Audiovox 2006 Annual Report Download - page 10

Download and view the complete annual report

Please find page 10 of the 2006 Audiovox annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 120

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120

we do. We compete directly with OEMs, including divisions of well-known automobile manufacturers,
in the autosound, auto security, mobile video and accessories industry. We believe that OEMs have
diversified and improved their product offerings and place increased sales pressure on new car dealers
with whom they have close business relationships to purchase that OEM-supplied equipment and
accessories. To the extent that OEMs succeed in their efforts, this success would have a material
adverse effect on our sales of automotive entertainment and security products to new car dealers. In
addition, we compete with major retailers who may at any time choose to direct import products that
we may currently supply.
We Do Not Have Long-term Sales Contracts with Any of Our Customers.
Sales of our products are made by written purchase orders and are terminable at will by either
party. The unexpected loss of all or a significant portion of sales to any one of our large customers
could have a material adverse effect on our performance.
Sales in Our Electronics Business Are Dependent on New Products and Consumer Acceptance.
Our Electronics business depends, to a large extent, on the introduction and availability of
innovative products and technologies. Significant sales of new products in niche markets, such as
navigation, satellite radios, flat-panel TVs and mobile video systems, have fueled the recent growth of
our Electronics business. If we are not able to continually introduce new products that achieve
consumer acceptance, our sales and profit margins may decline.
Since We Do Not Manufacture Our Products, We Depend on Our Suppliers to Provide Us with Adequate
Quantities of High Quality Competitive Products on a Timely Basis.
We do not manufacture our products, and we do not have long-term contracts with our suppliers.
Most of our products are imported from suppliers under short-term purchase orders. Accordingly, we
can give no assurance that:
• our supplier relationships will continue as presently in effect,
• our suppliers will not become competitors,
• our suppliers will be able to obtain the components necessary to produce high-quality,
technologically-advanced products for us,
• we will be able to obtain adequate alternatives to our supply sources should they be
interrupted,
• if obtained, alternatively sourced products of satisfactory quality would be delivered on a
timely basis, competitively priced, comparably featured or acceptable to our customers, and
• our suppliers have sufficient financial resources to fulfill their obligations.
On occasion our suppliers have not been able to produce the quantities of products that we
desire. Our inability to supply sufficient quantities of products that are in demand could reduce our
profitability and have a material adverse effect on our relationships with our customers. If any of our
supplier relationships were terminated or interrupted, we could experience an immediate or long-term
supply shortage, which could have a material adverse effect on our business.
The Impact of Future Selling Prices and Technological Advancements may cause Price Erosion and
Adversely Impact our Profitability and Inventory Value
Since we do not make any of our own products and do not conduct our own research, we cannot
assure you that we will be able to source technologically advanced products in order to remain
competitive. Furthermore, the introduction or expected introduction of new products or technologies
may depress sales of existing products and technologies. This may result in declining prices and
inventory obsolescence. Since we maintain a substantial investment in product inventory, declining
prices and inventory obsolescence could have a material adverse effect on our business and financial
results.
9