Audiovox 2005 Annual Report Download

Download and view the complete annual report

Please find the complete 2005 Audiovox annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 111

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111

FORM 10−K
AUDIOVOX CORP − VOXX
Filed: February 14, 2006 (period: November 30, 2005)
Annual report which provides a comprehensive overview of the company for the past year

Table of contents

  • Page 1
    FORM 10âˆ'K AUDIOVOX CORP âˆ' VOXX Filed: February 14, 2006 (period: November 30, 2005) Annual report which provides a comprehensive overview of the company for the past year

  • Page 2
    ... and Analysis of Financial and Qualitative Disclosures About Market Risk...39 Financial Statements and Supplementary Data...39 in and Disagreements with Accountants on Accounting and and Procedures...40 âˆ' Other Information...43 PART III Item 10âˆ'Directors and Executive Officers of the Registrant...

  • Page 3
    ... DATA ITEM 9âˆ'CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL ITEM 9Aâˆ'CONTROLS AND PROCEDURES ITEM 9B âˆ' OTHER INFORMATION ITEM 5âˆ'MARKET PART III PART IV ITEM 15âˆ'EXHIBITS, FINANCIAL STATEMENT SCHEDULES SIGNATURES EXâˆ'23 (Consents of experts and counsel...

  • Page 4

  • Page 5
    ... ENDED NOVEMBER 30, 2005 Commission file number 0âˆ'28839 AUDIOVOX CORPORATION (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation or organization) 180 MARCUS BLVD., HAUPPAUGE, NEW YORK (Address of principal executive offices) 13âˆ'1964841...

  • Page 6
    ...$265,510,375 (based upon closing price on the Nasdaq Stock Market on May 31, 2005). The number of shares outstanding of each of the common stock, as of February 9, 2006 was: CLASS Class A common stock $.01 par value Class B common stock $.01 par value DOCUMENTS INCORPORATED BY REFERENCE (1) Part III...

  • Page 7
    ... and Disagreements with Accountants on Accounting and Financial Disclosure...39 Item 9Aâˆ'Controls and Procedures...40 Item 9B âˆ' Other Information...43 PART III Item 10âˆ'Directors and Executive Officers of the Registrant...44 Item 11âˆ'Executive Compensation...44 Item 12âˆ'Security Ownership of...

  • Page 8
    3

  • Page 9
    ...Audiovox Germany") and one majorityâˆ'owned subsidiary: Audiovox Venezuela, C.A. We market our products under the Audiovox(R) brand name and other brand names, such as Jensen(R), Pursuit(R), Codeâˆ'Alarm(R), Car Link(R), Movies 2 Go(R), Magnate(R), Mac Audio(R), Heco(R), Acoustic Research(R), Advent...

  • Page 10
    ... in the electronics industry, such as satellite radio, collision avoidance, navigation, mobile video, DVD's, flat panel TVs and hand held GPS. Leverage our distribution network. We believe our distribution network which includes, power retailers, mass merchandisers, distributors, car dealers and OEM...

  • Page 11
    ...to, satellite radio, installed and portable DVD mobile video systems, rear observation and collision avoidance systems, flat panel TVs, hand held GPS, innovative home speaker systems and navigation systems with real time traffic information and digital multiâˆ'media products. PRODUCTS Our electronic...

  • Page 12
    ... portable stereos, HDTV Antennas, Twoâˆ'way (GMRS) radios, digital multiâˆ'media products such as personal video recorders and MP3 products, home speaker systems and home theater in a box, portable DVD players, handâˆ'held portable GPS, flat panel TV mounting systems, and home electronic accessories...

  • Page 13
    ... retailers, distributors, new car dealers, vehicle equipment manufacturers (OEM), and the U.S. military We sell our products under OEM arrangements with domestic and/or international subsidiaries of automobile manufacturers such as Ford Motor Company, Daimler Chrysler, General Motors Corporation...

  • Page 14
    ... support our warranties, we have independent warranty centers throughout the United States, Europe and Venezuela. At the Hauppauge, New York facility, the Company has a customer service group that provides product information, answers questions and serves as a technical hotline for installation help...

  • Page 15
    ... that happens, the market price of our common stock would likely decline, and you may lose all or part of your investment. WE COULD SPEND OR INVEST THE NET PROCEEDS FROM THE SALE OF THE CELLULAR BUSINESS IN WAYS WITH WHICH AUDIOVOX STOCKHOLDERS MAY NOT AGREE, INCLUDING THE POSSIBLE PURSUIT OF OTHER...

