Audiovox 2010 Annual Report Download - page 13

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Equity Investment
We have a 50% non-controlling ownership interest in Audiovox Specialized Applications, Inc. ("ASA") which acts as a
distributor of televisions and other automotive sound, security and accessory products to specialized markets for specialized vehicles,
such as, but not limited to, RV's, van conversions and marine vehicles. The goal of this equity investment is to blend financial and
product resources with local operations in an effort to expand our distribution and marketing capabilities.
Employees
As of February 28, 2010, we employed approximately 970 people worldwide. We consider our relations with employees to
be good and no employees are covered by collective bargaining agreements.
Item 1A-Risk Factors
We have identified certain risk factors that apply to us. You should carefully consider each of the following risk factors and
all of the other information included or incorporated by reference in this Form 10-K. If any of these risks, or other risks not presently
known to us or that we currently believe not to be significant, develop into actual events, then our business, financial condition,
liquidity, or results of operations could be adversely affected. If that happens, the market price of our common stock would likely
decline, and you may lose all or part of your investment.
Our success will depend on a less diversified line of business.
Currently, we generate substantially all of our sales from the Consumer and Mobile Electronics and Accessories
businesses. We cannot assure you that we can grow the revenues of our Electronics and Accessories businesses or maintain
profitability. As a result, the Company's revenues and profitability will depend on our ability to maintain and generate additional
customers and develop new products. A reduction in demand for our existing products and services would have a material adverse
effect on our business. The sustainability of current levels of our Electronics and Accessories businesses and the future growth of such
revenues, if any, will depend on, among other factors:
• the overall performance of the economy and discretionary consumer spending,
• competition within key markets,
• customer acceptance of newly developed products and services, and
• the demand for other products and services.
We cannot assure you that we will maintain or increase our current level of revenues or profits from the Electronics and
Accessories businesses in future periods.
The Electronics and Accessories Businesses are Highly Competitive and Face Significant Competition from Original Equipment
Manufacturers (OEMs) and Direct Imports By Our Retail Customers.
The market for consumer electronics and accessories is highly competitive across all product lines. We compete against many
established companies who have substantially greater financial and engineering resources than we do. We compete directly with
OEMs, including divisions of well-known automobile manufacturers, in the autosound, auto security, mobile video and accessories
industry. We believe that OEMs have diversified and improved their product offerings and place increased sales pressure on new car
dealers with whom they have close business relationships to purchase OEM-supplied equipment and accessories. To the extent that
OEMs succeed in their efforts, this success would have a material adverse effect on our sales of automotive entertainment and security
products to new car dealers. In addition, we compete with major retailers who may at any time choose to direct import products that
we may currently supply.
Sales Category Dependent on Economic Success of Automotive Industry.
A portion of our OEM sales are to American automobile manufacturers, specifically Chrysler, General Motors and Ford. Some of
these OEM manufacturers have entered plans to reorganize their operations as a result of general economic conditions. If they are not
successful in their reorganization, it could have a material adverse effect on a portion of our OEM business.
We Do Not Have Long-term Sales Contracts with Any of Our Customers.
Sales of our products are made by written purchase orders and are terminable at will by either party. The unexpected loss of
all or a significant portion of sales to any one of our large customers could have a material adverse effect on our performance.
We Depend on a Small Number of Key Customers for a Large Percentage of Our Sales
The electronics industry is characterized by a number of key customers. Specifically 36%, 36% and 25% of our sales were to five
customers in fiscal 2010, 2009 and 2008, respectively. The loss of one or more of these customers could have a material adverse
impact on our business.
Source: AUDIOVOX CORP, 10-K, May 14, 2010 Powered by Morningstar® Document Research℠