Audiovox 2010 Annual Report Download - page 15

Sales in Our Electronics and Accessories Businesses are Dependent on New Products, Product Development and Consumer
Acceptance.
Our Electronics and Accessories businesses depend, to a large extent, on the introduction and availability of innovative
products and technologies. If we are not able to continually introduce new products that achieve consumer acceptance, our sales and
profit margins may decline.
Since We Do Not Manufacture All Our Products, We Depend on Our Suppliers to Provide Us with Adequate Quantities of High
Quality Competitive Products on a Timely Basis.
We do not manufacture all our products, and we do not have long-term contracts with our suppliers. Most of our products are
imported from suppliers under short-term purchase orders. Accordingly, we can give no assurance that:
• our supplier relationships will continue as presently in effect,
• our suppliers will not become competitors,
• our suppliers will be able to obtain the components necessary to produce high-quality, technologically-advanced
products for us,
• we will be able to obtain adequate alternatives to our supply sources should they be interrupted,
• if obtained, alternatively sourced products of satisfactory quality would be delivered on a timely basis, competitively
priced, comparably featured or acceptable to our customers,
• our suppliers have sufficient financial resources to fulfill their obligations, and
• our suppliers will be able to obtain raw materials and labor necessary for production.
On occasion our suppliers have not been able to produce the quantities of products that we desire. Our inability to supply
sufficient quantities of products that are in demand could reduce our profitability and have a material adverse effect on our
relationships with our customers. If any of our supplier relationships were terminated or interrupted, we could experience an
immediate or long-term supply shortage, which could have a material adverse effect on our business.
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, South Korea, Malaysia 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
Source: AUDIOVOX CORP, 10-K, May 14, 2010 Powered by Morningstar® Document Research℠