  • Page 16
    ... extent, on the introduction and availability of innovative products and technologies. Significant sales of new products in niche markets, such as navigation, satellite radios, flatâˆ'panel TVs and mobile video systems, have fueled the recent growth of our Electronics business. If we are not able to...

  • Page 17
    ... alternatives to our supply sources should they be interrupted, if obtained, alternatively sourced products of satisfactory quality would be delivered on a timely basis, competitively priced, comparably featured or acceptable to our customers, and our suppliers have sufficient financial resources to...

  • Page 18
    ... adverse effect on our annual financial results. A DECLINE IN GENERAL ECONOMIC CONDITIONS COULD LEAD TO REDUCED CONSUMER DEMAND FOR THE DISCRETIONARY PRODUCTS WE SELL. Consumer spending patterns, especially discretionary spending for products such as mobile and consumer electronics, are affected by...

  • Page 19
    ...on the continued efforts of John J. Shalam, Patrick Lavelle, and C. Michael Stoehr, each of whom has worked with Audiovox for over two decades, as well as our other executive officers and key employees. We have no employment contracts, with any of our executive officers or key employees. The loss or...

  • Page 20
    ... of this annual report on Form 10âˆ'K, there were no unresolved comments from the staff of the Securities and Exchange Commission. ITEM 2âˆ'PROPERTIES Our Corporate headquarters is located at 180 Marcus Blvd. in Hauppauge, New York. In addition, as of November 30, 2005, the Company leased a total...

  • Page 21
    ... transferred to a Multiâˆ'District Litigation Panel of the United States District Court of the District of Maryland against the Company and other suppliers, manufacturers and distributors of handâˆ'held wireless telephones alleging damages relating to exposure to radio frequency radiation from hand...

  • Page 22
    ... ISSUER PURCHASES OF EQUITY SECURITIES MARKET INFORMATION RELATED STOCKHOLDER MATTERS The Class A Common Stock of Audiovox is traded on the Nasdaq Stock Market under the symbol "VOXX". The following table sets forth the low and high sale price of our Class A Common Stock, based on the last daily...

  • Page 23
    ...493,248 361,848 343,248 (1) Prior to the fiscal 2005 purchases, we had 1,070,957 stock purchased as part of a publicly announced program. shares of treasury ITEM 6âˆ'SELECTED CONSOLIDATED FINANCIAL DATA The following selected consolidated financial data for the last five years should be read in...

  • Page 24
    ... (see Note 4 of Notes to Consolidated Financial Statements). 2004 amount reflects the results of the divestiture of the Cellular business and 2005 amount reflects the divestiture of Malaysia (see Note 2 of Notes to Consolidated Financial Statements). 2005 amounts reflect the acquisition of Terk (see...

  • Page 25
    ... portable stereos, HDTV Antennas, Twoâˆ'way (GMRS) radios, digital multiâˆ'media product such as personal video recorders and MP3 products, home speaker systems and home theater in a box, portable DVD players, handâˆ'held portables GPS, flat panel TV mounting systems, and home electronic accessories...

  • Page 26
    ... fiscal 2005, sales of Jensen and Codeâˆ'Alarm branded products, the growth in sales of consumer electronic products to $200,361 in fiscal 2005 due to the introduction of new consumer models such as, portable DVD players and flatâˆ'panel TVs, and the introduction of satellite radio and mobile video...

  • Page 27
    ... or media advertising in which our product is featured on its own or in conjunction with other companies' products. The amount offered is either a fixed amount or is based upon a fixed percentage of sales revenue or fixed amount per unit sold to the customer during a specified time period. Market...

  • Page 28
    of the selling amount. price to the customer, a fixed amount per unit, or a lumpâˆ'sum The accrual balance for sales incentives at November 30, 2004 and 2005 was $7,584 and $9,826, respectively. Although we make our best estimate of sales incentive liability, many factors, including significant...

  • Page 29
    Accounts Receivable We perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and current credit worthiness, as determined by a review of current credit information. We continuously monitor collections from our customers and maintain a provision for ...

  • Page 30
    ... our products, the commonality of our customers across brands, our unified marketing strategy, and the nature of the financial information used by our Executive Officers. Management reviews the financial results of the Company based on the performance of the Electronics Group, which is supported by...

