partner, resulting in the establishment of the Company's Onkyo subsidiary. Sales ofOnkyo and Pioneer products under the distribution agreements were only present for three months during the prior year to date period. The Company also experienced an increase in sales of its premium home theater speakers during the nine months endedNovember 30, 2021 of approximately$15,100 , as the Company continues to see high consumer demand and has achieved market share growth and began selling many of its products through warehouse club channels during Fiscal 2021. Additionally, the lifting of many of the COVID-19 restrictions that were in place during the nine months endedNovember 30, 2020 has contributed positively to the sales of these products in Fiscal 2022. The Company also experienced improvements of approximately$2,100 related to wireless accessory speakers during the nine months endedNovember 30, 2021 , due to the rebound in sales following nationwide COVID-19 brick and mortar business closures and delayed customer orders during the nine months endedNovember 30, 2020 . WithinEurope , the Company experienced net increases in its premium audio product and accessories sales of approximately$1,600 as a result of the partial lifting of COVID-19 restrictions during the nine months endedNovember 30, 2021 , although many restrictions are still noted to be in place. Offsetting these increases, the Company experienced declining sales of hook-up products, reception products, and remotes totaling approximately$5,400 during the nine months endedNovember 30, 2021 , as these products saw a large increase during the comparable prior year period due to the significant number of people working from home during the COVID-19 pandemic. During Fiscal 2022, sales of these products have returned to normal levels. Additionally, sales of premium wireless speakers and premium mobility products decreased approximately$4,200 in total during the nine months endedNovember 30, 2021 primarily as a result of chip shortages that have caused product backorders, vendor delays, and shipping container and vessel shortages, as well as due to large load in sales or speaker products at warehouse club channels that did not repeat in the current year. Biometrics sales represented 0.2% of our net sales for both the three and nine months endedNovember 30, 2021 and 2020. Sales for the three months endedNovember 30, 2021 have remained relatively flat, while sales for the nine months endedNovember 30, 2021 have increased$110 . The increase in sales during the nine months endedNovember 30, 2021 was due primarily to an increase in sales of the NIXT product, which the Company began selling during the second half of Fiscal 2021. The NIXT product can be optionally fitted with iTEMP, a product that can take an individual's temperature before allowing iris access. During Fiscal 2022, the Company has also begun selling NIXT, iTemp, and NEXT products under the distribution agreement signed withGalvanEyes LLC inApril 2021 . 37
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Gross Profit and Gross Margin Percentage
November 30,
2021 2020 $ Change % Change
Three Months Ended
Automotive Electronics $ 14,648 $ 15,777 $ (1,129 ) (7.2 )%
23.8 % 25.7 %
Consumer Electronics 36,754 42,109 (5,355 ) (12.7 )%
28.3 % 30.3 %
Biometrics 114 50 64 128.0 %
32.1 % 14.6 %
Corporate 188 192 (4 ) (2.1 )%
$ 51,704 $ 58,128 $ (6,424 ) (11.1 )%
26.9 % 28.9 %
Nine Months Ended
Automotive Electronics $ 37,111 $ 25,555 $ 11,556 45.2 %
24.7 % 22.9 %
Consumer Electronics 87,854 90,166 (2,312 ) (2.6 )%
27.4 % 31.2 %
Biometrics 231 28 203 725.0 %
28.4 % 4.0 %
Corporate 386 430 (44 ) (10.2 )%
$ 125,582 $ 116,179 $ 9,403 8.1 %
26.6 % 29.0 %
Gross margin percentages for the Company have decreased 200 and 240 basis points
for the three and nine months ended November 30, 2021 , respectively, as compared
to the three and nine months ended November 30, 2020 .
Gross margin percentages in the Automotive Electronics segment decreased 190 for
the three months ended November 30, 2021 and increased 180 basis points for the
nine months ended November 30, 2021 , as compared to the respective prior year
periods. Positive margin impacts in this segment have been driven primarily by
sales of aftermarket security products related to the Company's DEI subsidiary,
whose products have higher profit margins than those typically achieved by the
segment. Sales from DEI were present in the prior year period for five months,
as it was established in July 2020 , and therefore these sales increased
significantly for the nine months ended November 30, 2021 as compared the prior
year; but were relatively flat for the three month comparable quarterly periods,
achieving less benefit from these high margin sales. The decrease in sales of
satellite radio products for both the three and nine months ended November 30,
2021 , which typically generate lower margins for the Company, also contributed
positively to margins overall. Offsetting these positive impacts, the increased
cost of materials and shipping, as well as increases in tariffs included in cost
of goods sold, have negatively affected margins during the three and nine months
ended November 30, 2021 for such items as OEM rear seat entertainment, OEM and
aftermarket automotive safety products, and aftermarket accessory products,
which the Company is actively working to mitigate through a combination of sales
price adjustments and other sourcing strategies. Additionally, certain new OEM
rear seat entertainment products that began during the three and nine months
ended November 30, 2021 , and that have positively contributed to sales during
the periods, have generated lower margins than are normally achieved in this
segment.
