EX-99 3 ka2080703ex992.txt EX 99.2 UNAUDITED PROFORMA FINANCIALS UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS On July 8, 2003, a newly formed wholly-owned subsidiary of Audiovox Corporation (the Company) acquired for approximately $41.8 million the outstanding capital stock of the Italian, German and Japanese subsidiaries of Recoton Corporation (Recoton) together with certain assets and the businesses of certain of Recoton's United States subsidiaries. The Recoton entities are collectively referred to as the Audio Business Group (the Group). As of the date of acquisition of the Group and since April 2003, Recoton was operating under Chapter XI of the Federal Bankruptcy Code. The Group is a developer and marketer of consumer home and mobile, audio and video products generally for aftermarket use. The Group's products are sold primarily to retailers located in the United States and Europe. The total purchase price was partially financed with proceeds of approximately $12.8 million of long-term debt obtained by the Company shortly after the acquisition with the balance paid from available cash on hand. The unaudited pro forma combined financial statements give effect to the acquisition of the Group under the purchase method of accounting. The following unaudited proforma condensed combined statements of operations information has been prepared to illustrate the effects of the acquisition and related financing had these transactions been completed as of December 1, 2001. The following unaudited proforma condensed balance sheet information as of May 31, 2003 has been prepared assuming the acquisition had been completed at that date. The proforma adjustments are based upon available information and certain assumptions that Audiovox believes are reasonable under the circumstances. The unaudited pro forma combined financial information reflects a preliminary allocation of the purchase price based on market valuations in process as at the date of the preparation of these statements, which valuations are subject to revision upon completion. It is therefore subject to revision upon determination of the fair value of assets acquired and liabilities assumed. The pro forma periods for the year ended November 30, 2002 and for the six months ended May 31, 2003 are the Company's historical financial reporting periods. Recoton and the Group have historically reported on a calendar year basis with equivalent interim quarterly basis reporting. The unaudited pro forma financial statements combine the historical consolidated amounts of the Company at May 31, 2003 and for the six months then ended and for the year ended November 30, 2002 with those of the Group as at June 30, 2003 and for the six months ended June 30, 2003 and for the year ended December 31, 2002. The Company believes the effect of the difference in the reporting periods is not significant to an understanding of the pro forma results of operations. The proforma information, while helpful in illustrating the financial characteristics of the combined company, does not attempt to predict or suggest future results. The proforma information also does not attempt to show how the combined company would actually have performed had the companies been combined as of December 1, 2001. If the companies had actually been combined at the beginning of the periods presented, these companies and businesses might have performed differently. You should not rely on proforma financial information as an indication of the results that would have been achieved if the acquisitions had taken place earlier or the future results that the companies will experience. These unaudited proforma condensed combined financial statements should be read in conjunction with the historical financial statements of the Group and the historical financial statements of Audiovox Corporation. Exhibit 99.2 1 Audiovox Corporation Unaudited Pro Forma Combined Balance Sheet May 31, 2003 (In thousands) Audio Pro Forma Audiovox Recoton Adjustments Pro Forma Cash $ 24,122 $ 2,223 $ (41,800)(1) $ 936 (9)(1) 3,600 (4) 12,800 (2) Accounts receivable, net 160,735 12,322 (599)(3) 172,458 Inventory, net 172,684 21,858 (816)(3) 193,726 Receivable from vendor 11,446 - - 11,446 Assets held for sale - - 3,600 (3) - (3,600)(4) Prepaid and other current assets 17,666 3,365 (140)(1) 20,891 ---------------------------------------------------- Total current assets 386,653 39,768 (26,964) 399,457 Property, plant and equipment, net 15,616 2,830 (625)(1) 17,821 Excess cost over fair value of assets acquired and other intangible assets, net 7,512 - - 7,512 Intangibles 3,466 9,986 (1) 7,801 (2,185)(3) (3,466)(1) Equity investments 11,665 - - 11,665 Other assets 9,205 731 - 9,936 ---------------------------------------------------- Total assets $ 430,651 $ 46,795 $ (23,254) $ 454,192 ==================================================== Accounts payable $ 34,033 $ 18,558 $ (13,787)(1) $ 38,804 Accrued expenses 34,628 2,223 (273)(1) 36,578 Accrued sales incentives 8,245 - - 8,245 Income taxes payable 10,099 - - 10,099 Bank obligations 3,245 3,776 - 7,021 ---------------------------------------------------- Total current liabilities 90,250 24,557 (14,060) 100,747 Other - 244 - 244 Long-term debt 8,132 - 12,800 (2) 20,932 Capital lease obligation 6,111 - - 6,111 Deferred income taxes payable 1,983 - - 1,983 Deferred compensation 4,293 - - 4,293 ---------------------------------------------------- Total liabilities 110,769 24,801 (1,260) 134,310 ---------------------------------------------------- Minority interest 5,359 - - 5,359 Stockholders' equity 314,523 21,994 (21,994)(1) 314,523 ---------------------------------------------------- Total equity 314,523 21,994 (21,994) 314,523 ---------------------------------------------------- Total liabilities and equity $ 430,651 $ 46,795 $ (23,254) $ 454,192 ==================================================== See the accompanying notes to the unaudited pro forma combined financial statements.
