Audiovox 2005 Annual Report Download - page 34

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o Professional fees decreased due to a decline in costs to comply
with Sarbanes−Oxley Section 404 as fiscal 2004 represented the
first year of implementation.
Other administrative operating expenses, which are mainly comprised of
allocations, occupancy costs, employee benefits and allocations, increased due
to an increase in occupancy costs and decrease in allocations as certain
administrative expenses were allocated to the discontinued Cellular Group in the
prior year.
Other Income (Expense)
FISCAL FISCAL $
2004 2005 CHANGE
−−−−−−−− −−−−−−−− −−−−−−−−
Interest and bank charges $(3,762) $(2,478) $1,284
Equity in income of equity investees 3,980 2,342 (1,638)
Other, net 2,436 9,730 7,294
−−−−−−− −−−−−−− −−−−−−−
Total other income $ 2,654 $ 9,594 $6,940
======= ====== ========
Interest expense and bank charges decreased primarily due to the reduction
in outstanding bank obligations, as we repaid all amounts outstanding under our
domestic bank obligations on November 1, 2004. Interest expense and bank charges
during fiscal 2005 primarily represent expenses for debt and bank obligations of
Audiovox Germany and interest for a capital lease.
Equity in income of equity investees decreased due to a decrease in the
equity income of Audiovox Specialized Applications, LLC ("ASA") as a result of
decreased sales due to increased competition for van conversion products and a
decline in sales to one major customer.
Other income increased due to a one−time $4,971 unrealized gain as a result
of an initial public offering and stock appreciation of Bliss−tel stock and
issuance of Bliss−tel warrants, a former equity investment. In addition,
interest income increased $3,018 to $3,813 during fiscal 2005 due to returns on
the purchase of short−term investments in November 2004. Furthermore, other
income was favorably impacted by increased rental income as compared to the
prior year. The increase in other income was partially offset by an other than
temporary impairment charge of $1,758 recorded during fiscal 2005 for our
Cellstar investment due to the extended decline in stock price of this
investment.
Provision for Income Taxes
The effective tax rate for fiscal 2005 was 63.0% compared to 36.9% in the
prior year. The income tax benefit for fiscal 2005 was primarily due to the
pre−tax loss for fiscal 2005, tax−exempt interest income earned on short−term
investments during fiscal 2005 and the favorable outcome of tax accrual
reductions due to the completion of certain tax examinations.
29