Gross margin percentages in the Consumer Electronics segment decreased 200 and
380 basis points for the three and nine months ended November 30, 2021 ,
respectively, as compared to the prior year periods. The primary driver of these
declines during the three and nine months ended November 30, 2021 has been
significant increases to container costs and surcharges affecting cost of sales
for many of the products within the segment, which the Company is actively
working to mitigate through pricing adjustments and other sourcing strategies.
In addition, the Company's newest line of premium wireless computer speakers, as
well as other premium audio products sold through warehouse club channels, which
have contributed positively to sales during the three and nine month periods,
have been sold at lower margins than those typically associated with the
Company's premium audio products. Offsetting these negative margin impacts,
sales from the Company's 11 Trading Company subsidiary positively impacted
margins for the three and nine month periods, as these sales were present for
only three months of the prior year comparable periods and have also increased
year over year for the three months ended November 30, 2021 .
Gross margin percentages in the Biometrics segment improved for the three and
nine months ended November 30, 2021 as compared to the prior year periods. The
increase in margins for the three and nine months ended November 30, 2021 was
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primarily a result of the increase in sales during the nine months ended
November 30, 2021 and consistent sales levels during the three months ended
November 30, 2021 , as the Company's NIXT product has generated high margins for
the segment. Additionally, in the prior year comparable periods, the Company
reduced pricing on certain products, which helped generate sales, but resulted
in lower margins for the segment.
Operating Expenses
November 30,
2021 2020 $ Change % Change
Three Months Ended
Operating expenses:
Selling $ 13,864 $ 13,176 $ 688 5.2 %
General and administrative 20,049 21,104 (1,055 ) (5.0 )%
Engineering and technical support 9,706 5,676 4,030 71.0 %
Acquisition costs 287 24 263 1095.8 %
Total operating expenses $ 43,906 $ 39,980 $ 3,926 9.8 %
Nine Months Ended
Operating expenses:
Selling $ 37,169 $ 30,976 $ 6,193 20.0 %
General and administrative 56,609 51,398 5,211 10.1 %
Engineering and technical support 23,824 14,942 8,882 59.4 %
Acquisition costs 3,279 270 3,009 1114.4 %
Total operating expenses $ 120,881 $ 97,586 $ 23,295 23.9 %
Total operating expenses have increased $3,926 and $23,295 for the three and
nine months ended November 30, 2021 , respectively, as compared with the prior
year periods.
For the three months ended November 30, 2021 , selling expenses increased $688 .
This increase was partially attributable to higher salary expenses and related
payroll taxes, which increased approximately $500 due to the additional
headcount created by new hires at the 11 Trading Company and Australia Premium
Audio Company ("Australia PAC") subsidiaries established in the second quarter
of Fiscal 2021 and first quarter of Fiscal 2022, respectively, as well as
headcount and compensation increases at certain other subsidiary locations.
Website fees also increased approximately $500 for the three months ended
November 30, 2021 , due to additional online advertising and promotions, as well
as the increased price of web advertising as compared to the prior year. The
Company also experienced an increase in trade show expenses of approximately
$200 during the three months ended November 30, 2021 , as a result of the return
to in-person attendance at certain shows during the quarter, as compared to the
prior year in which all shows were virtual. Finally, the Company saw an increase
in travel expenses for the three months ended November 30, 2021 of approximately
$100 due to the lifting of some of the Company's COVID-19 related restrictions
which have allowed salesmen to begin traveling to customer sites again.
Offsetting these increases was a decrease in commission expense of approximately
$600 for the three months ended November 30, 2021 as a result of lower sales as
compared to the prior year period.
For the nine months ended November 30, 2021 , selling expenses increased $6,193 .
This increase was primarily attributable to higher salary expenses during the
nine months ended November 30, 2021 , as compared to the prior year-to-date
period. Salary expense and related payroll taxes increased approximately $3,300
due primarily to the absence of COVID-19 related furloughs and salary and bonus
reductions that were present in the comparable prior year period, as well as due
to the additional headcount created by the July 2020 acquisition resulting in
the establishment of the Company's DEI subsidiary and new hires related to the
11 Trading Company and Australia PAC subsidiaries established in the second
quarter of Fiscal 2021 and first quarter of Fiscal 2022, respectively.
