Audiovox 2000 Annual Report Download - page 14

During this period, the Company’s unit gross profit margin declined due to
continued strong competition and increased sales of digital handsets,
which have a lower gross profit margin percentage than analog handsets.
Despite the margin decline, the Company’s gross margin dollars increased
significantly due to the large increases in net sales.
Sales by the Electronics Group were $188.4 million in 1996 and $193.9
million in 1997, but declined in 1998 to $185.0 million, primarily due to a
financial crisis in Asia, particularly Malaysia. Sales for fiscal 1999 were
$242.5 million. Sales for fiscal 2000 were $277.8 million. During this
period, the Company’s sales were impacted by the following items:
• the growth of our consumer electronic products business from $2.9
million in fiscal 1996 to $60.9 million in fiscal 2000
• the introduction of mobile video entertainment systems and other new
technologies
• the Asian financial crisis in 1998
• growth of OEM business
Gross margins in the Company’s electronics business increased from
18.9% in 1996 to 21.6% for fiscal 2000 due, in part, to higher margins in
mobile video products and other new technologies and products.
The Company’s total operating expenses have increased at a slower rate
than sales since 1996. Total operating expenses were $83.3 million in 1996
and $113.8 million in 2000. The Company has invested in management sys-
tems and improved its operating facilities to increase its efficiency.
During the period 1996 to 2000, the Company’s balance sheet was
strengthened by the conversion of its $65 million 61/4% subordinated con-
vertible debentures due 2001 into approximately 9.7 million shares of
Class A common stock, the net gain of $23.7 million from the sale of
CellStar stock held by the Company and the 2.3 million share follow-on
offering in which the Company received $96.6 million net proceeds.
All financial information, except share and per share data, is presented in
thousands.
Results of Operations
The following table sets forth for the periods indicated certain statements
of income data for the Company expressed as a percentage of net sales:
Percentage of Net Sales
Years Ended November 30,
1998 1999 2000
Net sales:
Wireless
Wireless products..................................... 65.1% 76.2% 81.7%
Activation commissions ........................... 3.5 2.1 1.7
Residual fees............................................ 0.6 0.3 0.1
Other ......................................................... 0.9 0.5 0.2
Total Wireless....................................... 70.0 79.1 83.7
Electronics
Mobile electronics.................................... 14.1 10.1 7.9
Sound........................................................ 13.4 7.1 4.6
Consumer electronics............................... 1.9 3.3 3.6
Other ......................................................... 0.6 0.3 0.2
Total Electronics ................................... 30.0 20.9 16.3
Total net sales ...................................... 100.0 100.0 100.0
Cost of sales..................................................... (85.6) (88.4) (91.0)
Gross profit....................................................... 14.4 11.6 9.0
Selling............................................................... (5.7) (3.2) (2.7)
General and administrative.............................. (5.9) (3.8) (2.9)
Warehousing, assembly and repair ................. (2.0) (1.3) (1.1)
Total operating expenses ..................... (13.6) (8.3) (6.7)
Operating income ............................................. 0.8 3.3 2.3
Interest and bank charges................................ (0.8) (0.4) (0.4)
Income in equity investments and
related income, net ...................................... 0.2 0.3 0.2
Gain on sale of investments ............................ 0.1 0.3 0.1
Gain on hedge of available-for-sale
securities ...................................................... — — 0.1
Gain on issuance of subsidiary shares ............ — 0.3 —
Other income (expense).................................... 0.3 (0.2) 0.1
Provision for income taxes ............................... (0.1) (1.3) (0.9)
Extraordinary item ............................................ — — 0.1
Net income ....................................................... 0.5% 2.3% 1.6%
MANAGEMENT’SDISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
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