Audiovox 2008 Annual Report Download

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FORM 10-K
AUDIOVOX CORP - VOXX
Filed: May 14, 2008 (period: February 29, 2008)
Annual report which provides a comprehensive overview of the company for the past year

Table of contents

  • Page 1
    FORM 10-K AUDIOVOX CORP - VOXX Filed: May 14, 2008 (period: February 29, 2008) Annual report which provides a comprehensive overview of the company for the past year

  • Page 2
    ...2-Properties Item 3-Legal Item 4-Submission Factors Staff Comments Proceedings of Matters to a Vote of Security Holders PART II Item 5-Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Consolidated Financial Data Discussion and Analysis...

  • Page 3
    EX-32.1 (CERTIFICATION) EX-32.2 (CERTIFICATION) EX-99.1 (CONSOLIDATED FINANCIAL REPORT) EX-99.2 (CONSENT OF INDEPENDENT ACCOUNTING FIRM)

  • Page 4
    ...New York (Address of principal executive offices) (631) 231-7750 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class: Class A Common Stock $.01 par value Name of Each Exchange on which Registered The Nasdaq Stock Market...

  • Page 5
    ... upon closing price on the Nasdaq Stock Market on August 31, 2007). The number of shares outstanding of each of the registrant's classes of common stock, as of May 14, 2008 was: Class Class A common stock $.01 par value Class B common stock $.01 par value DOCUMENTS INCORPORATED BY REFERENCE Part III...

  • Page 6
    ... with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information PART III Item 10 Item 11 Item 12 Item 13 Item 14 Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related...

  • Page 7
    ... Germany"), Audiovox Venezuela, C.A. and Code Systems, Inc. ("Code"). We market our products under the Audiovox® brand name and other brand names, such as Acoustic Research®, Advent®, Ambico®, Car Link®, Chapman®, Code-Alarm®, Discwasher®, Energizer®, Heco®, Incaar®, Jensen®, Mac Audio...

  • Page 8
    ...® brand in North America for rechargeable batteries and power supply systems, and to increase the Company's market share in the consumer electronics accessory business. In August 2007, Audiovox Germany completed the acquisition of certain assets of Incaar Limited, a U.K. business that specializes...

  • Page 9
    ... of brands, which includes Acoustic Research®, Advent®, Ambico®, Car Link®, Chapman®, Code-Alarm®, Discwasher®, Energizer®, Heco®, Incaar®, Jensen®, Mac Audio®, Magnat®, Movies2Go®, Oehlbach®, Phase Linear®, Prestige®, Pursuit®, RCA® (effective January 1, 2008), RCA Accessories...

  • Page 10
    ...headrest and portable mobile video systems, autosound products including radios, speakers, amplifiers and CD changers, satellite radios including plug and play models and direct connect models, automotive security and remote start systems, automotive power accessories, car to car portable navigation...

  • Page 11
    ...enhancing electronics, TV universal remotes, flat panel TV mounting systems, iPod specialized products, wireless headphones, rechargeable battery backups (UPS) for camcorders, cordless phones and portable video (DVD) batteries and accessories, and power supply systems. We believe our product groups...

  • Page 12
    ... of an order from public warehouses and leased facilities throughout the United States, Canada, Mexico, Venezuela and Germany. Product Development, Warranty and Customer Service Our product development cycle includes: • identifying consumer trends and potential demand, 9 Source: AUDIOVOX CORP, 10...

  • Page 13
    ... independent warranty centers throughout the United States, Canada, Mexico, Europe and Venezuela. We have a customer service group that provides product information, answers questions and serves as a technical hotline for installation help for end-users and customers. Suppliers We work directly with...

  • Page 14
    ... 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...

  • Page 15
    ... introduction and availability of innovative products and technologies. Significant sales of new products in niche markets, such as navigation, satellite radios, flat-panel TVs, mobile video systems and the acquisition of certain consumer electronic accessory businesses, has fueled the recent growth...

  • Page 16
    ...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...

  • Page 17
    ... effect on our annual financial results. A Decline in General Economic Conditions Could Lead to Reduced Consumer Demand for the Discretionary Products We Sell. Consumer spending patterns, especially discretionary spending for products such as mobile, consumer and accessory electronics, are affected...