Advertising expenses and web fees increased approximately $1,900 for the nine
months ended November 30, 2021 , due to increased advertising and promotions in
response to higher online traffic and sales, the lifting of COVID-19 related
cost cutting measures, as well as due to the increased price of web advertising
compared to the prior year. Commission expense increased approximately $700 , as
a result of the increase in the Company's sales for the nine months ended
November 30, 2021 as compared to prior year. The Company also experienced an
increase in credit card fees of approximately $600 during the nine months ended
November 30, 2021 , due primarily to sales generated by the Company's new DEI
subsidiary, as its telematic subscription sales are paid by customers through
credit card transactions. Additionally, a larger number of customers have
gradually begun using credit cards to pay for orders than in prior periods
across the entire Company. Finally, the Company saw an increase in travel
expenses for the nine months ended November 30, 2021 of approximately $300 due
to the lifting of some of the Company's COVID-19 related restrictions which have
allowed salesmen to begin traveling to customer sites again. Offsetting these
increases in selling expenses for the nine months ended November 30, 2021 was a
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decrease in trade show expenses of approximately $800 , as most trade shows have
continued to be either cancelled or held virtually due to the COVID-19 pandemic
and only began to return to in person attendance during the third quarter of
Fiscal 2022.
General and administrative expenses decreased $1,055 during the three months
ended November 30, 2021 , as compared to the prior year period. Salary expense
decreased approximately $3,100 during the three months ended November 30, 2021 ,
due primarily to lower bonus accruals as compared to the prior year period.
Professional fees also decreased approximately $300 due primarily to a stock
grant awarded to the Company's non-employee directors during the third quarter
of Fiscal 2021 that did not repeat in the current year. As an offset to these
decreases, the Company experienced increases in occupancy and office expenses
totaling approximately $800 due to expenses related to the Company's new Onkyo
subsidiary as a result of the September 2021 acquisition, as well as due to a
return to normal operations in the third quarter of Fiscal 2022 with all of the
Company's office locations open and operating. Bad debt expense increased
approximately $400 for the three months ended November 30, 2021 due to the prior
year recovery of a receivable balance that did not recur in the current year.
Depreciation and amortization expense increased approximately $500 due to
additional expense related to the Company's new Onkyo subsidiary established in
September 2021 . Taxes and licensing fees increased approximately $200 during the
three months ended November 30, 2021 , also due to expenses related to the new
Onkyo subsidiary, as well as due to additional licenses related to cyber
security. Finally, insurance premiums increased approximately $200 during the
three months ended November 30, 2021 due to higher premiums for cyber security
coverage and directors' and officers' insurance as compared to the prior year
period.
General and administrative expenses increased $5,211 during the nine months
ended November 30, 2021 , as compared to the prior year period. Professional fees
increased approximately $2,500 for the year-to-date period due to increased
litigation fees related primarily to an arbitration case, as well as consulting
fees related to the EyeLock distribution agreement with GalvanEyes LLC , and
legal and professional fees related to the Company's newest 11 Trading Company
and Australia PAC subsidiaries established in the second quarter of Fiscal 2021
and the first quarter of Fiscal 2022, respectively. Professional fees were also
higher during the nine months ended November 30, 2021 , due to the lifting of
many COVID-19 related restrictions, as both the Company and many of its
professional service providers had temporary office closures during the nine
months ended November 30, 2020 , or provided fee concessions as a result of the
pandemic that did not repeat in the current year. Occupancy and office expenses
increased approximately $1,300 in total for the nine months ended November 30,
2021 , due to costs related to the Company's new Onkyo subsidiary resulting from
the September 2021 acquisition and a full year of DEI expenses resulting from
the July 2020 acquisition. The Company has also returned to normal operations
after the lifting of COVID-19 related restrictions, with all of the Company's
locations open and operating, resulting in further increases to office and
occupancy costs. Fees related to taxes and licensing increased approximately
$800 during the nine months ended November 30, 2021 due to the establishment of
Company's Onkyo subsidiary in September 2021 , as well as the DEI, 11 Trading
Company , and PAC Australia subsidiaries, and additional licenses obtained
related to cyber security. Depreciation and amortization expense also increased
approximately $800 due to additional expense related to the Company's Onkyo
subsidiary and a full year of expense related to DEI. Finally, bad debt expense
increased approximately $600 for the nine months ended November 30, 2021 due
primarily to the prior year recovery of a receivable balance that did not recur
in the current year. As an offset to these increases in general and
administrative expense, the Company experienced a decrease in salary expense of
approximately $700 during the nine months ended November 30, 2021 , due primarily
to lower profitability for bonus accruals as compared to the prior year period.
