EX-99.1 2 ex991unauditedproformafina.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1
VOXX INTERNATIONAL CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

On August 31, 2017, Voxx International Corporation ("Voxx" or "the Company") closed the previously announced sale of Hirschmann Car Communication GmbH and its worldwide subsidiaries ("Hirschmann") pursuant to a Sale and Purchase Agreement, dated as of June 25, 2017 (the "Sale and Purchase Agreement") with a subsidiary of TE Connectivity Ltd (the "Purchaser"). The consideration received by the Company was approximately 149.0 million Euro, or $170.0 based on the terms of the sale and forward contracts at an average U.S. dollar exchange rate of approximately 1.14. The purchase price, at the exchange rate on the date of closing approximated $177.0 and is subject to adjustment based upon the final working capital.

The foregoing description does not purport to be complete and is qualified in its entirety by reference to the Sale and Purchase Agreement, a copy of which will be filed as an exhibit to Voxx's Form 10-Q for the Company's second fiscal quarter ended August 31, 2017.

The following unaudited pro forma consolidated financial statements are presented to comply with Article 11 of Regulation S-X and follow prescribed SEC regulations. The unaudited pro forma consolidated financial statements do not purport to present what the Company’s results would have been had the disposition actually occurred on the dates indicated or to project what the Company’s results of operations or financial position would be for any future period. The prescribed regulations limit pro forma adjustments to those that are directly attributable to the disposition, that are factually supportable and with respect to the pro forma statements of operations and comprehensive income (loss), that are expected to have a continuing impact. Consequently, the Company was not permitted within the consolidated financial statements to allocate to the disposed operations any indirect corporate overhead or costs, such as administrative corporate functions or any other costs that were shared with the retained business of the Company. As a result, such costs are not reflected in the pro forma adjustments and are included in the retained business of the Company. Additionally, the unaudited pro forma consolidated statements of operations and comprehensive income (loss) do not include costs associated with selling Hirschmann. The pro forma adjustments are described in the notes to the unaudited pro forma consolidated financial statements.

The unaudited pro forma consolidated financial statements have been prepared for informational purposes and to assist in the analysis of the Company’s sale of Hirschmann to the Purchaser. This information should be read together with the historical consolidated financial statements and related notes of the Company included in its Annual Report on Form 10-K for the year ended February 28, 2017 and its Quarterly Report on Form 10-Q for the quarter ended May 31, 2017.

The unaudited pro forma consolidated statements of operations and comprehensive income (loss) for the three months ended May 31, 2017 and the years ended February 28, 2017, February 29, 2016 and February 28, 2015, assume the sale occurred on March 1, 2014. The unaudited pro forma consolidated balance sheet as of May 31, 2017, assumes the sale occurred on May 31, 2017. The unaudited pro forma consolidated financial statements are derived from the historical consolidated financial statements of the Company and are based on assumptions that management believes are reasonable in the circumstances. Hirschmann's historical operation, for current and prior periods, including the gain on sale, will be presented as discontinued operations for financial reporting purposes beginning with the Company's Quarterly Report on Form 10-Q for the three and six months ended August 31, 2017.





VOXX International Corporation and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Balance Sheet
At May 31, 2017
(In thousands)
 
 
Voxx Historical
 
Pro Forma Adjustments (a)
 
 
 
Voxx Pro Forma
Assets
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
8,060

 
$
171,552

 
 
 
$
179,612

Accounts receivable, net
 
89,888

 
(12,189
)
 
 
 
77,699

Inventory, net
 
165,409

 
(34,161
)
 
 
 
131,248

Receivables from vendors
 
831

 
(42
)
 
 
 
789

Prepaid expenses and other current assets
 
29,181

 
(8,312
)
 
 
 
20,869

Income tax receivable
 
1,682

 
—

 
 
 
1,682

Total current assets
 
295,051

 
116,848

 
 
 
411,899

Investment securities
 
9,748

 
—

 
 
 
9,748

Equity investments
 
21,216

 
—

 
 
 
21,216

Property, plant and equipment, net
 
85,182

 
(18,839
)
 
 
 
66,343

Goodwill
 
105,799

 
(51,893
)
 
 
 
