Audiovox 1998 Annual Report Download - page 19

Communication Results
The Communications group is composed of ACC and
Quintex, both wholly-owned subsidiaries of Audiovox
Corporation. Since principally all of the net sales of Quintex
are cellular in nature, all operating results of Quintex are
being included in the discussion of the Communications
group’s product line.
Net sales were $444,400, an increase of $35,721, or 8.7%,
from 1996. Unit sales of cellular telephones increased
892,000 units, or 43.2%, over 1996. Average unit selling
prices decreased approximately 21.2% but were offset by a
corresponding decrease of 22.9% in average unit cost. The
number of new cellular subscriptions processed by Quintex
decreased 9.1%, with a corresponding decrease in activation
commissions of approximately $2,041. The average commis-
sion received by Quintex per activation, however, increased
approximately 3.2% from 1996. Unit gross profit margins
increased to 11.1% from 9.0% in 1996, primarily due to
increased unit sales and reduced unit costs. Operating
expenses decreased to $49,582 from $50,710. As a percent-
age of net sales, operating expenses decreased to 11.2%
during 1997 compared to 12.4% in 1996. Selling expenses
decreased $3,203 from 1996, primarily in advertising and
divisional marketing, partially offset by increases in commis-
sions and salesmen salaries. General and administrative
expenses increased over 1996 by $572, primarily in office
salaries and temporary personnel. Warehousing and assem-
bly expenses increased over 1996 by $1,503, primarily in
tooling and direct labor. Pre-tax income for 1997 was
$11,582, an increase of $8,476 compared to 1996.
Though gross margins have improved over 1996, man-
agement believes that the cellular industry is extremely
competitive and that this competition could affect gross
margins and the carrying value of inventories in the future.
The following table sets forth for the periods indicated
certain statements of income data for the Communications
group expressed as a percentage of net sales:
COMMUNICATIONS
1997 1996
Net sales:
Cellular product—
wholesale............... $390,230 87.8% $350,299 85.7%
Cellular product—
retail ....................... 6,280 1.4 7,665 1.9
Activation
commissions.......... 31,061 7.0 33,102 8.1
Residual fees ............. 4,688 1.1 4,828 1.2
Other.......................... 12,141 2.7 12,785 3.1
Total net sales.... 444,400 100.0 408,679 100.0
Gross profit.................... 66,117 14.9 60,245 14.7
Total operating
expenses.................... 49,582 11.2 50,710 12.4
Operating income......... 16,535 3.7 9,535 2.3
Other expense .............. (4,953) (1.1) (6,429) (1.6)
Pre-tax income .............. $ 11,582 2.6% $ 3,106 0.8%
Automotive Results
Net sales increased approximately $5,494 compared to
1996, an increase of 2.9%. Increases were experienced in
security and accessories and were partially offset by a
decrease in sound products. A majority of the increase was
from the group’s international operations, both from an
increase in existing business and the formation of a new
subsidiary in Venezuela. Automotive sound decreased 6.7%
compared to 1996, due to the transfer of the Heavy Duty
Sound division to a new joint venture. Excluding sound sales
from the Heavy Duty Sound division for fiscal 1997 and 1996,
sound sales decreased 0.6%. Automotive security and
accessories increased 11.7% compared to 1996, primarily
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The net sales and percentage of net sales by product line and marketing group for the fiscal years ended November 30,
1997, 1996 and 1995 are reflected in the following table. Certain reclassifications have been made to the data for periods prior
to fiscal 1996 in order to conform to fiscal 1997 presentation.
Years Ended November 30,
1997 1996 1995
Net sales:
Communications
Cellular wholesale ...................................... $390,230 61.1% $350,299 58.6% $261,997 52.3%
Cellular retail............................................... 6,280 1.0 7,665 1.3 14,177 2.8
Activation commissions ............................. 31,061 4.9 33,102 5.5 38,526 7.7
Residual fees............................................... 4,688 0.7 4,828 0.8 4,781 1.0
Other ........................................................... 12,141 1.9 12,785 2.1 11,293 2.3
Total Communications ........................... 444,400 69.5 408,679 68.4 330,774 66.1
Automotive
Sound .......................................................... 91,763 14.4 98,303 16.4 101,757 20.3
Security and accessories............................ 97,446 15.2 87,234 14.6 67,560 13.5
Other ........................................................... 4,701 0.7 2,879 0.5 649 0.1
Total Automotive.................................... 193,910 30.3 188,416 31.5 169,966 33.9
Other ............................................................... 772 0.1 820 0.1 — —
Total ......................................................... $639,082 100.0% $597,915 100.0% $500,740 100.0%