Engineering and technical support expenses increased $4,030 for the three months
ended November 30, 2021 , as compared to the prior year period. The Company
experienced a net increase in research and development expense of approximately
$2,100 for the three months ended November 30, 2021 , primarily as a result of
the Company's product development projects related to its new Onkyo subsidiary
in the Consumer Electronics segment, and within the Automotive Electronics
segment related to projects for Stellantis and Ford. This was offset by
decreases related to certain Consumer Electronics projects in development during
the prior year period that have been completed. There was also an increase in
direct labor and related payroll tax expense of approximately $1,900 , as a
result of additional headcount created by the September 2021 acquisition
resulting in the establishment of the Company's Onkyo subsidiary, as well as due
to prior year reimbursements of engineering labor expense that did not recur,
and an increase in the use of outside labor at certain subsidiaries.
Engineering and technical support expenses increased $8,882 for the nine months
ended November 30, 2021 , as compared to the prior year period. The Company
experienced a net increase in research and development expense of approximately
$4,500 for the nine months ended November 30, 2021 , primarily as a result of the
Company's product development projects related to its new Onkyo subsidiary in
the Consumer Electronics segment, and within the Automotive Electronics segment
related to projects for Stellantis and Ford, as well as due to additional
headcount within the Biometrics segment. This was offset by decreases related to
certain Consumer Electronics projects in development during the prior year that
have been completed. The Company also experienced an increase in direct labor
and related payroll tax expense of approximately $4,100 for the nine months
ended November 30, 2021 , as a result of additional headcount created by the July
2020 and September 2021 acquisitions resulting in the establishment of the
Company's DEI and Onkyo subsidiaries, respectively, as well as due to the
40
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prior year reimbursement of engineering labor expense that did not recur, and
the absence of Company-wide furloughs and pay reductions related to COVID-19
that were in place during the nine months ended November 30, 2020 .
Acquisition costs increased $263 and $3,009 for the three and nine months ended
November 30, 2021 , as compared to the respective prior year periods. During the
three and nine months ended November 30, 2021 , acquisition costs incurred were
related to consulting and due diligence fees for the asset purchase agreement
signed with Onkyo Home Entertainment Corporation and the joint venture created
with Sharp Corporation to complete the transaction. This transaction was
completed on September 8, 2021 . In the prior year, acquisition costs incurred
were related to the Company's VSHC and DEI acquisitions, completed in January
2020 and July 2020 , respectively.
Other (Expense) Income
November 30,
2021 2020 $ Change % Change
Three Months Ended
Interest and bank charges $ (730 ) $ (471 ) $ (259 ) (55.0 )%
Equity in income of equity investee 2,206 1,761 445 25.3 %
Arbitration settlement (39,444 ) - (39,444 ) (100.0 )%
Investment gain - 42 (42 ) (100.0 )%
Other, net (143 ) 294 (437 ) 148.6 %
Total other income $ (38,111 ) $ 1,626 $ (39,737 ) (2443.8 )%
Nine Months Ended
Interest and bank charges $ (1,840 ) $ (2,280 ) $ 440 19.3 %
Equity in income of equity investee 6,964 4,506 2,458 54.5 %
Arbitration settlement (39,444 ) - (39,444 ) (100.0 )%
Investment gain - 42 (42 ) (100.0 )%
Other, net 675 753 (78 ) (10.4 )%
Total other income $ (33,645 ) $ 3,021 $ (36,666 ) (1213.7 )%
Interest and bank charges represent interest expense and fees related to the
Company's bank obligations, supply chain financing and factoring agreements,
interest related to finance leases, and amortization of debt issuance costs.
During the first quarter of Fiscal 2021, the Company made a precautionary
borrowing from the Credit Facility of $20,000 related to COVID-19 pandemic
concerns. This balance was repaid during the third quarter of Fiscal 2021 and
there has been no balance outstanding during the three and nine months ended
November 30, 2021 . This resulted in a decrease in interest expense related to
the Credit Facility of approximately $115 and $302 for the three and nine months
ended November 30, 2021 as compared to the prior year. In addition, interest
expense was lower during the three and nine months ended November 30, 2021 due
to the amendment of the Company's Credit Facility in April 2021 , which resulted
in a decrease in amortization of debt issuance costs of $51 and $247 for the
three and nine months ended November 30, 2021 . As an offset to these decreases
in interest expense, the Company's new Onkyo subsidiary entered into a
shareholder loan payable to the Company's joint venture partner, Sharp, during
the third quarter of Fiscal 2022, for which interest expense was incurred during
the three and nine months ended November 30, 2021 that was not present in the
prior year periods.
