Audiovox 2003 Annual Report Download - page 49
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o The above decreases were offset by a $947 increase in employee
benefits due to increased profit sharing accruals and costs under the
employee health care plan.
o Taxes and licenses increased $371 primarily due to a 2002 battery
recycling refund that did not repeat in 2003.
o Additionally, insurance expense increased $409 as a result of higher
premiums for general and umbrella insurance policies as a result of
the increase in sales and business activity.
Warehousing and technical support expenses increased $234 for fiscal 2003
from 2002, primarily as a result of:
o Increases in direct labor, payroll taxes and benefits of $470 due to
additional personnel in engineering for product development, testing
and warranty call center for customer service as products have become
more complex.
o The above increase was partially offset by a decrease in overseas
buying offices of $263 due to non−usage of the Korean buying office.
Numerous other individually insignificant fluctuations account for the remaining
net change in operating expenses.
Pre−tax Income (Loss)
As a result of the increase in sales due to new product introductions, less
inventory write−downs and a reduction in operating expenses, pre−tax income for
fiscal 2003 was $5,617, compared to a pre−tax loss of $24,906 for fiscal 2002.
Management believes that the wireless industry is extremely competitive and
that this competition could affect gross margins and the carrying value of
inventories in the future as new competitors enter the marketplace. The Company
competes against suppliers with significantly greater financial resources and
who are able to offer more extensive advertising and greater promotions than the
Company does. This pressure from increased competition is further enhanced by
the consolidation of many of Wireless' customers into a smaller group, dominated
by only a few, large customers. Also, timely delivery and carrier acceptance of
new product could affect our quarterly performance. Our suppliers have to
continually add new products in order for Wireless to improve its margins and
gain market share. These new products require extensive testing and software
development which could delay entry into the market and affect our sales in the
future. In addition, given the anticipated emergence of new technologies in the
wireless industry, the Company will need to sell existing inventory quantities
of current technologies to avoid further write−downs to market.
47