Audiovox 2003 Annual Report Download - page 22

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elects not to do business with us or demands pricing changes in order to
compete, it would have a material adverse effect on our business. In fiscal
2003, the five largest wireless customers (Verizon Wireless, Bell Distribution,
Inc., Virgin Mobile, Sprint Spectrum LP and US Cellular) represented 72% of
Wireless' net sales and 44% of consolidated net sales during fiscal 2003. Three
customers each accounted for 34%, 15% and 12%, respectively, of Wireless' net
sales for fiscal 2003.
Sales in Our Electronics Business Are Dependent on New Products and Consumer
Acceptance.
Our electronics business depends, to a large extent, on the introduction
and availability of innovative products and technologies. Significant sales of
new products in niche markets, such as navigation, portable DVD players and
mobile video systems, have fueled the recent growth of our electronics business.
If we are not able to continually introduce new products that achieve consumer
acceptance, our sales and profit margins will decline.
Since We Do Not Manufacture Our Products, We Depend on Our Suppliers to Provide
Us with Adequate Quantities of High Quality Competitive Products on a Timely
Basis.
We do not manufacture our products. We do not have long−term contracts but
have exclusive distribution arrangements with certain suppliers. The suppliers
can only sell their products through the Company for a given geographic or
designated market area. Most of our products are imported from suppliers under
short−term purchase orders. Accordingly, we can give no assurance that:
o our supplier relationships will continue as presently in effect
o our suppliers will be able to obtain the components necessary to
produce high−quality, technologically−advanced products for us
o we will be able to obtain adequate alternatives to our supply sources
should they be interrupted
o if obtained, alternatively sourced products of satisfactory quality
would be delivered on a timely basis, competitively priced, comparably
featured or acceptable to our customers
o exclusive geographic or market area distribution agreements will be
renewed
Because of the increased demand for wireless and consumer electronics
products, there have been, and still could be, industry−wide shortages of
components. As a result, on occasion our suppliers have not been able to produce
the quantities of these products that we desire. Our inability to supply
sufficient quantities of products that are in demand could reduce our
profitability and have a material adverse effect on our relationships with our
customers. If any of our supplier relationships were terminated or interrupted,
we could experience an immediate or long−term supply shortage, which could have
a material adverse effect on us. It is likely that our supply of wireless
products would be interrupted before we could obtain alternative products.
Because We Purchase a Significant Amount of Our Products from Suppliers in
Pacific Rim Countries, We Are Subject to the Economic Risks Associated with
Changes in the Social, Political, Regulatory and Economic Conditions Inherent in
These Countries.
We import most of our products from suppliers in the Pacific Rim. Countries
in the Pacific Rim have experienced significant social, political and economic
upheaval over the past several years. Because of the large concentrations of our
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