Audiovox 2004 Annual Report Download - page 47

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Equity in income of equity investees increased for fiscal 2003 compared to
fiscal 2002. The majority of the increase was due to an increase in the equity
income of ASA as a result of improved gross margins achieved in marine industry
sales.
Other expenses decreased as a result of foreign exchange translation in our
Venezuelan subsidiary due to the decreased devaluation of the Venezuelan
currency against the U.S. Dollar as compared to fiscal 2002. Specifically,
foreign exchange losses were $850 in fiscal 2003 compared to $2,819 in 2002. In
addition, in fiscal 2002, the Company recorded an other−than−temporary
impairment for investment in common stock of Shintom Co., Ltd. of $1,158
compared to $21 in fiscal 2003. Included in other expenses for fiscal 2003 is a
$620 settlement of an administrative agency investigation involving alleged
reimbursement of a fixed nominal amount of federal campaign contributions during
the years 1995 through 1996.
Minority interest income increased $362 compared to fiscal 2002, primarily
due to increased losses in Audiovox Venezuela.
Provision for Income Taxes
The effective tax rate for 2002 was 83.1% as compared to 50.0% for 2003.
The decrease in the effective tax rate was principally due to and significant
losses in Venezuela during fiscal 2002 which were not deductible and the
reduction of state income taxes.
Income (Loss) 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
included within discontinued operations:
Years Ended November 30,
−−−−−−−−−−−−−−−−−−−−−−−−−−
2002 2003
−−−−−−−−− −−−−−−−−−
Net sales from discontinued operations $ 727,658 $ 806,210
Income (loss) from operations of discontinued operations before
income taxes (5,116) 5,351
Provision for income taxes 10,060 2,104
−−−−−−−−− −−−−−−−−−
Income (loss) from discontinued operations, net of tax $ (15,176) $ 3,247
========= =========
Income (loss) from discontinued operations, net of tax, provided income
(loss) of $3,247 and ($15,176) for the years ended November 30, 2003 and 2002,
respectively. Included in loss from discontinued operations for the year ended
November 30, 2002 is a pre−tax gain of $14,269 ($8,847 after provision for
deferred taxes) on the issuance of subsidiary shares.
Net sales increased $78,552, or 10.8%, to $806,210 from fiscal 2002. Unit
sales of wireless handsets decreased by approximately 293,000 units in fiscal
2003, or 5.9%, to approximately 4,657,000 units from 4,950,000 units in fiscal
2002. This decrease in unit sales was attributable to late introductions of new
product and slower growth in the Cellular industry, however, the average selling
price of handsets increased to $163 per unit in fiscal 2003 from $136 per unit
in fiscal 2002. This increase was due to higher selling prices of the
newly−introduced digital flip phones with color screens, web−browsing and camera
capability.
Gross profit margins increased to 4.7% as compared to 2.0% in 2002 as a
result of the introduction of higher margin products, decreased sales incentive
programs, lower inventory write−downs and decreased temporary personnel costs.
For fiscal 2002, gross margins were negatively impacted by inventory write−downs
44