  • Page 31
    ... sales, showed growth as a result of increased demand for LCD flatâˆ'panel TV product lines and portable DVD Players. Sales incentive expense increased $3,395 to $16,518 as a result of the shift in business to mass merchant and large retail customers. Also, the increase in sales incentive expense is...

  • Page 32
    ...margins in Jensen mobile, Audiovox LCD TV's and the recently acquired Terk brand. o Operating Expenses and Operating Income The following table presents the results Corporate Administrative Groups. separated by the Electronics and FISCAL 2004 ELECTRONICS: ...Selling ...General and administrative...

  • Page 33
    ... and increased software users. o o o o Engineering and technical support increased due to an increase in direct labor as a result of the recent Terk acquisition and an increase in product complexity, which has resulted in hiring additional engineers and providing additional customer service. The...

  • Page 34
    ... Audiovox Specialized Applications, LLC ("ASA") as a result of decreased sales due to increased competition for van conversion products and a decline in sales to one major customer. Other income increased due to a oneâˆ'time $4,971 unrealized gain as a result of an initial public offering and stock...

  • Page 35
    ... believe the Electronics Group has an expanding market with a certain level of volatility related to both domestic and international new car sales, increased competition by manufacturers, technological advancements, price erosion and general economic conditions. As a result, all of our products are...

  • Page 36
    ... for flat panel TVs and increased sales of Jensen, Acoustic Research and Advent home products. Sales were also adversely impacted by a decline in fourth quarter sales due to a decline in the video bag business as the category matured and experienced competition from low priced portable DVD players...

  • Page 37
    ..., respectively. The increase in writeâˆ'downs was primarily due to increased price competition for mobile video products. The above declines in margins were offset by margins achieved in Audiovox Germany as well as an increase in Codeâˆ'Alarm margins due to an increase in sales to OEM's. In addition...

  • Page 38
    ... increase in sales. Trade show expenses and advertising expense increased $567 and $844, respectively, as a result of increased product line and promotions to support the increase in sales. o The increase for the international group was due to a $3,113 increase in Audiovox Germany expenses offset by...

  • Page 39
    ... average Electronics inventory. Equity in income of equity investees increased primarily due to an increase in the equity income of Audiovox Specialized Applications, LLC ("ASA") as a result of increased sales in its Marine division and improvement in gross margins in specialized markets. In...

  • Page 40
    ...1%. In addition, Audiovox Germany has a 16,000 Euro accounts receivable factoring arrangement and a 6,000 Euro Asset Based Lending ("ABL") credit facility which expires on October 25, 2006 and is renewable on an annual basis. Operating activities used cash of $42,145 for fiscal 2005 compared to cash...

  • Page 41
    ... by a distribution received from an equity investee. Financing activities used cash of $495 during fiscal 2005, primarily due to the payment of bank obligations which were acquired in connection with the Terk acquisition, payment of debt and repurchase of treasury stock. The cash used from financing...

  • Page 42
    ... under the German factoring agreement and Venezuela bank obligation at November 30, 2005. Commercial letters of credit are issued during the ordinary course of business through major domestic banks as requested by certain suppliers. We also issue standby letters of credit to secure certain bank...

  • Page 43
    ... for Stock Based Compensation" and supersedes APB Opinion No. 25, "Accounting for Stock issued to Employees" (APB No. 25). Statement 123R requires a public entity to measure the cost of employee services recognized in exchange for an award of equity instruments based on the grantâˆ'date fair...

  • Page 44
    ...equity security ITEM 8âˆ'CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this item appears beginning on page Fâˆ'1 of this Annual Report on Form 10âˆ'K and is incorporated herein by reference. ITEM 9âˆ'CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING...

  • Page 45
    ... Securities and Exchange Act Rule 13aâˆ'15. Based upon this evaluation as of November 30, 2005, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective and adequately designed. MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER...

  • Page 46
    ...Company's Chief Executive Officer and Chief Financial Officer included in Exhibits 31.1 and 31.2 to this Annual Report on Form 10âˆ'K includes, in paragraph 4 of such certifications, information concerning the Company's disclosure controls and procedures and internal control over financial reporting...

  • Page 47
    ...in our opinion, Audiovox Corporation and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of November 30, 2005, based on the COSO criteria. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board...

