Audiovox 2004 Annual Report Download - page 44

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Net sales increased $144,968, or 38.9%, to $517,692 from net sales of
$372,724 in fiscal 2002. Sales of Audiovox Germany accounted for $26,377, or
18.2%, of this increase as a result of the Recoton acquisition (see Note 5).
Mobile electronics sales increased as sales of Mobile Video within the Mobile
Electronics category increased over 38% in fiscal 2003 from fiscal 2002 as a
result of the introduction of new video digital product, satellite radio and
navigation products. This increase in Mobile Electronics was partially offset by
a change in the marketplace as fully−featured sound systems are being
incorporated into vehicles at the factory rather than being sold in the
aftermarket. Consumer Electronics sales increased primarily in sales of
DVD/video−in−a−bag and portable DVD players, as well as sales from Audiovox
Germany as a result of the Jensen(R), Magnate(R), Mac Audio(R), Heco(R),
Acoustic Research(R) and Advent(R), trademarks which usage right was acquired
during the Recoton acquisition.
There was an increase in sales incentives expense of $7,915, net of
reversals of $1,803, to $14,080, due to higher sales volume. The increase in
sales resulted in an increase in sales incentives as many sales incentive
programs are based on a percentage of sales. These sales incentive programs are
expected to continue and will either increase or decrease based upon competition
and customer demands. Net sales in the Company's Malaysian subsidiary decreased
$4,844 (41.6%) from last year primarily from lower OEM business. The Company's
Venezuelan subsidiary experienced a decrease of $6,160 (68.1%) in sales from
last year, due to the temporary closing of the offices due to the impact of
economic and political instability in the country. These decreases were offset
by additional sales from Audiovox Germany of $26,377 since the acquisition of
Recoton on July 8, 2003.
Gross Profit
Fiscal Fiscal
2002 2003
−−−−−−−−−−−−−−−−− −−−−−−−−−−−−−−−−−−
Gross profit 60,308 86,229
Gross margins 16.2% 16.7%
Gross profit margins increased to 16.7% in fiscal 2003 from 16.2% in fiscal
2002. This increase was due to margins achieved in Audiovox Germany from
Jensen(R), Magnate(R), Mac Audio(R), Heco(R), Acoustic Research(R) and Advent(R)
products as well as an increase in Code−Alarm margins due to a decline in
production and warranty costs. This increase was offset by an increase in the
sales of video products sold through consumer channels, which carry a lower
gross margin as opposed to other product lines. In addition, there was a $7,915
increase in sales incentive expense, net of reversals of $1,803, due to higher
sales volume.
Operating Expenses and Operating Income
Fiscal Fiscal $ %
2002 2003 Change Change
−−−−−−−− −−−−−−−− −−−−−−−− −−−−−−
Selling $ 15,944 $ 22,159 $ 6,215 39.0%
General and administrative 23,571 31,209 7,638 32.4
Warehousing and technical support 1,137 2,956 1,819 160.0
−−−−−−−− −−−−−−−− −−−−−−−− −−−−−−
Electronics operating expenses 40,652 56,324 15,672 38.6
Electronics operating income 19,656 29,905 10,249 52.1
Electronics other expense (2,240) (365) 1,875 83.7
−−−−−−−− −−−−−−−− −−−−−−−− −−−−−
Electronics pre−tax income 17,416 29,540 12,124 69.6
41