  • Page 18
    .... Mr. Shalam's voting power may have the effect of delaying or preventing a change in control of the Company. We have two classes of common stock: Class A common stock is traded on the Nasdaq Stock Market under the symbol VOXX and Class B common stock, which is not publicly traded and substantially...

  • Page 19
    ... filing of this annual report on Form 10-K, there were no unresolved comments from the staff of the Securities and Exchange Commission. Item 2-Properties Our Corporate headquarters is located at 180 Marcus Blvd. in Hauppauge, New York. In addition, as of February 29, 2008, the Company leased a total...

  • Page 20
    ... Item 5-Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information The Class A Common Stock of Audiovox is traded on the Nasdaq Stock Market under the symbol "VOXX". The following table sets forth the low and high sale price of...

  • Page 21
    ... total stockholder return on our common Class A common stock during a period commencing on February 28, 2003 and ending on February 29, 2008 with the cumulative total return of the Nasdaq Stock Market (US) Index and our SIC Code Index, during such period. 18 Source: AUDIOVOX CORP, 10-K, May...

  • Page 22
    ... of Part II, "Consolidated Financial Statements and Supplementary Data." We begin Management's Discussion and Analysis of Financial Condition and Results of Operations with an overview of the business, including our strategy to give the reader a summary of the goals of our business and the direction...

  • Page 23
    19 Source: AUDIOVOX CORP, 10-K, May 14, 2008

  • Page 24
    ...headrest and portable mobile video systems, autosound products including radios, speakers, amplifiers and CD changers, satellite radios including plug and play models and direct connect models, automotive security and remote start systems, automotive power accessories, car to car portable navigation...

  • Page 25
    ...® brand in North America for rechargeable batteries and power supply systems and to increase the Company's market share in the consumer electronics accessory business. In August 2007, Audiovox Germany completed the acquisition of certain assets of Incaar Limited, a U.K. business that specializes in...

  • Page 26
    ... and growth in Jensen sales, acquisition of Code-Alarm branded products, the introduction of new products and lines such as portable DVD players, flat-panel TVs, satellite radio, GPS navigation and mobile multi-media devices, volatility in core mobile, consumer and accessories sales due to increased...

  • Page 27
    .... In addition, we plan to continue to acquire synergistic companies that would allow us to leverage overhead, penetrate new markets and expand existing product categories through our business channels. The key elements of our strategy are as follows Capitalize and increase the Audiovox® family of...

  • Page 28
    ... with other companies' products. The amount offered is either a fixed amount or is based upon a fixed percentage of sales revenue or fixed amount per unit sold to the customer during a specified time period. Market development funds are offered to customers in connection with new product launches or...

  • Page 29
    Accounts Receivable We perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and current credit worthiness, as determined by a review of current credit information. We continuously monitor collections from our customers and maintain a provision for ...

  • Page 30
    ... of our customers, suppliers and product developers across multiple brands, our unified marketing and distribution strategy, our centralized inventory management and logistics, and the nature of the financial information used by our Executive Officers. Management reviews the financial results of...

  • Page 31
    ... 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...

  • Page 32
    ... in Fiscal 2008 from 18.5% in Fiscal 2007 as a result of higher sales and better controls over our fixed costs. The increase in total operating expenses is due to the incremental costs related to the recently acquired Thomson Accessory, Oehlbach, Incaar, Technuity and Thomson Audio/Video operations...

  • Page 33
    ... related to the recently acquired Thomson Accessory, Oehlbach, Incaar, Technuity and Thomson Audio/Video operations and an increase in domestic direct labor and related payroll benefits as a result of increased product development efforts and general wage increases. Engineering and technical support...

  • Page 34
    ... decline in our short-term investment holdings due to cash utilized for acquisitions as well as current working capital requirements. This decrease was partially offset by realized gains on the sale of a portion of our marketable equity securities. Income Tax Benefit The effective tax rate in Fiscal...

  • Page 35
    .... In addition, we suspended sales of Plug & Play XM satellite radio receivers for five months pending the outcome of a Federal Communication Commission (''FCC'') issue. Electronic sales were also adversely impacted by lower average selling prices in our mobile multi-media line due to the maturing of...

