Glenn Wiener Patrick M. Lavelle - Chief Executive Officer, President and Director Charles Michael Stoehr - Chief Financial Officer, Principal Accounting Officer, Senior Vice President and Director

R. Scott Tilghman - B. Riley Caris, Research Division Ross Licero - Craig-Hallum Capital Group LLC, Research Division

Good day, ladies and gentlemen, and welcome to the Q4 2013 VOXX International Corporation Earnings Conference Call. My name is Marie, and I will be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. And now I'd like to turn the call over to today's host, Glenn Wiener. Please proceed.

Thank you very much, and welcome to VOXX International's Fiscal 2013 Year End Results Conference Call. Today's call is being webcast on our website, www.voxxintl.com, and can be accessed in the Investor Relations section. We also have a replay available for those who are unable to join us. With us today are Pat Lavelle, President and CEO, who's calling in from overseas; Michael Stoehr, Senior Vice President And Chief Financial Officer; and John Shalam, Chairman of the Board. Before we begin, I'd like to remind everyone that except for historical information contained herein, statements made on today's call and webcast that would constitute forward-looking statements are based on currently available information, and the company assumes no responsibility to update any such forward-looking statements. Risk factors associated with our business are detailed in our Form 10-K for the fiscal year ended February 28, 2013. We'll begin today's call with remarks from Pat, followed by Michael, and we'll then open up the call for your questions. If you have any follow-up questions thereafter, please feel free to call my office. I'll be more than happy to address them. We had a good year, and we're looking forward to an even better one next year. And at this time, I'd like to turn the call over to Mr. Pat Lavelle. Patrick M. Lavelle: Thank you, Glenn, and good morning, everyone. I'd like to start with a recap of our fiscal year performance and then provide background on some of our latest product offerings and programs and conclude with remarks on our fiscal 2014 outlook. Mike will then follow my remarks with more financial details. Despite the challenges, we and most companies continue to experience, given the struggling global markets, we had one of the most successful years in the company's history, actually posting the third-highest bottom line results. Gross sales came in at $933 million, with net sales after returns and MDF funds at $835.6 million. Gross margins were 28.3%, which was in line with our prior guidance. Our EBITDA was $60.7 million and our adjusted EBITDA was $67.7 million, which is higher than our prior statements and due to the strength of our fourth quarter. We also generated free cash of $30 million in fiscal '13. On one end, our domestic operations performed to expectations, and in some cases ahead as we continue to see strong growth in our OEM and modest growth in premium audio and accessories. This growth was somewhat offset by softness in the automotive aftermarket and weakness internationally in the Eurozone countries. Those issues, along with our SKU rationalization, translates to the following full year top line impact: $11.9 million in lower margin products we exited throughout the year; $17.6 million related solely to the euro translation; and $16.7 million in international sales that came in below forecast, excluding Hirschmann. As I announced last quarter and as you saw from our release and 10-K, we have changed our reporting structure and will now be providing financial details in 3 segments: Automotive, Premium Audio and Consumer Accessories. The Automotive segment includes our domestic and international aftermarket and OEM business. The OEM group includes sales from Code systems, Invision, Hirschmann and Incaar. And the aftermarket is made up primarily of sales from Jensen, Advent, CodeAlarm, Audiovoxx, Mac Audio and others. Domestically, the bulk of our sales are in rear seat entertainment, security and remote starts, satellite radio, car audio and a growing automotive electronics group. Internationally, sales are in antennas, digital TV tuners, rear seat entertainment and car audio. For the comparable fiscal year, our automotive segment is up 43.7%, driven by the addition of Hirschmann. Domestically, OEM sales had a soft first half as we transitioned to new programs and as anticipated, we saw a significant pickup in most sales in the second half as we launched the new Ford and Nissan programs. We expect we will continue to see growth in our OEM sales. The domestic car market remains healthy and projections now call for seasonally adjusted rate of just under $15 million in the U.S. In fact, March marked the best month for car sales since before the recession, with Ford, Chrysler, Toyota, GM and Nissan all reporting increases. April sales numbers came in a little below industry forecast, but still much stronger than the $14.1 million rate at this time last year and the Detroit's big 3 all posted higher sales amid rising demand for larger vehicles, such as SUVs, which are in our sweet spot. Automotive international sales, where we continue to feel the greatest impact on the short-term, we do believe we've seen the worst as our OEM customers have reforecast demand to more realistic numbers. However, based on the volatility in Europe, I'm going to remain cautious near-term. With