53,906

Intangible assets, net
 
175,732

 
(22,042
)
 
 
 
153,690

Deferred income taxes
 
23

 
—

 
 
 
23

Other assets
 
1,624

 
—

 
 
 
1,624

Total assets
 
$
694,375

 
$
24,074

 
 
 
$
718,449

Liabilities and Stockholders' Equity
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
Accounts payable
 
$
71,669

 
$
(16,388
)
 
 
 
$
55,281

Accrued expenses and other current liabilities
 
54,924

 
(1,603
)
 
(b)
 
53,321

Income taxes payable
 
1,369

 
13,712

 
(c)
 
15,081

Accrued sales incentives
 
12,078

 
—

 
 
 
12,078

Current portion of long-term debt
 
10,420

 
(997
)
 
 
 
9,423

Total current liabilities
 
150,460

 
(5,276
)
 
 
 
145,184

Long-term debt, net of debt issuance costs
 
102,296

 
—

 
 
 
102,296

Capital lease obligation
 
2,792

 
(1,874
)
 
 
 
918

Deferred compensation
 
3,868

 
(400
)
 
 
 
3,468

Deferred income tax liabilities
 
27,773

 
(4,277
)
 
 
 
23,496

Other tax liabilities
 
3,244

 
—

 
 
 
3,244

Other long-term liabilities
 
10,946

 
(8,747
)
 
 
 
2,199

Total liabilities
 
301,379

 
(20,574
)
 
 
 
280,805

Total stockholders' equity
 
392,996

 
44,648

 
 
 
437,644

Total liabilities and stockholders' equity
 
$
694,375

 
$
24,074

 
 
 
$
718,449

 
 
 
 
 
 
 
 
 





VOXX International Corporation and Subsidiaries
Unaudited Pro Forma Consolidated Statement of Operations and Comprehensive Income
For the Three Months Ended May 31, 2017
(In thousands, except share and per share data)
 
 
Voxx Historical
 
Pro Forma Adjustments (d)
 
 
 
Voxx Pro Forma
Net sales
 
$
159,103

 
$
(44,248
)
 
 
 
$
114,855

Cost of sales
 
115,364

 
(30,641
)
 
 
 
84,723

Gross profit
 
43,739

 
(13,607
)
 
 
 
30,132

 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
Selling
 
13,792

 
(1,382
)
 
 
 
12,410

General and administrative
 
27,192

 
(6,989
)
 
 
 
20,203

Engineering and technical support
 
10,594

 
(3,939
)
 
 
 
6,655

Total operating expenses
 
51,578

 
(12,310
)
 
 
 
39,268

Operating loss
 
(7,839
)
 
(1,297
)
 
 
 
(9,136
)
 
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
 
Interest and bank charges
 
(1,913
)
 
118

 
 
 
(1,795
)
Equity in income of equity investees
 
1,803

 
—

 
 
 
1,803

Other, net
 
(1,020
)
 
16

 
 
 
(1,004
)
Total other expense, net
 
(1,130
)
 
134

 
 
 
(996
)
 
 
 
 
 
 
 
 
 
Loss before income taxes
 
(8,969
)
 
(1,163
)
 
 
 
(10,132
)
Income tax benefit
 
(4,063
)
 
(3,391
)
 
(c)
 
(7,454
)
Net loss
 
(4,906
)
 
2,228

 
 
 
(2,678
)
Less: net loss attributable to non-controlling interest
 
(1,875
)
 
—

 
 
 
(1,875
)
Net loss attributable to Voxx International Corporation
 
$
(3,031
)
 
$
2,228

 
 
 
$
(803
)
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
        Foreign currency translation adjustments
 
7,359

 
(78
)
 
 
 
7,281

        Derivatives designated for hedging
 
(1,052
)
 
(355
)
 
 
 
(1,407
)
        Pension plan adjustments
 
(120
)
 
(96
)
 
 
 
(216
)
        Unrealized holding loss on available-for-sale investment securities, net of tax
 
(4
)
 
—

 
 
 
(4
)
          Other comprehensive income, net of tax
 
6,183

 
(529
)
 
 
 
5,654

Comprehensive income attributable to VOXX International Corporation
 
$
3,152

 
$
1,699

 
 
