VOXX International
Annual Report 2013

Plain-text annual report

UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-KAnnual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934For the fiscal year ended February 28, 2013Commission file number 0-28839VOXX INTERNATIONAL CORPORATION(Exact name of registrant as specified in its charter)Delaware(State or other jurisdiction ofincorporation or organization)13-1964841(IRS Employer Identification No.) 180 Marcus Blvd., Hauppauge, New York(Address of principal executive offices) 11788(Zip Code) (631) 231-7750(Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class: Name of Each Exchange on which Registered Class A Common Stock $.01 par value The Nasdaq Stock Market LLC Securities registered pursuant to Section 12(g) of the Act:NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes o No xIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.Yes o No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirementsfor the past 90 days.Yes x No oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the bestof registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form10-K.xIndicate by check mark whether registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller reporting company. Seedefinition of "accelerated filer", "large accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (check one):Large accelerated filer o Accelerated filer x Non-accelerated filer o Smaller reporting company oIndicate by check mark whether the Registrant is a shell company (as defined in rule 12b-2 of the Act).Yes o No x1Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required tobe submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files).Yes x No oThe aggregate market value of the common stock held by non-affiliates of the Registrant was $159,184,640 (based upon closing price on the Nasdaq StockMarket on August 31, 2012).The number of shares outstanding of each of the registrant's classes of common stock, as of May 14, 2013 was:ClassOutstanding Class A common stock $.01 par value21,586,269Class B common stock $.01 par value2,260,954DOCUMENTS INCORPORATED BY REFERENCEPart III - (Items 10, 11, 12, 13 and 14) Proxy Statement for Annual Meeting of Stockholders to be filed on or before June 28, 2013.2VOXX INTERNATIONAL CORPORATIONIndex to Form 10-K Table of Contents PART I Item 1Business4Item 1ARisk Factors10Item 1BUnresolved Staff Comments16Item 2Properties16Item 3Legal Proceedings16Item 4Removed and Reserved17 PART II Item 5Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities18Item 6Selected Consolidated Financial Data19Item 7Management's Discussion and Analysis of Financial Condition and Results of Operations20Item 7AQuantitative and Qualitative Disclosures About Market Risk34Item 8Consolidated Financial Statements and Supplementary Data34Item 9Changes in and Disagreements with Accountants on Accounting and Financial Disclosure35Item 9AControls and Procedures35Item 9BOther Information38 PART III Item 10Directors, Executive Officers and Corporate Governance38Item 11Executive Compensation38Item 12Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters38Item 13Certain Relationships and Related Transactions, and Director Independence38Item 14Principal Accounting Fees and Services38 PART IV Item 15Exhibits, Financial Statement Schedules38 SIGNATURES1043CAUTIONARY STATEMENT RELATING TO THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATIONREFORM ACT OF 1995This Annual Report on Form 10-K, including "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7, and theinformation incorporated by reference contains "forward-looking statements" within the meaning of section 27A of the Securities Act of 1933 and Section 21Eof the Securities Exchange Act of 1934. We intend those forward looking-statements to be covered by the safe harbor provisions for forward-lookingstatements. All statements regarding our expected financial position and operating results, our business strategy, our financing plans and the outcome of anycontingencies are forward-looking statements. Any such forward-looking statements are based on current expectations, estimates, and projections about ourindustry and our business. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," or variations of those words andsimilar expressions are intended to identify such forward-looking statements. Forward-looking statements are subject to risks and uncertainties that couldcause actual results to differ materially from those stated in or implied by any forward-looking statements. Factors that could cause actual results to differmaterially from forward-looking statements include, but are not limited to, matters listed in Item 1A under "Risk Factors" of this annual report. The Companyassumes no obligation and does not intend to update these forward-looking statements.NOTE REGARDING DOLLAR AMOUNTS AND FISCAL YEARIn this annual report, all dollar amounts are expressed in thousands, except for share prices and per-share amounts. Unless specifically indicated otherwise,all amounts and percentages in our Form 10-K are exclusive of discontinued operations.The Company’s current fiscal year began March 1, 2012 and ended February 28, 2013.PART IItem 1-BusinessEffective December 1, 2011, Audiovox Corporation changed its name to VOXX International Corporation ("Voxx," "We," "Our," "Us" or the "Company").The Company believes that the name VOXX International would be a name that better represents the widely diversified interests of the Company, and the morethan 30 global brands it has acquired and grown throughout the years, achieving a powerful international corporate image and creating a vehicle for each ofthese respective brands to emerge with its own identity. Voxx is a leading international distributor in the automotive, audio and consumer accessory industries.On March 14, 2012, the Company acquired Car Communication Holding, GmbH and its worldwide subsidiaries, a recognized tier-1 supplier ofcommunications and infotainment solutions, primarily in the automotive industry. We conduct our business through nineteen wholly-owned subsidiaries:American Radio Corp., Audiovox Electronics Corporation ("AEC"), VOXX Accessories Corp. ("AAC"), Audiovox Consumer Electronics, Inc. ("ACE"),Audiovox German Holdings GmbH ("Audiovox Germany"), Audiovox Venezuela, C.A., Audiovox Canada Limited, Audiovox Hong Kong Ltd., AudiovoxInternational Corp., Audiovox Mexico, S. de R.L. de C.V. ("Audiovox Mexico"), Technuity, Inc., Code Systems, Inc., Oehlbach Kabel GmbH ("Oehlbach"),Schwaiger GmbH ("Schwaiger"), Invision Automotive Systems, Inc. ("Invision"), Klipsch