the acquisition of Hirschmann, we significantly increased our capabilities as an OE supplier, and with many projects currently in development as well as a number of recent project awards, we believe the automotive business gives us one of our strongest growth areas for years to come. Besides the existing TV tuner, remote start, security, rear seat entertainment and digital antenna business, which we expect will continue to grow, we have secured a 5-year $160 million contract with Daimler-Benz and a contract with Jaguar Land Rover to build multidigital tuner modules for their next multimedia head units. The production starts in 2016 and 2014 respectively. This technology offers tremendous savings to the carmakers, and we believe this contract will be the first of many. In addition, over the last few months, we had been awarded several new projects from major OEs, including for GM, the development of a new multimedia connectivity base rear seat entertainment solution for a premium vehicle, as well as a seat top DVD rear seat entertainment system with smartphone connectivity for their Accessory business. For Nissan rear seat entertainment for the Infiniti QX60 vehicle; for Jaguar and Land Rover, the development of a software project for automotive TV; and for Ford Motor Company, the customized Ford and Lincoln-specific versions of a remote start keyless entry and security smartphone app and hardware for premium Ford and Lincoln vehicles. In addition, we have recently won several new OE contracts. Unfortunately I am not at liberty to share details on them. However, I will do so on future calls. With the exception of Ford, which has just launched, the effect of most of these new programs will not be felt in fiscal '14, but I believe that these programs are indicative of the potential for our global automotive business. For fiscal '14, although we see growth in certain parts of our Automotive business, we are projecting a soft first half for aftermarket sales, and we are anticipating the decline in aftermarket satellite radio sales as more and more cars come equipped with satellite radio. For the year, we expect OEM to increase, which will be a positive for margins, and we expect aftermarket sales to reverse the declining trend based on new products coming to market. Some potential drivers included the Telematics category as car connection rolls out throughout the year. The new programs include the CES introduced key charging cradle, a new Android-based rear-seat entertainment system, Siri voice control for select vehicles and new OE style radios. We maintained first mover advantage with the mobile content venture. The launch date has been pushed back to the fourth quarter, but we remain just as bullish on the opportunities Dyle TV will deliver once this product hits the market. In premium audio, our premium audio segment includes the high end speaker lines Klipsch, Yamo, Energy, Magna and Heco. Fiscal '14, we reported sales of $193 million, which is up slightly from the prior year. Similar to the automotive segment, our domestic business was strong, and we saw some weakness in Eurozone countries, which offset this growth. Domestically, Klipsch has expanded distribution across all its brands, and its headphone and soundbar categories are growing. Klipsch continues to lead across all distribution with the S4, S4I product families and continues its expansion into the action sports world with the S4I rugged and the A5I lifestyle products. We continue to add to our ear and over-ear headphone line, adding to the passive and noise canceling line with mode passive and the youth-oriented Eagle models scheduled for the early fall. In sound bars, Klipsch and Energy hold the #1 spot at Best Buy and Mongolia with the Klipsch SB1 and the Power Bar Elite. In addition, Klipsch and Energy will deliver 2 sound-based products this fall to further support the high performance consumer demand with simple plug-and-play solutions consumers want. We support the continued expansion into the connected lifestyle experience. The new Klipsch music centers have launched the first of 3 Bluetooth models that deliver high-performance sound and portability. This year, we plan to focus more resources on the professional and commercial markets. We had a solid base of business with customers like Hard Rock Hotel, Margaritaville restaurants; theater chains like Cinepolis, Regal Cinemas, and Lumiere Pavilions in China. There are opportunities to expand our commercial footprint both in the U.S. and Europe, and we believe we are well-positioned to do so. Overall, we believe our premium audio business will be the biggest growth driver in fiscal '14, with a growth rate of approximately 9%. Our third segment, Consumer Accessories, consists primarily of RCA, Acoustic Research and Terk domestically and Schleicher and Oehlbach in Europe. We sell a host of products, remote controls, reception products, wireless speakers and sound systems, a strong power and charging portfolio and select digital consumer products. Domestically, we hold the #1 market share for unit sales of universal remotes. We are #1 in both dollars and units for reception products and #1 in outdoor, wired and wireless speaker unit sales. In fiscal '13, we posted sales of $214.3 million, nearly flat with last year. Our domestic sales were up 2.8%, driven by strong revenue in reception products and solid growth in the wireless portable charging products like our wall plate