 
$
4,851

 
 
 
 
 
 
 
 
 
Net loss per common share attributable to VOXX International Corporation (basic)
 
$
(0.13
)
 
 
 
 
 
$
(0.03
)
 
 
 
 
 
 
 
 
 
Net loss per common share attributable to VOXX International Corporation (diluted)
 
$
(0.13
)
 
 
 
 
 
$
(0.03
)
 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding (basic)
 
24,160,324

 
 
 
 
 
24,160,324

Weighted-average common shares outstanding (diluted)
 
24,160,324

 
 
 
 
 
24,160,324






VOXX International Corporation and Subsidiaries
Unaudited Pro Forma Consolidated Statement of Operations and Comprehensive Income (Loss)
For the Year Ended February 28, 2017
(In thousands, except share and per share data)
 
 
Voxx Historical
 
Pro Forma Adjustments (d)
 
 
 
Voxx Pro Forma
Net sales
 
$
681,042

 
$
(166,513
)
 
 
 
$
514,529

Cost of sales
 
479,527

 
(109,027
)
 
 
 
370,500

Gross profit
 
201,515

 
(57,486
)
 
 
 
144,029

 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
Selling
 
48,205

 
(5,096
)
 
 
 
43,109

General and administrative
 
107,882

 
(28,291
)
 
 
 
79,591

Engineering and technical support
 
45,600

 
(16,082
)
 
 
 
29,518

Total operating expenses
 
201,687

 
(49,469
)
 
 
 
152,218

Operating loss
 
(172
)
 
(8,017
)
 
 
 
(8,189
)
 
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
 
Interest and bank charges
 
(7,488
)
 
541

 
 
 
(6,947
)
Equity in income of equity investees
 
6,797

 
—

 
 
 
6,797

Venezuela currency devaluation, net
 
(8
)
 
—

 
 
 
(8
)
Other, net
 
(572
)
 
89

 
 
 
(483
)
Total other expense, net
 
(1,271
)
 
630

 
 
 
(641
)
 
 
 
 
 
 
 
 
 
Loss before income taxes
 
(1,443
)
 
(7,387
)
 
 
 
(8,830
)
Income tax expense
 
1,759

 
(1,370
)
 
(c)
 
389

Net loss
 
(3,202
)
 
(6,017
)
 
 
 
(9,219
)
Less: net loss attributable to non-controlling interest
 
(7,624
)
 
—

 
 
 
(7,624
)
Net income (loss) attributable to Voxx International Corporation
 
$
4,422

 
$
(6,017
)
 
 
 
$
(1,595
)
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
        Foreign currency translation adjustments
 
(3,194
)
 
(41
)
 
 
 
(3,235
)
        Derivatives designated for hedging
 
210

 
(236
)
 
 
 
(26
)
        Pension plan adjustments
 
(180
)
 
(148
)
 
 
 
(328
)
        Unrealized holding loss on available-for-sale investment securities, net of tax
 
(17
)
 
—

 
 
 
(17
)
          Other comprehensive loss, net of tax
 
(3,181
)
 
(425
)
 
 
 
(3,606
)
Comprehensive income (loss) attributable to VOXX International Corporation
 
$
1,241

 
$
(6,442
)
 
 
 
$
(5,201
)
 
 
 
 
 
 
 
 
 
Net income (loss) per common share attributable to VOXX International Corporation (basic)
 
$
0.18

 
 
 
 
 
$
(0.07
)
 
 
 
 
 
 
 
 
 
Net income (loss) per common share attributable to VOXX International Corporation (diluted)
 
$
0.18

 
 
 
 
 
$
(0.07
)
 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding (basic)
 
24,160,324

 
 
 
 
 
24,160,324

Weighted-average common shares outstanding (diluted)
 
24,240,310

 
 
 
 
 
24,240,310






VOXX International Corporation and Subsidiaries
Unaudited Pro Forma Consolidated Statement of Operations and Comprehensive Loss
For the Year Ended February 29, 2016
(In thousands, except share and per share data)
 
 
Voxx Historical
 
Pro Forma Adjustments (d)
 
 
 