Holding LLC ("Klipsch"), Car Communication Holding GmbH("Hirschmann"), Omega Research and Development, LLC ("Omega") and Audiovox Websales LLC. We market our products under the Audiovox® brandname, other brand names and licensed brands, such as Acoustic Research®, Advent®, Ambico®, Car Link®, Chapman®, Code-Alarm®, Discwasher®,Energy®, Heco®, Hirschmann Car Communication®, Incaar™, Invision®, Jamo®, Jensen®, Klipsch®, Mac Audio™, Magnat®, Mirage®, Movies2Go®,Oehlbach®, Omega®, 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. Audiovox was incorporated in Delaware on April 10, 1987, as successor to a business founded in 1960 by John J. Shalam, our Chairman and controllingstockholder. Our extensive distribution network and long-standing industry relationships have allowed us to benefit from growing market opportunities andemerging niches in the electronics business.During the fourth quarter of Fiscal 2013, the Company realigned its subsidiaries into three operating segments based upon the Company's products andinternal organizational structure. The operating segments consist of the Automotive, Premium Audio and Consumer Accessories segments. The Automotivesegment designs, manufactures, distributes and markets rear-seat entertainment, satellite radio products, automotive security, remote start systems, digital TVtuners, mobile antennas, mobile multimedia, aftermarket/OE-styled radios, car-link smartphone telematics application, collision avoidance systems andlocation-based services. The Premium Audio segment designs, manufactures, distributes and markets home theater systems, high-end loudspeakers, outdoorspeakers, iPod/computer speakers, business music systems, cinema speakers, flat panel speakers, soundbars, headphones and Apple Air Play. TheConsumer Accessories segment designs and markets remote controls, reception products, wireless speakers,4iPod docks/iPod sound, A/V connectivity, portable/home charging, rechargeable battery packs, digital consumer products and personal sound amplifiers. SeeNote 13 to the Company's Consolidated Financial Statements for segment and geographic area information.We make available financial information, news releases and other information on our web site at www.voxxintl.com. There is a direct link from the web site tothe Securities and Exchange Commission's ("SEC") filings web site, where our annual report on Form 10-K, quarterly reports on Form 10-Q, current reportson Form 8-K and any amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are availablefree of charge as soon as reasonably practicable after we file such reports and amendments with, or furnish them to, the SEC. In addition, we have adopted aCode of Business Conduct and Ethics which is available free of charge upon request. Any such request should be directed to the attention of: Chris LisJohnson, Company Secretary, 180 Marcus Boulevard, Hauppauge, New York 11788, (631) 231-7750.AcquisitionsWe have recently acquired and continue to integrate the following acquisitions, discussed below, into our existing business structure:On March 14, 2012, Voxx International (Germany) GmbH, a wholly owned subsidiary of Voxx, acquired all of the issued and outstanding shares of CarCommunication Holding GmbH and its worldwide subsidiaries ("Hirschmann") for a total purchase price of approximately $114 million (based on the rate ofexchange as of the close of business on the closing date) plus related transaction fees, expenses and working capital adjustments. Hirschmann is a recognizedtier-1 supplier of communications and infotainment solutions and antenna solutions, primarily to the automotive industry, and counts among its globalcustomers Audi, BMW, DAF, Daimler, PSA, Renault, Volkswagen Group and AT&T, among others. Hirschmann delivers technologically advancedautomotive antenna systems and automotive digital TV tuner systems and is recognized throughout the industry for its commitment to innovation, havingdeveloped the world's first analog to digital tuner and the first digital TV tuner for the Chinese market.Prior to Fiscal 2013, the Company expanded its market presence by acquiring and fully integrating the following businesses:On March 1, 2011, Soundtech LLC, a Delaware limited liability company and wholly-owned subsidiary of Voxx, acquired all of the issued and outstandingshares of Klipsch Group, Inc. and its worldwide subsidiaries ("Klipsch") for a total purchase price of $169.6 million including contingent consideration of$2.2 million as a result of a contractual agreement with a former principal shareholder, plus related transaction fees and expenses. Klipsch is a global providerof high-end speakers for audio, multi-media and home theater applications. The acquisition of Klipsch added world-class brand names to Voxx's offerings,increased its distribution network, both domestically and abroad, and provided the Company with entry into the high-end installation market at both theresidential and commercial installation market. In addition to the Klipsch® brand, the Klipsch portfolio includes Jamo®, Mirage®, and Energy®.In February 2010, the Company’s subsidiary, Invision Automotive Systems, Inc. completed the acquisition of the assets of Invision Industries, Inc., a leadingmanufacturer of rear seat entertainment systems to Original Equipment Manufacturers ("OEM"’s), Toyota port facilities, and car dealers. The purpose of thisacquisition was to increase our R&D capabilities, add a manufacturing facility to our business structure and augment our OE group.In October 2009, Audiovox German Holdings GmbH completed the acquisition of certain assets of Schwaiger GmbH, a German market leader in theconsumer electronics, SAT and receiver technologies. The purpose of this acquisition was to expand our European operations and increase our presence in theEuropean accessory market.Refer to Note 2 "Business Acquisitions" of the Notes to Consolidated Financial Statements for additional information regarding the Fiscal 2013 and Fiscal2012 acquisitions.StrategyOur objective is to grow our business both organically and through strategic acquisitions. We will drive the business organically by continued productdevelopment in new and emerging technologies that should increase gross margins, and improve operating income. We are focused on expanding sales bothdomestically and internationally and broadening our customer and partner base as we bring these new products to our target markets. In addition, we plan tocontinue to acquire synergistic companies that would allow us to leverage our overhead, penetrate new markets and expand existing product categories.The