Audiovox 2010 Annual Report Download - page 17

Our Products Could Infringe the Intellectual Property Rights of Others and We May Be Exposed to Costly Litigation.
The products we sell are continually changing as a result of improved technology. Although we and our suppliers attempt to
avoid infringing known proprietary rights of third parties in our products, we may be subject to legal proceedings and claims for
alleged infringement by us, our suppliers or our distributors, of third party’s patents, trade secrets, trademarks or copyrights.
Any claims relating to the infringement of third-party proprietary rights, even if not meritorious, could result in costly
litigation, divert management’s attention and resources, or require us to either enter into royalty or license agreements which are not
advantageous to us or pay material amounts of damages. In addition, parties making these claims may be able to obtain an injunction,
which could prevent us from selling our products. We may increasingly be subject to infringement claims as we expand our product
offerings.
If Our Sales During the Holiday Season Fall below Our Expectations, Our Annual Results Could Also Fall below Expectations.
Seasonal consumer shopping patterns significantly affect our business. We generally make a substantial amount of our sales and net
income during September, October and November. We expect this trend to continue. December is also a key month for us, due largely
to the increase in promotional activities by our customers during the holiday season. If the economy faltered in these periods, if our
customers altered the timing or frequency of their promotional activities or if the effectiveness of these promotional activities
declined, particularly around the holiday season, it could have a material 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, consumer and accessory
electronics, are affected by, among other things, prevailing economic conditions, energy costs, raw material costs, wage rates,
inflation, consumer confidence and consumer perception of economic conditions. A general slowdown in the U.S. and certain
international economies or an uncertain economic outlook could have a material adverse effect on our sales and operating results.
Acquisitions and Strategic Investments May Divert Our Resources and Management Attention; Results May Fall Short of
Expectations.
We intend to continue pursuing selected acquisitions of and investments in businesses, technologies and product lines as a
key component of our growth strategy. Any future acquisition or investment may result in the use of significant amounts of cash,
potentially dilutive issuances of equity securities, incurrence of debt and amortization expenses related to intangible
assets. Acquisitions involve numerous risks, including:
• difficulties in the integration and assimilation of the operations, technologies, products and personnel of an acquired
business;
• diversion of management’s attention from other business concerns;
• increased expenses associated with the acquisition; and
• potential loss of key employees or customers of any acquired business.
We cannot assure you that our acquisitions will be successful and will not adversely affect our business, results of operations or
financial condition.
We have recorded, or may record in the future, goodwill and other intangible assets as a result of acquisitions, and changes in
future business conditions could cause these investments to become impaired, requiring substantial write-downs that would reduce
our operating income.
Goodwill and other intangible assets recorded on our balance sheet as of February 28, 2010 was $104,615. We evaluate the
recoverability of recorded goodwill and other intangible asset amounts annually, or when evidence of potential impairment
exists. The annual impairment test is based on several factors requiring judgment. During Fiscal 2009, the Company recorded an
impairment charge of $38,814 as a result of its impairment review (see Note 1(k)). Changes in our operating performance or business
conditions, in general, could result in an impairment of goodwill, if applicable, and/or other intangible assets, which could be material
to our results of operations.
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Source: AUDIOVOX CORP, 10-K, May 14, 2010 Powered by Morningstar® Document Research℠