Audiovox 2005 Annual Report Download - page 31

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FISCAL 2004 COMPARED TO FISCAL 2005
Continuing Operations
The following tables sets forth, for the periods indicated, certain
statement of operations data for the years ended November 30, 2004 ("fiscal
2004") and 2005 (fiscal 2005").
Net Sales
FISCAL FISCAL %
2004 2005 $ CHANGE CHANGE
−−−−−−−−− −−−−−−−− −−−−−−−−−− −−−−−−−−−−
$ 403,196 $ 339,355 $ (63,841) (15.8)%
Mobile Electronics
Consumer Electronics ... 160,457 200,361 39,904 24.9
−−−−−−−−−−−−−−−−−−−−−−−− −−−−−−−−− −−−−−−−−− −−−−−−−−− −−−−
Total net sales $ 563,653 $ 539,716 $ (23,937) (4.3)%
========= ======== ==========
Mobile Electronics sales, which represented 62.9% of net sales, continues
to be impacted by a shift in the mobile video category brought on by
video−in−a−bag systems being replaced by lower priced portable DVD's, increased
presence by original equipment car manufacturers and lower SUV sales. In
addition, sales were adversely impacted when reduced pricing by one of our
competitors resulted in a significant reduction in pricing for satellite radio
plug and play units. Sales were favorably impacted by the recent acquisition of
Terk in January of 2005 and an increase in sales of Jensen mobile multimedia
products.
Consumer Electronics sales, which represented 37.1% of net sales, showed
growth as a result of increased demand for LCD flat−panel TV product lines and
portable DVD Players.
Sales incentive expense increased $3,395 to $16,518 as a result of the
shift in business to mass merchant and large retail customers. Also, the
increase in sales incentive expense is attributable to a $1,053 decrease in
reversals due to increased achievement of Volume Incentive Rebate programs as
compared to the prior year. We believe that the reversal of earned but unclaimed
sales incentives upon the expiration of the claim period is a disciplined,
rational, consistent and systematic method of reversing unclaimed sales
incentives. These sales incentive programs are expected to continue and will
either increase or decrease based upon competition and customer demands.
Gross Profit
FISCAL FISCAL
2004 2005
−−−−−−−−−−−−−− −−−−−−−−−−−−−
−−−−−−−−−−−−−− −−−−−−−−−−−−−
Gross profit $89,737 $60,839
Gross margin percentage 15.9% 11.3%
Gross margins decreased to 11.3% for fiscal 2005 as compared to 15.9% for
fiscal 2004. Gross margins were impacted by the following:
o Increased inventory writedowns of $11,418 from $5,506 (1.0% impact) in
fiscal 2004 to $16,924 (3.1%impact) in fiscal 2005. The increase in
writedowns was the result of:
o the Company's: a) post holiday season review of inventory and sales
projections, b) review of products which were at the end of their
product life cycle at the completion of the fourth quarter, and
26