Audiovox 2000 Annual Report Download

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AUDIOVOX
2000
Revolutionizing the telecommunications
and consumer electronics industries.
Annual Report 2000

Table of contents

  • Page 1
    2000 AUDIOVOX Revolutionizing the telecommunications and consumer electronics industries. Annual Report 2000

  • Page 2
    ... cell phones. Nearly nine million cell phones sold. Electronics Division becomes subsidiary, Audiovox Electronics Corp. (AEC). AEC to supply mobile video entertainment systems to FORD. C O R P O R A T E P R O F I L E We generally market our products under the well-recognized Audiovox brand name...

  • Page 3
    ... shares to Toshiba Corporation. for 2000: • a pre-tax charge of $8.2 million for an analog inventory cost reduction; • a $2.2 million extraordinary item related to the extinguishment of debt; • a pre-tax gain of $3.9 million on the sale of marketable securities and related recognition of gain...

  • Page 4
    ... digital product development. • We formed a wholly-owned subsidiary (Audiovox Electronics Corp.) for our electronics group to allow them to focus on market penetration and diversification. Their mobile video and consumer product sales groups both posted record years. During the year, AEC was named...

  • Page 5
    ...for 2001 are to continue our sales and operational initiatives so that we can increase shareholder value and see our stock price rise to a level commensurate with our success. I would like to express my genuine thanks to our management team and all of our employees for their contribution to a record...

  • Page 6
    ... mode and tri-mode models sporting advanced features such as web browsing and data capabilities, two-way short messaging service, T9 predictive text, expanded LCD displays, interchangeable color faceplates and even a phone with a built-in MP-3 player. For carriers that support 3G CDMA2000 1x systems...

  • Page 7
    "As wireless communication technology continues to evolve, Audiovox Communications Corp. is uniquely positioned to meet the ever-changing needs of consumers and service providers." A U D I O V O X 5

  • Page 8
    "As CDMA further advances its position a s t h e l e a d i n g U . S . w i r e l e s s t e c h n o l o g y, A u d i o v o x 's s t r e n g t h in this sector is of growing significance."

  • Page 9
    ... centers and/or sales offices in the United States, Canada, Japan, Korea, Malaysia, Taiwan, Thailand, Peru, Venezuela and the Netherlands. We sell wireless products to the wireless carriers and their respective agents, distributors and retailers. Some of our key customers in 2000 included Verizon...

  • Page 10
    ...DVD will also be included on a number of home audio shelf systems. Included in our consumer electronics group are FRS two-way radios. For 2001 we have added features like Weather Alert and FM Radio. In addition a 5-mile range GMRS unit with built-in GPS, and two base stations will be part of the new...

  • Page 11
    " We a r e c o n f i d e n t t h a t c o n s u m e r acceptance of the Audiovox brand will fuel our expansion and further diversification in consumer electronics." A U D I O V O X 9

  • Page 12
    ...) applications to support the Company's growth and new markets. These applications focused on warranty and repair, product purchases, financial reporting and budgeting. There were also further enhancements to the operating systems and Internet capabilities including the launch of a new web site with...

  • Page 13
    ...Holdings (M) Sdn. Bhd. and Audiovox Venezuela, C.A. The Electronics Group markets automotive sound and security systems, electronic car accessories, home and portable sound products, FRS radios, invehicle video systems, flat-screen televisions, DVD's and navigation systems. Sales are made through an...

  • Page 14
    ... of mobile video entertainment systems and other new technologies • the Asian financial crisis in 1998 • growth of OEM business Gross margins in the Company's electronics business increased from 18.9% in 1996 to 21.6% for fiscal 2000 due, in part, to higher margins in mobile video products and...

  • Page 15
    ...$242,452 in fiscal 1999. This increase was largely due to increased sales in the mobile video and consumer electronics product lines. Sales by the Company's international subsidiaries increased 2.8% in fiscal 2000 to approximately $25.8 million as a result of improvements in the Malaysian subsidiary...

  • Page 16
    ... to effectively exit the active analog market. However, even as Wireless and the wireless communications market continues to shift away from analog to digital technology, Wireless will continue to sell analog telephones on a limited basis to specific customers to support specific carrier programs...

