Audiovox 2006 Annual Report Download - page 30

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Other Income (Expense )
Fiscal
2005 Fiscal
2004 $
Change
Interest and bank charges .......................... ($2,478) ($3,762) $ 1,284
Equity in income of equity investees ................. 2,342 3,980 (1,638)
Other, net ........................................ 9,730 2,436 7,294
Total other income .............................. $9,594 $2,654 $ 6,940
Interest expense and bank charges decreased primarily due to the reduction in outstanding bank
obligations, as we repaid all amounts outstanding under our domestic bank obligations on
November 1, 2004. Interest expense and bank charges during fiscal 2005 primarily represent expenses
for debt and bank obligations of Audiovox Germany and interest for a capital lease.
Equity in income of equity investees decreased due to a decrease in the equity income of
Audiovox Specialized Applications, LLC (‘‘ASA’’) as a result of decreased sales due to increased
competition for van conversion products and a decline in sales to one major customer.
Other income increased due to a one-time $4,971 unrealized gain as a result of an initial public
offering and stock appreciation of Bliss-tel stock and issuance of Bliss-tel warrants, a former equity
investment. In addition, interest income increased $3,018 to $3,813 during fiscal 2005 due to returns on
the purchase of short-term investments in November 2004. Furthermore, other income was favorably
impacted by increased rental income as compared to the prior year. The increase in other income was
partially offset by an other than temporary impairment charge of $1,758 recorded during fiscal 2005
for our Cellstar investment due to the extended decline in stock price of this investment.
Provision for Income Taxes
The effective tax rate for fiscal 2005 was 63.0%compared to 36.9%in the prior year. The income
tax benefit for fiscal 2005 was primarily due to the pre-tax loss for fiscal 2005, tax-exempt interest
income earned on short-term investments during fiscal 2005 and the favorable outcome of 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
2005 Fiscal
2004
Net sales from discontinued operations ........................ $ 3,404 $1,162,863
Income (loss) from discontinued operations before income taxes. . (1,187) 10,837
Provision for (benefit from) income taxes ...................... (362) 701
(825) 10,136
Gain (loss) on sale of discontinued operations, net of tax ........ (2,079) 67,000
Income (loss) from discontinued operations, net of tax .......... ($ 2,904) $ 77,136
Income (loss) from discontinued operations, net of tax, was a loss of $2,904 for fiscal 2005
compared to income of $77,136 for fiscal 2004. Included in loss from discontinued operations for fiscal
2005 is a loss of $2,079 on the sale of AVM. The decline in income from discontinued operations for
fiscal 2005 is primarily due to the losses of AVM as well as the sale of Cellular business on
November 1, 2004, which resulted in a $67,000 gain in fiscal 2004.
Net Income (loss)
Net loss for fiscal 2005 was $9,591, compared to net income of $77,200 in 2004. Loss per share for
fiscal 2005 was $0.43 basic and diluted, as compared to earnings of $3.52 basic and $3.45 diluted for
2004. Net income (loss) was favorably impacted by sales incentive reversals of $2,836 and $5,083
(inclusive of discontinued operations) for fiscal 2005 and 2004, respectively.
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