Equity in income of equity investee represents the Company's share of income
from its 50% non-controlling ownership interest in ASA Electronics LLC and
Subsidiaries ("ASA"). The increase in income for the three and nine months ended
November 30, 2021 is due to an increase in ASA net income resulting from
improved sales across all of its markets due primarily to the lifting of
COVID-19 restrictions on customers and end consumers and an increase in demand
for product, offset by an increase in both ocean and air freight costs.
For the three and nine months ended November 30, 2021 , the Company has recorded
a charge of $39,444 related to an unfavorable interim arbitration settlement
award relating to a breach of contract claim brought against the Company by
Seaguard Electronics LLC for a contractual arrangement entered in 2007 for the
purchase of products and back-end services. The Company is reviewing its legal
options and has moved in the arbitration proceeding to modify the interim award.
During the three and nine months ended November 30, 2020 , a final pay-out of $42
was received representing proceeds from the Fiscal 2018 sale of the Company's
investment in a non-controlled corporation, consisting of shares of the
investee's preferred stock, as a portion of the proceeds had been held back at
the time of sale. The payment was recorded as an investment gain for the three
and nine months ended November 30, 2020
41
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Other, net includes net foreign currency gains or losses, interest income,
rental income, and other miscellaneous income and expense. During the three and
nine months ended November 30, 2021 , the Company had foreign currency losses of
$382 and $268 , respectively, as compared to foreign currency gains/(losses) of
$34 and $(445) for the three and nine months ended November 30, 2020 ,
respectively. As an offset, during the nine months ended November 30, 2020 , the
Company received the proceeds of a key man life insurance policy in the net
amount of $420 , which did not recur in the current year.
Income Tax Provision
The Company's provision for income taxes consists of federal, foreign, and state taxes necessary to align the Company's year-to-date tax provision with the annual effective rate that it expects to achieve for the full year. At each interim period, the Company updates its estimate of the annual effective tax rate and records cumulative adjustments, as necessary. For the three months endedNovember 30, 2021 , the Company recorded an income tax benefit of$641 , which includes a discrete income tax provision of$175 related primarily to finalization of the federal and certain state tax return filings. For the three months endedNovember 30, 2020 , the Company recorded an income tax provision of$2,334 , which includes a discrete income tax benefit of$542 related primarily to the finalization of the federal and certain state tax return filings. The effective tax rates for the three months endedNovember 30, 2021 and 2020 were an income tax benefit of 2.1% on a pre-tax loss of$30,313 and an income tax provision of 11.8% on pre-tax income of$19,774 , respectively. The effective tax rate for the three months endedNovember 30, 2021 differs from theU.S. statutory rate of 21% primarily related to an increase in valuation allowance as the Company recorded a limited tax benefit with respect to the Arbitration Settlement as it could not conclude that all of its US deferred tax assets were realizable on a more-likely-than-not basis. The effective tax rate for the three months endedNovember 30, 2020 differed from the statutory rate of 21% primarily due to the anticipated reversal of a portion of theU.S. valuation allowance based on projected current year earnings, immediateU.S. taxation of foreign earnings, non-controlling interest related toEyeLock LLC , state and local income taxes, nondeductible permanent differences, and income taxed in foreign jurisdictions at varying tax rates. For the nine months endedNovember 30, 2021 , the Company recorded an income tax benefit of$374 , which includes a discrete income tax provision of$31 related to the finalization of federal and state tax filings during the quarter endedNovember 30, 2021 and the accrual of interest for unrecognized tax benefits, offset with the reversal of uncertain tax provision liabilities as a result of the lapse of the applicable statute of limitations. For the nine months endedNovember 30, 2020 , the Company recorded an income tax provision of$6,724 , which includes a discrete income tax provision of$3,609 . The Company recorded a discrete tax provision of$4,275 related to an increase in valuation allowance as a result of the technical correction to net operating losses as provided in the CARES Act and a discrete income tax benefit of$697 related to finalization of federal and state tax filings during the quarter endedNovember 30, 2020 , and the reversal of uncertain tax provision liabilities as a result of the lapse of the applicable statute of limitations, offset with a discrete tax provision of$31 related to the accrual of interest for unrecognized tax benefits. The effective tax rates for the nine months endedNovember 30, 2021 and 2020 were an income tax benefit of 1.3% on pre-tax loss of$28,941 and an income tax provision of 31.1% on pre-tax income of$21,614 , respectively. The effective tax rate for the nine months endedNovember 30, 2021 differs from theU.S. statutory rate of 21% as a result of a number of factors, including the non-controlling interest related toEyeLock LLC , state and local income taxes, nondeductible permanent differences, income taxed in foreign