Audiovox 1997 Annual Report Download - page 11

The net sales and percentage of net sales by product line and
marketing group for the fiscal years ended November 30, 1997, 1996
and 1995 are reflected in the following table. Certain reclassifications
have been made to the data for periods prior to fiscal 1996 in order to
conform to fiscal 1997 presentation.
Years Ended November 30,
1997 1996 1995
Net sales:
Communications
Cellular wholesale $390,230 61.1% $350,299 58.6% $261,997 52.3%
Cellular retail 6,280 1.0 7,665 1.3 14,177 2.8
Activation
commissions 31,061 4.9 33,102 5.5 38,526 7.7
Residual fees 4,688 0.7 4,828 0.8 4,781 1.0
Other 12,141 1.9 12,785 2.1 11,293 2.3
Total
Communications 444,400 69.5 408,679 68.4 330,774 66.1
Automotive
Sound 91,763 14.4 98,303 16.4 101,757 20.3
Security and
accessories 97,446 15.2 87,234 14.6 67,560 13.5
Other 4,701 0.7 2,879 0.5 649 0.1
Total
Automotive 193,910 30.3 188,416 31.5 169,966 33.9
Other 772 0.1 820 0.1 – –
Total $639,082 100.0% $597,915 100.0% $500,740 100.0%
Communication Results
The Communications group is composed of ACC and Quintex,
both wholly-owned subsidiaries of Audiovox Corporation. Since
principally all of the net sales of Quintex are cellular in nature, all
operating results of Quintex are being included in the discussion of
the Communications group’s product line.
Net sales were $444,400, an increase of $35,721, or 8.7%, over the
same period last year. Unit sales of cellular telephones increased
892,000 units, or 43.2%, over 1996. Average unit selling prices
decreased approximately 21.2% but were offset by a corresponding
decrease of 22.9% in average unit cost. The number of new cellular
subscriptions processed by Quintex decreased 9.1%, with a corre-
sponding decrease in activation commissions of approximately
$2,041. The average commission received by Quintex per activation,
however, increased approximately 3.2% from last year. Unit gross
profit margins increased to 11.1% from 9.0% last year, primarily due to
increased unit sales and reduced unit costs. Operating expenses
decreased to $49,582 from $50,710. As a percentage of net sales,
operating expenses decreased to 11.2% during 1997 compared to
12.4% in 1996. Selling expenses decreased $3,203 from last year, pri-
marily in advertising and divisional marketing, partially offset by
increases in commissions and salesmen salaries. General and
administrative expenses increased over 1996 by $572, primarily in
office salaries and temporary personnel. Warehousing and assembly
expenses increased over 1996 by $1,503, primarily in tooling and
direct labor. Pre-tax income for 1997 was $11,582, an increase of
$8,476 compared to last year.
Though gross margins have improved over last year, management
believes that the cellular industry is extremely competitive and that
this competition could affect gross margins and the carrying value of
inventories in the future.
The following table sets forth for the periods indicated certain
statements of income data for the Communications group expressed
as a percentage of net sales:
Communications
1997 1996
Net sales:
Cellular product - wholesale $390,230 87.8% $350,299 85.7%
Cellular product - retail 6,280 1.4 7,665 1.9
Activation commissions 31,061 7.0 33,102 8.1
Residual fees 4,688 1.1 4,828 1.2
Other 12,141 2.7 12,785 3.1
Total net sales 444,400 100.0 408,679 100.0
Gross profit 66,117 14.9 60,245 14.7
Total operating expenses 49,582 11.2 50,710 12.4
Operating income 16,535 3.7 9,535 2.3
Other expense (4,953) (1.1) (6,429) (1.6)
Pre-tax income $ 11,582 2.6% $ 3,106 0.8%
Automotive Results
Net sales increased approximately $5,494 compared to last year,
an increase of 2.9%. Increases were experienced in security and
accessories and were partially offset by a decrease in sound products.
A majority of the increase was from the group’s international opera-
tions, both from an increase in existing business and the formation of
a new subsidiary in Venezuela. Automotive sound decreased 6.7%
compared to last year, due to the transfer of the Heavy Duty Sound
division to a new joint venture. Excluding sound sales from the
Heavy Duty Sound division for fiscal 1997 and 1996, sound sales
decreased 0.6%. Automotive security and accessories increased
11.7% compared to last year, primarily due to increased sales in
Prestige Security, Protector Hardgoods and alarms and video, partial-
ly offset by decreases in net sales of AA security and cruise controls.
Gross margins increased to 20.8% from 18.9% last year. This increase
was experienced in the AV and Private Label sound lines and cruise
control, Protector Hardgoods and AA security accessory lines, par-
tially offset by decreases in Prestige Security. Operating expenses
increased to $27,989 from $25,559. Selling expenses increased over
last year by $1,151, primarily in our international operations, in com-
missions and advertising. General and administrative expenses
increased over 1996 by $1,512, primarily from our international opera-
M a n a g e m e n t ’ s D i s c u s s i o n a n d A n a l y s i s o f F i n a n c i a l C o n d i t i o n
a n d R e s u l t s o f O p e r a t i o n s
(continued)
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