line. Expanded distribution also aided the increase as we added a number of home furnishing, do-it-yourself chains, discount stores and drug chains as customers both in the United States and Europe. New AR wireless speakers were launched at Lowe's, Bed, Bath & Beyond, Home Depot, HHGregg, Fry's PC Richards, and RadioShack, 3 of those are new distribution partners. In Europe, we have entered into a 3-year agreement with Saturn for AV Accessories. Saturn is a leading German retailer that belongs to the Metro group, the largest electronic retailer in Europe. New RCA charging products continue to gain distribution and consumer acceptance, and we have several new products slated for launch in Q3 and that include multiple port wall plate chargers, and which are a top consumer demand charging product, now that most households have more than 6 devices all needing charging. Bluetooth Speakers and new sound flow audio products are scheduled for the third quarter. And we continue development on a streaming-enabled digital antenna to provide the best value in TV entertainment and we'll have additional information on these products on future calls. We are projecting that sales for the Consumer Accessories group will likely be close to this year's for these reasons: We will continue to exit certain lower margin product categories as we have been doing consistently over the last several years in an effort to increase profit margins. This year, we have exited camcorders and reduced the SKU count in conventional MP3 as they no longer are a profit or sales driver for us. As a result, I expect that we'll be removing approximately $20 million to $25 million of products from our mix. However, there is no inventory risk associated with this exit. Softness throughout Europe and Germany still persists, and we expect this will have a negative to neutral effect on our German Accessories operation. We'll also have a number of programs in presentation in approval stages right now that could result in improved numbers for the group. Keep in mind that when I say overall flat sales in Consumer Accessories, if you remove the categories that we have planned to exit, our accessory products show an approximate 10% growth rate. In summary, we did a little over $835 million in sales in fiscal '13, and we are estimating approximately $840 million in fiscal '14. Automotive will be approximately $413 million. Premium audio will be approximately $210 million and consumer Accessories will be approximately $216 million. We posted EBITDA of $60.4 million and adjusted EBITDA of $67.5 million, and we generated free cash of $30 million in fiscal '13. Our current budget calls for fiscal '14 EBITDA of $62 million, but better free cash flow of approximately $37 million and gross margins should come in at 28.8%. This projection takes into account again at minimum $20 million of lower margin commoditized products that we are exiting. While we still maintain a healthy business and remain the exclusive aftermarket supplier to Sirius XM, this product category continued shifting from the aftermarket to the OE side, and we are anticipating a $14 million decline in sales for fiscal '14. Anticipated weakness in the Eurozone throughout the year with modest increase in the second half versus the first. And there is also approximately $12 million in sales through our Venezuelan operation that we have not projected due to the uncertainties in the country's economic policies as there is currently no mechanism for the conversion of bolivar to dollars. Although we believe this situation is temporary, we have not projected sales in Venezuela for fiscal '14. All this considered, we expect our business to be up modestly this year on a consolidated basis, but when you factor in 45 million plus for commodity products, satellite radio in Venezuela, I think you'd see that of our other businesses continue to grow within the 5% to 6% range. Our margins will trend upwards from fiscal '13, approximately 50 basis points, with a projected mix of products that we have slated for the year. And our goal remains to get our gross margins north of 30%, and that will come organically, as well as from some smaller tuck-in acquisitions we may make. We have expanded our retail distribution during the past year to a wider selection of retailers, and we will expand our commercial business further in fiscal '14. We're operating lean, and we're investing in our infrastructure. We're in the process of rolling out our upgraded ERP system for our Klipsch and Invision businesses. Once complete in fiscal '15, we anticipate a total savings in the neighborhood of $4 million as a result of this upgrade and some facility consolidation. Our technical capabilities and resources have never been stronger. We have moved the company from an import distribution model to a leading manufacturer in our specific categories with over 30% of our revenue produced in our own facilities. With 280 engineers on staff, we are creating technology, our own technology, for the future. We have expanded our distribution globally, and although we have seen a significant rise in our total revenue, more importantly, we have increased margins by 46% and nearly tripled EBITDA over the last 3 years. And although we have room for improvement, I do believe the company is headed in the right direction. And with that, I'll turn the call now over to Mike, and then when he is done, we will open it up for questions. So Mike?