key elements of our strategy are as follows:5Capitalize on the VOXX family of brands. We believe the "VOXX" portfolio of brands is one of our greatest strengths and offers us significant opportunityfor increased market penetration. Today, VOXX International has over 30 global brands in its portfolio, which provides the Company with the ability to bringto market products under brands that consumers know to be quality. In addition, with such a wide brand portfolio, we can manage channels and sell intomultiple outlets as well as leverage relationships with distributors, retailers, aftermarket car dealers and expeditors, and to global Original EquipmentManufacturers (OEMs). Finally, we are open to opportunities to license some of the brands as an additional use of the brands and a growth strategy.Capitalize on niche product and distribution opportunities in our target markets. Throughout our history, we have used our extensive distribution andsupply networks to capitalize on niche product and distribution opportunities in the automotive, premium audio and consumer accessories categories. We willcontinue that focus as we remain committed to innovation, developing products internally and through our outsourced technology and manufacturing partnersto provide our customers with products that are in demand by consumers.Combine new, internal manufacturing capabilities with our proven outsourced manufacturing with industry partners. For years, VOXX Internationalhas employed an outsourced manufacturing strategy that has enabled the Company to deliver the latest technological advances without the fixed costsassociated with manufacturing. With recent acquisitions, the Company now has added manufacturing capabilities to produce select product lines, such ashigh-end speakers, rear-seat entertainment systems and digital TV tuners and antennas. This blend of internal and outsourced manufacturing enables theCompany to drive innovation, control product quality and speed time-to-market.Leverage our domestic and international distribution network. We believe that today VOXX International has the most expansive distribution network in itshistory. Our distribution network, which includes power retailers, mass merchandisers, distributors, professional and commercial installation channels, cardealers and OEM's will allow us to increase our market penetration. Recently, we have expanded into new channels, such as drug store, hardware andfurniture chains.Grow our international presence. We continue to expand our international presence in Europe through our subsidiaries in Germany, as well as operations inCanada, Mexico, Venezuela and Hong Kong. We also continue to export from our domestic operations in the United States. Through our most recentacquisitions of Klipsch and Hirschmann we have expanded our presence throughout Europe, the Asia Pacific region and in select emerging markets.Pursue strategic and complementary acquisitions. We continue to monitor economic and industry conditions in order to evaluate potential synergisticbusiness acquisitions that would allow us to leverage overhead, penetrate new markets and expand our existing business distribution. Over the past severalyears, the Company has employed an M&A strategy to build its brand portfolio and enhance its product offering in higher margin product categories, while atthe same time, exiting lower margin and commoditized product lines; resulting in improved bottom-line performance. The Company is focused on continuingto grow organically, but may pursue opportunistic acquisitions within the areas of automotive, primarily with OEM accounts, consumer accessories andpremium audio.Improve bottom-line performance and generate sustainable shareholder returns. The Company has instituted an aggressive strategy in recent years toshift its product mix to higher-margin product categories, while controlling costs and strategically investing in its infrastructure. All of these collective changeshave resulted in higher gross profit margins and in recent periods, higher operating and net income. The Company remains focused on growing its businessorganically, continuing to grow its gross profit margins and leveraging its fixed overhead structure to generate sustainable returns for its shareholders.IndustryWe participate in selected product categories in the automotive, premium audio and consumer accessories markets within the electronics industry. Thesemarkets are large and diverse, encompass a broad range of products and offer the ability to specialize in niche product groups. The introduction of newproducts and technological advancements are the major growth drivers in these markets. Based on this, we continue to introduce new products across allsegments, with an increased focus on niche product offerings.ProductsThe Company currently reports sales data for the following three operating segments:Automotive products include:▪mobile multi-media video products, including in-dash, overhead and headrest systems,6▪autosound products including radios, amplifiers and CD changers,▪satellite radios including plug and play models and direct connect models,▪automotive security and remote start systems,▪automotive power accessories,▪rear observation and collision avoidance systems,▪TV tuners and antennas, and▪location based services.Premium Audio products include:▪premium loudspeakers,▪architectural speakers,▪commercial speakers,▪on-ear and in-ear headphones,▪soundbars, and▪airplay products. Accessories products include:▪High-Definition Television ("HDTV") antennas,▪Wireless Fidelity ("WiFi") antennas,▪High-Definition Multimedia Interface ("HDMI") accessories,▪home electronic accessories such as cabling,▪other connectivity products,▪power cords,▪performance enhancing electronics,▪TV universal remotes,▪flat panel TV mounting systems,▪iPod specialized products,▪wireless headphones,▪wireless speakers,▪rechargeable battery backups (UPS) for camcorders, cordless phones and portable video (DVD) batteries and accessories,▪power supply systems and charging products,▪electronic equipment cleaning products,▪personal sound amplifiers,▪set-top boxes,▪home and portable stereos,▪digital multi-media products, such as personal video recorders and MP3 products,▪camcorders,▪clock radios,▪digital voice recorders, and▪portable DVD players.We believe our product groups have expanding market opportunities with certain levels of volatility related to domestic and international markets, new carsales, increased competition by manufacturers, private labels, technological advancements, discretionary consumer spending and general