Audiovox 2004 Annual Report Download - page 41

expense. The increase in Audiovox German expenses is a result of a
full fiscal year of operating results in fiscal 2004 as compared to
five months of operating results in fiscal 2003 as Recoton was
acquired in July 2003. The decline in Malaysia and Venezuela expenses
was primarily due to a $1,034 decrease in employee benefits because of
a 2003 payment made to certain Venezuela employees, which did not
recur in fiscal 2004.
Electronics warehousing and technical support increased due to an increase
in direct labor of $1,671 as a result of: increased average inventory levels
during fiscal 2004, increased sales and personnel required to support the
assimilation of the Recoton technical staff. The continual increase in product
complexity has resulted in the Company hiring additional engineers and providing
added customer service.
Electronics operating income decreased to $20,213 for the year ended
November 30, 2004 due to a decline in gross margins and increased operating
expenses.
The following is a summary of administrative operating expenses:
Fiscal Fiscal $ %
2003 2004 Change Change
−−−−−−− −−−−−−− −−−−−−−− −−−−−−
Advertising $ 3,396 $ 4,168 $ 772 22.7%
Professional fees 4,007 6,522 2,515 62.8
Depreciation 1,576 1,178 (398) (25.3)
Insurance 742 978 236 31.8
Officers' salaries 2,606 4,661 2,055 78.9
Office salaries and other 3,993 4,831 838 21.0
−−−−−−− −−−−−−− −−−−−−−− −−−−−−
Total administrative operating expenses $16,320 $22,338 $ 6,018 36.9%
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The increase in professional fees is primarily due to $2,660 in compliance
costs for Sarbanes−Oxley Section 404 and additional audit fees. The Company
incurred significant implementation costs for Sarbanes− Oxley Section 404 in
fiscal 2004 and expects professional fees to decline in fiscal 2005. Advertising
expenses increased due to additional resources needed to promote the expanded
product lines. Officers' salaries increased primarily due to a $1,916 payment of
a long−term incentive award as a result of the sale of the Cellular business.
Other administrative operating expenses, which are mainly comprised of
accounting, IT and office salaries, increased primarily due to increased
salaries and payroll taxes.
The increase in administrative operating expenses coupled with the decline
in Electronics operating income caused consolidated operating income (loss) to
decline to ($2,125) for the year ended November 30, 2004.
Other Income (Expense)
Fiscal Fiscal $
2003 2004 Change
−−−−−−− −−−−−−− −−−−−−−
Interest and bank charges $(2,850) $(3,833) $ (983)
Equity in income of equity investees 3,274 4,234 960
Other, net 610 2,859 2,249
−−−−−−− −−−−−−− −−−−−−−
Total other income (expense) $ 1,034 $ 3,260 $ 2,226
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