Thanks, Pat. Good morning. With the change in our reporting structure, we have a lot of information to cover. I'm going to tailor my remarks to the way we reported in our Form 10-K, and hopefully this will provide you with a better insight into our operations and performance. We reported net sales of $385.6 million, an increase of $128.5 million or 18.2%. Within this, automotive sales were $427 million, up 43.7%, driven by the additional -- driven by the addition of Hirschmann and gains in our domestic OEM business, such as new programs with Ford and Nissan, which began in the second quarter. We also got a tick-up from new product sales, mobile iPad and iPod interfaces. Offsetting these increases were declines in the domestic aftermarket for mobile audio and satellite radio products. Internationally, automotive sales were up due to Hirschmann, but down in the aftermarket, due to slower car speaker sales in Europe. OEM products accounted for approximately 33% of total sales in fiscal '13 versus 19% to 20% in fiscal '11 and fiscal '12. Premium auto sales were $193 million, up $1.6 million year-over-year or 0.8%. Our sales of headphones increased by 14.4%. Sound bars, which is a relatively new category, was up over sevenfold. Offsetting these increases were the impact of Europe, where we had approximately a 19% decrease in sales. Consumer Accessories sales were $214.3 million, down $1.3 million or 0.6%. This number is a bit misleading, however, as declines were due to us exiting lower margin categories, almost $12 million in sales throughout the fiscal year. Adjusting for this planned exit of these product lines, our domestic business was up 5% year-over-year as much of the increase was driven by growth in the wireless speaker category, and increased sales of portable power lines and power supply systems. Internationally our sales declined 8.6%. In fiscal year '13, automotive comprised 51.1% of our total sales. Premium auto was 23.1% and consumer Accessories was 25.6%. This compares to 42% for Automotive, 27.1% for Premium and 30.5% Consumer Accessories in fiscal year '12. Our 5 largest customers represented 28% of total sales, which is consistent with recent years and one customer accounted for more than 10% of our sales. As Pat mentioned, the euro translation impacted our top line by approximately $17.6 million. Our gross profit margins came in at 28.3% in fiscal year '13, versus 28.7% in fiscal year '12, slightly higher than our prior guidance, but down 40 basis points for the comparable periods. As we just reported, we now break out gross margin percentage for each of our business segments. In the automotive segment, our gross margins increased 220 basis points to 25 -- 26.9%. This was primarily due to the acquisition of Hirschmann, higher sales of OEM-related products and the net impact of the currency devaluation in Venezuela. Offsetting this increase was a decrease in sales of higher margin car speakers in Europe and unfavorable swings between hedged costs and related sales. Gross margins in Premium Audio segment declined 410 basis points to 33.9%. However, this is not a product sales-related. It's primarily the result of one, higher inventory provisions, both for warranty; and the cost of moving our Asia warehouse facilities. The mix, given the impact of lower international sales in Europe, also impacted margins. In our Consumer Accessories segment, we saw 110 basis point increase to gross margins to 25.9%. This was all due to the product mix as we sold fewer low-margin consumer products and more of our newer higher margin product lines such as wireless speakers and some of our charging and power products. The strong increases we've seen domestically were offset somewhat by the European environment. Margins should continue to trend upwards, and our goal remains to get our gross margins over 30%. Operating expenses of $195.1 million increased by $36 million, though a percentage of sales increased marginally by 0.9%. Excluding Hirschmann, operating expenses, which were $43 million, our core overhead declined by $7 million or 4.4% despite increases in advertising and marketing to raise awareness of our product lines and expand both our distribution and consumer adoption. Excluding Hirschmann, the increases in operating expenses were partially offset by a reduction in our depreciation expense, headcount reduction in some of our other operating groups, lower commissions tied to net sales, these are non-Hirschmann sales, lower occupancy cost as we purchased the Klipsch headquarter in fiscal '13 and lower professional