economicconditions. Also, all of our products are subject to price fluctuations, which could affect the carrying value of inventories and gross margins in the future.Net sales by product category, gross profit and net assets are as follows:7 Fiscal Fiscal Fiscal 2013 2012 2011Automotive$426,983 $297,145 $298,126Premium Audio192,987 191,427 20,071Consumer Accessories214,275 215,604 240,128Corporate/Eliminations1,332 2,886 3,347Total net sales$835,577 $707,062 $561,672 Gross profit$236,822 $202,955 $123,937Gross margin percentage28.3% 28.7% 22.1% Total assets$829,272 $632,882 $501,097Patents, Trademarks/Tradenames, Licensing and RoyaltiesThe Company regards its trademarks, copyrights, patents, domain names, and similar intellectual property as important to its operations. It relies ontrademark, copyright and patent law, domain name regulations, and confidentiality or license agreements to protect its proprietary rights. The Company hasregistered, or applied for the registration of, a number of patents, trademarks, domain names and copyrights by U.S. and foreign governmental authorities.Additionally, the Company has filed U.S. and international patent applications covering certain of its proprietary technology. The Company renews itsregistrations, which vary in duration, as it deems appropriate from time to time.The Company has licensed in the past, and expects that it may license in the future, certain of its proprietary rights to third parties. Some of the Company'sproducts are designed to include intellectual property licensed or otherwise obtained from third parties. While it may be necessary in the future to seek or renewlicenses relating to various aspects of the Company's products, the Company believes, based upon past experience and industry practice, such licensesgenerally could be obtained on commercially reasonable terms; however, there is no guarantee such licenses could be obtained at all. We intend to operate in away that does not result in willful infringement of the patent, trade secret and other intellectual property rights of other parties. Nevertheless, there can be noassurance that a claim of infringement will not be asserted against us or that any such assertion will not result in a judgment or order requiring us to obtain alicense in order to make, use, or sell our products.License and royalty programs offered to our manufacturers, customers and other electronic suppliers are structured using a fixed amount per unit or apercentage of net sales, depending on the terms of the agreement. Current license and royalty agreements have duration periods which range from 1 to 17 yearsor continue in perpetuity. Certain agreements may be renewed at termination of the agreement. The Company's license and royalty income is recorded upon saleand amounted to $2,559, $2,239 and $4,248 for the years ended February 28, 2013, February 29, 2012 and February 28, 2011, respectively.Distribution and MarketingWe sell our products to:•power retailers,•mass merchants,•regional chain stores,•specialty and internet retailers,•independent 12 volt retailers,•distributors,•new car dealers,•vehicle manufacturers,•vehicle and transportation equipment manufacturers (OEM's),•system integrators,•communication network providers,•smart grid manufacturers,•the U.S. military, and•cinema operators.8We sell our products under OEM arrangements with domestic and/or international subsidiaries of automobile manufacturers such as Volkswagen, Audi,BMW, DAF Daimler, Peugeot, Ford Motor Company, Chrysler, General Motors Corporation, Toyota, Kia, Mazda, Subaru, Nissan, Porsche and Bentley.These arrangements require a close partnership with the customer as we develop products to meet specific requirements. OEM products accounted forapproximately 33%, 19% and 20% of net sales for the years ended February 28, 2013, February 29, 2012 and February 28, 2011, respectively.Our five largest customers represented 28% of net sales during the year ended February 28, 2013, 26% for the year ended February 29, 2012, and 30% for theyear ended February 28, 2011. Best Buy accounted for more than 10% of the Company's sales for Fiscal 2012 and Wal-Mart accounted for more than 10% ofthe Company's sales for Fiscal 2011. No one customer accounted for more than 10% of the Company's sales for the year ended February 28, 2013.We also provide value-added management services, which include:•product design and development,•engineering and testing,•sales training and customer packaging,•in-store display design,•installation training and technical support,•product repair services and warranty,•nationwide installation network,•warehousing, and•specialized manufacturing.We have flexible shipping policies designed to meet customer needs. In the absence of specific customer instructions, we ship products within 24 to 48 hoursfrom the receipt of an order from public warehouses, as well as owned and leased facilities throughout the United States, Canada, Mexico, Venezuela, China,Hong Kong, France, the Netherlands, Hungary and Germany. The Company also employs a direct ship model from our suppliers for select customers upontheir request.Product Development, Warranty and Customer ServiceOur product development cycle includes:•identifying consumer trends and potential demand,•responding to those trends through product design and feature integration, which includes software design, electrical engineering, industrial designand pre-production testing. In the case of OEM customers, the product development cycle may also include product validation to customer qualitystandards, and•evaluating and testing new products in our own facilities to ensure compliance with our design specifications and standards.Utilizing our company-owned and third party facilities in the United States, Europe and Asia, we work closely with customers and suppliers throughout theproduct design, testing and development process in an effort to meet the expectations of consumer demand for technologically-advanced and high qualityproducts. Our Hauppauge, New York, Troy, Michigan and Orlando, Florida facilities are ISO/TS 16949:2009 and/or ISO 14001:2004 certified, whichrequires the monitoring of quality standards in all facets of business.We are committed to providing product warranties for all of our product lines, which generally range from 90 days up to five years. The Company alsoprovides warranties for certain vehicle security products for the life of the vehicle for the original owner. To support our warranties, we have independentwarranty centers throughout the United States, Canada, Mexico, Central America, Puerto Rico, Europe