Audiovox 2001 Annual Report Download - page 19

Fiscal 2000 Compared to Fiscal 2001
Consolidated Results
Net sales for fiscal 2001 were $1,267,746, a 25.6% decrease from net
sales of $1,704,459 in fiscal 2000. Wireless Group sales were
$966,701 in fiscal year 2001, a 32.2% decrease from sales of
$1,426,195 in fiscal 2000. Unit sales of wireless handsets decreased
21.4% to approximately 7,000,000 units in fiscal 2001 from approxi-
mately 8,909,000 units in fiscal 2000. The average selling price of the
Company’s handsets decreased to $127 per unit in fiscal 2001 from
$150 per unit in fiscal 2000.
Electronics Group sales were $301,045 in fiscal 2001, an 8.2%
increase from sales of $278,264 in fiscal 2000. This increase was
largely due to increased sales in the mobile video and consumer elec-
tronics product lines. Sales by the Company’s international sub-
sidiaries increased 6.2% in fiscal 2001 to approximately $28.0 million,
primarily due to a 41.7% increase in Venezuela, partially offset by a
17.8% decrease in Malaysia.
Gross profit margin for fiscal 2001 was 7.9%, compared to 9.0%
in fiscal 2000. This decline in profit margin resulted primarily from
$20,650 of inventory write-downs to market and margin reductions
in Wireless attributable to increased sales of digital products, which
have lower margins offset by the reimbursement of $4,550 received
from a manufacturer for upgrades. Due to specific technical require-
ments of individual carrier customers, carriers place large purchase
commitments for digital handsets with Wireless, which results in a
lower selling price which then lowers gross margins.
Operating expenses were $111,075 in fiscal 2001, compared to
$113,844 in fiscal 2000. As a percentage of net sales, operating
expenses increased to 8.8% in fiscal 2001 from 6.7% in fiscal 2000.
Operating loss for fiscal 2001 was $10,537, compared to operating
income of $38,524 in 2000.
During 2000, the Company also recorded an extraordinary gain of
$2,189 in connection with the extinguishment of debt.
Net loss for fiscal 2001 was $8,209 compared to net income of
$27,229 in fiscal 2000. Loss per share was $(0.38), basic and diluted
compared to $1.17, basic, and $1.11, diluted, and $1.27, basic and
$1.21, diluted after extraordinary item, in fiscal 2000.
Wireless Results
The following table sets forth for the fiscal years indicated certain
statements of operations data for Wireless expressed as a percentage
of net sales: 2000 2001
Net sales:
Wireless products $1,391,741 97.6% $936,734 96.9%
Activation commissions 28,983 2.0 26,879 2.8
Residual fees 1,852 0.1 2,396 0.2
Other 3,619 0.3 692 0.1
Total net sales 1,426,195 100.0 966,701 100.0
Gross profit 93,184 6.5 39,176 4.1
Total operating expenses 54,524 3.8 49,219 5.1
Operating income (loss) 38,660 2.7 (10,043) (1.0)
Other expense (7,663) (0.5) (7,689) (0.8)
Pre-tax income (loss) $ 30,997 2.2% $ (17,732) (1.8)%
Wireless is composed of ACC and Quintex, both subsidiaries of
the Company.
Net sales were $966,701 in fiscal 2001, a decrease of $459,494, or
32.2%, from fiscal 2000. Unit sales of wireless handsets decreased by
1,909,000 units in fiscal 2001, or 21.4%, to approximately 7,000,000
units from 8,909,000 units in fiscal 2000. This decrease was attributa-
ble to decreased sales of both analog and digital handsets which was
due to delayed digital product acceptances by our customers and
slower sales. The average selling price of handsets decreased to $127
per unit in fiscal 2001 from $150 per unit in fiscal 2000. Unit gross
profit margins decreased to 3.1% in fiscal 2001 from 5.7% in fiscal
2000, reflecting an increase in average unit cost. During 2000 and
2001, Wireless adjusted the carrying value of its analog inventory by
recording write-downs to market of $8,152 and $13,500, respectively.
These charges enabled Wireless to effectively exit the active analog
hand-held market. However, even as Wireless and the wireless
communications market continues to shift away from analog to digital
technology, Wireless will continue, upon request by its customers, to
sell analog telephones on a limited basis to specific customers to sup-
port specific carrier programs. During the fourth quarter ended
November 30, 2001, Wireless adjusted the carrying value of certain
digital inventory by recording a write-down to market of $7,150. During
the quarter ended November 30, 2001, the Company recorded a
reduction to cost of sales of approximately $4,550 for reimbursement
from a manufacturer for upgrades performed in 2001 on certain digital
phones which partially offset the decline in margins.
17 Audiovox Corporation and Subsidiaries