jurisdictions at varying tax rates, and an increase in valuation allowance as the Company recorded a limited tax benefit with respect to the Arbitration Settlement as it could not conclude that all of its US deferred tax assets were realizable on a more-likely-than-not basis. The effective tax rate for the nine months endedNovember 30, 2020 differed from the statutory rate of 21% primarily due to the anticipated reversal of a portion of theU.S. valuation allowance based on projected current year earnings, immediateU.S. taxation of foreign earnings, non-controlling interest related toEyeLock LLC , state and local income taxes, nondeductible permanent differences, and income taxed in foreign jurisdictions at varying tax rates. EBITDA and Adjusted EBITDA EBITDA and Adjusted EBITDA are not financial measures recognized by GAAP. EBITDA represents net (loss) income attributable toVOXX International Corporation , computed in accordance with GAAP, before interest expense and bank charges, taxes, and depreciation and amortization. Adjusted EBITDA represents EBITDA adjusted for stock-based compensation expense, acquisition costs, certain non-routine legal and professional fees, settlements, and life insurance proceeds. Depreciation, amortization, and stock-based compensation are non-cash items. We present EBITDA and Adjusted EBITDA in this Form 10-Q because we consider them to be useful and appropriate supplemental measures of our performance. Adjusted EBITDA helps us to evaluate our performance without the effects of certain GAAP calculations that may not have a direct cash impact on our current operating performance. In addition, the exclusion of certain costs or gains relating to certain events allows for a more meaningful comparison of our results from period-to-period. These non-GAAP measures, as we define them, are not necessarily comparable to similarly entitled measures of other companies and may not be an appropriate measure for performance relative to other companies. EBITDA and Adjusted 42 -------------------------------------------------------------------------------- EBITDA should not be assessed in isolation from, are not intended to represent, and should not be considered to be more meaningful measures than, or alternatives to, measures of operating performance as determined in accordance with GAAP. Reconciliation of GAAP Net Income Attributable toVOXX International Corporation to EBITDA and Adjusted EBITDA Three months ended Nine months ended November 30, November 30, 2021 2020 2021 2020 Net (loss) income attributable to VOXX International Corporation$ (28,121 ) $ 18,251 $ (25,094 ) $ 17,319 Adjustments: Interest expense and bank charges (1) 565 325 1,357 1,853 Depreciation and amortization (1) 3,378 2,904 8,891 8,128 Income tax (benefit) expense (641 ) 2,334 (374 ) 6,724 EBITDA (24,819 ) 23,814 (15,220 ) 34,024 Stock-based compensation 221 768 694 1,454 Investment gain - (42 ) - (42 ) Acquisition costs 287 24 3,279 270 Professional fees related to distribution agreement with GalvanEyes LLC - - 325 - Non-routine legal fees 235 - 1,469 - Interim arbitration award 39,444 - 39,444 - Life insurance proceeds - - - (420 ) Adjusted EBITDA$ 15,368 $ 24,564 $ 29,991 $ 35,286
(1) For purposes of calculating Adjusted EBITDA for the Company, interest expense
and bank charges, as well as depreciation and amortization, have been
adjusted in order to exclude the non-controlling interest portion of these
expenses attributable to
Liquidity and Capital Resources
Cash Flows, Commitments and Obligations
As ofNovember 30, 2021 , we had working capital of$124,172 which includes cash and cash equivalents of$21,162 , compared with working capital of$172,543 atFebruary 28, 2021 , which included cash and cash equivalents of$59,404 . We plan to utilize our current cash position as well as collections from accounts receivable, the cash generated from our operations, when applicable, and the income on our investments to fund the current operations of the business. However, we may utilize all or a portion of current capital resources to pursue other business opportunities, including acquisitions, or to further pay down our debt. As ofNovember 30, 2021 , we had cash amounts totaling$1,077 held in foreign bank accounts, none of which would be subject toUnited States federal income taxes if made available for use inthe United States . The Tax Cuts and Jobs Act provides a 100% participation exemption on dividends received from foreign corporations afterJanuary 1, 2018 , asthe United States has moved away from a worldwide tax system and closer to a territorial system for earnings of foreign corporations. Operating activities used cash of$10,008 for the nine months endedNovember 30, 2021 due to factors including the increase in inventory and accounts receivable, as well as due to losses incurred byEyeLock LLC . This was offset primarily by the increase in accounts payable, accrued expenses, and accrued sales incentives. For the nine months endedNovember 30, 2020 , operating activities used cash of$2,628 due to factors including the increases in both accounts receivable and inventory, as well as losses incurred byEyeLock LLC . This was offset primarily by increases in accounts payable, accrued expenses, and accrued sales incentives. Investing activities used cash of$33,452 during the nine months endedNovember 30, 2021 primarily due the acquisition of the home audio/video business of Onkyo Home Entertainment Corporation, as well as capital expenditures. For the nine months endedNovember 30, 2020 , investing activities used cash of$14,510 primarily due to the acquisition of the Directed business, as well as capital expenditures.
