Audiovox 2004 Annual Report Download - page 73

AUDIOVOX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
November 30, 2002, 2003 and 2004
(Dollars in thousands, except share and per share data)
(m) Advertising
Excluding co−operative advertising, the Company expenses the cost of
advertising, as incurred, of $3,618, $6,371 and $8,821 for the years
ended November 30, 2002, 2003 and 2004, respectively. During the years
ended November 30, 2002, 2003 and 2004, the Company had no direct
response advertising.
(n) Product Warranties and Product Repair Costs
The Company generally warrants its products against certain
manufacturing and other defects. The Company provides warranties for
all of its products ranging from 90 days to the lifetime, if
applicable, of the product. Warranty expenses are accrued at the time
of sale based on the Company's estimated cost to repair expected
returns of products for warranty matters. This liability is based
primarily on historical experiences of actual warranty claims as well
as current information on repair costs. The warranty liability of
$8,408 and $7,947 is recorded in accrued expenses in the accompanying
consolidated balance sheets as of November 30, 2003 and 2004,
respectively. In addition, the Company records a reserve for product
repair costs which is based upon the quantities of defective inventory
on hand and an estimate of the cost to repair such defective
inventory. The reserve for product repair costs of $6,287 and $3,847
is recorded as a reduction to inventory in the accompanying
consolidated balance sheets as of November 30, 2003 and 2004,
respectively. Warranty claims and product repair costs expense for
each of the fiscal years ended November 30, 2002, 2003 and 2004 were
$5,500, $9,691 and $3,257, respectively.
The following table provides the changes in the Company's product
warranties and product repair costs for November 30, 2002, 2003 and
2004:
2002 2003 2004
−−−−−−−− −−−−−−−− −−−−−−−−
Beginning balance $ 7,149 $ 11,309 $ 14,695
Liabilities accrued for warranties issued
during the period 5,500 9,691 3,257
Warranty claims paid during the period (1,340) (6,305) (6,158)
−−−−−−−− −−−−−−−− −−−−−−−−
Ending balance $ 11,309 $ 14,695 $ 11,794
======== ======== ========
During the year ended November 30, 2004, the Company received a credit
of $1,517 from a vendor as a result of re−negotiating charges for the
repair of defective inventory. This credit has been included as a
reduction to the liabilities accrued for warranties issued during the
year ended November 30, 2004.
(o) Foreign Currency
Assets and liabilities of those subsidiaries and equity investees
located outside the United States whose cash flows are primarily in
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