fees as patent lawsuits have ended. We reported operating income of $41.7 million versus operating income of $43.9 million last fiscal year. Other net for fiscal year '13 included net charges in connection with the patent suit of approximately $2.7 million and losses on foreign exchange contracts of roughly $2.7 million, which were incurred with the Hirschmann acquisition. These charges were partially offset by one, income recorded and related to the favorable settlements received by Klipsch of approximately $1.1 million: and rental income of approximately $1.1 million. We recorded interest and bank charges for bank obligations of $8.3 million in fiscal year '13 versus $5.6 million in fiscal year '12, principally as a result of increased borrowings outstanding to fund the Hirschmann acquisition. Equity and income of equity investees was $4.9 million versus $4 million, a $900,000 year-over-year improvement as our equity investees markets continue to improve. We recorded an income tax expense of $13.2 million in both fiscal year '13 and fiscal '12. This is based on an effective tax rate of 37% in fiscal '13 and 34% in fiscal '12. I will address fourth quarter impact on tax rates in our discussions of fourth quarter later on in this presentation. We reported net income of $22.5 million and net income per common share of $0.95 diluted in fiscal '13 versus net income of $25.6 million or $1.10 per diluted share in fiscal year '12. Our EBITDA came in at $60.4 million versus $54.8 million in fiscal year '12, an increase of $5.2 million. Adjusted EBITDA was $67.5 million versus $60.4 million -- $60.7 million in fiscal year '12, an increase of $6.8 million. The reconciliations are as follows: One, in fiscal '13, stock-based compensation was $435,000 versus $1.1 million in fiscal '12; two, net charges related to MPEG suit after a $7.1 million of settlements with our vendors were $2.7 million in fiscal '13 versus $3.6 million in fiscal year '12; three, we had $1 million in funds recovered as part of a Klipsch counterfeiting suit in fiscal year '13 versus nothing in fiscal '12; four, this was mostly offset by Asian restructuring charges in fiscal '13 of approximately $800,000 versus nothing last year; five, we had $1.5 million in acquisition-related costs in fiscal '13 and $2.8 million in fiscal '12; and finally, we had op losses on foreign exchange contracts of $2.7 million in fiscal '13 versus a gain of $1.6 million in fiscal '12, a difference of roughly $4.3 million. Taking everything into account, there were $7.1 million in adjustments to EBITDA in fiscal year '13 and $5.9 million adjustments last fiscal year. Now we like to address the fourth quarter. Our Form 10-K includes annual comparison for each of the segments based on our new reporting structure, but does not have detailed segment reporting on a quarterly basis yet. This will be reported on a go-forward basis beginning with our first quarter report to you in July. For the fourth quarter, on a consolidated basis only. We reported net sales of $206.8 million, up 17.1% over net sales of $176.6 million. The big increase was Hirschmann, which accounted for $37.7 million. Domestically, our mobile OEM group rose for the quarter on the heels of a strong fourth quarter at Invision for rear seat entertainment system and offset by declines in the aftermarket, satellite radio and mobile audio. We also experienced increases in our Domestic Accessories and Premium Audio segments, offset by weakness in the Eurozone, which we have discussed. Overall sales at Klipsch both domestically and abroad were up in the fourth quarter. Gross profit came in at 29.8% versus 31.5% in the fourth quarter last year. There was some activity in the gross profit for both the fourth quarter of 2013 and the fourth quarter of 2012. This year's fourth quarter was adjusted for increased inventory provisions and a customer claim. This claim is a result of a negotiation in which the vendor, customer and VOXX participated in. Within both of these events, gross -- without both of these events, gross profit would have been 30.9%. Fourth quarter fiscal '12 adjusted for charges that were in the cost of goods sold during the year, which were adjusted to the other expense line in the fourth quarter fiscal 2012, and the gross profit margin accounting for this would have been 30.8% for fourth quarter fiscal 2012. We continue to experience a similar pattern for MDF releases, $3.4 million for the entire fiscal year '13 versus $3.7 million in fiscal '12. So as you can see, it is not a product growth issue. Operating expenses