Greenbackd

Audiovox Corporation (NASDAQ:VOXX) has filed its 10K for the fiscal year ended February 28, 2009.

The stock has risen strongly over recent weeks to close yesterday at $5.93, which gives VOXX a market capitalization of $135.6M. We’ve had an opportunity to review the 10K, and we’ve now slightly reduced our estimate of VOXX’s liquidation value to $117.3M or $5.13 per share. With the stock trading at a premium to our estimate of liquidation value, we’ve decided to exit. We opened the position at $3.73, and the stock closed yesterday at $5.93, which means we’re up 59.0% on an absolute basis. The S&P500 Index closed at 789.17 on the day we opened the position in VOXX and closed yesterday at 909.71, which means we’re up 43.7% on a relative basis.

Post mortem

We started following VOXX (see the post archive here) because it was a profitable, undervalued asset play. When we opened the position, we estimated VOXX’s liquidation value to be around $128.4M or $5.60 per share against a share price of $3.73 and a market capitalization of $85.3M. Howson Tattersal had filed a 13D notice in September last year disclosing a 7.3% holding. We noted that, while VOXX was a perennial inclusion on lists of net-net stocks, we thought it hard to ignore at $3.73. Fast forward to today. The stock is up 59% to $5.93 and the liquidation value is down slightly to $5.13 per share. The updated balance sheet is set out below (the “Book Value” column shows the assets as they are carried in the financial statements, and the “Liquidating Value” column shows our estimate of the value of the assets in a liquidation):

Balance sheet adjustments

• Cash generation: The company generated $30.0M in operating cash flow in the last year.
• Off-balance sheet arrangements and contractual obligations: According to its most recent 10K, VOXX does 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 its financial condition or results of operations.VOXX has around $43.4M in contractual cash obligations (including $11M in capital lease obligations and $32M in operating leases), around half of which falls due in the next 5 years and $24.0M falling due after 5 years. VOXX also has another $62M in unconditional purchase obligations falling due in the next 12 months.

Conclusion

We are again reasonably happy with the outcome in VOXX. While Howson Tattersall’s campaign has not been run to its conclusion, we feel that with the stock trading at a premium to VOXX’s liquidation value, and with VOXX’s liquidation value reducing over the last quarter, it is an opportune time to exit.

[Full Disclosure:  We do not have a holding in VOXX. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only. Do your own research before investing in any security.]