Audiovox 2010 Annual Report Download - page 72

Audiovox Corporation and Subsidiaries
Notes to Consolidated Financial Statements, continued
February 28, 2010
(Dollars in thousands, except share and per share data)
m) Advertising
Excluding co-operative advertising, the Company expensed the cost of advertising, as incurred, of $5,420, $6,523 and
$5,854 for the years ended February 28, 2010, February 28, 2009 and February 29, 2008, respectively.
n) Product Warranties and Product Repair Costs
The Company generally warranties its products against certain manufacturing and other defects. The Company provides
warranties for all of its products ranging from 90 days to the lifetime of the product. Warranty expenses are accrued at
the time of sale based on the Company's estimated cost to repair expected product returns for warranty matters. This
liability is based primarily on historical experiences of actual warranty claims as well as current information on repair
costs. The warranty liability of $7,853 and $7,779 is recorded in accrued expenses in the accompanying consolidated
balance sheets as of February 28, 2010 and February 28, 2009, respectively. In addition, the Company records a reserve
for product repair costs which is based upon the quantities of defective inventory on hand and an estimate of the cost to
repair such defective inventory. The reserve for product repair costs of $5,205 and $6,631 is recorded as a reduction to
inventory in the accompanying consolidated balance sheets as of February 28, 2010 and February 28, 2009, respectively.
Warranty claims and product repair costs expense for the years ended February 28, 2010, February 28, 2009 and
February 29, 2008 were $12,931, $12,187 and $9,401, respectively.
Changes in the Company's accrued product warranties and product repair costs are as follows:
Year Year Year
Ended Ended Ended
February 28, February 28, February 29,
2010 2009 2008
Beginning balance $ 14,410 $ 17,319 $ 9,586
Liabilities acquired during acquisitions (see Note 2) 879 - 12,848
Liabilities accrued for warranties issued 12,052 12,187 9,401
Warranty claims paid (14,283) (15,096) (14,516)
Ending balance $ 13,058 $ 14,410 $ 17,319
o) Foreign Currency
Assets and liabilities of those subsidiaries and former equity investees located outside the United States whose cash
flows are primarily in local currencies have been translated at rates of exchange at the end of the period or historical
exchange rates, as appropriate in accordance with ASC 830, "Foreign Currency Matters" (“ASC 830”). Revenues and
expenses have been translated at the weighted-average rates of exchange in effect during the period. Gains and losses
resulting from translation are recorded in the cumulative foreign currency translation account in accumulated other
comprehensive income (loss). For the years ended February 28, 2010, February 28, 2009 and February 29, 2008, the
Company recorded foreign currency transaction losses (gains) in the amount of $1,362, $60 and $(218), respectively.
Exchange gains and losses on inter-company balances of a long-term nature are also recorded in the cumulative foreign
currency translation account in accumulated other comprehensive income (loss).
On Friday, January 8, 2010, the Venezuelan government announced its intention to devalue its currency (Bolivar fuerte)
and move to a two tier exchange structure, 2.60 for essential goods and 4.30 for non-essential goods and
services. Although products sold by our Venezuelan operation are expected to be classified as non-essential, the
Company has certain US dollar denominated assets and liabilities for which the 2.60 rate has been applied. During the
fourth quarter of Fiscal 2010, the Company recorded approximately a $3 loss through other comprehensive income
associated with the devaluation.
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Source: AUDIOVOX CORP, 10-K, May 14, 2010 Powered by Morningstar® Document Research℠