Voxx Pro Forma
Net sales
 
$
680,746

 
$
(150,540
)
 
 
 
$
530,206

Cost of sales
 
485,061

 
(98,391
)
 
 
 
386,670

Gross profit
 
195,685

 
(52,149
)
 
 
 
143,536

 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
Selling
 
48,513

 
(4,937
)
 
 
 
43,576

General and administrative
 
111,382

 
(27,175
)
 
 
 
84,207

Engineering and technical support
 
37,490

 
(14,567
)
 
 
 
22,923

Intangible asset impairment charges
 
9,070

 
—

 
 
 
9,070

Acquisition costs
 
800

 
—

 
 
 
800

Total operating expenses
 
207,255

 
(46,679
)
 
 
 
160,576

Operating loss
 
(11,570
)
 
(5,470
)
 
 
 
(17,040
)
 
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
 
Interest and bank charges
 
(8,075
)
 
581

 
 
 
(7,494
)
Equity in income of equity investees
 
6,538

 
—

 
 
 
6,538

Venezuela currency devaluation, net
 
(2
)
 
—

 
 
 
(2
)
Gain on bargain purchase
 
4,679

 
—

 
 
 
4,679

Other, net
 
632

 
(44
)
 
 
 
588

Total other income, net
 
3,772

 
537

 
 
 
4,309

 
 
 
 
 
 
 
 
 
Loss before income taxes
 
(7,798
)
 
(4,933
)
 
 
 
(12,731
)
Income tax benefit
 
(1,735
)
 
(616
)
 
(c)
 
(2,351
)
Net loss
 
(6,063
)
 
(4,317
)
 
 
 
(10,380
)
 
 
 
 
 
 
 
 
 
Less: net loss attributable to non-controlling interest
 
(3,381
)
 
—

 
 
 
(3,381
)
Net loss attributable to Voxx International Corporation
 
$
(2,682
)
 
$
(4,317
)
 
 
 
$
(6,999
)
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
        Foreign currency translation adjustments
 
(5,702
)
 
(12
)
 
 
 
(5,714
)
        Derivatives designated for hedging
 
(2,440
)
 
(807
)
 
 
 
(3,247
)
        Pension plan adjustments
 
640

 
569

 
 
 
1,209

        Unrealized holding loss on available-for-sale investment securities, net of tax
 
20

 
—

 
 
 
20

          Other comprehensive loss, net of tax
 
(7,482
)
 
(250
)
 
 
 
(7,732
)
Comprehensive loss attributable to VOXX International Corporation
 
$
(10,164
)
 
$
(4,567
)
 
 
 
$
(14,731
)
 
 
 
 
 
 
 
 
 
Net loss per common share attributable to VOXX International Corporation (basic)
 
$
(0.11
)
 
 
 
 
 
$
(0.29
)
 
 
 
 
 
 
 
 
 
Net loss per common share attributable to VOXX International Corporation (diluted)
 
$
(0.11
)
 
 
 
 
 
$
(0.29
)
 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding (basic)
 
24,172,710

 
 
 
 
 
24,172,710

Weighted-average common shares outstanding (diluted)
 
24,172,710

 
 
 
 
 
24,172,710





VOXX International Corporation and Subsidiaries
Unaudited Pro Forma Consolidated Statement of Operations and Comprehensive Loss
For the Year Ended February 28, 2015
(In thousands, except share and per share data)
 
 
Voxx Historical
 
Pro Forma Adjustments (d)
 
 
 
Voxx Pro Forma
Net sales
 
$
757,498

 
$
(172,138
)
 
 
 
$
585,360

Cost of sales
 
533,628

 
(106,957
)
 
 
 
426,671

Gross profit
 
223,870

 
(65,181
)
 
 
 
158,689

 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
Selling
 
54,136

 
(6,169
)
 
 
 
47,967

General and administrative
 
114,849

 
(32,206
)
 
 
 
82,643

Engineering and technical support
 
37,157

 
(18,818
)
 
 
 
18,339

Restructuring expense
 
1,134

 
—

 
 
 
1,134

Total operating expenses
 
207,276

 
(57,193
)
 
 
 
150,083

Operating income
 
16,594

 
(7,988
)
 
