Audiovox 2001 Annual Report Download - page 21

Electronics Group sales were $278,264 in fiscal 2000, a 14.6%
increase from sales of $242,855 in fiscal 1999. 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 2.8% in fiscal 2000 to approximately $25.8 million
as a result of improvements in the Malaysian subsidiary.
Gross profit margin for fiscal 2000 was 9.0%, compared to 11.6% in
fiscal 1999. This decline in profit margin resulted primarily from an
$8,152 analog inventory cost reduction and margin reductions in
Wireless attributable to increased sales of digital handsets, which have
lower margins. Due to specific technical requirements of individual
carrier customers, carriers place large purchase commitments for digi-
tal handsets with Wireless, which results in a lower selling price which
then lowers gross margins. Gross profit increased 13.2% to $152,368
in fiscal 2000, versus $134,628 in fiscal 1999.
Operating expenses were $113,844 in fiscal 2000, compared to
$96,391 in fiscal 1999. As a percentage of net sales, operating
expenses decreased to 6.7% in fiscal 2000 from 8.3% in fiscal 1999.
Operating income for fiscal 2000 was $38,524, an increase of $287
from fiscal 1999.
During 2000, the Company also recorded an extraordinary gain of
$2,189 in connection with the extinguishment of debt.
Net income for fiscal 2000 was $27,229 compared to $27,246 in fiscal
1999. Earnings per share before extraordinary item were $1.17, basic,
and $1.11, diluted, and $1.27, basic and $1.21, diluted after extraordi-
nary item, in fiscal 2000 compared to $1.43, basic and $1.39, diluted,
in fiscal 1999.
Wireless Results
The following table sets forth for the fiscal years indicated certain
statements of income data for Wireless expressed as a percentage of
net sales: 1999 2000
Net sales:
Wireless products $885,130 96.3% $1,391,741 97.6%
Activation commissions 24,412 2.7 28,983 2.0
Residual fees 2,939 0.3 1,852 0.1
Other 6,197 0.7 3,619 0.3
Total net sales 918,678 100.0 1,426,195 100.0
Gross profit 81,679 8.9 93,184 6.5
Total operating expenses 44,248 4.8 54,524 3.8
Operating income 37,431 4.1 38,660 2.7
Other expense (6,176) 0.7 (7,663) (0.5)
Pre-tax income $ 31,255 3.4% $ 30,997 2.2%
Wireless is composed of ACC and Quintex, both subsidiaries of
the Company.
Net sales were $1,426,195 in fiscal 2000, an increase of $507,517, or
55.3%, from fiscal 1999. Unit sales of wireless handsets increased by
2,842,000 units in fiscal 2000, or 46.9%, to approximately 8,909,000
units from 6,067,000 units in fiscal 1999.This increase was attributable
to sales of portable, digital products. The addition of a new supplier
also provided a variety of new digital, wireless products that con-
tributed to the sales increase. The average selling price of handsets
increased to $150 per unit in fiscal 2000 from $140 per unit in fiscal
1999.The number of new wireless subscriptions processed by Quintex
increased 30.9% in fiscal 2000, with a corresponding increase in acti-
vation commissions of approximately $4,571 in fiscal 2000. The aver-
age commission received by Quintex per activation decreased by
approximately 9.3% in fiscal 2000 from fiscal 1999 due to changes
within the commission structure with the various carriers. Unit gross
profit margins decreased to 5.7% in fiscal 2000 from 7.8% in fiscal
1999, reflecting an increase in average unit cost, partially offset by an
increase in selling prices. During 2000, Wireless adjusted the carrying
value of its analog inventory by recording an $8,152 cost reduction.
This charge will enable Wireless 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.
Operating expenses increased to $54,524 in fiscal 2000 from $44,248
in fiscal 1999. As a percentage of net sales, however, operating
expenses decreased to 3.8% during fiscal 2000 compared to 4.8% in
fiscal 1999. Selling expenses increased in fiscal 2000 from fiscal 1999,
primarily in commissions and divisional marketing expenses. General
and administrative expenses increased in fiscal 2000 from fiscal 1999,
primarily in office salaries, temporary personnel, depreciation and
amortization. Warehousing, assembly and repair expenses increased
in fiscal 2000 from fiscal 1999, primarily in direct labor. Pre-tax income
for fiscal 2000 was $30,997, a decrease of $258 from fiscal 1999.
Management believes that the wireless industry is extremely com-
petitive and that this competition could affect gross margins and the
carrying value of inventories in the future as new competitors enter the
marketplace. Also, timely delivery and carrier acceptance of new prod-
uct could affect our quarterly performance.
Electronics Results
The following table sets forth for the fiscal years indicated certain
statements of income data for the Electronics Group expressed as a
percentage of net sales: 1999 2000
Net sales:
Mobile electronics $117,946 48.6% $135,557 48.7%
Sound 82,800 34.1 77,790 27.9
Consumer electronics 38,150 15.7 60,968 21.9
Other 3,959 1.6 3,949 1.5
Total net sales 242,855 100.0 278,264 100.0
Gross profit 53,025 21.9 60,066 21.6
Total operating expenses 38,645 15.9 43,360 15.6
Operating income 14,380 5.9 16,706 6.0
Other expense (3,021) (1.2) (1,937) (0.7)
Pre-tax income $ 11,359 4.7% $ 14,769 5.3%
Net sales were $278,264 in fiscal 2000, a 14.6% increase from net
sales of $242,855 in fiscal 1999. Mobile and consumer electronics’
19 Audiovox Corporation and Subsidiaries