  • Page 48
    ..., stockholders' equity and comprehensive income (loss) and cash flows for each of the three years in the period ended November 30, 2005 and our report dated February 10, 2006 expressed an unqualified opinion thereon. /s/Grant Thornton LLP GRANT THORNTON LLP Melville, New York February 10, 2006 43

  • Page 49
    ...: 1. The Company enhanced the design of the information technology general security controls in connection with user access conflicts and segregation of duties related to certain applications and business processes to ensure there is appropriate authorization, execution, monitoring and review by...

  • Page 50
    ... to the Company's Form 8âˆ'K filed via EDGAR on June 6, 2002). 10.8 First Amended and Restated Stock and Asset Purchase Agreement, dated as of June 2, 2003, by and among Recoton Audio Corporation, Recoton Home Audio, Inc., Recoton Mobile Electronics, Inc., Recoton International Holdings, Inc. ("RIH...

  • Page 51
    ...Philip Christopher (incorporated by reference to the Company's Annual Report on Form 10âˆ'K for the year ended November 30, 2002). 10.11 Asset Purchase Agreement, dated as of June 11, 2004, by and among Audiovox Communications Corp., Quintex Mobile Communications Corporation, Audiovox Communications...

  • Page 52
    ... 906 of The Sarbanesâˆ'Oxley Act of 2002 (filed herewith). 99.1 Consolidated Financial Report of Audiovox Specialized Applications LLC (ASA) as of November 30, 2005 and 2004 and for the Years Ended November 30, 2005, 2004 and 2003 (filed herewith). 99.2 Consent of McGladrey & Pullen, LLP (filed...

  • Page 53
    ... 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AUDIOVOX CORPORATION February 13, 2006 BY: /s/Patrick M. Lavelle Patrick M. Lavelle, President and Chief Executive Officer 48

  • Page 54
    ... Executive Officer) and Director Senior Vice President, Chief Financial Officer (Principal Financial and Accounting Officer) and Director Chairman of the Board of Directors February 13, 2006 February 13, 2006 February 13, 2006 /s/ John J. Shalam John J. Shalam /s/ Philip Christopher Philip...

  • Page 55
    Fâˆ'1 AUDIOVOX CORPORATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS: Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of November 30, 2004 and 2005 Consolidated Statements of Operations for the years ended November 30, 2003, 2004 and 2005...

  • Page 56
    ...Company's internal control over financial reporting as of November 30, 2005, based on criteria established in Internal Controlâˆ'Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 10, 2006 expressed an unqualified opinion...

  • Page 57
    AUDIOVOX CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS NOVEMBER 30, 2004 AND 2005 (IN THOUSANDS, EXCEPT SHARE DATA) 2004 2005 ASSETS Current assets: Cash and cash equivalents ...Restricted cash ...Shortâˆ'term investments ...Accounts receivable, net ...Inventory ...Receivables from ...

  • Page 58
    AUDIOVOX CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (CONTINUED) NOVEMBER 30, 2004 AND 2005 (IN THOUSANDS, EXCEPT SHARE DATA) 2004 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable ...Accrued expenses and other current liabilities ...Accrued sales incentives ...

  • Page 59
    ... (loss) from continuing operations (loss) from discontinued operations, net of tax (including gain from sale of Cellular business in fiscal 2004 and $2,079 loss Malaysia in fiscal 2005) Net income (loss) 3,212 11,239 ========= 77,136 77,200 ======== (2,904 9,591) ========= Income (loss) per...

  • Page 60
    AUDIOVOX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS) YEARS ENDED NOVEMBER 30, 2003, 2004 AND 2005 (IN THOUSANDS, EXCEPT SHARE DATA) ACCUMULATED OTHER COMPREHENSIVE RETAINED INCOME TREASURY EARNINGS (LOSS) STOCK PREFERRED STOCK CLASS ...

  • Page 61
    ... operating assets and liabilities, net of assets and liabilities acquired: Accounts receivable (48,518) Inventory (23,517) Receivables from vendors (3,859) Prepaid expenses and other (1,293) Investment securitiesâˆ'trading (1,312) Accounts payable, accrued expenses and other current liabilities and...

  • Page 62
    AUDIOVOX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) YEARS ENDED NOVEMBER 30, 2003, 2004 AND 2005 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 2003 Repayments on bank obligations Principal payments on capital lease obligation Proceeds from exercise of stock ...

