Audiovox 2003 Annual Report Download - page 7

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to benefit from growing market opportunities in the wireless industry and to
exploit emerging niches in the consumer electronics business.
The Company operates in two primary markets:
o Wireless communications. The Wireless Group (Wireless), which accounts
for approximately 61% of revenues in fiscal 2003, sells wireless
handsets and accessories through domestic and international wireless
carriers and their agents, independent distributors and retailers.
o Mobile and consumer electronics. The Electronics Group (Electronics),
which accounts for approximately 39% of revenues in fiscal 2003, sells
autosound, mobile electronics and consumer electronics through
domestic and international distribution channels primarily to mass
merchants, power retailers, specialty retailers, new car dealers,
original equipment manufacturers (OEMs), independent installers of
automotive accessories and the U.S. military.
Since 2001, several factors have affected the Wireless Group. New
subscriber subscriptions have slowed, the consolidation within our wireless
customer base has created a more competitive market with a smaller number of
customers and there has been a slow down in the development of new technologies
which have slowed consumer demand from one technology to another. In addition,
testing for acceptances have become more complex which have caused a slow down
in product introductions. However new technology, such as camera phones, is
expected to have a favorable impact on the Wireless Group.
The Electronics Group has been positively influenced by an increase in the
sale of consumer and mobile electronics. Specifically, sales for portable DVD
players, DVD in a bag products, satellite radios and flat panel screens have
increased due to higher customer demand. In addition, the recent acquisitions of
Recoton trademarks (Jensen(R), Magnate(R), Mac Audio(R), Heco(R), Acoustic
Research(R) and Advent(R)) and Code−Alarm have contributed to the increase in
Electronic Group sales (see Note 6 to the consolidated financial statements) .
The following table shows net sales by group:
Percent
Change
2001 (1) 2002 2003 2001/2003
−−−−−−− −−−−−− −−−−−− −−−−−−−−−−
Wireless $ 979 $ 727 $ 806 (17.7)%
Electronics 298 373 518 73.8 %
−−−−−− −−−−−− −−−−−− −−−−−−−
Total $1,277 $1,100 $1,324 3.7 %
====== ====== ====== =======
(1) See Note (2) of Notes to Consolidated Financial Statements.
To remain flexible and limit our research and fixed costs, the Company does
not manufacture its products. Instead, the Company has relationships with a
broad group of suppliers who manufacture its products. The Company works
directly with its suppliers in feature design, development and testing of all
5