Audiovox 1997 Annual Report Download - page 22

financial statement carrying amounts of existing assets and liabilities
and their respective tax bases and operating loss and tax credit carry-
forwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the
enactment date.
(q) Net Income (Loss) Per Common Share
Primary earnings per share are computed based on the weighted
average number of common shares outstanding and common stock
equivalents. The Company did not present fully-diluted earnings per
share for the years ended November 30, 1996 and 1995 as the addition
of potentially dilutive securities would result in anti-dilution.
The following weighted average shares were used for the compu-
tation of primary and fully-diluted earnings per share:
For theYears Ended November 30,
1997 1996 1995
Primary 19,295,346 9,398,352 9,038,742
Fully diluted 20,112,523 – –
The Company will adopt the provisions of Statement of Financial
Accounting Standards (SFAS) No. 128, “Earnings per Share”, on
December 1, 1997. Adoption of SFAS No. 128 will not have an impact
on the Company’s financial position, results of operations or liquidity,
however, the impact on previously reported earnings per share data
is currently unknown.
(r) Supplementary Financial Statement Information
Advertising expenses approximated $16,981, $21,794, and $13,538
for the years ended November 30, 1997, 1996, and 1995, respectively.
Interest income of approximately $1,525, $1,097, and $1,047 for
the years ended November 30, 1997, 1996, and 1995, respectively, is
included in other in the accompanying consolidated statements of
income (loss).
Included in accrued expenses and other current liabilities is
$4,091 and $4,405 of accrued wages and commissions at November
30, 1997 and 1996, respectively.
(s) Use of Estimates
The preparation of financial statements in conformity with gener-
ally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of the contingent assets and liabilities at
the date of the financial statements and the reported amounts of rev-
enues and expenses during the reporting period. Actual results could
differ from those estimates.
(t) Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of
On December 1, 1996, the Company adopted SFAS No. 121,
“Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed of.” SFAS No. 121 requires that long-lived
assets and certain identifiable intangibles be reviewed for impair-
ment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is measured by comparison of the carry-
ing amount of an asset to the future net cash flows expected to be
generated by the asset. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceed the fair value of
assets. Assets to be disposed of are reported at the lower of the carry-
ing amount or fair value less cost to sell. Adoption of SFAS No. 121
did not have a material impact on the Company’s financial position,
results of operations or liquidity.
(u) Accounting for Stock-Based Compensation
Prior to December 1, 1996, the Company accounted for its stock
option plan in accordance with the provisions of Accounting
Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued
to Employees”, and related interpretations. As such, compensation
expense would be recorded on the date of grant only if the current
market price of the underlying stock exceeded the exercise price. On
December 1, 1996, the Company adopted SFAS No. 123, “Accounting
for Stock-Based Compensation”, which permits entities to recognize,
as expense over the vesting period, the fair value of all stock-based
awards on the date of grant. Alternatively, SFAS No. 123 also allows
entities to continue to apply the provisions of APB Opinion No. 25
and provide pro forma net income and pro forma earnings per share
disclosures for employee stock option grants made in fiscal 1996 and
future years as if the fair-value-based method defined in SFAS No.
123 had been applied. The Company has elected to continue to apply
the provisions of APB Opinion No. 25 and provide the pro forma dis-
closure provisions of SFAS No. 123.
(2) Business Acquisitions/Dispositions
During 1997, the Company formed Audiovox Venezuela C.A.
(AudiovoxVenezuela), an 80%-owned subsidiary, for the purpose of
expanding its international business. The Company made an initial
investment of $478 which was used by AudiovoxVenezuela to obtain
certain licenses, permits and fixed assets.
In April 1996, the Company formed Audiovox Holdings (M) Sdn.
Bhd. (Audiovox Holdings) and Audiovox Communications (Malaysia)
Sdn. Bhd. (Audiovox Communications), which are 80% and 72% -
owned subsidiaries of Audiovox Asia, Inc. (Audiovox Asia), respec-
tively, which, in turn, is a wholly-owned subsidiary of the Company.
In July 1994, the Company formed Audiovox (Thailand) Co., Ltd., a
100%-owned subsidiary of Audiovox Asia. In 1996, Audiovox
Communications formed Vintage Electronics Holdings (Malaysia)
Sdn. Bhd., a wholly-owned subsidiary. The Company formed these
subsidiaries to assist in its planned expansion of its international
business.
In October 1996, the Company contributed the net assets of its
cellular division into a newly-formed, wholly-owned subsidiary
Audiovox Communications Corp. (ACC).
(3) Supplemental Cash Flow Information
The following is supplemental information relating to the consolidat-
ed statements of cash flows:
For the Years Ended November 30,
1997 1996 1995
Cash paid during the years for:
Interest $ 1,560 $7,666 $9,224
Income taxes $23,530 $ 272 $ 818
During 1997, the Company issued a credit of $1,250 on open
accounts receivable and issued 250,000 shares of its Class A Common
Stock, valued at five dollars per share, in exchange for a 20% interest
in Bliss-Tel Company, Limited (Bliss-Tel) (Note 8).
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