and Venezuela. Our customer service group along withour Company websites, provide product information, answer questions and serve as technical hotlines for installation help for end-users and customers.SuppliersWe work directly with our suppliers on industrial design, feature sets, product development and testing in order to ensure that our products and componentparts meet our design specifications.We purchase our products and component parts from manufacturers principally located in several Pacific Rim countries, including China, Hong Kong,Indonesia, Malaysia, South Korea, Taiwan and Singapore, as well as the United States, Canada, Mexico and Europe. In selecting our manufacturers, weconsider quality, price, service, reputation, financial stability, as well as labor practices, disruptions, or shortages. In order to provide coordination andsupervision of supplier performance such as price negotiations,9delivery and quality control, we maintain buying and inspection offices in China and Hong Kong. We consider relations with our suppliers to be good andalternative sources of supply are generally available within 120 days. We have few long-term contracts with our suppliers and we generally purchase ourproducts under short-term purchase orders. Although we believe that alternative sources of supply are currently available, an unplanned shift to a newsupplier could result in product delays and increased cost, which may have a material impact on our operations.CompetitionThe electronics industry is highly competitive across all product categories, and we compete with a number of well-established companies that manufactureand sell similar products. Brand name, design, advancement of technology and features as well as price are the major competitive factors within the electronicsindustry. Our Automotive products compete against factory-supplied products, including those provided by, among others, Volkswagen, Audi, GeneralMotors, Ford and Chrysler, as well as against major companies in the automotive aftermarket, such as Sony, Panasonic, Kenwood, Directed Electronics,Autopage, Rosen, Myron and Davis, Coby, Phillips, Insignia, and Pioneer and other Tier 1 OEM's, such as Delphi and Kathrein. Our Premium Audioproducts compete against major companies such as Polk, Definitive, Yamaha, Bose, Pioneer and Sony. Our Consumer Accessories product lines competeagainst major companies such as Sony, Phillips, Coby, Emerson Radio, Jasco and Belkin.Financial Information About Foreign and Domestic OperationsThe amounts of net sales and long-lived assets, attributable to foreign and domestic operations for all periods presented are set forth in Note 13 of the Notes toConsolidated Financial Statements, included herein.Equity InvestmentWe have a 50% non-controlling ownership interest in ASA Electronics, LLC ("ASA") which acts as a distributor of televisions and other automotive sound,security and accessory products to specialized markets for specialized vehicles, such as, but not limited to, RV's, van conversions and marine vehicles.EmployeesAs of February 28, 2013, we employed approximately 2,100 people worldwide, of which 337 were covered under collective bargaining agreements. Weconsider our relations with employees to be good as of February 28, 2013.Item 1A-Risk FactorsWe have identified certain risk factors that apply to us. You should carefully consider each of the following risk factors and all of the other informationincluded or incorporated by reference in this Form 10-K. If any of these risks, or other risks not presently known to us or that we currently believe not to besignificant, develop into actual events, then our business, financial condition, liquidity, or results of operations could be adversely affected. If that happens,the market price of our common stock would likely decline, and you may lose all or part of your investment.The Automotive, Premium Audio and Consumer Accessories businesses are highly competitive and face significant competition from OriginalEquipment Manufacturers (OEMs) and direct imports by our retail customers.The market for mobile electronics, premium audio products and consumer accessories is highly competitive across all product lines. We compete againstmany established companies, some of whom have substantially greater financial and engineering resources than we do. We compete directly with OEMs,including divisions of well-known automobile manufacturers, in the autosound, auto security, mobile video and accessories markets. We believe thatOEMs have diversified and improved their product offerings and place increased sales pressure on new car dealers with whom they have close businessrelationships to purchase OEM-supplied equipment and accessories. To the extent that OEMs succeed in their efforts, this success would have a materialadverse effect on our sales of automotive entertainment and security products to new car dealers. In addition, we compete with major retailers who may at anytime choose to direct import products that we may currently supply.We have few long-term sales contracts with any of our customers that contain guaranteed customer purchase commitments.Sales of our many of products are made by written purchase orders and are terminable at will by either party. We do have long-term sales contracts withcertain customers, however, these contracts do not require the customers to guarantee specific levels of product purchases over the term of the contracts. Theunexpected loss of all or a significant portion of sales to any one of our large customers could have a material adverse effect on our performance.10Sales in our Automotive, Premium Audio and Consumer Accessories businesses are dependent on new products, product development andconsumer acceptance.Our Automotive, Premium Audio and Consumer Accessories businesses depend, to a large extent, on the introduction and availability of innovative productsand technologies. If we are not able to continually introduce new products that achieve consumer acceptance, our sales and profit margins may decline.The impact of future selling prices and technological advancements may cause price erosion and adversely impact our profitability and inventoryvalue.Since we do not manufacture all of our products and do not conduct a majority of our own research, we cannot assure you that we will be able to sourcetechnologically advanced products in order to remain competitive. Furthermore, the introduction or expected introduction of new products or technologies maydepress sales of existing products and technologies. This may result in declining prices and inventory