Audiovox 2009 Annual Report Download - page 32

Stock-Based Compensation
As discussed further in “Notes to Consolidated Financial Statements – Note 1(t) Accounting for Stock-Based Compensation,” we
adopted Statement of Financial Accounting Standards (“SFAS”) No. 123(R) on December 1, 2005 using the modified prospective
method. Through November 30, 2005 we accounted for our stock option plans under the intrinsic value method of Accounting
Principles Board (“APB”) Opinion No. 25, and as a result no compensation costs had been recognized in our historical consolidated
statements of operations.
We have used and expect to continue to use the Black-Sholes option pricing model to compute the estimated fair value of
stock-based awards. The Black-Scholes option pricing model includes assumptions regarding dividend yields, expected volatility,
expected option term and risk-free interest rates. The assumptions used in computing the fair value of stock-based awards reflect our
best estimates, but involve uncertainties relating to market and other conditions, many of which are outside of our control. We
estimate expected volatility by considering the historical volatility of our stock, the implied volatility of publicly traded stock options
in our stock and our expectations of volatility for the expected term of stock-based compensation awards. As a result, if other
assumptions or estimates had been used for options granted in the current and prior periods, the stock-based compensation expense of
$309 that was recorded for the year ended February 28, 2009 could have been materially different. Furthermore, if different
assumptions are used in future periods, stock-based compensation expense could be materially impacted in the future.
Income Taxes
We account for income taxes in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" and Financial Accounting Standards Board Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN No.
48"). We record a valuation allowance to reduce our deferred tax assets to the amount of future tax benefit that is more likely than not
to be realized. We decrease the valuation allowance when, based on the weight of available evidence, it is more likely than not that
the amount of future tax benefit will be realized. During fiscal 2009, the Company provided a valuation allowance against
substantially all of its deferred tax assets. Any decline in the valuation allowance could have a material favorable impact on our
income tax provision and net income in the period in which such determination is made.
Under FIN 48, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the
tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits
recognized in the financial statements from such position should be measured based on the largest benefit that has a greater than fifty
percent likelihood of being realized upon ultimate settlement. It is possible that the amount of unrecognized tax benefits could change
in the next 12 months and the Company believes that it is reasonably possible that its uncertain tax positions will decrease by
approximately $2,323 as a result of lapses in the statute of limitations for various jurisdictions. Furthermore, the Company provides
loss contingencies for state and international tax matters relating to potential tax examination issues, planning initiatives and
compliance responsibilities. The development of these reserves requires judgments about tax issues, potential outcomes and timing,
which if different, may materially impact the Company’s financial condition and results of operations.
Results of Operations
In February 2006, we changed our fiscal year end from November 30th to February 28th. Included in Item 8 of this annual report
on Form 10-K are the consolidated balance sheets at February 28, 2009 and February 29, 2008 and the consolidated statements of
operations, consolidated statements of stockholders’ equity and consolidated statements of cash flows for the years ended February 28,
2009, February 29, 2008 and February 28, 2007. In order to provide the reader meaningful comparison, the following analysis
provides comparison of the audited year ended February 28, 2009 with the audited year ended February 29, 2008, and the audited year
ended February 29, 2008 with the audited year ended February 28, 2007. We analyze and explain the differences between periods in
the specific line items of the consolidated statements of operations.
Year Ended February 28, 2009 Compared to the Year Ended February 29, 2008
Continuing Operations
The following table sets forth, for the periods indicated, certain Statement of Operations data for the years ended February 28, 2009
(“Fiscal 2009”) and February 29, 2008 (“Fiscal 2008”).
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Source: AUDIOVOX CORP, 10-K, May 14, 2009 Powered by Morningstar® Document Research℠