were $49.7 million, an increase of $7.9 million for the comparable quarters. Excluding Hirschmann, which was not in our fiscal '12 comparison, operating expenses were down $3 million. Pretax net income was $17.7 million versus $13.9 million in last year's fourth quarter. The effective tax rate in fourth quarter fiscal '13 was 41.9% versus 21.6% in fiscal year '12, which impacted the total fiscal tax rate. During fiscal fourth quarter fiscal 2012, the company completed an R&D study and a remeasurement of state tax provisions, which reduced the fourth quarter -- fiscal fourth quarter effective tax rate. This did not repeat in our fourth quarter of 2013. We reported net income of $10.3 million or $0.43 per diluted share versus $10.9 million or $0.46 per diluted share. EBITDA was $24 million versus $17.6 million, an increase of $6.4 million. On an adjusted basis, EBITDA was $18.4 million versus $18.6 million. Here are how the adjustments break out for the fiscal '13 fourth quarter versus fiscal '12 fourth quarter. One, stock-based compensation was $245,000 fourth quarter '13 versus $354,000 fourth quarter '12; two, a settlement charge of $5.7 million versus a settlement charge of $1 million, an acquisition credit of $181,000 versus a charge of $1.1 million; and our fiscal year fourth quarter includes a gain of -- fourth quarter '12 includes a gain of $1.6 million for FX exchange from the Hirschmann acquisition. There was no gain or loss in fiscal '13 fourth quarter. Before turning to the balance sheet, I'll refer you all to Page 81 and 82 of our Form 10-K where you can find the segment information. I'm not going to read through every line, but instead would like to make a few high-level comments. In this section, we describe what the products make up -- segments of Automotive, Premium Audio and Consumer Accessories. All 3 groups show expenses related to interest and bank charges and depreciation and amortization. The Automotive segment also includes equity income from our equity investee. The final item in our segment reporting is corporate/elimination. This group is responsible for the financing public reporting cost, such as audit and director fees, et cetera. The corporate group also is the operating platform for all of our U.S. corporation and provides accounting, MIS, distribution, logistics and marketing support. This is also inclusive of our overseas buying and engineering offices. These costs are allocated out to the business segments. Our German, Mexican and Venezuelan operations provide their own operating support. The segment groups are charged 6% interest on their outstanding intercompany loans on funds provided by the corporate group. The elimination portion of this column is the basic elimination of intercompany activity and allocations to arrive at consolidated numbers. Now for the balance sheet, our AR turns were 5.5 in fiscal '13 versus 5 in fiscal '12. Our inventory turns were 3.4 versus 3.5 for the same period. On December 31, 2012, the company reached the high point on its bank lines with $181.8 million. The revolver outstanding was $118.1 million and the term loan was $63.7 million. As of February 28, 2013, our bank borrowings under the term loan were $60 million and our revolver was $93.3 million. Our cash balances on February 28, 2013 were $19.8 million versus $13.6 million, a $6 million increase. I would like to point out that we have been discussing impacts in the Eurozone. Our European operations though not more profitable, have been profitable and are generating cash and building on cash balances. Today May 15, the term loan outstanding is $60 million and the revolver is $65 million. A total of $125 million outstanding. Our leverage ratio, which is inclusive of mortgage debt, bank debt and capital leases was $2.8 million on February 28, 2013, and at the end of our first quarter 2014 we're looking at leverage below 2.5. CapEx purchases for the company were approximately $20.2 million for fiscal year '13 versus $12.3 million for fiscal '12. This increase is a result of previously discussed real estate projects, MIS upgrades and leasehold improvements. During the fourth quarter, the company purchased industrial real estate in anticipation of a devaluation in Venezuela. This was done using cash that we had built up in Venezuela. We completed earlier than anticipated the acquisition of our German facility. As we have discussed, the Indiana and German real estate acquisitions reduced overhead by approximately $1.5 million per annum. As an update on our MIS upgrade and integration project, we have been