Exhibit 99.2 2 Audiovox Corporation Unaudited Pro Forma Combined Statement of Income Six Months Ended May 31, 2003 (In thousands, except per share amounts) Audio Pro Forma Audiovox Recoton Adjustments Pro Forma Net sales $ 597,828 $ 35,551 $ (932)(5) $ 632,447 Cost of sales 546,748 35,047 (654)(5) 581,141 -------------------------------------------------------- Gross profit 51,080 504 (278) 51,306 Selling, general, administrative, warehouse and technical support expenses 43,565 19,326 93 (6) 62,984 -------------------------------------------------------- Operating income (loss) 7,515 (18,822) (371) (11,678) Interest 4 (7) (353)(8) (2,118) (628) (145)(9) (3,240) Other Income (expense) 587 - - 587 -------------------------------------------------------- Income (loss) from continuing operations before provision for (recovery of) income taxes and minority interest 5,984 (19,450) (865) (14,331) Provision for (recovery of) income taxes 1,958 (1,750) (5,537)(10) (5,329) Minority interest (743) - - (743) -------------------------------------------------------- Net income (loss) $ 3,283 $ (17,700) $ 4,672 $ (9,745) ======================================================== Net income (loss) per common share - basic $ 0.15 $ (0.45) =========== =========== Net income (loss) per common share - diluted $ 0.15 $ (0.45) =========== =========== Weighted average number of common shares outstanding: Basic 21,834,099 21,834,099 =========== =========== Diluted 21,949,521 21,834,099 =========== =========== See the accompanying notes to the unaudited pro forma combined financial statements.
Exhibit 99.2 3 Audiovox Corporation Unaudited Pro Forma Combined Statement of Income ForThe Twelve Months Ended November 30, 2002 (In thousands, except per share amounts) Audio Pro Forma Audiovox Recoton Adjustments Pro Forma Net sales $1,100,382 $211,399 $ (6,569)(5) $1,305,212 Cost of sales 1,025,783 161,064 (4,275)(5) 1,182,572 ------------------------------------------------------ Gross profit 74,599 50,335 (2,294) 122,640 Selling, general, administrative, warehouse and technical support expenses 88,675 46,668 378 (6) 135,721 ------------------------------------------------------ Operating income (loss) (14,076) 3,667 (2,672) (13,081) Gain on issuance of subsidiary's shares 14,269 - - 14,269 Interest (4,219) (2,645) 1,277(7) (6,583) (706)(8) (290)(9) Other Income (expense) (2,377) 519 - (1,858) ------------------------------------------------------ Income (loss) from operations before provision for (recovery of) income taxes, minority interest (6,403) 1,541 (2,391) (7,253) Provision for (recovery of) income taxes 12,932 787 (932)(10) 12,787 Minority interest 5,055 - - 5,055 ------------------------------------------------------ Income (loss) from continuing operations $ (14,280) $ 754 $ (1,459) $ (14,985) ====================================================== Loss from continuing operations per common share - basic $ (0.65) $ (0.69) =========== ========== Loss from continuing operations per common share - diluted $ (0.65) $ (0.69) =========== ========== Weighted average number of common shares outstanding: Basic 21,850,035 21,850,035 ========== ========== Diluted 21,850,035 21,850,035 =========== ========== See the accompanying notes to the unaudited pro forma combined financial statements.
Exhibit 99.2 4 Audiovox Corporation Notes to Unaudited Pro Forma Combined Financial Statements For The Year Ended November 30, 2002 and Six Month Period Ended May 31, 2003 (In thousands, except per share amounts) NOTE 1 - Group Pro Forma Adjustments 1. Represents the adjustment to record the acquisition of certain United States subsidiaries of the Audio Business Group of Recoton Corporation and the stock of its Italian, Germa and Japanese subsidiaries (the Group) by adjusting their historical values of certain assets and liabilities which were not acquired and recording assets and liabilities acquired at their preliminary estimated fair values. The acquisition cost is approximately $41.8 million in cash, including estimated transaction costs of $1.5 million. We have allocated the purchase price to acquire assets and liabilities based on a preliminary valuation in accordance with the purchase method of accounting. The excess of the estimated purchase price over the fair valu of assets and liabilities acquired of $9,986,000 has been preliminarily allocated to trademarks, with an indefinite useful life. The actual allocation of purchase price to assets and liabilities acquired will b dependent upon the final valuation study. The acquisition is assumed to be funded with bank loan proceeds of $12.8 million, cash on hand and cash obtained in the acquisition an cash obtained from the sale of the Group's marine products division as noted below. 2. Represents the partial financing of the purchas price with bank debt of approximately $12.8 million (euro $11.9 million) 3. Represents the classification of accounts receivable, inventory and trademark attributabl to the marine products division of the Group as assets held for sale based upon their estimated fair values. The sale of the marine division assets is required since the Company is precluded from selling marine products as a result of its joint venture agreement with Audiovox Specialized Applications, Inc. (ASA), an equity investee of the Company. 4. Represents the sale of the marine division assets and liabilities of the Group classified as assets held for sale to ASA for $3.6 million. 5. Elimination of sales and cost of sales of the marine products division as a result of its sal to ASA. 6. Represents additional compensation expense related to compensation agreements entered into with management of the German subsidiary of the Group. 7. Represents the elimination of the Group's historical allocated interest expense. 8. Represents the pro forma interest expense from the beginning of the period on the bank loan utilized to partially fund the acquisition of the Group utilizing an interest rate of 5.5%. 9. Elimination of interest income related to cash utilized to partially fund the acquisition of the Group. 10. Represents the income tax benefit of the proforma adjustments for the twelve months ende November 30, 2002 and six months ended May 31, 2003 and the tax benefit resultin from the combined operations for the six months ended May 31, 2003. Exhibit 99.2 5