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PART I
Item 1−Business
This Annual Report on Form 10−K and the documents incorporated herein by
reference contain forward−looking statements based on expectations, estimates
and projections as of the date of this filing. Actual results may differ
materially from those expressed in forward−looking statements. See Item 7 of
Part II−−"Management's Discussion and Analysis of Financial Condition and
Results of Operations−−Forward− Looking Statements."
General
All amounts presented in thousands unless otherwise indicated.
Audiovox Corporation ("Audiovox", "We", "Our", "Us" or "Company") is a
leading international distributor and value added service provider in the mobile
and consumer electronics industry. The Company conducts its business through
subsidiaries and markets its products both domestically and internationally
under its own brands. The Company also functions as an OEM ("Original Equipment
Manufacturer") supplier to several customers and presently has one reportable
segment ("Electronics"), which is organized by product class.
The Company was incorporated in Delaware on April 10, 1987, as successor to
a business founded in 1960 by John J. Shalam, our President, Chief Executive
Officer and controlling stockholder. The Company designs and markets a diverse
line of products and provides related services throughout the world. These
products and services include:
o mobile entertainment and security products,
o mobile electronic products and accessories,
o consumer electronic products and accessories, and
o autosound products and accessories.
The Company through its four wholly−owned subsidiaries: Audiovox
Electronics Corporation ("AEC"), American Radio Corp., Code Systems, Inc.
("Code") and Audiovox German Holdings GmbH ("Audiovox Germany") and three
majority−owned subsidiaries: Audiovox Communications (Malaysia) Sdn. Bhd.,
Audiovox Holdings (M) Sdn. Bhd. and Audiovox Venezuela, C.A. markets its
products under the Audiovox(R) brand name and other brand names, such as
Jensen(R), Prestige(R), Pursuit(R), Rampage(TM), Code− Alarm(R), Car Link(R),
Movies 2 Go(R), Magnate(R), Mac Audio(R), Heco(R), Acoustic Research(R),
Advent(R) and Phase Linear, as well as private labels through a large and
diverse distribution network both domestically and internationally. The
Company's extensive distribution network and its long−standing industry
relationships have allowed the Company to benefit from growing market
opportunities and emerging niches in the electronics business.
Divestiture of Cellular Business
On November 1, 2004, the Company completed the divestiture of its Cellular
business (formerly known as "ACC", "Cellular" or "Wireless") to UTStarcom, Inc.
("UTSI"). The Cellular business was a major driver in the Company's growth over
the past twenty years. However, consolidation of cellular service providers
within the cellular industry, extensive price competition and the inability to
successfully partner with a manufacturer created a difficult challenge for the
Company to compete within the cellular industry.
The competitive nature of the Cellular business caused inconsistency in
Cellular results, which led to the Company's sale of selected assets and certain
liabilities of ACC to UTSI for a purchase price of $165,170 subject to a working
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