  • Page 17
    ... Shintom common stock. The Company sold the Shintom common stock yielding net proceeds of $27,916 and a gain of $3,501. On March 31, 1999, Toshiba Corporation, a major supplier, purchased 5% of the Company's subsidiary, Audiovox Communications Corp. (ACC), a supplier of wireless products for $5,000...

  • Page 18
    ... new product lines in both categories and were partially offset by decreases in Prestige audio and SPS sound lines. Operating expenses were $38,645 in fiscal 1999, a 19.0% increase from operating expenses of $32,466 in fiscal 1998. Selling expenses increased during fiscal 1999, primarily in salaries...

  • Page 19
    ...of ASA and TALK. During 1998, the Company purchased 400,000 Japanese yen (approximately $3,132) of Shintom debentures and exercised its option to convert the Shintom debentures into shares of Shintom common stock. These shares are included in the Company's available-for-sale marketable securities at...

  • Page 20
    ...to each of the underlying revenue transactions. The consensus is effective for interim or annual periods ending after February 15, 2001. A portion of the Company's sales programs are in the form of volume incentive rebates which, as of November 30, 2000, have been recorded in selling expenses on the...

  • Page 21
    ... The potential loss resulting from a hypothetical 10% adverse change in quoted foreign currency exchange rates, as of November 30, 2000, amounts to $687. Actual results may differ. Certain of the Company's investments in marketable securities and notes payable are subject to risk from changes in the...

  • Page 22
    ... Notes payable Current installment of long-term ...2000, respectively Class B convertible; 10,000,000 authorized; 2,260,954 issued and outstanding Paid-in capital Retained earnings Accumulated other comprehensive income (loss) Gain on hedge of available-for-sale securities, net Treasury stock...

  • Page 23
    ... per share data) Net sales Cost of sales (including inventory write-downs to market in 1998 of $6,600 and an analog inventory cost reduction of $8,152 in 2000) Gross profit Operating expenses: Selling General and administrative Warehousing, assembly and repair Total operating expenses Operating...

  • Page 24
    ... loss, net of tax: - Foreign currency translation adjustment - Unrealized loss on marketable securities, net of tax effect of $(6,202) - Other comprehensive loss - Comprehensive income - Exercise of stock options into 121,300 shares of common stock and issuance of 11,671 shares under the Restricted...

  • Page 25
    ...and equipment, net Income tax benefit on exercise of stock options Changes in: Accounts receivable Receivable from vendor Inventory Accounts payable, accrued expenses and other current liabilities Income taxes payable Investment securities-trading Prepaid expenses and other, net Net cash provided by...

  • Page 26
    ...market a diverse line of products and provide related services throughout the world. These products and services include handsets and accessories for wireless communications, fulfillment services for wireless carriers, automotive entertainment and security products, automotive electronic accessories...

  • Page 27
    ... life of the related heldto-maturity security as an adjustment to yield using the effective interest method. Dividend and interest income are recognized when earned. ( G ) D ERIVATIVE F INANCIAL I NSTRUMENTS The Company, as a policy, does not use derivative financial instruments for trading purposes...

  • Page 28
    ..., 1999 and 2000, the Company had no direct response advertising. ( N ) WARRANTY E XPENSES Warranty expenses are accrued at the time of sale based on the Company's estimated cost to repair expected returns for products. At November 30, 1999 and 2000, the liability for future warranty expense amounted...

  • Page 29
    ... in the statements of income in accordance with the Company's policy on the recognition of such transactions. In February 2000, the Board of Directors of Audiovox Communications Corp. (ACC), declared a dividend payable to its shareholders, Audiovox Corporation, a 95% shareholder, and Toshiba...

  • Page 30
    ... a manufacturer of products purchased by the Company through its previously-owned equity investment, TALK Corporation (TALK). The Company currently holds stock in Shintom and has previously invested in Shintom convertible debentures. The purchase of the Property by AX Japan was financed with a 500...

  • Page 31
    ... As of November 30, 2000, the Company's investment securities consists of $3,273 of available-for-sale marketable securities which consist primarily of 1,530,000 shares of CellStar Common Stock and 1,904,000 shares of Shintom common stock and trading securities of $2,211 which consists of mutual...