  • Page 63
    ... of Business and Accounting Principles Audiovox Corporation and subsidiaries (the "Company") design and market a diverse line of electronic products throughout the world. The Company completed the divestiture of the Cellular Group on November 1, 2004 and Audiovox Malaysia on November 7, 2005 (See...

  • Page 64
    ... FINANCIAL STATEMENTS, CONTINUED NOVEMBER 30, 2003, 2004 AND 2005 (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PERâˆ'SHARE DATA) cash of $8,264 at November 30, 2004 represents amounts held in escrow for the sale of the Cellular Business (Note2). (e) Investment Securities The Company classifies...

  • Page 65
    ..., based upon terms established with the customer. The Company's selling price to its customers is a fixed amount that is not subject to refund or adjustment or contingent upon additional rebates. Any customer acceptance provisions, which are related to product testing, are satisfied prior to revenue...

  • Page 66
    ... for print or media advertising in which the Company's product is featured on its own or in conjunction with other companies' products. The amount offered is either a fixed amount or is based upon a fixed percentage of sales revenue or a fixed amount per unit sold to the customer during a specified...

  • Page 67
    ...respectively (Note 4). (h) Accounts Receivable The majority of the Company's accounts receivable are due from companies in the retail, mass merchant and OEM industries. Credit is extended based on an evaluation of a customer's financial condition. Accounts receivable are generally due within 30âˆ'60...

  • Page 68
    ... onâˆ'hand and records a provision for excess and obsolete inventory based primarily from selling prices, indications from customers based upon current price negotiations and purchase orders. The Company's industry is characterized by rapid technological change and frequent new product introductions...

  • Page 69
    ... of certain products within select product lines. In addition, the Company recorded a $3,789 inventory writedown during the third quarter of fiscal 2005 primarily for satellite radio plug and play products as a result of sudden reduced pricing by a competitor. The Company's estimates of...

  • Page 70
    ... under capital lease at November 30, 2004 and 2005, respectively. Computer software includes approximately $573 and $433 of unamortized costs as of November 30, 2004 and 2005, respectively, related to the acquisition and installation of management information systems for internal use. Fâˆ'16

  • Page 71
    ... over their respective estimated useful lives and reviewed for impairment in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Longâˆ'Lived Assets". For intangible assets with indefinite lives, including goodwill, the Company performed its annual impairment test, as of the...

  • Page 72
    ...of November 30, 2004 and 2005, 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 $3,847 and $4,187...

  • Page 73
    ...$9,691, $3,257 and $6,063, respectively. Changes in the Company's product warranties and product repair costs are as follows: YEARS ENDED NOVEMBER 30 2003 2004 2005 Beginning balance Liabilities accrued for warranties issued during the year Warranty claims paid during the year Ending balance $ 11...

  • Page 74
    ...is based upon the weighted average number of common shares outstanding during the period. Diluted net income (loss) per common share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. A reconciliation...

  • Page 75
    ... of assets to be held and used is measured by a comparison of ...price of the Company's employee stock options equals the market price of the underlying stock on the date of grant. SFAS No. 123, "Accounting for Stockâˆ'Based Compensation", requires that the Company provide proâˆ'forma information...

  • Page 76
    ... for Stock Based Compensation" and supersedes APB Opinion No. 25, "Accounting for Stock issued to Employees" (APB No. 25). Statement 123R requires a public entity to measure the cost of employee services recognized in exchange for an award of equity instruments based on the grantâˆ'date fair...

  • Page 77
    ... of the Cellular business (Note 2). (y) Issuances of Subsidiary Stock The Company's accounting policy on the issuances of subsidiary stock is to recognize through earnings the gain on the sale of the shares as long as the sale of the shares is not part of a broader corporate reorganization planned...

  • Page 78
    ...,000 in order for ACC to have the ability to convey all of the assets used in connection with the conduct of the Cellular business to UTSI. Upon the closing, ACC paid $5,019 to certain employees of ACC and its subsidiaries as a severance payment and in exchange for which Audiovox received a release...

  • Page 79
    ... a royalty free licensing agreement permitting UTSI to use the Audiovox brand name on certain products. During such period, the Company will not conduct, directly or indirectly, in the Cellular business without the prior written consent of UTSI. The Company has no separate accounting treatment for...

  • Page 80
    ...Cellular business, the Company recorded a gain of $67,000 for the year ended November 30, 2004, which was calculated as follows: Purchase Price Working capital adjustment Less: payment to former Cellular employees.... NOVEMBER 30, 2004 ASSETS Accounts receivable, net Inventory Prepaid expenses and...