Financing activities provided cash of
43
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amendment of the Credit Facility, as well as repayments of finance leases and
the Florida mortgage. During the nine months ended November 30, 2020 , financing
activities used cash of $1,680 primarily due to the repayment of the Company's
precautionary borrowing of $20,000 from the Credit Facility, the repayment of
the Magnat subsidiary's Euro asset-based loan balance upon its expiration,
repayments of finance leases, and the payment of deferred finance fees related
to the amendment of the Credit Facility, offset by the precautionary borrowing
of $20,000 made in April 2020 .
Federal, state, and local governments have taken a variety of actions to contain
the spread of COVID-19. Many jurisdictions required mandatory business closures
during the Company's 2021 fiscal year and imposed capacity limitations and other
restrictions affecting our operations, some of which have continued into Fiscal
2022. Many of these restrictions were lifted in phases throughout Fiscal 2021
but could return if there is a resurgence of the pandemic spread. We have
proactively taken steps to increase available cash, including, but not limited
to, utilizing existing supply chain financing and factoring agreements, and
utilizing available funds under our existing Credit Facility.
The Company has a senior secured credit facility (the "Credit Facility") that
provides for a revolving credit facility with committed availability of up to
$140,000 . The availability under the revolving credit line within the Credit
Facility is subject to a borrowing base, which is based on eligible accounts
receivable, eligible inventory and certain real estate, subject to reserves as
determined by the lender, and is also limited by amounts outstanding under the
Florida Mortgage (see Note 16(b)). The availability under the revolving credit
line of the Credit Facility was $128,517 as of November 30, 2021 .
All amounts outstanding under the Credit Facility will mature and become due on
April 19, 2026 ; however, it is subject to acceleration upon the occurrence of an
Event of Default (as defined in the Agreement). The Company may prepay any
amounts outstanding at any time, subject to payment of certain breakage and
redeployment costs relating to LIBOR Rate Loans. The commitments under the
Credit Facility may be irrevocably reduced at any time, without premium or
penalty as set forth in the Agreement.
Generally, the Company may designate specific borrowings under the Credit
Facility as either Base Rate Loans or LIBOR Rate Loans, except that Swingline
Loans may only be designated as Base Rate Loans. Loans designated as LIBOR Rate
Loans shall bear interest at a rate equal to the then applicable LIBOR rate plus
a range of 1.75 - 2.25%. Loans designated as Base Rate loans shall bear interest
at a rate equal to the applicable margin for Base Rate Loans plus a range of
0.75 - 1.25%, as defined in the Agreement, and shall not be lower than 1.75%.
The Credit Facility provides for a Benchmark Replacement that will replace the
LIBOR rate for all revolver usage. The Benchmark Replacement is subject to the
occurrence of a Benchmark Transition Event, as defined in the Second Amended and
Restated Credit Agreement and becomes effective after a five-day transition
period following the event.
Provided that the Company is in a Compliance Period (the period commencing on
that day in which Excess Availability is less than 15% of the Maximum Revolver
Amount and ending on a day in which Excess Availability is equal to or greater
than 15% for any consecutive 30-day period thereafter), the Credit Facility
requires compliance with a financial covenant calculated as of the last day of
each month, consisting of a Fixed Charge Coverage Ratio. The Credit Facility
also contains covenants, subject to defined carveouts, that limit the ability of
the loan parties and certain of their subsidiaries which are not loan parties
to, among other things: (i) incur additional indebtedness; (ii) incur liens;
(iii) merge, consolidate or dispose of a substantial portion of their business;
(iv) transfer or dispose of assets; (v) change their name, organizational
identification number, state or province of organization or organizational
identity; (vi) make any material change in their nature of business; (vii)
prepay or otherwise acquire indebtedness; (viii) cause any change of control;
(ix) make any restricted junior payment; (x) change their fiscal year or method
of accounting; (xi) make advances, loans or investments; (xii) enter into or
permit any transaction with an affiliate of any borrower or any of their
subsidiaries; (xiii) use proceeds for certain items; (xiv) issue or sell any of
their stock; or (xv) consign or sell any of their inventory on certain terms. In
addition, if excess availability under the Credit Facility were to fall below
certain specified levels, as defined in the Agreement, the lenders would have
the right to assume dominion and control over the Company's cash.