  • Page 32
    ...; ASA which acts as a distributor to specialized markets for RV's and van conversions, of televisions and other automotive sound, security and accessory products; and G.L.M. Wireless Communications, Inc. (G.L.M.) which is in the cellular telephone, pager and communications business in the New York...

  • Page 33
    ... 2001, respectively. The obligations of the Company under the Malaysian Credit Agreement are secured by the property and building owned by Audiovox Communications Sdn. Bhd. Outstanding obligations under the Malaysian Credit Agreement at November 30, 1999 and 2000 were approximately $5,843 and $4,693...

  • Page 34
    ... gain (loss) on equity collar recognized for financial reporting purposes Income tax benefit of employee stock option exercises Total income tax expense (benefit) $ 829 1999 $15,477 2000 $14,925 On March 15, 1994, the Company completed the sale of $65,000, 61/4% subordinated debentures due 2001...

  • Page 35
    ... at November 30, 2000. Further, management believes the existing net deductible temporary differences will reverse during periods in which the Company generates net taxable income. There can be no assurance, however, that the Company will generate any earnings or any specific level of continuing...

  • Page 36
    ... at November 30, 1999 and 2000, respectively. (17) Stock-Based Compensation and Stock Warrants ( A ) S TOCK O PTIONS The Company has stock option plans under which employees and nonemployee directors may be granted incentive stock options (ISO's) and non-qualified stock options (NQSO's) to purchase...

  • Page 37
    ... 25,494 $ 1.43 1.33 $ 1.39 1.30 2000 $27,229 22,795 $ 1.27 1.07 $ 1.21 1.01 (b) Restricted Stock Plan The Company has restricted stock plans under which key employees and directors may be awarded restricted stock. Total restricted stock outstanding, granted under these plans, at November 30, 1999...

  • Page 38
    ...J. Shalam, Chief Executive Officer of the Company, has granted the Company an option to purchase 1,668,875 shares of Class A common stock from his personal holdings..., basic) Effect of dilutive securities: Employee stock options and stock warrants Employee stock grants Convertible debentures Weighted ...

  • Page 39
    ... and equipment from its principal stockholder and several officers. Rentals for such leases are considered by management of the Company to approximate prevailing market rates. At November 30, 2000, minimum annual rental payments on these related party leases, in addition to the capital lease...

  • Page 40
    ... customers based upon management's credit evaluation. A portion of the Company's customer base may be susceptible to downturns in the retail economy, particularly in the consumer electronics industry. Additionally, customers specializing in certain automotive sound, security and accessory products...

  • Page 41
    ... Company has two reportable segments which are organized by products: Wireless and Electronics. The Wireless segment markets wireless handsets and accessories through domestic and international wireless carriers and their agents, independent distributors and retailers. The Electronics segment sells...

  • Page 42
    ... (Note 20). Also during 1998, the Company entered into a sale/leaseback transaction for certain equipment with its principle stockholder and chief executive office (Note 20). During 2000, the Company advanced $620 to an officer/director of the Company which has been included in prepaid expenses and...

  • Page 43
    ... from hand-held wireless telephones. An order dismissing the Company as a defendant was granted on the grounds that the plaintiff failed to make proper legal service. However, the plaintiff has the right to effect proper legal service of the original complaint or file a new lawsuit. The Company has...

  • Page 44
    ... O R P O R AT I O N AND SUBSIDIARIES Summary of Stock Prices and Dividend Data The Class A Common Stock of Audiovox are traded on The Nasdaq Stock Marketா under the symbol VOXX. No dividends have been paid on the Company's common stock. The Company is restricted by agreements with its financial...

  • Page 45
    ...the corporation's annual report on Form 10K are available from: Audiovox Corporation Stockholders' Relations at PR 21, Inc. 79 Fifth Avenue New York, New York 10003 Audiovox Corporation is an Equal Opportunity Employer Web Site: www.audiovox.com Philip Christopher Executive Vice President, Audiovox...

  • Page 46
    150 Marcus Boulevard Hauppauge, New York 11788 (631) 231-7750