Audiovox 2004 Annual Report Download - page 53

consolidated statements of operations for the year ended November 30, 2002 in
accordance with the Company's policy on the recognition of such transactions,
which is an allowable method under Staff Accounting Bulleting Topic 5.H.
In connection with Toshiba's 20% purchase of ACC, the following agreements
(which became null and void on November 1, 2004 as a result of the sale to the
Cellular business to UTSI, with the exception of payments made) were entered
into:
o Stockholders agreement − provided for the composition of the board of
directors of ACC and identified certain items, other than in the
ordinary course of business, that ACC cannot do without prior approval
from Toshiba.
o Distribution arrangement − ACC would be Toshiba's exclusive
distributor for the sale of Toshiba cellular products in the United
States, Canada, Mexico and all countries in the Caribbean and Central
and South America through May 29, 2007.
o Employment agreement with the President and Chief Executive Officer
(the Executive) of ACC − ACC was required to pay the Executive an
annual base salary of $500 in addition to an annual bonus equal to 2%
of ACC's annual earnings before income taxes. The Company, under the
employment agreement, was required to establish and pay a bonus of
$3,200 to key employees of ACC, including the Executive, to be
allocated by the Executive. The bonus was for services previously
rendered and, accordingly, the bonus has been included in discontinued
operations in the accompanying statements of operations for the year
ended November 30, 2002. During the year ended November 30, 2002, the
Executive was paid $1,800 less an amount outstanding under a
promissory note of $651.
In May 2002, the Company granted seven stock appreciation units in ACC to
its Chief Executive Officer of ACC and seven stock appreciation units in ACC to
the Chief Executive Officer of the Company. Each unit had a value of
approximately $774, which was based upon the then fair value per share of ACC
based upon the value of shares sold to Toshiba.
The Company was released from the above agreements on November 1, 2004 as a
result of the sale of the Cellular business to UTSI (see Note 2 of Notes to
Consolidated Financial Statements).
Minority interest income (expense) relating to Toshiba's minority share
ownership in ACC for the years ended November 30, 2002, 2003 and 2004 was
$4,741, ($1,066) and $(2,398), respectively. Such income (expense) has been
included in discontinued operations in the accompanying statements of operations
for all periods presented.
Recent Accounting Pronouncements
In November 2004, The Financial Accounting Standards Board (FASB)
issued FASB Statement No. 151 ("Statement 151"), "Inventory Costs, an amendment
of ARB No. 43, Chapter 4". The amendments made by Statement 151 clarified that
abnormal amounts of idle facility expense, freight, handling costs, and wasted
materials (spoilage) should be recognized as current−period charges and requires
the allocation of fixed production overheads to inventory based on the normal
capacity of the production facilities. Statement 151 is effective for inventory
costs incurred during fiscal years beginning after June 15, 2005 or the
Company's fiscal year ended November 30, 2006. The Company does not expect the
adoption of Statement 151 to have a material impact on the Company's
consolidated financial statements.
In December 2004, the Financial Accounting Standards Board (FASB) issued
FASB Statement No. 123R ("Statement 123R"), "Share Based Payment". Statement
123R is a revision of FASB Statement 123, "Accounting for Stock Based
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