successfully running since March 1 the original VOXX group. Klipsch is slated to come on our system as of June 30. As we progress throughout the year, I will give you further updates. There is one area I would like to quickly address before moving to guidance and that relates to the exercise of options and sale of underlying stock by insiders to 10 B5 programs. As reported in our Form 10-K and proxy, the company awards options to executives at the VP level and above. Because of the complexity in operations of our company, and the resulting lockout periods, we were advised by our counsel years ago that the best way to exercise an option and sell the underlying shares was through the use of a 10b5 plan, where prices are set well in advance and cannot be altered. All of the entire sales seen over the past years were made pursuant to 10b5 plans and were not attributable to executives really selling shares in the open market. Although some purchases were made in the open market recently, certain senior executives have also entered into purchasing programs under 10b5 programs. Lastly, our guidance. Pat covered sales, gross margin and EBITDA. I'll add that: One, our overhead will be increasing as we return the salaries to more competitive levels for VP and below following our cuts in prior years, and we will be investing more in advertising. Most of the increase in our overhead however should be upset by higher gross margins and planned efficiencies. EBITDA should increase by more than $1 million on $5 million on-sales based upon projected mix. If sales come in higher, of course we'll adjust on the upside, but right now, we see domestic offsetting international for the most part. Free cash flow is projected to be approximately $37 million in fiscal '14 and our CapEx should be somewhere north of $12 million. Our strategy remains to lower our overhead, pay down our debt and reduce our interest payments while remaining opportunistic with tuck-in acquisitions as Pat mentioned. Overall, I feel confident in the future direction of the company and believe we have the right financial structure and team in place to capitalize on some very exciting programs and opportunities that are now materializing. Thank you, and at this time, I'll turn the call back to Pat. Patrick M. Lavelle: Okay, Mike, thank you for your detailed report. And now we'll open the call to any questions.

[Operator Instructions] Our first question comes from line of Scott Tilghman from B. Riley. R. Scott Tilghman - B. Riley Caris, Research Division: Wanted to touch on a couple of things. First, Pat, you were breaking up a couple of times at least on my end, and I wanted to clarify that the revenue guidance, the $842 million, excludes any numbers from Venezuela, whereas the $836 million in round numbers for 2013 does include Venezuela. Is that correct? Patrick M. Lavelle: Yes, that's correct. R. Scott Tilghman - B. Riley Caris, Research Division: Okay. Second, just looking at the cost trends, and then Mike, to your point about overhead increasing, we see selling sort of ticking up here in the fourth quarter, G&A ticking up even though we had a lower revenue level than in the fiscal third quarter. Is that part of that increase kicking in there, or is there some other dynamic at work that caused the uptick in expenses relative to the revenue line?

No, the advertising as I said we have been advertising more, and there has really I think if you kind of take out the Hirschmann, you'll see that -- our actual compensation expenses haven't risen yet. R. Scott Tilghman - B. Riley Caris, Research Division: And then let me -- last and then I'll get back in queue, but the engineering line has been fairly consistent adjusting for acquisitions and saw that number come in significantly lower here in the fourth quarter. Just wondering what was causing that.

Actually I look in the fourth quarter, I don't see an engineering labor line. But this year versus last year? R. Scott Tilghman - B. Riley Caris, Research Division: Right. It looks like it was about $5.9 million. You're backing into it with the full year results you offered versus $6.9 million in the third quarter. Just wanted to get that -- some of the upfront money on the Hirschmann contract or is there something else at play there?

I'm sorry. I'm actually looking at this year versus last year. You kind of caught me by -- no, nothing major. We have actually, as we said, we had some headcounts reductions internally here, not related to the Hirschmann people as I've said. So we have reduced some of the engineering expenses.

