Audiovox 2004 Annual Report Download - page 19

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 our
business.
The Impact of Future Selling Prices and Technological Advancements may Adversely
Impact our Profitability and Inventory Value
Since we do not make any of our own products and do not conduct our own
research, we cannot assure you that we will be able to source technologically
advanced products in order to remain competitive. Furthermore, the introduction
or expected introduction of new products or technologies may depress sales of
existing products and technologies. This may result in declining prices and
inventory obsolescence. Since we maintain a substantial investment in product
inventory, declining prices and inventory obsolescence could have a material
adverse effect on our business and financial results.
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
purchases in Pacific Rim countries, particularly Japan, China, South Korea,
Taiwan and Malaysia, any adverse changes in the social, political, regulatory
and economic conditions in these countries may materially increase the cost of
the products that we buy from our foreign suppliers or delay shipments of
products, which could have a material adverse effect on our business. In
addition, our dependence on foreign suppliers forces us to order products
further in advance than we would if our products were manufactured domestically.
This increases the risk that our products will become obsolete or face selling
price reductions before we can sell our inventory.
We Plan to Expand the International Marketing and Distribution of Our Products,
Which Will Subject Us to Additional Business Risks.
As part of our business strategy, we intend to increase our international
sales, although we cannot assure you that we will be able to do so. Conducting
business outside of the United States subjects us to significant additional
risks, including:
o export and import restrictions, tax consequences and other trade
barriers,
o currency fluctuations,
o greater difficulty in accounts receivable collections,
o economic and political instability,
o foreign exchange controls that prohibit payment in U.S. dollars, and
o increased complexity and costs of managing and staffing international
operations.
For instance, our international sales have been affected by political
unrest and currency fluctuation in Venezuela. Any of these factors could have a
material adverse effect on our business, financial condition and results of
operations.
Our products could infringe the intellectual property rights of others and we
may be exposed to costly litigation.
The products we sell are continually changing as a result of improved
technology. As a result, although we and our suppliers attempt to avoid
infringing known proprietary rights of third parties in our products, we may be
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