  • Page 36
    ... increase in occupancy costs as a result of transition services costs necessary to support the newly acquired Thomson operations. $1,517 increase in employee benefits due to increased health care costs under the Company's medical and dental plan as well as increased employer contributions to the 401...

  • Page 37
    ... of Audiovox Germany and Venezuela and interest for a capital lease. Equity in income of equity investees increased due to increased equity income of Audiovox Specialized Applications, Inc. ("ASA") as a result of increased sales and gross margins in the Jensen Audio and Voyager product lines. Other...

  • Page 38
    ... Thomson's audio/video business totaling $42,265, the funding of our working capital, investments in capital equipment, repayment of certain bank and debt obligations and the repurchase of our common stock, partially offset by the proceeds received from the exercise of stock options and the sale of...

  • Page 39
    ...temporary short-term working capital needs of the Company. This line expires on June 30, 2008 and allows aggregate borrowings of up to $25,000 at an interest rate of Prime (or similar designations) plus 1%. In addition, Audiovox Germany has a 16,000 Euro accounts receivable factoring arrangement and...

  • Page 40
    ... States dollars, price negotiations depend in part on the foreign currency of foreign manufacturers, as well as market, trade and political factors. Seasonality We typically experience seasonality in our operations. We generally sell a substantial amount of our products during September, October...

  • Page 41
    ... on the Company's financial position or results of operations. Item 7A-Quantitative and Qualitative Disclosures About Market Risk The market risk inherent in our market instruments and positions is the potential loss arising from adverse changes in marketable equity security prices, interest rates...

  • Page 42
    ...Report on Form 10-K and is incorporated herein by reference. Item 9-Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not Applicable Item 9A-Controls and Procedures Evaluation of Disclosure Controls and Procedures Audiovox Corporation and subsidiaries (the "Company...

  • Page 43
    ...an independent registered public accounting firm who also audited the Company's consolidated financial statements. Grant Thornton LLP's attestation report on the effectiveness of the Company' s internal control over financial reporting is included below. 39 Source: AUDIOVOX CORP, 10-K, May 14, 2008

  • Page 44
    ... PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders Audiovox Corporation We have audited Audiovox Corporation (a Delaware corporation) and subsidiaries' (the "Company") internal control over financial reporting as of February 29, 2008, based on criteria established in Internal Control...

  • Page 45
    ... controls over financial reporting. Item 9B - Other Information Not Applicable PART III The information required by Item 10 (Directors, Executive Officers and Corporate Governance), Item 11 (Executive Compensation), Item 12 (Security Ownership of Certain Beneficial Owners and Management and Related...

  • Page 46
    ...Audiovox Corporation (incorporated by reference to the Company's Annual Report on Form 10-K for the year ended February 28, 2007). Audiovox Corporation 2006 Stock Compensation Plan (incorporated by reference to the Company...). Consolidated Financial Report of Audiovox Specialized Applications LLC (ASA...

  • Page 47
    ... the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AUDIOVOX CORPORATION May 14, 2008 Patrick M. Lavelle, President and Chief Executive Officer BY: /s/ Patrick M. Lavelle 43 Source: AUDIOVOX CORP...

  • Page 48
    ... M. Lavelle Title President; Chief Executive Officer (Principal Executive Officer) and Director Date May 14, 2008 /s/ Charles M. Stoehr Charles M. Stoehr Senior Vice President, Chief Financial Officer (Principal Financial and Accounting Officer) and Director May 14, 2008 /s/ John J. Shalam John...

  • Page 49
    AUDIOVOX CORPORATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page F-2 F-3 F-4 F-5 F-7 F-8 Financial Statements: Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of February 29, 2008 and February 28, 2007 Consolidated Statements of Operations for the years ...

  • Page 50
    ... Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated May 14, 2008 expressed an unqualified opinion thereon. GRANT THORNTON LLP Melville, New York May 14, 2008 F-2 Source: AUDIOVOX CORP, 10-K, May 14, 2008

  • Page 51
    Audiovox Corporation and Subsidiaries Consolidated Balance Sheets February 29, 2008 and February 28, 2007 (In thousands, except share data) 2008 2007 Assets Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net Inventory Receivables from vendors Prepaid expenses ...

