Audiovox 2004 Annual Report Download - page 45

Fiscal Fiscal $ %
2002 2003 Change Change
−−−−−−−− −−−−−−−− −−−−−−−− −−−−−−
Administrative operating expenses 13,540 16,320 2,780 20.5
Administrative other income (loss) (422) 1,399 1,821 431.5
−−−−−−−− −−−−−−−− −−−−−−−− −−−−−
Consolidated pre−tax income $ 3,454 $ 14,619 $ 11,165 323.2%
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Consolidated operating expenses increased $18,452, or 34.0%, for the year
ended November 30, 2003, as compared to fiscal 2002. As a percentage of net
sales, operating expenses decreased to 14.0% for the year ended November 30,
2003 from 14.5% in 2002.
Electronics operating expenses increased $15,672 in fiscal 2003, a 38.6%
increase compared to fiscal 2002. The domestic group (AEC, Code−Alarm and
American Radio) accounted for $7,888 or 50.3% of the fiscal 2003 increase. The
international group (Audiovox Germany, Malaysia and Venezuela) accounted for
$7,784 or 49.7% of the fiscal 2003 increase which was primarily due to the
Recoton acquisition.
Electronics selling expenses increased due to a $3,761 and $2,454 increase
in the domestic group and international group, respectively.
o The increase for the domestic group was primarily due to increases of
$1,359 in commissions due to an increase in commissionable sales and
salesmen salaries, payroll taxes and benefits of $1,161 as a result of
higher employee wages and the hiring of additional employees. In
addition, advertising expense increased $827 as a result of general
promotions in an effort to support the growing business.
o The increase for the international group was due to approximately
$2,640 of Audiovox Germany expenses offset by a $186 decrease in
Malaysia and Venezuela. Audiovox Germany expenses were primarily
comprised of $1,285 in commissions, $241 of salesmen salaries and $951
of advertising due to the operations of Recoton, which was acquired
during the third quarter of fiscal 2003. The decrease in Malaysia and
Venezuela was mainly due to a $130 decrease in commissions as a result
of a decline in commissionable sales.
Electronics general and administrative expenses increased due to a $2,362
and $5,276 increase in the domestic group and international group, respectively.
o The increase for the domestic group was primarily due to an increase
of $1,647 in salaries and payroll taxes as a result of hiring
additional employees and increase in employee wages to support the
increased business. Corporate allocations increased $666 and insurance
expense increased $248 due to higher premiums as a result of increased
business activities. In addition, higher costs for the employee health
care plan and increased profit sharing accruals caused employee
benefits to increase $582. The above increases were partially offset
by a $974 decrease in bad debt expense due to the bad debt recovery in
fiscal 2003 of a 2002 customer write−off. The Company does not
consider this decrease in bad debt expense to be a trend in the
overall accounts receivable.
o The increase for the international group was due to $4,533 of Audiovox
Germany expenses and a $743 increase in Malaysia and Venezuela
expenses. Audiovox Germany expenses were primarily comprised of $1,793
in salaries and related payroll taxes, $570 of office expenses, $765
of occupancy costs and $356 of depreciation as a result of the Recoton
acquisition. The increase in Malaysia and Venezuela expenses was
primarily due to an increase in Venezuela's employee benefits of
$1,129 due to a payment made to certain Venezuela executives as a
result
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