Audiovox 2008 Annual Report Download - page 16

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.
Our estimates of excess and obsolete inventory may prove to be inaccurate, in which case the provision required for excess and
obsolete inventory may be understated or overstated. Although we make every effort to ensure the accuracy of our forecasts of future
product demand, any significant unanticipated changes in demand or technological developments could have a significant impact on
the value of our inventory and operating results.
Because We Purchase a Significant Amount of Our Products from Suppliers in Pacific Rim Countries, We Are Subject to the
Economic Risks Associated with Changes in the Social, Political, Regulatory and Economic Conditions Inherent in These
Countries.
We import most of our products from suppliers in the Pacific Rim. Countries in the Pacific Rim have experienced significant social,
political and economic upheaval over the past several years. Due to the large concentrations of our purchases in Pacific Rim countries,
particularly China, Hong Kong, Malaysia, South Korea, and Taiwan, any adverse changes in the social, political, regulatory and
economic conditions in these countries may materially increase the cost of the products that we buy from our foreign suppliers or
delay shipments of products, which could have a material adverse effect on our business. In addition, our dependence on foreign
suppliers forces us to order products further in advance than we would if our products were manufactured domestically. This increases
the risk that our products will become obsolete or face selling price reductions before we can sell our inventory.
We Plan to Expand the International Marketing and Distribution of Our Products, Which Will Subject Us to Additional Business
Risks.
As part of our business strategy, we intend to increase our international sales, although we cannot assure you that we will be able to do
so. Conducting business outside of the United States subjects us to significant additional risks, including:
•export and import restrictions, tax consequences and other trade barriers,
•currency fluctuations,
•greater difficulty in accounts receivable collections,
•economic and political instability,
•foreign exchange controls that prohibit payment in U.S. dollars, and
•increased complexity and costs of managing and staffing international operations.
Our Products Could Infringe the Intellectual Property Rights of Others and We May Be Exposed to Costly Litigation.
The products we sell are continually changing as a result of improved technology. Although we and our suppliers attempt to avoid
infringing known proprietary rights of third parties in our products, we may be subject to legal proceedings and claims for alleged
infringement by us, our suppliers or our distributors, of third party’s patents, trade secrets, trademarks or copyrights.
Any claims relating to the infringement of third-party proprietary rights, even if not meritorious, could result in costly litigation, divert
management’s attention and resources, or require us to either enter into royalty or license agreements which are not advantageous to
us or pay material amounts of damages. In addition, parties making these claims may be able to obtain an injunction, which could
prevent us from selling our products. We may increasingly be subject to infringement claims as we expand our product offerings.
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Source: AUDIOVOX CORP, 10-K, May 14, 2008