  • Page 52
    Total liabilities and stockholders' equity See accompanying notes to consolidated financial statements. F-3 $ 533,036 $ 499,120 Source: AUDIOVOX CORP, 10-K, May 14, 2008

  • Page 53
    ... 30, 2005 (In thousands, except share and per share data) Year Ended February 29, 2008 Net sales Cost of sales Gross profit Operating expenses: Selling General and administrative Engineering and technical support Total operating expenses Operating income (loss) Other income (expense): Interest...

  • Page 54
    ...net of reclassification adjustment (see disclosure below) Unrealized loss on marketable securities, net of tax effect of $190 Other comprehensive loss Comprehensive loss Exercise of stock options into 660,500 shares of common stock Tax benefit of stock options exercised Purchase of 150,000 shares of...

  • Page 55
    ... loss on marketable securities, net of tax effect of $1,210, and reclassification adjustment (see disclosure below) Other comprehensive loss Comprehensive income Exercise of stock options into 485,000 shares of common stock Purchase of 305,100 shares of treasury stock Tax benefit of stock options...

  • Page 56
    ... of common stock Reversal of tax benefits from stock options exercised Stock-based compensation expense Cumulative effect of a change in accounting principles (FIN No. 48) Purchase of 128,100 shares of treasury stock Issuance of 585 shares of treasury stock Balances at February 29, 2008 $ - Paid-in...

  • Page 57
    Less: reclassification adjustments for gain (loss) included in net income Net unrealized gain (loss) on marketable securities, net of tax See accompanying notes to consolidated financial statements. F-6 $ 1,876 1,938 $ (117) (1,892) Source: AUDIOVOX CORP, 10-K, May 14, 2008

  • Page 58
    ...cash compensation (benefit) expense adjustment Unrealized gain on trading security Non-cash stock based compensation expense Realized (gain) loss on sale of investment Changes in operating assets and liabilities (net of assets and liabilities acquired): Accounts receivable Inventory Receivables from...

  • Page 59
    ...stock Repurchase of preferred stock Principal payments on debt Tax benefit on stock options exercised Cash used by discontinued operations Net cash used in financing activities Effect of exchange rate changes... notes to consolidated financial statements. F-7 Source: AUDIOVOX CORP, 10-K, May 14, 2008

  • Page 60
    ...Audiovox Corporation and subsidiaries (the "Company") is a leading international distributor and value added service provider in the mobile, consumer and accessory electronics industries. The Company designs and markets a diverse line of electronic products under the Audiovox® and other brand names...

  • Page 61
    Audiovox Corporation and Subsidiaries Notes to Consolidated Financial Statements, continued February 29, 2008 (Dollars in thousands, except share and per share data) d) Cash and Cash Equivalents Cash and cash equivalents consist of demand deposits with banks and highly liquid money market funds with...

  • Page 62
    ... returns at point of sale, based on historical experience and any notification the Company receives of pending returns. The Company includes all costs incurred for shipping and handling as cost of sales and all amounts billed to customers as revenue. F-10 Source: AUDIOVOX CORP, 10-K, May 14, 2008

  • Page 63
    ... and sales projections, b) review of products which were at the end of their product life cycle at the completion of the fourth quarter and c) market information obtained from industry competitors and customers regarding pricing and product demand at the January 2006 Consumer Electronics trade show...

  • Page 64
    ... of the lease term or estimated useful life of the asset. Assets acquired under capital leases are amortized over the term of the respective lease. Capitalized computer software costs obtained for internal use are amortized on a straight-line basis. F-12 Source: AUDIOVOX CORP, 10-K, May 14, 2008

  • Page 65
    ... 28, 2007, respectively. Computer software includes approximately $3,302 and $1,240 of unamortized costs as of February 29, 2008 and February 28, 2007, respectively, related to the acquisition and installation of management information systems for internal use. j) Goodwill and Other Intangible...

  • Page 66
    ...(2) market development funds; (3) volume incentive rebates and (4) other trade allowances. The Company accounts for sales incentives in accordance with Emerging Issues Task Force 01-9, " Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of Vendor's Products )" ("EITF...

