Audiovox 2003 Annual Report Download - page 52

$1,647 in salaries and payroll taxes as a result of hiring additional
employees and increase in employee wages to support the increased
business. Corporate allocations increased $666 and insurance expense
increased $248 due to higher premiums as a result of increased
business activities. In addition, higher costs for the employee health
care plan and increased profit sharing accruals caused employee
benefits to increase $582. The above increases were partially offset
by a $974 decrease in bad debt expense due to the bad debt recovery in
fiscal 2003 of a 2002 customer write−off. The Company does not
consider this decrease in bad debt expense to be a trend in the
overall accounts receivable.
o The increase for the international group was due to $4,533 of Audiovox
Europe expenses and a $743 increase in Malaysia and Venezuela
expenses. Audiovox Europe expenses were primarily comprised of $1,793
in salaries and related payroll taxes, $570 of office expenses, $765
of occupancy costs and $356 of depreciation as a result of the Recoton
acquisition. The increase in Malaysia and Venezuela expenses was
primarily due to an increase in Venezuela's employee benefits of
$1,129 due to a payment made to certain Venezuela executives as a
result of restructuring actions for claims made and for further
potential termination claims. The above increase was partially offset
by a $190 decrease in salaries due to employee terminations in
Venezuela.
Warehouse and technical support increased $1,623 or 142.7%. This increase
was primarily due to a $1,385 increase in direct labor and payroll taxes due to
the hiring of additional employees and includes $583 of Audiovox Europe
expenses. In addition, the increase in warehouse and technical support is due to
the hiring of additional engineers as the increase in sales volume has resulted
in the Company providing added customer service. Furthermore, overseas buying
office expenses increased $472 as a result of increased costs associated with
operating this office.
Numerous other individually insignificant fluctuations account for the
remaining net change in operating expenses.
Pre−tax Income (Loss)
As a result of increased sales due to new product introductions and the
Recoton acquisition, increased gross profit, offset by increased operating
expenses, pre−tax income for fiscal 2003 was $29,540, compared to $17,729 for
fiscal 2002.
The Company believes that the Electronics Group has an expanding market
with a certain level of volatility related to both domestic and international
new car sales and general economic conditions. Also, all of its products are
subject to price fluctuations which could affect the carrying value of
inventories and gross margins in the future.
Consolidated Other Income and Expense
Interest expense and bank charges increased $383 during fiscal 2003 from
fiscal 2002, primarily due to interest incurred on German debt acquired as a
result of the Recoton acquisition, offset by lower average borrowings from the
Company's primary credit facility during fiscal 2003.
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