  • Page 81
    ...accompanying statements of operations. (4) Business Acquisitions Code Systems, Inc. On March 15, 2002, Code Systems, Inc. (Code), a whollyâˆ'owned subsidiary of the Company, purchased certain assets of Code, an automotive security product company. The purchase price consisted of approximately $7,100...

  • Page 82
    ... or 2005. Recoton Audio Group On July 8, 2003, the Company, acquired in cash (i) trademarks from the U.S. audio operations of Recoton Corporation (the "U.S. audio business") or (Recoton) and (ii) the outstanding capital stock of Recoton German Holdings GmbH (the "international audio business"), the...

  • Page 83
    ...'s market share for satellite radio products as well as accessories such as antennas for HDTV products. The following summarizes the allocation of the purchase price to the fair value of the assets acquired and liabilities assumed at the date of acquisition: Assets acquired Accounts receivable...

  • Page 84
    ...The Company has a 50% nonâˆ'controlling ownership interest in Audiovox Specialized Applications, Inc. ("ASA") which acts as a distributor to specialized markets for specialized vehicles, such as RV's and van conversions, of televisions and other automotive sound, security and accessory products. The...

  • Page 85
    ... following presents summary financial information for ASA. Such summary financial information has been provided herein based upon the individual significance of this unconsolidated equity investment to the consolidated financial information of the Company. NOVEMBER 30 2004 2005 Current assets Non...

  • Page 86
    ... and a 6,000 Euro Asset Based Lending ("ABL") (finished goods inventory and non factored accounts receivable) credit facility for the Company's subsidiary, Audiovox Germany, which expires on October 25, 2006 and is renewable on an annual basis. Selected accounts receivable are purchased from the...

  • Page 87
    ... of Audiovox German Holdings GmbH and on all brands of the Audiovox German Holdings Group. The term the of this term the stock of and trademarks loan requires maintenance of certain yearly financial covenants that are calculated according to German Accounting Standards for Audiovox German Holdings...

  • Page 88
    ... as follows: YEARS ENDED NOVEMBER 30 2003 2004 2005 Consolidated Statements of Operations Stockholders' equity: Unrealized holding gain (loss) on investment securities recognized for financial reporting purposes Tax benefit of stock options exercised âˆ'âˆ'âˆ' Income tax expense (benefit) $7,296...

  • Page 89
    ... of deferred income tax expense (recovery) for the years ended November 30, 2004 and 2005 are as follows: NOVEMBER 30 2004 2005 Deferred tax expense (recovery) (exclusive of the effect of other components listed below) Increase (decrease) in the balance of the valuation allowance for deferred tax...

  • Page 90
    ... NOVEMBER 30 2004 2005 Deferred tax assets: Accounts receivable, principally due to allowance for doubtful accounts Inventory, principally due...all, of the deferred tax assets will not be realized. Based on the Company's ability to carry back future reversals of deferred tax assets to taxes paid in...

  • Page 91
    ... at November 30, 2004 and 2005, respectively. (11) (a) Stockâˆ'Based Compensation and Retirement Plans Stock Options The Company has stock option plans under which employees and nonâˆ'employee directors may be granted incentive stock options (ISO's) and nonâˆ'qualified stock options (NQSO's) Fâˆ'37

  • Page 92
    ...and the exercise price of the warrants was equal to the market price on the date of issuance. In accordance with APB No. 25 and SFAS 123, the Company recorded an expense equal to the fair value of the warrants, as these warrants were issued to nonâˆ'employees for services performed. Accordingly, the...

  • Page 93
    ... AVERAGE AVERAGE EXERCISE LIFE PRICE REMAINING OF SHARES OF SHARES IN YEARS 759,200 120,000 1,322,952 $ 7.59 $11.02 $14.70 1.59 0.60 3.47 (c) Restricted Stock Plan The Company has restricted stock plans under which key employees and directors may be awarded restricted stock. Awards under the...

  • Page 94
    ... to purchase shares of the Company's Class A common stock through payroll deductions at a minimum of 2% and a maximum of 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...

  • Page 95
    ... 2004 and 2005. (12) Lease Obligations During 1998, the Company entered into a 30âˆ'year capital lease for a building with its principal stockholder and current chairman, which was the headquarters of the discontinued Cellular operation. Payments on the capital lease were based upon the construction...

