Audiovox 1999 Annual Report Download - page 34

AUDIOVOX
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77,871 and 13,750, respectively. Awards under the restricted stock plan
may be performance accelerated shares or performance-restricted shares.
During fiscal 1999, 32,222 performance-accelerated shares and 12,103
performance restricted shares were granted. No performance accelerated
shares or performance restricted shares were granted in 1997 or 1998.
During fiscal 1999, 19,796 performance restricted shares lapsed. No per-
formance accelerated shares or performance restricted shares lapsed in
fiscal years 1997 or 1998.
Compensation expense for the performance accelerated shares is
recorded based upon the quoted market value of the shares on the date of
grant. Compensation expense for the performance restricted shares is
recorded based upon the quoted market value of the shares on the bal-
ance sheet date. Compensation expense (income) for these grants for the
years ended November 30, 1997, 1998 and 1999 were $135, $(23) and
$127, respectively.
(c) Employee Stock Purchase Plan
In May 1993, the stockholders approved the 1993 Employee Stock
Purchase Plan. The stock purchase plan provides eligible employees an
opportunity to purchase shares of the Company’s Class A common stock
through payroll deductions up to 15% of base salary compensation.
Amounts withheld are used to purchase Class A common stock on the
open market. The cost to the employee for the shares is equal to 85% of
the fair market value of the shares on or about the last business day of
each month. The Company bears the cost of the remaining 15% of the fair
market value of the shares as well as any broker fees. This Plan provides
for purchases of up to 1,000,000 shares.
(d) Stock Warrants
In December 1993, the Company granted warrants to purchase 50,000
shares of Class A Common Stock at a purchase price of $14.375 per share
as part of the acquisition of H & H Eastern Distributors, Inc. During fiscal
1999, the warrants were surrendered for cancellation, and the holder
agreed to waive registration rights in exchange for $5.
On May 9, 1995, the Company issued 1,668,875 warrants in a private
placement, each convertible into one share of Class A common stock at
$7 1⁄8, subject to adjustment under certain circumstances. The warrants
were issued to the beneficial holders as of June 3, 1994, of approximately
$57,600 of the Company’s subordinated debentures in exchange for a
release of any claims such holders may have against the Company, its
agents, directors and employees in connection with their investment in
the subordinated debentures. As a result, the Company incurred a warrant
expense of $2,900 and recorded a corresponding increase to paid-in capi-
tal. The warrants are not exercisable after March 15, 2001, unless sooner
terminated under certain circumstances. John J. Shalam, Chief Executive
Officer of the Company, has granted the Company an option to purchase
1,668,875 shares of Class A common stock from his personal holdings.
The exercise price of this option is $7 1⁄8, plus the tax impact, if any,
should the exercise of this option be treated as dividend income rather
than capital gains to Mr. Shalam. During 1998, the Company purchased
approximately 1,324,075 of these warrants at a price of $1.30 per war-
rant, pursuant to the terms of a self-tender offer. In connection with this
purchase, the option to purchase 1,324,075 shares from John J. Shalam’s
personal holdings was canceled. As of November 30, 1999, 344,800
remaining warrants are outstanding.
During fiscal 1997, the Company granted warrants to purchase
100,000 shares of Class A Common Stock, which have been reserved, at
$6.75 per share. The warrants, which are exercisable in whole or in part
at the discretion of the holder, expire on January 29, 2002. During the
year ended November 30, 1999, all of the warrants were exercised.
(e) Profit Sharing Plans
The Company has established two non-contributory employee profit
sharing plans for the benefit of its eligible employees in the United States
and Canada. The plans are administered by trustees appointed by the
Company. A contribution of $500, $150 and $800 was made by the
Company to the United States plan in fiscal 1997, 1998 and 1999, respec-
tively. Contributions required by law to be made for eligible employees in
Canada were not material.
(16) Accumulated Other
Comprehensive Income
The change in net unrealized gain (loss) on marketable securities of
$1,917, $(8,040) and $5,775 for the years ended November 30, 1997, 1998
and 1999 is net of tax of $1,174, $(4,928) and $3,540, respectively.
Reclassification adjustments of $23,232, $488 and $2,171 are included in
the net unrealized gain (loss) on marketable securities for the years ended
November 30, 1997, 1998 and 1999, respectively.
The currency translation adjustments are not adjusted for income
taxes as they relate to indefinite investments in non-U.S. subsidiaries and
equity investments.
(17) Net Income Per Common Share
A reconciliation between the numerators and denominators of the
basic and diluted earnings per common share is as follows:
For the Years Ended
November 30,
1997 1998 1999
Net income (numerator for net income
per common share, basic).......................... $ 21,022 $ 2,972 $ 27,246
Interest on 61⁄4% convertible subor-
dinated debentures, net of tax.................. 185 — 84
Adjusted net income (numerator for net
income per common share, diluted).......... $ 21,207 $ 2,972 $ 27,330
Weighted average common shares
(denominator for net income per
common share, basic)................................ 18,948,356 19,134,529 19,100,047
Effect of dilutive securities:
Employee stock options and
stock warrants ....................................... 237,360 — 430,560
Employee stock grants............................... 70,845 — 62,175
Convertible debentures.............................. 251,571 — 110,551
Weighted average common and poten-
tial common shares outstanding
(denominator for net income per
common share, diluted) ............................. 19,508,132 19,134,529 19,703,333
Net income per common share, basic........... $ 1.11 $ 0.16 $ 1.43
Net income per common share, diluted........ $ 1.09 $ 0.16 $ 1.39
Employee stock options and stock warrants totaling 1,908,438 and
2,779,363 for the years ended November 30, 1997 and 1998, respectively,
Notes to Consolidated
FINANCIAL STATEMENTS (continued) Audiovox Corporation and Subsidiaries