Audiovox 2004 Annual Report Download - page 32

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As a result of the sale of the Cellular business, the Company recorded an
after−tax gain of $67,000 for the year ended November 30, 2004 which was
calculated as follows:
Purchase Price $165,170
Working capital adjustment 8,472
Less: payment to former Cellular employees 25,019
Less: acquisition costs for legal, accounting and other 4,603
Less: net assets sold 49,598
Less: non−cash charge for stock options 98
Non−cash cumulative translation gains 914
Gain on purchase of Toshiba minority interest 8,073
Less: estimated taxes 36,311
−−−−−−−−
Gain on sale of Cellular business, included in discontinued operations $ 67,000
========
The Company has presented Cellular's financial results in discontinued
operations for all periods presented due to the divestiture of the Cellular
business. As such, certain reclassifications have been made to prior year
amounts in order to conform to the current period presentation. The Company has
one reportable segment ("Electronics") and, unless indicated otherwise, all
amounts presented herein exclude the results of the Cellular business. Please
refer to Note 2 of the Notes to Consolidated Financial Statements for a further
discussion regarding the divestiture of the Cellular business.
Growth of Electronics Business
Electronics net sales have increased 105.1% from $276,471 in 2000 to
$567,077 in 2004. During this period, the Company's sales were impacted by the
following items:
o the growth in sales of consumer electronic products to $161,432 in
fiscal 2004 due to the introduction of new consumer goods, primarily
from portable DVD players, two−way radios and flat panel TVs,
o the introduction of satellite radio and mobile video entertainment
systems, such as video's in a bag, caused Mobile Electronics sales to
grow to approximately $405,645 in fiscal 2004,
o growth of OEM business, and
o acquisition of Recoton in fiscal 2003 and Code−Alarm, Inc. in fiscal
2002.
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.
Gross margins for the Company decreased to 15.9% for fiscal 2004 from 17.8%
in 2000 due to increased sales to mass merchants and increased price competition
for DVD products in the Mobile and Consumer Electronics categories. This decline
was partially offset by margins achieved from new technologies and products such
as LCD TVs and satellite radio products, as well as the growth of Audiovox
Germany.
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