obsolescence. Since we maintain a substantialinvestment in product inventory, declining prices and inventory obsolescence could have a material adverse effect on our business and financial results.Our estimates of excess and obsolete inventory may prove to be inaccurate, in which case the provision required for excess and obsolete inventory may beunderstated or overstated. Although we make every effort to ensure the accuracy of our forecasts of future product demand, any significant unanticipatedchanges in demand or technological developments could have a significant impact on the value of our inventory and operating results.There is no guarantee that patent/royalty rights will be renewed or licensing agreements will be maintainedCertain product development and revenues are dependent on the ownership and or use of various patents, licenses and license agreements. If the Company isnot able to successfully renew or renegotiate these rights, we may suffer from a loss of product sales or royalty revenue associated with these rights or incuradditional expense to pursue alternative arrangements.We plan to continue to expand the international marketing and distribution of our products, which will subject us to risks associated withinternational operations, including exposure to foreign currency fluctuations.As part of our business strategy, we intend to continue to increase our international sales, although we cannot assure you that we will be able to do so.Approximately 31% of our net sales currently originate in markets outside the U.S. While geographic diversity helps to reduce the Company's exposure to riskin any one country or part of the world, it also means that we are subject to the full range of risks associated with significant international operations,including, but not limited to:•changes in exchange rates for foreign countries, which may reduce the U.S. dollar value of revenues, profits and cash flows we receive from non-U.S. markets or increase our supply costs, as measured in U.S. dollars, in those markets,•exchange controls and other limits on our ability to import raw materials or finished product or to repatriate earnings from overseas,•political and economic instability, social or labor unrest or changing macroeconomic conditions in our markets,•foreign ownership restrictions and the potential for nationalization or expropriation of property or other resources, and•other foreign or domestic legal and regulatory requirements, including those resulting in potentially adverse tax consequences or other imposition ofonerous trade restrictions, price controls or other government controls.These risks could have a significant impact on our ability to sell our products on a competitive basis in international markets and may have a materialadverse effect on our results of operations, cash flows and financial condition.In an effort to reduce the impact on earnings of foreign currency rate movements, we engage in a combination of cost-containment measures and selectivehedging of foreign currency transactions. However, these measures may not succeed in offsetting any negative impact of foreign currency rate movements onour business and results of operations.For example, in February 2013, the government of Venezuela devalued its currency, which has affected our business and results of operations for Fiscal 2013.Likewise, in 2010, our results of operations were impacted by the designation of Venezuela as hyperinflationary and the subsequent currency devaluations inVenezuela that year. Volume restrictions on the conversion of the Venezuelan Bolivar Fuerte to U.S. Dollar limits purchasing activity for our Venezuelansubsidiary. In March 2013, the president of Venezuela passed away, creating further uncertainty about the country's political and economic future. Goingforward, additional government actions, including further currency devaluations or continued worsening import authorization controls, foreign exchange pricecontrols or labor unrest in Venezuela could have further adverse impacts on our business and results of operations.11Concerns regarding the European debt crisis and market perceptions concerning the instability of the Euro, the potential re-introduction ofindividual currencies within the Eurozone, or the potential dissolution of the Euro entirely, could adversely affect our business, results ofoperations and financing.We have concerns regarding the debt burden of certain Eurozone countries and their ability to meet future financial obligations, the overall stability of the Euroand the suitability of the Euro as a single currency given the diverse economic and political circumstances within individual Eurozone countries. Theseconcerns could lead to the reintroduction of individual currencies in one or more Eurozone countries, or, in more extreme circumstances, the possibledissolution of the Euro currency entirely. Should the Euro dissolve entirely, the legal and contractual consequences for holders of Euro-denominated obligationswould be determined by laws in effect at such time. These potential developments, or market perceptions concerning these and related issues, could adverselyaffect the value of the Company's Euro-denominated assets and obligations. In addition, concerns over the effect of this financial crisis on financialinstitutions in Europe and globally could have an adverse impact on the economy generally, and more specifically on the consumers' demand for our products.We are responsible for product warranties and defects.Whether we outsource manufacturing or manufacture products directly for our customers, we provide warranties for all of our products for which we haveprovided an estimated liability. Therefore, we are highly dependent on the quality of our suppliers’ products.Our capital resources may not be sufficient to meet our future capital and liquidity requirements.We believe our current funds and available credit lines would provide sufficient resources to fund our existing operations for the foreseeable future. However,we may need additional capital to operate our business if:•market conditions change,•our business plans or assumptions change,•we make significant acquisitions,•we need to make significant increases in capital expenditures or working capital, or•our restrictive covenants may not provide sufficient credit.Our success will depend on a less diversified line of business.Currently, we generate substantially all of our sales from the Automotive, Premium Audio and Consumer Accessories businesses. We cannot assure you thatwe can grow the revenues of our Automotive, Premium Audio and