Audiovox 2008 Annual Report Download - page 78

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Audiovox Corporation and Subsidiaries
Notes to Consolidated Financial Statements, continued
February 29, 2008
(Dollars in thousands, except share and per share data)
b) Financial Presentation of Discontinued Operations
The following is a summary of results included within discontinued operations:
Three
Year Year Months Year
Ended Ended Ended Ended
February 29, February 28, February 28, November 30,
2008 2007 2006 2005
Net sales from discontinued operations $ - $ - $ - $ 3,404
Income (loss) from operations of discontinued operations
before income taxes $ 3,248 $ (1,163) $ (281) $ (1,187)
Provision (benefit) for income taxes 1,529 (407) (97) (362)
1,719 (756) (184) (825)
Loss on sale of business, net of tax - - - (2,079)
Income (loss) from discontinued operations, net of tax $ 1,719 $ (756) $ (184) $ (2,904)
The net income (loss) from discontinued operations for the years ended February 29, 2008, February 28, 2007, the three
months ended February 28, 2006 and the year ended November 30, 2005 is primarily due to legal settlements and related
legal and administrative costs associated with contingencies pertaining to the Company’s discontinued Cellular (see Note
16) and Malaysia businesses.
Included in income from discontinued operations are tax provisions (benefits) of $1,529, $(407), $(97) and $(662) for the
years ended February 29, 2008, February 28, 2007, the three months ended February 28, 2006 and the year ended
November 30, 2005, respectively. The net change in the total valuation allowance for the year ended November 30,
2005 was a decrease of $144. Such change positively impacted the provision for income taxes from discontinued
operations for the year indicated. The effective tax rate from discontinued operations for Fiscal 2008 was impacted by
state and local taxes and the resolution of a domestic tax audit.
3) Business Acquisistions
Thomson Accessories
On January 29, 2007, the Company acquired certain assets and liabilities of Thomson’s Americas consumer electronics
accessory business as well as rights to the RCA, Recoton, Spikemaster, Ambico and Discwasher brands for consumer
electronics accessories for $64,716, including a working capital payment of $7,617, acquisition costs of $2,414 and a fee
currently estimated to be approximately $4,685 related to 0.75% of future net sales of the RCA brand for five years from the
date of acquisition. The fee related to the future net sales of the RCA brand was recorded in connection with the final
purchase price allocation (increase to intangible assets, other current liabilities ($890) and other long-term liabilities) as the
estimated fair value of the net assets acquired exceeded the total purchase price. As the estimated fair value of the net assets
acquired exceeded the total purchase price, after recording the estimated fee related to future net sales of the RCA brand, the
Company reduced the estimated fair value of the non-financial assets acquired on a prorata basis to the adjusted purchase
price of $64,716.
The results of operations of this acquisition have been included in the consolidated financial statements from the date of
acquisition. The purpose of this acquisition was to enhance the Company’s market share in the accessory business, which
includes rights to the RCA brand and other brand names.
F-24
Source: AUDIOVOX CORP, 10-K, May 14, 2008