Audiovox 2006 Annual Report Download - page 62

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Audiovox Corporation and Subsidiaries
Notes to Consolidated Financial Statements, continued
February 28, 2007
(Dollars in thousands, except share and per-share data)
The following table illustrates the effect on net income (loss) and net income (loss) per
common share as if the Company had measured the compensation cost for stock option
programs under SFAS 123 during the years ended November 30, 2005 and 2004.
Years ended
November 30,
2005 2004
Net income (loss):
As reported............................................ $ (9,591) $77,200
Stock based compensation expense ....................... (490) —
Pro-forma ............................................. $(10,081) $77,200
Net income (loss) per common share (basic):
As reported............................................ $ (0.43) $ 3.52
Pro-forma ............................................. $ (0.45) $ 3.52
Net income (loss) per common share (diluted):
As reported............................................ $ (0.43) $ 3.45
Pro-forma ............................................. $ (0.45) $ 3.45
The per share weighted average fair value of stock options granted during the years ended
February 28, 2007 and November 30, 2005 was $4.11 and $2.51, respectively on the date of
grant. These options vested immediately, had exercise prices equal to the fair market value
of the stock on the date of grant and a contractual term ranging from two to three years.
This fair value was determined using the Black-Scholes option-pricing model with the
following weighted average assumptions:
Year ended
February 28,
2007
Year ended
November 30,
2005
Expected dividend yield ................................... 0%0%
Expected volatility ........................................ 49.8%19.4%
Risk-free interest rate ..................................... 4.7%4.7%
Expected life (years) ...................................... 2.0 2.6
The expected dividend yield is based on historical and projected dividend yields. The
Company estimates expected volatility based primarily on historical daily price changes of
the Company’s stock equal to the expected life of the option. The risk free interest rate is
based on the U.S. Treasury yield in effect at the time of the grant. The expected option
term is the number of years the Company estimates the options will be outstanding prior
to exercise based on employment termination behavior.
The Company recognized stock-based compensation expense for awards issued in the
following line items in the consolidated statement of operations for the year ended
February 28, 2007:
Cost of sales ................................ $ 21
Selling expense.............................. 156
General and administrative expenses........... 245
Engineering and technical support ............. 10
Stock-based compensation expense before
income tax benefit ......................... $432
F-22