Consumer Accessories businesses or maintain profitability. As a result, the Company'srevenues and profitability will depend on our ability to maintain and generate additional customers and develop new products. A reduction in demand for ourexisting products and services would have a material adverse effect on our business. The sustainability of current levels of our Automotive, Premium Audioand Consumer Accessories businesses and the future growth of such revenues, if any, will depend on, among other factors:•the overall performance of the economy and discretionary consumer spending,•competition within key markets,•customer acceptance of newly developed products and services, and•the demand for other products and services.We cannot assure you that we will maintain or increase our current level of revenues or profits from the Automotive, Premium Audio and ConsumerAccessories businesses in future periods.OEM sales are dependent on economic success of automotive industry.A portion of our OEM sales are to automobile manufacturers. In the past, some domestic OEM manufacturers have reorganized their operations as a result ofgeneral economic conditions. There is no guarantee that additional automobile manufacturers will not face similar reorganizations in the future. If additionalreorganizations do take place and are not successful, it could have a material adverse effect on a portion of our OEM business.We depend on a small number of key customers for a large percentage of our sales.12The electronics industry is characterized by a number of key customers. Specifically 28%, 26% and 30% of our sales were to five customers in Fiscal 2013,2012 and 2011, respectively. The loss of one or more of these customers could have a material adverse impact on our business.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 duringSeptember, October and November. We expect this trend to continue. December is also a key month for us, due largely to the increase in promotional activitiesby our customers during the holiday season. If the economy faltered in these periods, if our customers altered the timing or frequency of their promotionalactivities or if the effectiveness of these promotional activities declined, particularly around the holiday season, it could have a material adverse effect on ourannual 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, amongother things, prevailing economic conditions, energy costs, raw material costs, wage rates, inflation, consumer confidence and consumer perception ofeconomic conditions. A general slowdown in the U.S. and certain international economies or an uncertain economic outlook could have a material adverseeffect on our sales and operating results.We have debt outstanding and must comply with restrictive covenants in our debt agreements.Our existing debt agreements contain a number of significant covenants, which limit our ability to, among other things, borrow additional money, makecapital expenditures, pay dividends, dispose of assets and acquire new businesses. These covenants also require us to maintain a specified debt leverage ratioand Earnings Before Interest and Taxes (EBIT) to Interest Expense ratio. If the Company is unable to comply with these covenants, there would be a defaultunder these debt agreements. Changes in economic or business conditions, results of operations or other factors could cause the Company to default under itsdebt agreements. A default, if not waived by our lenders, could result in acceleration of our debt and possible bankruptcy.We have recorded, or may record in the future, goodwill and other intangible assets as a result of acquisitions, and changes in future businessconditions 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, 2013 was $352,078. We evaluate the recoverability of recorded goodwilland other intangible asset amounts annually, or when evidence of potential impairment exists. The annual impairment test is based on several factorsrequiring judgment. Changes in our operating performance or business conditions, in general, could result in an impairment of goodwill, if applicable, and/orother intangible assets, which could be material to our results of operations.A portion of our workforce is represented by labor unions. Collective bargaining agreements can increase our expenses. Labor disruptions couldadversely affect our operations.As of February 28, 2013, 337 of our full-time employees were covered by collective bargaining agreements. While it is unlikely that disruptions to ouroperations due to labor related problems would have an adverse effect on our business based on the current number of union employees, as the Companycontinues to pursue selected business acquisitions, it is possible that the number of employees covered by collective bargaining agreements may increase. Wecannot predict whether labor unions may be successful in organizing other portions of our workforce or what additional costs we could incur as a result.We depend on our suppliers to provide us with adequate quantities of high quality competitive products and/or component parts on a timely basis.We have few long-term contracts with our suppliers. Most of our products and component parts are imported from suppliers under short-term purchase orders.Accordingly, we can give no assurance that:•our supplier relationships will continue as presently in effect,•our suppliers will be able to obtain the components necessary to produce high-quality, technologically-advanced products for us,•we will be able to obtain adequate alternatives to our supply sources, should they be interrupted,•if obtained, alternatively sourced products of satisfactory quality would be delivered on a timely basis, competitively priced, comparably featured oracceptable to our customers,13•our suppliers have sufficient financial resources to fulfill their obligations,•our suppliers will be able to obtain raw materials and labor necessary for production,•our suppliers could be impacted by natural disasters directly or via their supply chains, and•as it relates to products we do not manufacture, our suppliers will not become our competitors.On occasion, our suppliers have not been able to produce the quantities of products or component parts that we desire. Our inability to manufacture and/orsupply sufficient quantities of products that are in demand could reduce our profitability and have a material adverse effect on our relationships with ourcustomers. If any of our supplier relationships were terminated or interrupted, we could experience an immediate or long-term supply shortage, which couldhave a material