Audiovox 2001 Annual Report Download - page 36

Notes to Consolidated Financial Statements (Continued) 34 Audiovox Corporation and Subsidiaries
(u) Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of
The Company accounts for its long-lived assets in accordance with the
provisions of SFAS No.121. Statement 121 requires that long-lived assets
and certain identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets to be held and
used is measured by comparison of the carrying amount of an asset to
the future net cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets
exceed the fair value of assets. Assets to be disposed of are reported
at the lower of the carrying amount or fair value less cost to sell.
In October 2001, the FASB issued SFAS No. 144, “Accounting for the
Impairment of Long-Lived Assets” (Statement 144), which addresses
financial accounting and reporting for the impairment or disposal of long-
lived assets. This statement supersedes Statement 121 while retaining
the fundamental recognition and measurement provisions of that state-
ment. Statement 144 requires that a long-lived asset to be abandoned,
exchanged for a similar productive asset or distributed to owners in a
spin-off to be considered held and used until it is disposed of. However,
Statement 144 requires that management consider revising the depre-
ciable life of such long-lived asset. With respect to long-lived assets to
be disposed of by sale, Statement 144 retains the provisions of
Statement 121 and, therefore, requires that discontinued operations no
longer be measured on a net realizable value basis and that future oper-
ating losses associated with such discontinued operations no longer be
recognized before they occur. Statement 144 is effective for all fiscal
quarters of fiscal years beginning after December 15, 2001, and will
thus be adopted by the Company on December 1, 2002. The Company
has not determined the effect, if any, that the adoption of Statement 144
will have on the Company’s consolidated financial statements.
(v) Accounting for Stock-Based Compensation
The Company applies the intrinsic value-based method of accounting
prescribed by Accounting Principles Board Opinion No. 25, “Account-
ing for Stock Issued to Employees,” and related interpretations, in
accounting for its stock-based compensation plans (APB No. 25).
(w) Reporting Comprehensive Income
Effective December 1, 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, “Reporting Comprehensive
Income” (Statement 130). Statement 130 requires that all items recog-
nized under accounting standards as components of comprehensive
income be reported in an annual financial statement that is displayed
with the same prominence as other annual financial statements. Other
comprehensive income may include foreign currency translation adjust-
ments, minimum pension liability adjustments and unrealized gains
and losses on investment securities classified as available-for-sale.
(x) Reclassifications
Certain reclassifications have been made to the 1999 and 2000
consolidated financial statements in order to conform to the 2001
presentation.
In fiscal 2001, the Company adopted the provisions of Emerging Issue
Task Force (EITF) Issue No. 00-10, “Accounting for Shipping and
Handling Fees and Costs,” which requires the Company to report
all amounts billed to a customer related to shipping and handling as
revenue. The Company includes all costs incurred for shipping and
handling as cost of sales. The Company has reclassified such billed
amounts, which were previously netted in cost of sales to net sales.
As a result of this reclassification, net sales and cost of goods sold
were increased by $1,996, $2,162 and $1,548 for years ended
November 30, 1999, 2000 and 2001, respectively.
(2) Issuance of Subsidiary Shares
On March 31, 1999, Toshiba Corporation, a major supplier, purchased
5% of the Company’s subsidiary, Audiovox Communications Corp.
(ACC), a supplier of wireless products for $5,000 in cash. The
Company currently owns 95% of ACC; prior to the transaction ACC
was a wholly-owned subsidiary. As a result of the issuance of ACC’s
shares, the Company recognized a gain of $3,800 in 1999 ($2,204
after provision for deferred taxes). The gain on the issuance of the
subsidiary’s shares have been recognized in the consolidated state-
ments of operations in accordance with the Company’s policy on the
recognition of such transactions.
In February 2000 and 2001, the Board of Directors of Audiovox
Communications Corp. (ACC), declared a dividend payable to its
shareholders, Audiovox Corporation, a 95% shareholder, and Toshiba
Corporation (Toshiba), a 5% shareholder. ACC paid Toshiba its share
of the dividend, which approximated $859 and $1,034 in 2000 and
2001, for the years ended November 30, 1999 and 2000, respectively.
(3) Supplemental Cash Flow Information
The following is supplemental information relating to the consolidated
statements of cash flows: For the Years Ended
November 30,
1999 2000 2001
Cash paid during the years for:
Interest, excluding bank charges $ 2,994 $ 4,870 $3,883
Income taxes $12,039 $21,069 $3,550
Non-Cash Transactions:
During 1999 and 2000, the Company exercised its option to convert
2,282,788 and 800,000 Japanese yen (approximately $24,026 and
$7,595) of Shintom Co. Ltd. (Shintom) convertible debentures (Shintom
debentures) into approximately 48,100,000 and 33,900,000 shares of
Shintom common stock, respectively (Note 13).
During the years ended November 30, 1999, 2000 and 2001, the
Company recorded an unrealized holding gain (loss) relating to
available-for-sale marketable equity securities, net of deferred income
taxes, of $5,775, $(10,119) and $(831), respectively, as a separate com-
ponent of accumulated other comprehensive income (loss) (Note 17).
During 1999 and 2000, $1,249 and $535 of its $65,000 61⁄4% subordi-
nated debentures were converted into 70,565 and 30,170 shares,
respectively, of Class A common stock (Note 13).