Audiovox 2004 Annual Report Download - page 42

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Interest expense and bank charges increased primarily due to interest
incurred on German debt acquired as a result of the Recoton acquisition and
increased average borrowings from the Company's domestic credit facility during
fiscal 2004 as compared to fiscal 2003 due to increased average Electronics
inventory. The Company expects interest expense to decrease in fiscal 2005 as
the Company repaid all amounts outstanding under its domestic bank obligations
on November 1, 2004 and the Company has no outstanding amounts under its
domestic bank obligations at November 30, 2004.
Equity in income of equity investees increased primarily due to an increase
in the equity income of Audiovox Specialized Applications, LLC ("ASA") as a
result of increased sales in its Marine division and improvement in gross
margins in specialized markets. In addition, increased sales and net income of
Bliss− tel contributed towards the increase in equity income as Bliss−tel
expanded its sales force in Thailand.
Other income increased due to increased royalty income of $1,188 as a
result of royalty rights received from acquired trademarks. In addition,
included in other expense for the year ended November 30, 2003 is a civil
penalty of $620 which did not recur for fiscal 2004. Furthermore, other expense
decreased $329 as a result of lower foreign exchange devaluation in our
Venezuelan subsidiary as compared to fiscal 2003. The Company expects other
income to increase during fiscal 2005 as a result of expected returns on
short−term investments purchased in November of fiscal 2004.
Minority interest expense increased $1,324 for the year ended November 30,
2004 compared to the year ended November 30, 2003, mainly due to the write−off
of uncollectible amounts owed to the Company from its minority interest
shareholder in Audiovox Venezuela.
Provision for Income Taxes
The effective tax rate for the year ended November 30, 2004 was 42.1%
compared to 50.0% in the prior year. The decrease in the effective tax rate was
primarily due to the Company's mix of foreign and domestic earnings and
reduction of state income taxes.
Income from Discontinued Operations
As previously discussed, the Company completed it divestiture of the
Cellular business on November 1, 2004. The following is a summary of Cellular
results included within discontinued operations:
Fiscal Fiscal
2003 2004
−−−−−−−−−− −−−−−−−−−−
Net sales from discontinued operations $ 806,210 $1,159,439
Income from discontinued operations before income taxes 5,351 10,893
Provision for income taxes 2,104 702
−−−−−−−−−− −−−−−−−−−−
3,247 10,191
−−−−−−−−−− −−−−−−−−−−
Gain on sale of Cellular business, net of tax −− 67,000
−−−−−−−−−− −−−−−−−−−−
Income from discontinued operations, net of tax $ 3,247 $ 77,191
========== ==========
Income from discontinued operations, net of tax, provided income of $77,191
and $3,247 for the years ended November 30, 2004 and 2003, respectively.
Included in income from discontinued operations for the year ended November 30,
2004 is a gain of $67,000 on the sale of the Cellular business.
Net sales of Cellular were $1,159,439 and $806,210 for the years ended
November 30, 2004 and 2003, respectively. Unit sales of wireless handsets
increased by approximately 1,412,000 units for the year ended November 30, 2004,
or 30.3%, to approximately 6,069,000 units from 4,657,000 units in 2003. This
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