Audiovox 2008 Annual Report Download - page 31

Results of Operations
In February 2006, we changed our fiscal year end from November 30th to February 28th. Included in Item 8 of this annual report on
Form 10-K are the consolidated balance sheets at February 29, 2008 and February 28, 2007 and the consolidated statements of
operations, consolidated statements of stockholders’ equity and consolidated statements of cash flows for the years ended February 29,
2008, February 28, 2007, the three month transition period ending February 28, 2006 and the year ended November 30, 2005. In order
to provide the reader meaningful comparison, the following analysis provides comparison of the audited year ended February 29, 2008
with the audited year ended February 28, 2007, and 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 the fiscal year ended November 30, 2005 and the transition
quarter ended February 28, 2006). Refer to the previously filed Form 10-QT for the transition period ended February 28, 2006, which
discusses the results of operations for 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 29, 2008 Compared to the Year Ended February 28, 2007
Continuing Operations
The following table sets forth, for the periods indicated, certain Statement of Operations data for the years ended February 29, 2008
(“Fiscal 2008”) and February 28, 2007 (“Fiscal 2007”).
Net Sales
Fiscal Fiscal $ %
2008 2007 Change Change
Electronics $ 437,018 $ 432,943 $ 4,075 0.9%
Accessories 154,337 23,747 130,590 549.9
Total net sales $ 591,355 $ 456,690 $ 134,665 29.5%
Electronics sales, which include both mobile and consumer electronics, represented approximately 73.9% of net sales in Fiscal 2008
compared to 94.8% in Fiscal 2007, increased by 0.9% or $4,075 primarily due to an increase in mobile audio sales as a result of
improved sales in the Company’s car audio and Satellite Radio product lines and increases in the electronics sales of the Company’s
International operations in Germany and Venezuela. Offsetting these increases were lower consumer electronic sales as a result of
lower than anticipated holiday sales and industry-wide shortages of LCD panels that adversely affected sales of LCD TV’s, portable
DVD’s and digital picture frames. Electronic sales also declined in certain mobile video categories due to increased OEM programs
that include the video system as “standard” on more and more vehicles and a decline in new car sales.
Accessories sales, which represented 26.1% of our net sales in Fiscal 2008 compared to 5.2% in Fiscal 2007, increased approximately
549.9% or $130,590 due to the incremental sales generated from the recently acquired Thomson Accessory, Oehlbach and Technuity
operations.
Sales incentive expense increased $11,504 to $24,005 in Fiscal 2008, as a result of a general increase in sales, specifically an
increase in accessories net sales which offer more sales incentive programs, which was partially offset by a $1,648 increase in
reversals to $4,108 during the year. The increase in reversals was primarily due to a $873 increase in reversals of unearned sales
incentives as a result of large retail customers not reaching minimum sales targets required to earn sales incentive funds. We believe
the reversal of unearned and earned but unclaimed sales incentives upon the expiration of the claim period is a disciplined, rational,
consistent and systematic method of reversing unearned and earned but unclaimed sales incentives. These sales incentive programs are
expected to continue and will either increase or decrease based upon competition and customer demands.
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Source: AUDIOVOX CORP, 10-K, May 14, 2008