  • Page 67
    F-14 Source: AUDIOVOX CORP, 10-K, May 14, 2008

  • Page 68
    Audiovox Corporation and Subsidiaries Notes to Consolidated Financial Statements, continued February 29, 2008 (Dollars in thousands, except share and per share data) Market development funds are offered to customers in connection with new product launches or entrance into new markets. The amount ...

  • Page 69
    ...477 and $6,063, respectively. Changes in the Company's product warranties and product repair costs are as follows: Year Ended February 29, 2008 Beginning balance Liabilities acquired during acquisitions (see Note 3) Liabilities accrued for warranties issued Warranty claims paid Ending balance $ Year...

  • Page 70
    Source: AUDIOVOX CORP, 10-K, May 14, 2008

  • Page 71
    ... number of common shares outstanding during the period. Diluted income (loss) per common share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. F-17 Source: AUDIOVOX CORP, 10-K, May 14, 2008

  • Page 72
    ... data) A reconciliation between the denominators of the basic and diluted income (loss) per common share are as follows: Year Ended February 29, 2008 Weighted-average number of common shares outstanding (basic) Effect of dilutive securities: Stock options and stock warrants Weighted-average number...

  • Page 73
    Audiovox Corporation and Subsidiaries Notes to Consolidated Financial Statements, continued February 29, 2008 (Dollars in thousands, except share and per share data) s) Accounting for Stock-Based Compensation The Company has stock option plans under which employees and non-employee directors may be ...

  • Page 74
    ... table below and considered exercisable at February 29, 2008. The Company granted 105,000 stock options during the year ended February 28, 2007, which vested immediately, had exercise prices equal to the fair market value of the stock on the date of grant and a contractual term of two years. The per...

  • Page 75
    ...the Company's stock option plans in the following line items in the consolidated statement of operations for the years ended February 29, 2008 and February 28, 2007: Year Ended February 29, 2008 Cost of sales Selling expense General and administrative expenses Engineering and technical support Stock...

  • Page 76
    ... fiscal 2008 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on February 29, 2008 was $3,043,800 This amount changes based on the fair market value of the company's stock. The...

  • Page 77
    Audiovox Corporation and Subsidiaries Notes to Consolidated Financial Statements, continued February 29, 2008 (Dollars in thousands, except share and per share data) On December 4, 2007, the Financial Accounting Standards Board ("FASB") issued Statement No. 141(R), Business Combinations ("Statement ...

  • Page 78
    ...have been included in the consolidated financial statements from the date of acquisition. The purpose of this acquisition was to enhance the Company's market share in the accessory business, which includes rights to the RCA brand and other brand names. F-24 Source: AUDIOVOX CORP, 10-K, May 14, 2008

  • Page 79
    ... expand the Company's accessory product lines to European Markets. The following summarizes the final allocation of the total purchase price to the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition: Assets acquired: Cash Accounts receivable, net Inventory...

  • Page 80
    ...purchase price to assets acquired and liabilities assumed was based upon a valuation study performed by management and is final (see Note 1(j)). Trademark and other intangible assets includes $4,315 of amortizable customer relationships with an estimated life of 15 years. F-25 Source: AUDIOVOX CORP...

  • Page 81
    ... Americas for rechargeable batteries and battery packs for camcorders, cordless phones, digital cameras, DVD players and other power supply devices. As consideration for Technuity, the Company paid the following: Purchase price (net of cash acquired) Final working capital credit Acquisition related...

  • Page 82
    ...U.S., Canada, Mexico, China and Hong Kong consumer electronics audio/video business as well as the rights to the RCA brand for the audio/video field of use. As consideration for Thomson's audio/video business, the Company paid the following: Purchase price Net asset payment Acquisition related costs...

  • Page 83
    Audiovox Corporation and Subsidiaries Notes to Consolidated Financial Statements, continued February 29, 2008 (Dollars in thousands, except share and per share data) Source: AUDIOVOX CORP, 10-K, May 14, 2008

  • Page 84
    ... market share for satellite radio products as well as accessories such as antennas for HDTV products. The following summarizes the final allocation of the purchase price to the fair value of the assets acquired and liabilities assumed at the date of acquisition: Assets acquired: Accounts receivable...