And our next question comes from the line of Mike Malouf from Craig-Hallum Capital Group. Ross Licero - Craig-Hallum Capital Group LLC, Research Division: This is Ross Licero on for Mike. I had a couple of questions. First you said there were several OEMs that you won for the automotive business that you couldn't really go into detail on, but could you just give us a little more color around the size of the contracts? Are these new customers? Are you just increasing business with current customers? A little color would be helpful. Patrick M. Lavelle: I'm sorry. This is primarily new business with existing customers. At this particular point, until we have everything formal, I think I'll hold back on providing any more detail. But these are new wins for some existing projects where we will get the next program. And then these are also wins for new technology that we haven't provided previously. So that's rather exciting, those new wins. I'll hold until I can formally make some announcements. Ross Licero - Craig-Hallum Capital Group LLC, Research Division: Okay, great. That sounds exciting. And with your new business pipeline, can you let us know how is that looking right now? Patrick M. Lavelle: The pipeline looks good. Again, we have some new program that I announced, one with Daimler-Benze. A portion of that business is also under NRE where we get paid upfront for the developing the portion of the program. So until we deliver the product, we are still generating income off of the NRE. And then the new projects that we're winning, the Daimler-Benz program is completely new to us. These are multi-tuner modules that will house the AM/FM section, the satellite section, the TV tuner section. And we will build these for each geographies marketplace, so that the car manufacturer does not have to go out and retest every time there's a change to -- let's say the center stack. That's very closely propositioned to retest all their radios when the design changes for the center stack. So this technology and putting all the tuners for one geographic market like Europe and China and the United States into one tuner pack that can interface with the center stack will save millions of dollars of testing and engineering time for the OEM. So we're pretty excited about those multi-tuners. Ross Licero - Craig-Hallum Capital Group LLC, Research Division: Okay, great. And I just got one more. For the Dyle launch, it looks like it's been pushed back in the fourth quarter. What's driving that and is that -- how do guys factor that into your guidance for this year? Patrick M. Lavelle: We have very, very little sales posted or projected for it, and it will be very late in the fourth quarter. This is a -- this really stems from what MCV and one of their vendors, their chip manufacturer vendors are doing. The chip manufacturer is a little late on the program and therefore, it's all pushing it back for us because MCV needs that chip. We need to get that chip to build out the product. Ross Licero - Craig-Hallum Capital Group LLC, Research Division: Okay, great. So the contracts with the content providers have been negotiated and that's all settled? Patrick M. Lavelle: That's all settled, that's all done. We're just waiting for the chips so that we can continue doing our end.

[Operator Instructions] And we have question and it comes from the line of Scott Tilghman from B. Riley. R. Scott Tilghman - B. Riley Caris, Research Division: Just wanted to circle bock on the product exits. You talked a little bit about some of the Eurozone softness in the first half of the year. Obviously, the euro is closer to parity against last year, so less of an impact there. But thinking about the product exits, will those be fairly evenly spread over the course of the year or are you doing more early on? How should we think about that in terms of the pace of revenue during the four quarters? Patrick M. Lavelle: You'll see as we exit the category, you'll see that we will not make that particular sale in that particular quarter and that will be -- that will follow our year, whether it's -- we have higher incident of sale in our third quarter for our Christmas quarter. So we'll follow the year, the way you would normally see it. But some of these categories, when we run the numbers, it's -- at best case at times it's trading dollars. And we have much, much better use for our dollars. So we made the call to exit these categories. This is part of the CE space. We reached end-of-life, ASPs dropped to a point where it doesn't pay any longer. So -- and again as I indicated, we have no exit loss with any of this. These are all planned, and it's better to have a planned exit than to be forced out when the business just goes down. So that's pretty much what we're doing. R. Scott Tilghman - B. Riley Caris, Research Division: Okay, and then second, when the Car Connection program and the OBD devices, I know you've talked about being in discussions with some of the insurance companies previously. Anything new to report there in terms of potential opportunities going forward? Or is it still just in the discussion stage? Patrick M. Lavelle: Scott, until we have more formal information, I mean all of the insurance companies we are talking to are interested. They're engaged, but they are large companies. And like our OEM business, putting a program together will take some time. But I can tell you the interest level is high, and we are positioned with our partners and our product very well.

We have no further questions at this time. [Operator Instructions] We have no further questions. Patrick M. Lavelle: If there are no further questions, I want to thank you for joining us this morning. I would like to express the company's appreciation for your interest and support. And I wish you all a good day.

Thank you, ladies and gentlemen. That concludes of the conference for today. Thank you for joining us. You may now disconnect.