Audiovox 2010 Annual Report Download - page 62

Audiovox Corporation and Subsidiaries
Notes to Consolidated Financial Statements, continued
February 28, 2010
(Dollars in thousands, except share and per share data)
Unrealized holding gains and losses, net of the related tax effect (if applicable), on available-for-sale securities are
reported as a component of accumulated other comprehensive income (loss) until realized. Realized gains and losses
from the sale of available-for-sale securities are determined on a specific identification basis.
The fair value of the Cellstar and Bliss-tel investments are determined by quoted prices in active markets as they are
publicly traded. The auction rate security is collateralized by student loan portfolios, which are guaranteed by the United
States government. Based on the impact of the current economy on the U.S. credit markets, the Company relies on
various valuation techniques for its auction rate security classified as Level 3 inputs. These analyses consider, among
other items, the underlying collateral, the credit worthiness of the issuer, the timing of expected future cash flows, and
when a successful auction can be expected. Whenever possible, the securities will be compared to other observable and
relevant market data.
On December 13, 2004, one of the Company's former equity investments, Bliss-tel Public Company Limited
("Bliss-tel"), issued 575,000,000 shares on the SET (Security Exchange of Thailand) for an offering price of 2.48 baht
per share. Prior to the issuance of these shares, the Company was a 20% shareholder in Bliss-tel and, subsequent to the
offering, the Company owned 75,000,000 shares (or approximately 13%) of Bliss-tel's outstanding stock. In addition, on
July 21, 2005, the Company received 22,500,000 warrants ("the warrants") which may be exercised beginning on
September 29, 2006, and expire on July 17, 2012. Each warrant is exercisable into one share of Bliss-tel common stock
at an exercise price of 8 baht per share.
During the year ended February 29, 2008, the Company sold 32,898,500 shares of Bliss-tel stock resulting in a gain of
$1,533, which is included in other income (loss) on the accompanying consolidated statements of operations. During
Fiscal 2010, Bliss-tel concluded a 4:1 reverse stock split. Accordingly, all share data has been retroactively restated. As
of February 28, 2010 the Company owns 36,250,000 shares and 22,500,000 warrants in Bliss-tel with an aggregate fair
value of $250.
A decline in the market value of any available-for-sale security below cost that is deemed other-than-temporary results in
a reduction in carrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security
is established. The Company considers numerous factors, on a case-by-case basis, in evaluating whether the decline in
market value of an available-for-sale security below cost is other-than-temporary. Such factors include, but are not
limited to, (i) the length of time and the extent to which the market value has been less than cost; (ii) the financial
condition and the near-term prospects of the issuer of the investment; and (iii) whether the Company's intent to retain the
investment for the period of time is sufficient to allow for any anticipated recovery in market value. As a result of its
review, the Company determined that its investment in Bliss-tel was other-than-temporarily impaired based on its market
price (which has been below our cost in excess of twelve months), Bliss-tel’s recent losses, its deteriorating financial
position, and conditions in the local and global economy, as well as the political environment in Thailand. This
impairment relates to the approximate value of the warrants which the Company will not exercise. Furthermore, the
Company does not believe that it would realize its initial investment in these warrants, via conversion or sale in the open
market, within a reasonable amount of time. The Company continues to consider management’s business plan to
improve its financial and commercial position which includes the repayment of Bliss-tel’s debt by selling real estate
assets, raising additional capital and plans to grow their business. There is no assurance that its plans will be successful,
therefore, we will continue to evaluate the circumstances impacting this investment throughout the fiscal year ending
February 28, 2011.
Held-to-Maturity Investment
The Company holds a dollar-denominated Venezuelan bond issued by the Venezuelan government which matures in
2015 in the amount of $7,110. This security is classified as held-to-maturity and with the exception of an adjustment of
approximately $340 associated with the country’s recent currency devaluation, the security is accounted for under the
cost method.
Other Long-Term Investments
Other long-term investments include an investment in a non-controlled corporation of $1,803 accounted for by the cost
method.
40
Source: AUDIOVOX CORP, 10-K, May 14, 2010 Powered by Morningstar® Document Research℠