Audiovox 2004 Annual Report Download - page 48

of $13,823 or 1.9% compared to $2,817 or 0.3% in 2003. The decrease in inventory
write−downs was primarily due to Cellular maintaining lower inventory levels in
fiscal 2003, which consisted primarily of newer products as compared to fiscal
2002. In addition, the Company has recorded price protection of $27,683 and
$13,031 for fiscal 2002 and 2003, respectively, from a vendor for certain
inventory, recorded as a reduction to cost of sales as the related inventory was
sold. Without this price protection, gross profit margins would have been lower
by 4.5% and 1.6% for fiscal 2002 and 2003, respectively.
Operating expenses of Cellular were $29,759 and $34,483 for the years ended
November 30, 2003 and 2002, respectively, a decrease of $4,724. As a percentage
of net sales operating expenses decreased to 3.7% during fiscal 2003 compared to
4.7% in fiscal 2002. Excluding the $3,200 bonus provision recorded in connection
with the Toshiba transaction in 2002 (see Transactions with Toshiba) and $3,492
decrease in bad debt expense, operating expenses would have increased $1,968 or
7.1% in fiscal 2003 from fiscal 2002.
Net Income
As a result of an increase in Electronics sales and gross margins, as well
as increased income from discontinued operations net income for the year ended
November 30, 2003 was $11,239 compared to a net loss of $14,040 in 2002.
Earnings (loss) per share for the year ended November 30, 2003 was $0.51 basic
and diluted as compared to $(0.64) basic and diluted for 2002 Net income was
favorably impacted by sales incentive reversals of $2,940 and $4,716 for the
years ended November 30, 2003 and 2002, respectively.
The Company believes that the Electronics Group has an expanding market
with a certain level of volatility related to both domestic and international
new car sales and general economic conditions. Also, all of its products are
subject to price fluctuations which could affect the carrying value of
inventories and gross margins in the future.
Liquidity and Capital Resources
As of November 30, 2004, the Company had working capital of $362,018, which
includes cash and cash equivalents and short−term investments of $167,646
compared with working capital of $304,354 at November 30, 2003, which includes
cash of $4,702.
The proceeds from the sale of the Cellular business, including collections
from accounts receivable, during fiscal 2004 has increased the liquidity of the
Company. The Company utilized the proceeds from the sale of the Cellular
business to repay domestic bank obligations outstanding of $99,266 at November
1, 2004. The Company plans to utilize its current cash position as well as
collections from accounts receivable to fund the current operations of the
business. However, the Company may utilize all or a portion of the current
capital resources to pursue other business opportunities, including
acquisitions.
Historically, the Company had financed its operations through a combination
of available borrowings under bank lines of credit and issuance of debt and
equity securities, which was typically dependent on the collections of accounts
receivable and purchase of inventory. The Company's fifth amended and restated
credit agreement expired on November 1, 2004 as a result of the sale of
substantially all the assets of its Cellular business to UTSI. Subsequently, the
Company obtained a credit line to fund the temporary short−term working capital
needs of the Company. This line originally expired on January 31, 2005 and was
subsequently extended to May 30, 2005, and allows aggregate borrowings of up
to $25,000 at an interest rate of Prime (or similar designations) plus 1%.
Operating activities provided cash of $28,799 and $86,706 in fiscal 2003
and 2004, respectively. Income from continuing operations provided $7,992 and $9
for operating activities in fiscal 2003 and 2004, respectively.
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