 
 
8,606

 
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
 
Interest and bank charges
 
(6,851
)
 
272

 
 
 
(6,579
)
Equity in income of equity investees
 
5,866

 
—

 
 
 
5,866

Venezuela currency devaluation, net
 
(7,104
)
 
—

 
 
 
(7,104
)
Impairment of Venezuela investment properties
 
(9,304
)
 
—

 
 
 
(9,304
)
Other, net
 
1,495

 
(489
)
 
 
 
1,006

Total other expense, net
 
(15,898
)
 
(217
)
 
 
 
(16,115
)
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
 
696

 
(8,205
)
 
 
 
(7,509
)
Income tax expense (benefit)
 
1,638

 
(2,504
)
 
(c)
 
(866
)
Net loss
 
$
(942
)
 
$
(5,701
)
 
 
 
$
(6,643
)
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
        Foreign currency translation adjustments
 
(33,170
)
 
787

 
 
 
(32,383
)
        Derivatives designated for hedging
 
3,258

 
1,229

 
 
 
4,487

        Pension plan adjustments
 
(1,423
)
 
(1,073
)
 
 
 
(2,496
)
        Unrealized holding loss on available-for-sale investment securities, net of tax
 
(27
)
 
—

 
 
 
(27
)
          Other comprehensive loss, net of tax
 
(31,362
)
 
943

 
 
 
(30,419
)
Comprehensive loss
 
$
(32,304
)
 
$
(4,758
)
 
 
 
$
(37,062
)
 
 
 
 
 
 
 
 
 
Net loss per common share (basic)
 
$
(0.04
)
 
 
 
 
 
$
(0.27
)
 
 
 
 
 
 
 
 
 
Net loss per common share attributable (diluted)
 
$
(0.04
)
 
 
 
 
 
$
(0.27
)
 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding (basic)
 
24,330,361

 
 
 
 
 
24,330,361

Weighted-average common shares outstanding (diluted)
 
24,330,361

 
 
 
 
 
24,330,361





VOXX International Corporation
Notes to the Unaudited Pro Forma Consolidated Financial Statements
(In thousands, except per share amounts)

1.
Description of Transaction

On August 31, 2017, VOXX International Corporation ("Voxx" or "the Company") closed the previously announced sale of Hirschmann Car Communications GmbH and its worldwide subsidiaries ("Hirschmann") pursuant to a Sale and Purchase Agreement, dated as of June 25, 2017 (the "Sale and Purchase Agreement") with a subsidiary of TE Connectivity Ltd. The proceeds received by the Company were approximately 149.0 million Euro, or $177.0, based on the exchange rate at August 31, 2017 before the effect of forward contracts used to hedge the transaction which are not included in the pro forma adjustments below. The purchase price is subject to adjustment based upon the final working capital.

2. Pro Forma Adjustments

a.) These adjustments reflect proceeds of 149.0 million Euro or $177.0 (in cash, based on the exchange rate at August 31, 2017) from the sale, net of preliminary working capital adjustments, derecognition of the related assets and liabilities of Hirschmann, and the related after-tax estimated gain on sale. The estimated gain on sale is taxed using a statutory tax rate of 37%, which includes federal and state income taxes. The amount of estimated taxes payable on the gain may differ from the taxes payable computed using the statutory rate of 37%, as the taxes payable may be offset by certain net operating loss and tax credit carryforwards. The estimated gain on sale has not been included in the unaudited pro forma consolidated statements of operations and comprehensive income (loss) as it is considered to be non-recurring in nature. The actual gain may differ materially from the amount reflected in this proforma based on the carrying values of Hirschmann's net assets as of the date of closing, final working capital adjustments and other factors.
b.) This adjustment includes the expectation of non-recurring costs in connection with the sale. These amounts are for investment advisory, consulting and legal fees.
c.) These adjustments represent the estimated income tax effects of proforma adjustments, which are calculated using the jurisdictional statutory rates in effect for the periods presented based on the Company's tax position in each year.
d.) These adjustments eliminate the historical revenue and operating expenses directly attributable to the Hirschmann operation. Not included in the pro forma results are anticipated savings due to costs that may be reduced or eliminated.