Audiovox 2010 Annual Report Download - page 57

Audiovox Corporation and Subsidiaries
Notes to Consolidated Financial Statements
February 28, 2010
(Dollars in thousands, except share and per share data)
1) Description of Business and Summary of Significant Accounting Policies
a) Description of Business and Accounting Principles
Audiovox Corporation (“Audiovox", “We", "Our", "Us" or “Company") is a leading international distributor in the
accessory, mobile and consumer electronics industries. With our most recent acquisition of Invision Automotive
Systems, Inc. we have added manufacturing capabilities to our business model. We conduct our business through eleven
wholly-owned subsidiaries: American Radio Corp., Audiovox Electronics Corporation (“AEC”), Audiovox Accessories
Corp. (“AAC”), Audiovox Consumer Electronics, Inc. (“ACE”), Audiovox German Holdings GmbH (“Audiovox
Germany”), Audiovox Venezuela, C.A., Audiovox Canada Limited, Entretenimiento Digital Mexico, S. de C.V.
(“Audiovox Mexico”), Code Systems, Inc, Schwaiger GmbH (“Schwaiger”) and Invision Automotive Systems, Inc.
(“Invision”). We market our products under the Audiovox® brand name, other brand names and licensed brands, such as
Acoustic Research®, Advent®, Ambico®, Car Link®, Chapman®, Code-Alarm®, Discwasher®, Energizer®, Heco®,
IncaarTM, Invision®, Jensen®, Mac AudioTM, Magnat®, Movies2Go®, Oehlbach®, Phase Linear®, Prestige®,
Pursuit®, RCA®, RCA Accessories®, Recoton®, Road Gear®, Schwaiger®, Spikemaster® and Terk®, as well as
private labels through a large domestic and international distribution network. We also function as an OEM ("Original
Equipment Manufacturer") supplier to several customers and presently have one reportable segment (the "Electronics
Group"), which is organized by product category.
The Company completed the divestiture of Audiovox Malaysia on November 7, 2005. Unless specifically indicated
otherwise, all amounts and percentages presented in the notes below are exclusive of discontinued operations.
The Company’s current fiscal year began March 1, 2009 and ended on February 28, 2010. This annual report on Form
10-K compares the financial position as of February 28, 2010 to February 28, 2009 and the results of operations for the
years ended February 28, 2010, February 28, 2009 and February 29, 2008.
The financial statements and accompanying notes are prepared in accordance with accounting principles generally
accepted in the United States of America.
b) Principles of Consolidation
The consolidated financial statements include the financial statements of Audiovox Corporation and its wholly-owned
subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Equity investments in which the Company exercises significant influence but does not control and is not the primary
beneficiary are accounted for using the equity method. The Company's share of its equity method investees earnings or
losses are included in other income in the accompanying Consolidated Statements of Operations. The Company
eliminates its pro rata share of gross profit on sales to its equity method investees for inventory on hand at the investee at
the end of the year. Investments in which the Company is not able to exercise significant influence over the investee are
accounted for under the cost method.
c) Use of Estimates
The preparation of these financial statements require the Company to make estimates and assumptions that affect
reported amounts of assets, liabilities, revenue and expenses. Such estimates include the allowance for doubtful
accounts, inventory valuation, recoverability of deferred tax assets, reserve for uncertain tax positions, valuation of
long-lived assets, accrued sales incentives, warranty reserves, stock-based compensation, impairment assessment of
investment securities, goodwill and trademarks, and disclosure of contingent assets and liabilities at the date of the
consolidated financial statements. Actual results could differ from those estimates.
d) Cash and Cash Equivalents
Cash and cash equivalents consist of demand deposits with banks and highly liquid money market funds with original
maturities of three months or less when purchased. Cash and cash equivalents amounted to $69,511 and $69,504 at
February 28, 2010 and February 28, 2009, respectively. Cash amounts held in foreign bank accounts amounted to
$7,089 and $8,922 at February 28, 2010 and February 28, 2009, respectively. The majority of these amounts are in
excess of government insurance. The Company places its cash and cash equivalents in institutions and funds of high
credit quality. We perform periodic evaluations of these institutions and funds.
Source: AUDIOVOX CORP, 10-K, May 14, 2010 Powered by Morningstar® Document Research℠