Audiovox 1998 Annual Report Download - page 37

(12) Capital Structure
The Company’s capital structure is as follows:
Par Voting Rights Liquidation
SECURITY Value Shares Authorized Shares Outstanding Per Share Rights
November 30, November 30,
1998 1997 1998 1997
Preferred Stock.............................. $50.00 50,000 50,000 50,000 50,000 — $50 per share
Series Preferred Stock .................. 0.01 1,500,000 1,500,000 —— — —
Class A Common Stock................ 0.01 30,000,000 30,000,000 16,760,518 16,963,533 One Ratably with Class B
Class B Common Stock................ 0.01 10,000,000 10,000,000 2,260,954 2,260,954 Ten Ratably with Class A
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The holders of Class A and Class B Common Stock are
entitled to receive cash or property dividends declared by the
Board of Directors. The Board can declare cash dividends for
Class A Common Stock in amounts equal to or greater than
the cash dividends for Class B Common Stock. Dividends
other than cash must be declared equally for both classes.
Each share of Class B Common Stock may, at any time, be
converted into one share of Class A Common Stock.
The 50,000 shares of non-cumulative Preferred Stock
outstanding are owned by Shintom and have preference
over both classes of common stock in the event of liquida-
tion or dissolution.
On May 16, 1997, the Company’s Board of Directors
approved the repurchase of 1,000,000 shares of the
Company’s Class A Common Stock in the open market
under a share repurchase program (the Program). As of
November 30, 1998 and 1997, 498,055 and 290,000 shares,
respectively, were repurchased under the Program at an
average price of $7.21 and $8.35 per share, respectively, for
an aggregate amount of $3,589 and $2,421, respectively.
As of November 30, 1998 and 1997, 1,963,480 and 969,500
shares of the Company’s Class A Common Stock are
reserved for issuance under the Company’s Stock Option
and Restricted Stock Plans and 4,167,117 and 5,491,192 for
all convertible securities and warrants outstanding at
November 30, 1998 and 1997 (Notes 10 and 13).
Undistributed earnings from equity investments included
in retained earnings amounted to $2,324 and $1,564 at
November 30, 1998 and 1997, respectively.
(13) Stock-Based Compensation and
Stock Warrants
(a) Stock Options
The Company has stock option plans under which
employees and non-employee directors may be granted
incentive stock options (ISO’s) and non-qualified stock
options (NQSO’s) to purchase shares of Class A Common
Stock. Under the plans, the exercise price of the ISO’s will
not be less than the market value of the Company’s Class A
Common Stock or 110% of the market value of the
Company’s Class A Common Stock on the date of grant.
The exercise price of the NQSO’s may not be less than 50%
of the market value of the Company’s Class A Common
Stock on the date of grant. The options must be exercisable
no later than ten years after the date of grant. The vesting
requirements are determined by the Board of Directors at
the time of grant.
Compensation expense is recorded with respect to the
options based upon the quoted market value of the
shares and the exercise provisions at the date of grant.
Compensation expense for the year ended November 30,
1996 was $97. No compensation expense was recorded for
the years ended November 30, 1998 and 1997.
Information regarding the Company’s stock options is sum-
marized below:
Weighted
Average
Number Exercise
of Shares Price
Outstanding at
November 30, 1995.............................. 558,250 8.80
Granted ............................................. — —
Exercised........................................... — —
Canceled ........................................... (9,500) 10.17
Outstanding at
November 30, 1996.............................. 548,750 8.78
Granted ............................................. 1,260,000 7.09
Exercised........................................... — —
Canceled ........................................... (109,000) 10.95
Outstanding at
November 30, 1997.............................. 1,699,750 7.38
Granted ............................................. 10,000 4.63
Exercised........................................... — —
Canceled ........................................... (16,000) 8.79
Outstanding at
November 30, 1998 .......................... 1,693,750 7.33
Options exercisable,
November 30, 1998 .......................... 1,117,750 7.18
At November 30, 1998 and 1997, 207,302 and 190,250
shares, respectively, were available for future grants under
the terms of these plans.
The Company adopted Statement 123 in fiscal 1997. The
Company has elected to disclose the pro-forma net earn-
ings and earnings per share as if such method had been
used to account for stock-based compensation costs as
described in Statement 123.
The per share weighted average fair value of stock
options granted during 1998 was $3.45 on the date of grant
using the Black-Scholes option-pricing model with the fol-
lowing weighted average assumptions: risk free interest rate
of 5.7%, expected dividend yield of 0.0%, expected stock
volatility of 60% and an expected option life of 10 years.
The per share weighted average fair value of stock
options granted during 1997 was $5.73 on the date of the
grant using the Black-Scholes option-pricing model with the