Audiovox 2006 Annual Report Download - page 25

Segment
We have determined that we operate in one segment, the Electronics Group based on review of
SFAS No. 131 ‘‘Disclosures about Segments of an Enterprise and Related Information’’. Characteristics
of our operations which are relied on in making and reviewing business decisions include the
similarities in our products, the commonality of our customers across brands, our unified marketing
strategy, and the nature of the financial information used by our Executive Officers. Management
reviews the financial results of the Company based on the performance of the Electronics Group.
Results of Operations
In February 2006, we changed our fiscal year end from November 30
th
to February 28
th
. Included
in Item 8 of this annual report on Form 10-K are the consolidated balance sheets at February 28, 2007
and 2006 and the consolidated statements of operations, consolidated statements of stockholders’
equity and consolidated statements of cash flows for the year ended February 28, 2007, the three
month transition period ending February 28, 2006 and the years ended November 30, 2005 and 2004.
In order to provide the reader meaningful comparison, the following analysis provides comparison of
the audited year ended February 28, 2007 with the unaudited year ended February 28, 2006 (derived
from the results of operations of the last nine months of fiscal year ended November 30, 2005 and the
transition quarter ended February 28, 2006) and the historical analysis for the years ended
November 30, 2005 and 2004. Refer to the previously filed Form 10-QT for the period of
February 28, 2006, which discusses the operations of the three months ended February 28, 2006
compared to the three months ended February 28, 2005. We analyze and explain the differences
between periods in the specific line items of the consolidated statements of operations.
Year ended February 28, 2007 compared to the year ended February 28, 2006
Continuing Operations
The following tables sets forth, for the periods indicated, certain statement of operations data for
the years ended February 28, 2007 (‘‘fiscal 2007’’) and 2006 (‘‘fiscal 2006’’).
Net Sales
Fiscal
2007 Fiscal 2006 $ Change
%
Change
Mobile Electronics ............................... $317,355 $335,491 $(18,136) (5.4)%
Consumer Electronics............................. 139,335 191,295 (51,960) (27.2)
Total net sales ................................. $456,690 $526,786 $(70,096) (13.3)%
Mobile Electronics, which represented 69.5%of net sales, were impacted by the absence of
Rampage, Prestige and Video-in-a-Bag sales, which were the result of our decision to exit those
product lines at the end of fiscal 2006. In addition, we suspended sales of Plug & Play XM satellite
radio receivers for five months pending the outcome of a Federal Communication Commission
(‘‘FCC’’) issue. Mobile sales were also adversely impacted by lower average selling prices in our
mobile multi-media line due to the maturing of the category and increased competition in the market.
This decrease was partially offset by increased sales in Phase Linear, Audiovox Germany, Code
Systems and $10,335 in sales generated from the acquisition of Thomson Accessories business in
January 2007.
Consumer Electronics, which represented 30.5%of net sales for fiscal 2007, decreased as average
selling prices on LCD TVs and Plasma TVs declined during fiscal 2007. In anticipation of the decline
in selling prices we limited inventory for the holiday season, which adversely affected consumer
electronics sales but reduced exposure from post holiday inventory write downs. In addition, during
fiscal 2007, the Company continued its policy of eliminating low margin retail programs which
adversely impacted consumer sales.
Sales incentive expense decreased $4,524 to $12,501 for fiscal 2007 as a result of a decline in sales
and increased reversals of $465. The increase in reversals is primarily due to an increase in reversals
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