  • Page 85
    ... Company has a 50% non-controlling ownership interest in Audiovox Specialized Applications, Inc. ("ASA") which acts as a distributor to specialized markets for specialized vehicles, such as RV's, van conversions and marine vehicles, of televisions and other automotive sound, security and accessory...

  • Page 86
    Members' equity F-29 26,443 22,705 Source: AUDIOVOX CORP, 10-K, May 14, 2008

  • Page 87
    Audiovox Corporation and Subsidiaries Notes to Consolidated Financial Statements, continued February 29, 2008 (Dollars in thousands, except share and per share data) Three Year Months Year Ended Ended Ended February 28, February 28, November 30, 2007 2006 2005 (unaudited) $ 60,414 $ 11,421 $ 49,795 ...

  • Page 88
    ... Lending ("ABL") (finished goods inventory and non factored accounts receivable) credit facility for the Company's subsidiary, Audiovox Germany, which expires on October 25, 2008 and is renewable on an annual basis. Selected accounts receivable are purchased from the Company on a non-recourse basis...

  • Page 89
    ... repaid can not be reborrowed. The term loan is secured by a pledge of the stock of Audiovox Germany and the Magnat brand name, prohibits the distribution of dividends and takes precedence to all other intercompany loans with Audiovox Corporation. F-32 Source: AUDIOVOX CORP, 10-K, May 14, 2008

  • Page 90
    Audiovox Corporation and Subsidiaries Notes to Consolidated Financial Statements, continued February 29, 2008 (Dollars in thousands, except share and per share data) 8) Income Taxes The components of income (loss) from continuing operations before the provision for income taxes are as follows: Year ...

  • Page 91
    ... of assets and liabilities for financial reporting and tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows: February 29, 2008 Deferred tax assets: Accounts receivable Inventory Property, plant and equipment Accruals and reserves Net operating...

  • Page 92
    ...' equity as such amounts are attributable to the tax effects of excess compensation deductions from exercises of employee and non-employee stock options. The remainder of the valuation allowance of approximately $945 would reduce income tax expense. F-34 Source: AUDIOVOX CORP, 10-K, May 14, 2008

  • Page 93
    ... income tax jurisdictions with varying statutes of limitations. The earliest years' tax returns filed by the Company that are still subject to examination by the tax authorities in the major jurisdictions are as follows: Jurisdiction U.S. Germany Canada Indiana Tax Year 2004 2005 2004 2003 The...

  • Page 94
    ... quarterly purchase date (December 31, March 31, June 30 or September 30). The Company bears the cost of the remaining 15% of the fair market value of the shares as well as any broker fees. Effective March 1, 2008, the Employee Stock Purchase Plan was terminated. Source: AUDIOVOX CORP, 10-K, May 14...

  • Page 95
    F-36 Source: AUDIOVOX CORP, 10-K, May 14, 2008

  • Page 96
    Audiovox Corporation and Subsidiaries Notes to Consolidated Financial Statements, continued February 29, 2008 (Dollars in thousands, except share and per share data) The Company's employee stock purchase plan is a non-compensatory plan, and the related expense is recorded in general and ...

  • Page 97
    Audiovox Corporation and Subsidiaries Notes to Consolidated Financial Statements, continued February 29, 2008 (Dollars in thousands, except share and per share data) 11) Lease Obligations During 1998, the Company... connection with the sale of the Cellular business, the Company entered into an ...

  • Page 98
    ... customer accounted for more than 10% of net sales. A portion of the Company's customer base may be susceptible to downturns in the retail economy, particularly in the consumer electronics industry. Additionally, customers specializing in certain automotive sound, security and accessory products...

  • Page 99
    ... of Bliss-tel common stock at an exercise price of 8 baht per share. Beginning on September 1, 2005, the Company accounted for the Bliss-tel investment as an available-for-sale security in accordance with Financial Accounting Standards Board Statement No. 115 " Accounting for Certain Investments in...

  • Page 100
    ... share and per share data) 14) Financial and Product Information About Foreign and Domestic Operations Net sales and long-lived assets by location were as follows: Net Sales Year Ended February 29, 2008 North America Latin America Germany Other foreign countries Total net sales $ Year Ended February...