The obligations under the Credit Facility documents are secured by a general lien on and security interest in substantially all of the assets of the borrowers and certain of the guarantors, including accounts receivable, equipment, real estate, general intangibles, and inventory. The Company has guaranteed the obligations of the borrowers under the Agreement.
The Company has a Euro asset-based loan facility inGermany with a credit limit of €8,000 that expires onJuly 31, 2023 . The Company's subsidiariesVoxx German Holdings GmbH ,Oehlbach Kabel GmbH , andSchwaiger GmbH are authorized to borrow funds under this facility for working capital purposes. The Company also utilizes supply chain financing arrangements and factoring agreements as a component of its financing for working capital, which accelerates receivable collection and helps to better manage cash flow. Under the agreements, the Company has agreed to sell certain of its accounts receivable balances to banking institutionswho have agreed to advance amounts equal to the net accounts receivable balances due, less a discount as set forth in the respective agreements (see Note 9). The balances under these agreements are accounted for as sales of accounts receivable, as they are sold without recourse. 44 --------------------------------------------------------------------------------
Cash proceeds from these agreements are reflected as operating activities included in the change in accounts receivable in the Company's Consolidated Statements of Cash Flows. Fees incurred in connection with the agreements are recorded as interest expense by the Company.
Certain contractual cash obligations and other commercial commitments will
impact our short and long-term liquidity. At
Amount of Commitment Expiration per Period
Less than 2-3 4-5 After
Contractual Cash Obligations Total 1 Year Years Years 5 Years
Finance lease obligation (1) $ 386 $ 269 $ 117 $ - $ -
Operating leases (1) 4,102 1,029 1,312 691 1,070
Total contractual cash obligations $ 4,488 $ 1,298 $ 1,429 $ 691 $ 1,070
Other Commitments
Bank obligations (2) $ 1,591 $ 1,591 $ - $ - $ -
Stand-by and commercial letters of
credit (3) 50 50 - - -
Other (4) 11,534 500 1,000 1,000 9,034
Pension obligation (5) 498 - - - 498
Unconditional purchase obligations
(6) 228,807 228,807 - - -
Total other commitments 242,480 230,948 1,000 1,000 9,532
Total commitments $ 246,968 $ 232,246 $ 2,429 $ 1,691 $ 10,602 1. Represents total principal payments due under operating and finance lease
obligations. Total current balances (included in other current liabilities)
due under finance and operating lease obligations are
respectively, at
and operating leases are
2. Represents amounts outstanding under the Company's Credit Facility and the
VOXX Germany asset-based lending facility at
3. We issue standby and commercial letters of credit to secure certain purchases
and insurance requirements.
4. This amount represents the outstanding balances of the mortgage for our
manufacturing facility in
5. Represents the liability for an employer defined benefit pension plan covering
certain eligible current and former employees of Voxx Germany.
6. Open purchase obligations represent inventory commitments. These obligations
are not recorded in the consolidated financial statements until commitments
are fulfilled given that such obligations are subject to change based on
negotiations with manufacturers.
We regularly review our cash funding requirements and attempt to meet those requirements through a combination of cash on hand, cash provided by operations, available borrowings under bank lines of credit and possible future public or private debt and/or equity offerings. At times, we evaluate possible acquisitions of, or investments in, businesses that are complementary to ours, which transactions may require the use of cash. We believe that our cash, other liquid assets, operating cash flows, credit arrangements, and access to equity capital markets, taken together, provide adequate resources to fund ongoing operating expenditures for the next twelve months, including the intercompany loan funding we provide to our majority owned subsidiary,EyeLock LLC , and our accrual related to an unfavorable interim arbitration award recorded inNovember 30, 2021 for which a schedule for the issuance of a final award has not yet been established. In the event they do not, we may require additional funds in the future to support our working capital requirements or for other purposes and may seek to raise such additional funds through the sale of public or private equity and/or debt financings, as well as from other sources. No assurance can be given that additional financing will be available in the future or that if available, such financing will be obtainable on terms favorable when required.
Off-Balance Sheet Arrangements
We do not maintain any off-balance sheet arrangements, transactions, obligations, or other relationships with unconsolidated entities that would be expected to have a material current or future effect upon our financial condition or results of operations.
45
--------------------------------------------------------------------------------Related Party Transactions None noted. New Accounting Pronouncements
We are required to adopt certain new accounting pronouncements. See Note 25 to our consolidated financial statements included herein.
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