Audiovox 2003 Annual Report Download - page 24

we conduct a substantial amount of business could have a material adverse effect
on our operations. Some of the countries we purchase products from are: China,
Japan, South Korea, Taiwan and Malaysia. China and Japan have been affected by
such sanctions in the past. In addition, the United States has imposed, and may
in the future impose, sanctions on foreign companies for anti−dumping and other
violations of U.S. law. If sanctions were imposed on any of our suppliers or
customers, it could have a material adverse effect on our operations.
We May Not Be Able to Sustain Our Recent Growth Rates or Maintain Profit
Margins.
Sales of our wireless products, a large portion of our business that
operates on a high−volume, low−margin basis, have varied significantly over the
past several years, from approximately $423 million in fiscal 1998 to
approximately $1.4 billion for fiscal 2000 back to approximately $806 million in
2003. Sales of our electronics products also increased significantly from
approximately $182 million for fiscal 1998 to approximately $518 million for
fiscal 2003. We may not be able to continue to achieve this overall revenue
growth rate or maintain profit margins because, among other reasons, of
increased competition and technological changes, which can be seen in the
decline of our Wireless Group. In addition, we expect that our operating
expenses will continue to increase as we seek to expand our business, which
could also result in a reduction in profit margins if we do not concurrently
increase our sales proportionately.
If Our Sales During the Holiday Season Fall below Our Expectations, Our Annual
Results Could Also Fall below Expectations.
Seasonal consumer shopping patterns significantly affect our business. We
generally make a substantial amount of our sales and net income during
September, October and November, our fourth fiscal quarter. We expect this trend
to continue. December is also a key month for us, due largely to the increase in
promotional activities by our customers during the holiday season. If the
economy faltered in these periods, if our customers altered the timing or
frequency of their promotional activities or if the effectiveness of these
promotional activities declined, particularly around the holiday season, it
could have a material adverse effect on our annual financial results.
A Decline in General Economic Conditions Could Lead to Reduced Consumer Demand
for the Discretionary Products We Sell.
Consumer spending patterns, especially discretionary spending for products
such as consumer electronics and wireless handsets, are affected by, among other
things, prevailing economic conditions, wage rates, inflation, consumer
confidence and consumer perception of economic conditions. A general slowdown in
the U.S. economy or an uncertain economic outlook could have a material adverse
effect on our sales.
We Depend Heavily on Existing Management and Key Personnel and Our Ability to
Recruit and Retain Qualified Personnel.
Our success depends on the continued efforts of John J. Shalam, Philip
Christopher, C. Michael Stoehr and Patrick Lavelle, each of whom has worked with
Audiovox for over two decades, as well as our other executive officers and key
22