Audiovox 2005 Annual Report Download - page 36

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Mobile Electronics sales, which represented 71.5% of net sales, increased
primarily due to a $26,093 increase in satellite radio sales and increased sales
to Original Equipment Manufacturers ("OEM"'s). In addition, Code sales increased
$12,976 as a result of increased sales to OEM's for remote−start and security
products. The increase in Mobile Electronics was partially offset by increased
competition and price erosion from lower priced portable DVD players. In
addition, overhead system sales were negatively impacted by a decline in SUV
sales combined with factory−supplied product by OEM's.
Consumer Electronics sales, which represented 28.5% of net sales, remained
steady due to price erosion, increased competition on portable DVD products,
increased demand for flat panel TVs and increased sales of Jensen, Acoustic
Research and Advent home products. Sales were also adversely impacted by a
decline in fourth quarter sales due to a decline in the video bag business as
the category matured and experienced competition from low priced portable DVD
players.
Sales were also impacted by the acquisition of Recoton (Audiovox Germany)
and Venezuela as follows:
FISCAL FISCAL %
2003 2004 $ CHANGE CHANGE
−−−−−−−−−−− −−−−−−−− −−−−−−−−− −−−−−−−−−
Net sales:
Audiovox Germany $26,377 $54,832 $28,455 107.9%
Recoton U.S. 3,649 36,118 32,469 889.8
Venezuela 2,887 4,535 1,648 57.1
The increase in Audiovox Germany and Recoton U.S. sales was due to the
acquisition of Recoton in July 2003, as fiscal 2004 include twelve months of
sales activity compared to five months of sales activity in fiscal 2003. The
increase in Venezuela sales was due to economic growth in Venezuela as a result
of increased revenue to OEM's due to improved political and economic stability.
Sales incentive expense decreased $957 to $13,123 due to a $2,086 increase
in reversals, partially offset by an increase in sales. Specifically, reversals
for unearned sales incentives for fiscal 2004 increased $1,270 as compared to
2003 due to customers not purchasing the minimum quantities of product required
during the program time period as a result of lower than expected post holiday
season sales. In addition, reversals for unclaimed sales incentives for 2004
increased $816 due to mass merchant customers not claiming funds within the
expiration period. We believe 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. The
majority of sales incentive programs are calendar−year programs. Accordingly,
the program ends on the month following the fiscal year end and the claim period
expires one year from the end of the program. These sales incentive programs are
expected to continue and will either increase or decrease based upon competition
and customer demands.
Gross Profit
FISCAL FISCAL
2003 2004
−−−−−−−−−−− −−−−−−−−
Gross profit $85,125 $89,737
Gross margin percentage 16.7% 15.9%
31