Audiovox 1999 Annual Report Download - page 31

A reconciliation of the provision for income taxes computed at the Federal statutory rate to the reported provision for income taxes is as follows:
November 30,
1997 1998 1999
Tax provision at Federal statutory rates......................................................................................... $15,205 35.0% $1,292 34.0% $14,953 35.0%
Expense relating to exchange of subordinated debentures........................................................... 4,578 10.5 — — — —
Undistributed income (losses) from equity investments................................................................ 123 0.3 287 7.6 (373) (0.9)
State income taxes, net of Federal benefit.................................................................................... 1,637 3.8 260 6.8 1,025 2.4
Decrease in beginning-of-the-year balance
of the valuation allowance for deferred tax assets................................................................... (180) (0.4) (340) (8.9) (989) (2.3)
Foreign tax rate differential............................................................................................................ 323 0.7 (82) (2.2) 38 0.1
Benefit of concluded examination.................................................................................................. — — (350) (9.2) — —
Other, net......................................................................................................................................... 734 1.7 (238) (6.3) 823 1.9
$22,420 51.6% $ 829 21.8% $15,477 36.2%
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AUDIOVOX
such, a current tax expense of $2,888 was recorded. An increase to paid-in
capital was reflected for the face value of the bonds converted, plus the
difference in the fair market value of the shares issued in the Exchange
and the fair market value of the shares that would have been issued under
the terms of the original conversion feature for a total of $63,564.
During January 1997, the Company completed additional exchanges
totaling $21,479 of its $65,000 subordinated debentures for 2,860,925
shares of Class A common stock (Additional Exchanges). As a result of the
Additional Exchanges, similar to that of the Exchange described earlier, a
charge of $12,686, tax expense of $158 and an increase to paid-in capital
of $33,592, was recorded.
During fiscal 1999, holders of the Company’s 65,000 subordinated
debentures exercised their option to convert $1,249 debentures for 70,565
shares of the Company’s Class A common stock. As a result, the remain-
ing subordinated debentures are $1,020 as of November 30, 1999.
On October 20, 1994, the Company issued a note payable for 500,000
Japanese yen (approximately $4,062 and $4,912 on November 30, 1998
and 1999, respectively) to finance its investment in TALK (Note 10). The
note is scheduled to be repaid on October 20, 2004 and bears interest at
4.1%. The note can be repaid by cash payment or by giving 10,000 shares
of its TALK investment to the lender. The lender has an option to acquire
2,000 shares of TALK held by the Company in exchange for releasing the
Company from 20% of the face value of the note at any time after October
20, 1995. This note and the investment in TALK are both denominated in
Japanese yen, and, as such, the foreign currency translation adjustments
are recorded in accumulated other comprehensive income. Any foreign
currency translation adjustment resulting from the note will be recorded
in other comprehensive income to the extent that the adjustment is less
than or equal to the adjustment from the translation of the investment in
TALK. Any portion of the adjustment from the translation of the note that
exceeds the adjustment from the translation of the investment in TALK is
a transaction gain or loss that will be included in earnings.
Maturities on long-term debt for the next five fiscal years are as follows:
2000 ............................................................................................................ —
2001 ............................................................................................................ $1,020
2002 ............................................................................................................ —
2003 ............................................................................................................ —
2004 ............................................................................................................ $4,912
(13) Income Taxes
The components of income (loss) before the provision for income
taxes are as follows: November 30,
1997 1998 1999
Domestic Operations ..................................... $42,613 $ 5,380 $42,668
Foreign Operations......................................... 829 (1,579) 55
$43,442 $ 3,801 $42,723
Total income tax expense (benefit) was allocated as follows:
November 30,
1997 1998 1999
Statement of income ..................................... $22,420 $ 829 $15,477
Stockholders’ equity:
Unrealized holding gain (loss) on
investment securities recognized
for financial reporting purposes ............ 1,174 (4,928) 3,540
Unrealized holding gain on equity
collar recognized for financial
reporting purposes................................. 473 (1,043) —
Income tax benefit of employee
stock option exercises ........................... — — (1,101)
Total income tax expense (benefit).... $24,067 $(5,142) $17,916
The provision for (benefit of) income taxes is comprised of:
Federal Foreign State Total
1997:
Current..................................... $23,316 $1,159 $1,068 $25,543
Deferred .................................. (2,845) — (278) (3,123)
$20,471 $1,159 $790 $22,420
1998:
Current..................................... $1,499 $(119) $351 $1,731
Deferred .................................. (819) — (83) (902)
$680 $(119) $268 $829
1999:
Current ................................... $14,565 $(116) $1,593 $16,042
Deferred................................. (118) (431) (16) (565)
$14,447 $(547) $1,577 $15,477