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Article Excerpt
Original Source: FD (FAIR DISCLOSURE) WIRE
OPERATOR: Good afternoon, ladies and gentlemen and thank you for standing by. Welcome to the DEI Holdings, Incorporated Second Quarter 2008 Earnings Results Conference Call. During today's presentation, all parties will be in a listen only-mode. Following the presentation, the conference will be open for questions. (OPERATOR INSTRUCTIONS). This conference is being recorded today, Tuesday, August 5th, 2008.
I would like to now turn the conference over to John Mills of ICR. Please go ahead, sir.
JOHN MILLS, SENIOR MANAGING DIRECTOR, INTEGRATED CORPORATE RELATIONS: Thank you. On the call today from the Company are Jim Minarik, President and Chief Executive Officer, and Kevin Duffy, Executive Vice President and Chief Financial Officer. By now, everyone should have access to the press release which went out today at approximately 1.00 p.m. Pacific time. If you have not received the release, it is available on the Investor Relations portion of DEI Holdings website at DEIholdings.com.
Before we begin today, we'd like to remind everyone of the Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995. The following prepared remarks contain forward-looking statements and management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance and therefore undue reliance should not be placed upon them. For more detailed discussion of the factors that can cause actual results to differ materially from those projected in any forward-looking statements, we refer you to DEI Holdings most recent 10-K filed with the SEC.
I'd like to remind you that the Company will present some financial results on a pro forma basis. We believe that pro forma results provide useful information to investors by excluding specific revenue, cost and expenses that are not indicative of core operating results.
Also, this presentation will discuss pro forma and adjusted EBITDA, which are non-GAAP financial measures. We believe pro forma and adjusted EBITDA are important measures to better understand our operating performance as well. Earnings release distributed today as well as the Company's website include a full set of reconciliation of pro forma to GAAP numbers and EBITDA to GAAP numbers.
And with that, I'd like to turn the call over to Mr. Minarik. Go ahead, Jim.
JAMES MINARIK, PRESIDENT AND CEO, DEI HOLDINGS, INC.: Good afternoon everyone, and thank you for joining us today. Despite the continued softness in the consumer environment, we returned to profitability in the second quarter generating strong earnings as compared to a year ago. As you know from our earlier calls at the beginning of this year, we developed a plan that would help us offset lower sales due to weaker macroeconomic conditions, and better position the Company for strong, profitable growth once the economy improved.
Our plan included three key strategic initiatives that I'd like to update you on. The first was to position the Company for long-term sales growth. Year-to-date, we have been successful in this regard by expanding our distribution footprint, by placing a broad assortment of Polk Audio products in approximately 900 Best Buy stores, the leading retailer of home audio. Our initial shipments to Best Buy occurred in the second quarter.
We also expanded our channels of distribution by beginning a relationship with Hyundai Motors Canada, whereby we will be supplying vehicle remote starters later this year. Lastly, we continue to maximize the value of our security and convenience IT portfolio demonstrated by the additional royalty revenue earned in the second quarter.
The second key strategic initiative involved a comprehensive restructuring plan to lower our cost base in light of near-term sales headwinds related to the slower economy as well as the risk of inflationary pressures, such as increased fuel prices. To date, we have made significant progress on this initiative, including the difficult but necessary elimination of 87 positions or 15% of our work force, which will result in $5 million dollars of annualized savings.
We have also decided to exit Mobile Video due to long-term declining consumer purchase trends and our desire to focus on higher margin products. We do not expect this exit to materially impact our results, as our video business has been by far our smallest product category with very low margins.
We are also closing our UK Office which has recently generated operating losses and have transitioned that business to a leading distribution partner located in the UK. As it relates to our satellite radio business, our most recent amendment was SIRIUS, lowered our risk related to warranty and returns which was evident in our second quarter results. We believe the recently improved merger with XM should eventually bring more clarity to consumers and retailers and ultimately result in greater demand for after-market satellite radio products.
As part of our restructuring plan, at the end of June, we changed our parent company's name from Directed Electronics to DEI Holdings, Inc. As you know, our Company now includes Polk Audio, Definitive Technology, Directed Canada, and the Vista, California-based mobile electronics business which will continue to do business under the name Directed Electronics.
These changes will more closely align our corporate structure and leadership roles with the day-to-day operations and responsibilities of the Company. They will also allow our leadership to better focus on...
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