  • Page 96
    ... of trade receivables. The Company's customers are located principally in the United States and Canada and consist of, among others, distributors, mass merchandisers, warehouse clubs and independent retailers. The Company generally grants credit based upon analyses of its customers' financial...

  • Page 97
    ... each accounted for 10% of the Company's net sales. A portion of the Company's customer base may be susceptible to downturns in the retail economy, particularly in the consumer electronics industry. Additionally, customers specializing in certain automotive sound, security and accessory products may...

  • Page 98
    ... security. (15) Financial and Product Information About Foreign and Domestic Operations Net sales and longâˆ'lived assets by location for the years ended November 30, 2003, 2004 and 2005 were as follows. NET SALES LONGâˆ'LIVED ASSETS 2003 2004 2005 2003 2004 2005 468,880 United States Venezuela...

  • Page 99
    ...916 paid to John Shalam pursuant to an Award Agreement with ACC, and (e) recovery by ACC of $5,000 in severance payments distributed by Philip Christopher to ACC's former employees. Defendants filed a motion to dismiss the complaint, which was withdrawn. The Company understands that the individual...

  • Page 100
    ... transferred to a Multiâˆ'District Litigation Panel of the United States District Court of the District of Maryland against the Company and other suppliers, manufacturers and distributors of handâˆ'held wireless telephones alleging damages relating to exposure to radio frequency radiation from hand...

  • Page 101
    ... share (basic) Income (loss) per common share (diluted): From continuing operations From discontinued operations Net income per common share (diluted) 2005 Net sales Gross profit Income (loss) from continuing operations Income (loss) from discontinued operations Net income (loss) Income (loss) per...

  • Page 102
    ..., chargebacks and payments made or credits issued to customers. For the reserve for warranties and product repair costs, deductions represent currency effects and payments for labor and parts made to service centers and vendors for the repair of units returned under warranty.

  • Page 103
    ... PUBLIC ACCOUNTING FIRM We have issued our reports dated February 10, 2006 accompanying the consolidated financial statements and schedule, and management's assessment of the effectiveness of internal control over financial reporting included in the Annual Report of Audiovox Corporation and...

  • Page 104
    ... Corporation Quintex Mobile Communications Corp. American Radio Corp. Audiovox Holding Corp. Audiovox Communications Canada Co. Audiovox Venezuela C.A. Audiovox German Holdings GmbH Code Systems, Inc. Jurisdiction of Incorporation Delaware Delaware Delaware Georgia New York Ontario Venezuela Germany...

  • Page 105
    ...âˆ'14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 I, Patrick M. Lavelle, President and Chief Corporation, certify that: Executive Officer of Audiovox Corporation 1. I have reviewed this annual report on Form 10âˆ'K of Audiovox (the "Company"); 2. Based on my knowledge, this report does not contain...

  • Page 106
    ... financial information; and b. Any fraud, weather or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. February 13, 2006 /s/Patrick M. Lavelle Patrick M. Lavelle President and Chief Executive Officer...

  • Page 107
    ...âˆ'OXLEY ACT OF 2002 In connection with the Annual Report of Audiovox Corporation (the "Company") on Form 10âˆ'K for the period ended November 30, 2005 (the "Report") as filed with the Securities and Exchange Commission on the date hereof, I, C. Michael Stoehr, Senior Vice President and Chief...

  • Page 108
    ... with the Annual Report of Audiovox Corporation (the Company) on Form 10âˆ'K for the period ended November 30, 2005 (the Report) as filed with the Securities and Exchange Commission on the date hereof, I, Patick M. Lavelle, President and Chief Executive Officer of the Company, certify, pursuant...

  • Page 109
    ... PUBLIC ACCOUNTING FIRM We have issued our report, dated February 9, 2006, on the consolidated financial statements of Audiovox Specialized Applications, LLC which is included in the Annual Report of Audiovox Corporation and subsidiaries on Form 10âˆ'K for the year ended November 30, 2005. We...

  • Page 110
    ...14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 I, C. Michael Stoehr, Senior Vice Audiovox Corporation, certify that: 1. I have reviewed (the "Company"); this annual President and Chief Financial Officer of Corporation report on Form 10âˆ'K of Audiovox 2. Based on my knowledge, this report does not...

  • Page 111
    ... fiscal quarter in the case of an annual report) that has materiality affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of...