Audiovox 2005 Annual Report Download - page 39

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The increase in professional fees is primarily due to $2,660 in compliance
costs for Sarbanes−Oxley Section 404 and additional audit fees. Advertising
expenses increased due to additional resources needed to promote the expanded
product lines. Officers' salaries increased primarily due to a $1,916 payment of
a long−term incentive award as a result of the sale of the Cellular business.
Other Income (Expense)
FISCAL FISCAL $
2003 2004 CHANGE
−−−−−−−−− −−−−−−− −−−−−−−
Interest and bank charges $(2,560) $(3,762) $(1,202)
Equity in income of equity investees 3,269 3,980 711
Other, net (51) 2,436 2,487
−−−−−− −−−−−−− −−−−−−−
Total other income $ 658 $2,654 $1,996
====== ======= ======
Interest expense and bank charges increased primarily due to interest
incurred on German debt acquired as a result of the Recoton acquisition and
increased average borrowings from the Company's domestic credit facility during
fiscal 2004 as compared to fiscal 2003 due to increased average Electronics
inventory.
Equity in income of equity investees increased primarily due to an increase
in the equity income of Audiovox Specialized Applications, LLC ("ASA") as a
result of increased sales in its Marine division and improvement in gross
margins in specialized markets. In addition, increased sales and net income of
Bliss−tel contributed towards the increase in equity income as Bliss−tel
expanded its sales force in Thailand.
Other income increased due to increased royalty income of $1,188 as a
result of royalty rights received from acquired trademarks. In addition,
included in other expense for fiscal 2003 is a civil penalty of $620, which did
not recur for fiscal 2004. Furthermore, other expense decreased $329 as a result
of lower foreign exchange devaluation in our Venezuelan subsidiary as compared
to fiscal 2003.
Minority interest expense increased $1,412 for fiscal 2004 compared to
fiscal 2003, mainly due to the write−off of uncollectible amounts owed to us
from a minority interest shareholder in Audiovox Venezuela.
Provision for Income Taxes
The effective tax rate for fiscal 2004 was 36.9% compared to 49.7% in the
prior year. The decrease in the effective tax rate was primarily due to the mix
of foreign and domestic earnings and reduction of state income taxes.
34