Audiovox 2004 Annual Report Download - page 11

The Company markets products under several trademarks, including
Audiovox(R), Jensen(R), Prestige(R), Pursuit(R), Rampage(TM), Code−Alarm(R), Car
Link(R), Movies 2 Go(R), Magnate(R), Mac Audio(R), Heco(R), Acoustic
Research(R), Advent(R) and Phase Linear. These trademarks are a significant
factor in marketing our products to customers. The Company's net sales by
product category were as follows:
Percent
Change
2002 2003 2004 2002/2004
−−−−−−−− −−−−−−−− −−−−−−−− −−−−−−−−
Mobile electronics $285,608 $355,207 $405,645 42.0%
Consumer electronics 86,472 161,965 161,432 86.7
Other 644 520 −− (100.0)
−−−−−−−− −−−−−−−− −−−−−−−− −−−−−−−−
Total net sales $372,724 $517,692 $567,077 52.1%
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The increase in net sales reflects new product introductions in the Mobile
and Consumer Electronics categories as well as increased sales of Jensen
autosound and strong satellite radio sales. Net sales of Consumer Electronics
were negatively impacted in fiscal 2004 due to the decline in portable DVD
players as a result of price erosion and increased competition. In fiscal 2005,
the Company will focus its Consumer Electronics efforts on emerging technologies
such as LCD TVs, digital multimedia portables, home theater and new speaker
lines and expects these lines to be key drivers. New product introductions in
fiscal 2005 for Mobile Electronics will include satellite radio including new
direct connect models, DVD video shuttle systems for both car and home, larger
screen mobile video products, new dual all−in−one headrest systems, rear
observation systems and navigation systems with real time traffic.
In the future, the Company will continue to focus its efforts on new
technologies to take advantage of market opportunities created by the digital
convergence of data, navigation and entertainment products.
Licensing and Royalties
In the late 1990's, the Company began to license its brand name for use on
selected products, such as home and portable stereo systems. The Company
increased license and royalty income by acquiring the assets of Recoton in
fiscal 2003. Actual sales of licensed products are not included in the Company's
reported net sales. License sales promote select Audiovox(R) brands without
adding any significant costs. License fees are recognized upon sale to the
end−user and are recorded in other income. License fees in fiscal 2004 were
$2,024 compared to $1,116 in fiscal 2003.
The Company has various license and royalty programs with manufacturers,
customers and other electronic suppliers. Such agreements entitle the Company to
receive license and royalty income for Audiovox products sold by the licensees.
Depending on the agreement, income from these agreements is based on either a
fixed amount per unit or percentage of net sales. Current license and royalty
agreements have duration periods, which range from 1 to 8 years and certain
agreements may be renewed at the end of termination of the agreement. Renewals
of license and royalty agreements are dependent on negotiations with licensees
as well as current Audiovox products being sold by the licensee.
Distribution and Marketing
The Company sells its electronics products to:
o power retailers,
o mass merchants,
o regional chain stores,
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