Audiovox 2004 Annual Report Download - page 39

Download and view the complete annual report

Please find page 39 of the 2004 Audiovox annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 144

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144

Sales incentive expense decreased $957 to $13,123 due to a $2,086 increase
in reversals, partially offset by an increase in sales. Specifically, reversals
for unearned sales incentives for the year ended November 30, 2004 increased
$1,270 as compared to 2003 due to customers not purchasing the minimum
quantities of product required during the program time period as a result of
lower than expected post holiday season sales. In addition, reversals for
unclaimed sales incentives for 2004 increased $816 due to mass merchant
customers not claiming funds within the expiration period. The Company believes
that the reversal of earned but unclaimed sales incentives upon the expiration
of the claim period is a disciplined, rational, consistent and systematic method
of reversing unclaimed sales incentives. The majority of sales incentive
programs are calendar−year programs. Accordingly, the program ends on the month
following the fiscal year end and the claim period expires one year from the end
of the program. These sales incentive programs are expected to continue and will
either increase or decrease based upon competition and customer demands.
Gross Profit
Fiscal Fiscal
2003 2004
−−−−−−−−−−−−− −−−−−−−−−−−−−−
Gross profit 86,229 90,091
Gross margins 16.7% 15.9%
Gross margins decreased to 15.9% for the year ended November 30, 2004 as
compared to 16.7% for the year ended November 30, 2003. Gross margins were
negatively impacted by price erosion and price competition of mobile video and
DVD products during fiscal 2004. Furthermore, inventory write−downs resulted in
gross margins to be reduced by $5,506 (1.0%) and $4,397 (0.8%) during the years
ended November 30, 2004 and 2003, respectively. The increase in write−downs was
primarily due to increased price competition for mobile video products.
The above declines in margins were offset by margins achieved in Audiovox
Germany as well as an increase in Code−Alarm margins due to an increase in sales
to OEM's. In addition, gross margins were favorably impacted from a credit of
$1,517 from one of the Company's vendors during the year ended November 30, 2004
as a result of renegotiating charges for the repair of defective inventory.
Without this credit, the Electronics Group gross margin for the year ended
November 30, 2004 would have been 15.6%. Furthermore, reversals of sales
incentives expense favorably impacted gross margins by 0.7% and 0.3% during the
years ended November 30, 2004 and 2003, respectively.
Operating Expenses and Operating Income
The following table presents the results of the Company separated by the
Electronics and Administrative Groups.
Fiscal Fiscal $ %
2003 2004 Change Change
−−−−−−−− −−−−−−−− −−−−−−−− −−−−−−
Selling $ 22,159 $ 27,938 $ 5,779 26.1%
General and administrative 31,209 37,219 6,010 19.3
Warehousing and technical support 2,956 4,721 1,765 59.7
−−−−−−−− −−−−−−−− −−−−−−−− −−−−−−
Electronics operating expenses 56,324 69,878 13,554 24.1
Electronics operating income 29,905 20,213 (9,692) (32.4)
Electronics other expense (365) (176) 189 51.8
−−−−−−−− −−−−−−−− −−−−−−−− −−−−−−
Electronics pre−tax income 29,540 20,037 (9,503) (32.2)
36