  • Page 101
    Source: AUDIOVOX CORP, 10-K, May 14, 2008

  • Page 102
    ... from the proceeds of the sale of the Company's cellular business. These actions were subsequently consolidated into a single derivative complaint (the "Complaint"), In re Audiovox Corporation Derivative Litigation. This matter was settled in May 2007 and received final Chancery court approval in...

  • Page 103
    Audiovox Corporation and Subsidiaries Notes to Consolidated Financial Statements, continued February 29, 2008 (Dollars in thousands, except share and per share data) Simultaneous with the acquisition of Code Systems, Inc. (Code) in March 2002, the Company entered into a purchase and supply agreement...

  • Page 104
    ... are computed separately for each quarter. Therefore, the sum of such quarterly per share amounts may differ from the total for the years. F-43 Source: AUDIOVOX CORP, 10-K, May 14, 2008

  • Page 105
    ...payments made or credits issued to customers. For the reserve for warranties and product repair costs, deductions represent currency effects and payments for labor and parts made to service centers and vendors for the repair of units returned under warranty. Source: AUDIOVOX CORP, 10-K, May 14, 2008

  • Page 106
    (c) Column C includes $1,255, $1,705, $325, $646 and $12,848 of liabilities acquired during the Terk, Thomson Accessory, Oehlbach, Technuity and Thomson Audio/Video acquisitions, respectively (see Note 3 of the Consolidated Financial Statements). S-1 Source: AUDIOVOX CORP, 10-K, May 14, 2008

  • Page 107
    ... OF REGISTRANT Subsidiaries Audiovox Accessories Corp. Audiovox Consumer Electronics, Inc. Audiovox Electronics Corporation American Radio Corp. Audiovox Venezuela C.A. Audiovox German Holdings GmbH Code Systems, Inc. Jurisdiction of Incorporation Delaware Delaware Delaware Georgia Venezuela Germany...

  • Page 108
    ... OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We have issued our reports dated May 14, 2008 with respect to the consolidated financial statements, financial statement schedule and internal control over financial reporting included in the Annual Report of Audiovox Corporation and subsidiaries on...

  • Page 109
    ...not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. 3. 4. May 14, 2008 /s/Patrick M. Lavelle Patrick M. Lavelle President and Chief Executive Officer Exhibit 31.1 Source: AUDIOVOX CORP, 10-K, May 14...

  • Page 110
    ..., that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. 3. 4. May 14, 2008 /s/C. Michael Stoehr C. Michael Stoehr Senor Vice President and Chief Financial Officer Exhibit 31.2 Source: AUDIOVOX CORP, 10-K, May...

  • Page 111
    ... with the Annual Report of Audiovox Corporation (the "Company") on Form 10-K for the period ended February 29, 2008 (the "Report") as filed with the Securities and Exchange Commission on the date hereof, I, Patick M. Lavelle, President and Chief Executive Officer of the Company, certify, pursuant...

  • Page 112
    ... with the Annual Report of Audiovox Corporation (the "Company") on Form 10-K for the period ended February 29, 2008 (the "Report") as filed with the Securities and Exchange Commission on the date hereof, I, C. Michael Stoehr, Senior Vice President and Chief Financial Officer of the Company, certify...

  • Page 113
    Audiovox Specialized Applications, LLC And Subsidiary (A Limited Liability Company) Consolidated Financial Report 11.30.2007 McGladrey & Pullen Certified Public Accountants McGladrey & Pullen, LLP is a member firm of RSM International -- an affiliation of separate and independent legal entities. ...

  • Page 114
    ... Registered Public Accounting Firm Consolidated Financial Statements Consolidated balance sheets Consolidated statements of income Consolidated statements of members' equity Consolidated statements of cash flows Notes to financial statements 2 3 4 5 6-14 1 Source: AUDIOVOX CORP, 10-K, May 14, 2008

  • Page 115
    Report of Independent Registered Public Accounting Firm To the Members Audiovox Specialized Applications, LLC and Subsidiary Elkhart, Indiana We have audited the consolidated balance sheets of Audiovox Specialized Applications, LLC and Subsidiary as of November 30, 2007 and 2006, and the related ...

