Audiovox 2006 Annual Report Download - page 27

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Engineering and technical support expenses increased $1,065 or 17.2%due to an increase in direct
labor as a result of wage increases and increased labor costs.
Other Income (Expense)
Fiscal
2007 Fiscal
2006 $
Change
Interest and bank charges................................... $(1,955) $(2,405) $ 450
Equity in income of equity investees ......................... 2,937 2,463 474
Other, net ................................................ 6,253 6,894 (641)
Total other income ...................................... $ 7,235 $ 6,952 $ 283
Interest and bank charges decreased due to reductions in outstanding bank obligations and long
term debt. Interest and bank charges represent expenses for debt and bank obligations of Audiovox
Germany and Venezuela and interest for a capital lease.
Equity in income of equity investees increased due to increased equity income of Audiovox
Specialized Applications, Inc. (‘‘ASA’’) as a result of increased sales and gross margins in the Jensen
Audio and Voyager product lines.
Other income declined due to a one time $2,455 unrealized gain recorded during fiscal 2006 in
connection with the Bliss-tel investment partially offset by an other than temporary impairment charge
of $1,758 recorded for the CellStar investment during fiscal 2006. The decline in other income was
further offset by increased interest income as a result of increased short-term investment holdings and
higher interest rates as compared to the prior year.
Income Tax Benefit
The effective tax rate for fiscal 2007 was a benefit of 71.1%compared to a benefit of 68.1%in the
prior period. The interest income earned on our short-term investments is tax exempt, which results in
our effective tax rate being less than the statutory rate. The tax benefit for fiscal 2006 was positively
impacted by the favorable outcome of $3,307 in tax accrual reductions due to the completion of
certain tax examinations.
Income (loss) from Discontinued Operations
The following is a summary of results included within discontinued operations:
Fiscal
2007 Fiscal
2006
Net sales from discontinued operations........................... $ — $ 2,690
Income (loss) from discontinued operations before income taxes .... (1,163) (774)
Income tax benefit............................................. 407 418
(756) (356)
Loss on sale of discontinued operations, net of tax ................ — (2,079)
Loss from discontinued operations, net of tax ..................... $ (756) $(2,435)
Included in loss from discontinued operations for fiscal 2006 is the financial results of Audiovox
Malaysia which was sold on November 7, 2005. The loss from discontinued operations for fiscal 2007is
primarily due to legal and related costs associated with contingencies pertaining to our discontinued
Cellular business.
Net Income (Loss)
Net income for fiscal 2007 was $2,936 compared to a net loss of $8,203 in fiscal 2006. Income per
share for fiscal 2007 was $0.13 (diluted) as compared to loss per share of $0.36 (diluted) for fiscal
2006. Net income (loss) was favorably impacted by sales incentive reversals of $2,460 ($1,501 after
taxes) and $1,995 ($1,217 after taxes) for fiscal 2007 and 2006, respectively.
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