Audiovox 2000 Annual Report Download - page 38

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
$71/8, 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 in 1995 of $2,900 and recorded a corresponding increase to paid-
in capital. 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 $71/8, 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 pur-
chased approximately 1,324,075 of these warrants at a price of $1.30 per
warrant, 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, 2000,
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 dis-
cretion 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 $150, $800 and $1,000 was made by the
Company to the United States plan in fiscal 1998, 1999 and 2000, respec-
tively. Contributions required by law to be made for eligible employees in
Canada were not material.
(F)DEFERRED COMPENSATION PLAN
Effective December 1, 1999, the Company adopted a Deferred Compen-
sation Plan (the Plan) for a select group of management. The Plan is intended
to provide certain executives with supplemental retirement benefits as well
as to permit the deferral of more of their compensation than they are per-
mitted to defer under the Profit Sharing and 401(k) Plan. The Plan provides
for a matching contribution equal to 25% of the employee deferrals up to
$20. The Plan is not intended to be a qualified plan under the provisions of
the Internal Revenue Code. All compensation deferred under the Plan is held
by the Company in an investment trust which is considered an asset of the
Company. The investments, which amounted to $2,211 at November 30,
2000, have been classified as trading securities and are included in invest-
ment securities on the accompanying consolidated balance sheet as
of November 30, 2000. The return on these underlying investments will
determine the amount of earnings credited to the employees. The Company
has the option of amending or terminating the Plan at any time. The deferred
compensation liability is reflected as long-term liability on the accompanying
consolidated balance sheet as of November 30, 2000.
(18) Accumulated Other Comprehensive Income (Loss)
The change in net unrealized gain (loss) on marketable securities of
$(8,040), $5,775 and $(10,119) for the years ended November 30, 1998,
1999 and 2000 is net of tax of $(4,928), $3,540 and $(6,202), respectively.
Reclassification adjustments of $488, $2,171 and $1,480 are included in
the net unrealized gain (loss) on marketable securities for the years ended
November 30, 1998, 1999 and 2000, 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.
(19) 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,
1998 1999 2000
Net income (numerator for net
income per common share, basic) $ 2,972 $ 27,246 $ 27,229
Interest on 61/4% convertible
subordinated debentures,
net of tax — 84 28
Adjusted net income (numerator for net
income per common share, diluted) $ 2,972 $ 27,330 $ 27,257
Weighted average common shares
(denominator for net income per
common share, basic) 19,134,529 19,100,047 21,393,566
Effect of dilutive securities:
Employee stock options and
stock warrants — 430,560 1,129,896
Employee stock grants — 62,175 —
Convertible debentures — 110,551 42,344
Weighted average common and
potential common shares
outstanding (denominator for net
income per common share, diluted) 19,134,529 19,703,333 22,565,806
Net income per common share before
extraordinary item:
Basic $ 0.16 $ 1.43 $ 1.17
Diluted $ 0.16 $ 1.39 $ 1.11
Net income per common share:
Basic $ 0.16 $ 1.43 $ 1.27
Diluted $ 0.16 $ 1.39 $ 1.21
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)