  • Page 116
    Audiovox Specialized Applications, LLC and Subsidiary (A Limited Liability Company) Consolidated Balance Sheets November 30, 2007 and 2006 2007 ASSETS Current Assets Cash and cash equivalents Available-for-sale securities Trade receivables Inventories Prepaid expenses Total current assets Leasehold ...

  • Page 117
    Audiovox Specialized Applications, LLC and Subsidiary (A Limited Liability Company) Consolidated Statements of Income November 30, 2007, 2006 and 2005 2007 Net sales Cost of goods sold Gross profit Selling, general and administrative expenses Operating income Nonoperating income (expense): ...

  • Page 118
    Audiovox Specialized Applications, LLC and Subsidiary (A Limited Liability Company) Consolidated Statements of Members' Equity November 30, 2007, 2006 and 2005 2007 Balance, beginning Net income Member distributions Balance, ending See Notes to Financial Statements $ $ 2006 2005 23,336,848 $ 24,145...

  • Page 119
    Audiovox Specialized Applications, LLC and Subsidiary (A Limited Liability Company) Consolidated Statements of Cash Flows November 30,...on sale of equipment Change in assets and liabilities: Decrease (increase) in: Trade receivables Inventories Prepaid expenses Increase (decrease) in: Accounts payable...

  • Page 120
    ... Limited Liability Company) Notes To Financial Statements Note 1. Nature of Business and Significant Accounting Policies Nature of business: Audiovox Specialized Applications (the "Company") "The Mobile Electronics Company" is an international supplier of mobile electronics in certain niche markets...

  • Page 121
    Audiovox Specialized Applications, LLC And Subsidiary (A Limited Liability Company) Notes To Financial Statements All sales transactions are denominated in U.S. dollars. Sales incentives: The Company offers sales incentives to its customers primarily in the form of co-operative advertising ...

  • Page 122
    Audiovox Specialized Applications, LLC And Subsidiary (A Limited Liability Company) Notes To Financial Statements The Company accounts for these investments in accordance with Financial Accounting Standards Board ("FASB") Statement No. 115. Management determines the appropriate classification of ...

  • Page 123
    ... Company provides a limited warranty primarily for a period of up to three years for its products. The Company's standard warranties require the Company, the original equipment manufacturer or its dealers to repair or replace defective products during such warranty periods at no cost to the consumer...

  • Page 124
    Audiovox Specialized Applications, LLC And Subsidiary (A Limited Liability Company) Notes To Financial Statements Advertising costs: The Company expenses the cost of advertising (including trade shows), as incurred. Advertising costs in the accompanying statements of income were approximately $629,...

  • Page 125
    Audiovox Specialized Applications, LLC And Subsidiary (A Limited Liability Company) Notes To Financial Statements Note 2. Available-For-Sale Securities The following is a summary of the Company's investment securities as of November 30, 2007 and 2006: Gross Unrealized Gains $ Gross Unrealized Gains...

  • Page 126
    Audiovox Specialized Applications, LLC And Subsidiary (A Limited Liability Company) Notes To Financial Statements Note 3. Leasehold Improvements and Equipment The cost of leasehold improvements and equipment and the related accumulated depreciation at November 30, 2007 and 2006 are as follows: 2007...

  • Page 127
    Audiovox Specialized Applications, LLC And Subsidiary (A Limited Liability Company) Notes To Financial Statements The Company has a royalty agreement with Audiovox whereby the Company earns a 3% royalty on the member's purchases of certain mobile video product from a third party. The related ...

  • Page 128
    Audiovox Specialized Applications, LLC And Subsidiary (A Limited Liability Company) Notes To Financial Statements The Company has a health plan for its employees, which is self-insured for medical and pharmaceutical claims up to $35,000 per participant and approximately $423,000 annually in ...

  • Page 129
    Source: AUDIOVOX CORP, 10-K, May 14, 2008

  • Page 130
    ... Public Accounting Firm We consent to the incorporation by reference in the Registration Statements of Audiovox Corporation on Forms S-8 (Registration Nos. 333-36762 and 333-82073) of our report, dated March 31, 2008, on the consolidated financial statements of Audiovox Specialized Applications, LLC...