adverse effect on our business.Because we purchase a significant amount of our products from suppliers in Pacific Rim countries, we are subject to the economic risksassociated with inherent changes in the social, political, regulatory and economic conditions in these countries.We import most of our products from suppliers in the Pacific Rim. Countries in the Pacific Rim have experienced significant social, political and economicupheaval over the past several years. Due to the large concentrations of our purchases in Pacific Rim countries, particularly China, Hong Kong, South Korea,Malaysia and Taiwan, any adverse changes in the social, political, regulatory and economic conditions in these countries may materially increase the cost ofthe products that we buy from our foreign suppliers or delay shipments of products, which could have a material adverse effect on our business. In addition,our dependence on foreign suppliers forces us to order products further in advance than we would if our products were manufactured domestically. Thisincreases the risk that our products will become obsolete or face selling price reductions before we can sell our inventory.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 knownproprietary rights of third parties in our products, we may be subject to legal proceedings and claims for alleged infringement by us, our suppliers or ourdistributors, of a 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 attentionand resources, or require us to either enter into royalty or license agreements which are not advantageous to us or pay material amounts of damages. Inaddition, parties making these claims may be able to obtain an injunction, which could prevent us from selling our products. We may increasingly be subjectto infringement claims as we expand our product offerings.Our cash and cash equivalents could be adversely affected if the financial institutions in which we hold our cash and cash equivalents fail.Our cash and cash equivalents consist of demand deposits and highly liquid money market funds with original maturities of three months or less at the timeof purchase. We maintain the cash and cash equivalents with major financial institutions. Some deposits with these banks exceed the Federal DepositInsurance Corporation ("FDIC") insurance limits or similar limits in foreign jurisdictions. While we monitor daily the cash balances in the operating accountsand adjust the balances as appropriate, these balances could be impacted if one or more of the financial institutions with which we deposit fails or is subject toother adverse conditions in the financial or credit markets. To date, we have experienced no loss or lack of access to our invested cash or cash equivalents;however, we can provide no assurance that access to our invested cash and cash equivalents will not be impacted by adverse conditions in the financial andcredit markets.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 growthstrategy. Any future acquisition or investment may result in the use of significant amounts of cash, potentially dilutive issuances of equity securities, or theincurrence 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.14We cannot assure you that our acquisitions will be successful and will not adversely affect our business, results of operations or financial condition.We invest in marketable securities and other investments as part of our investing activities. These investments fluctuate in value based oneconomic, operational, competitive, political and technological factors. These investments could be subject to loss or impairment based on theirperformance.The Company has incurred other-than-temporary impairments on its investment in Bliss-tel Public Company Limited ("Bliss-tel") and continues to monitorits investments in a non-controlled corporation as well as its Venezuelan TICC bonds for potential future impairments. In addition, there is no guarantee thatthe fair values recorded for other investments will be sustained in the future.We depend heavily on existing directors, management and key personnel and our ability to recruit and retain qualified personnel.Our success depends on the continued efforts of our directors, executives and senior vice presidents, many of whom have worked with VOXX for over threedecades, as well as our other executive officers and key employees. We have no employment contracts with any of our executive officers or key employees,except our President and Chief Executive Officer, as well as certain executive officers of Audiovox Germany, Klipsch and Hirschmann. The loss orinterruption of the continued full-time service of certain of our executive officers and key employees could have a material adverse effect on our business.In addition, to support our continued growth, we must effectively recruit, develop and retain additional qualified personnel both domestically andinternationally. Our inability to attract and retain necessary qualified personnel could have a material adverse effect on our business.Our stock price could fluctuate significantly.The market price of our common stock could fluctuate significantly in response to various factors and events, including:•operating results being below market expectations,•announcements of technological innovations or new products by us or our competitors,•loss of a major customer or supplier,•changes in, or our failure to meet, financial estimates by securities analysts,•industry developments,•economic and other external factors,•general downgrading of our industry sector by securities analysts,•inventory write-downs, and•ability to integrate acquisitions.In addition, the securities markets have experienced significant price and volume fluctuations over the past several years that have often been unrelated to theoperating performance of particular companies. These market fluctuations may also have a material adverse effect on the market price of our common stock.John J. Shalam, our Chairman, controls a significant portion of the voting power of our common stock and can exercise control over our affairs.Mr. Shalam beneficially owns approximately 53% of the combined voting power of both classes of common stock. This will allow him to elect our Board ofDirectors and, in general, determine the outcome of any other matter submitted to the stockholders for approval. Mr. Shalam's voting power may have theeffect of delaying or preventing a change in control of the Company.We have two classes of common stock: Class A common stock is traded on the Nasdaq Stock Market under the symbol VOXX and Class B common stock,which is not publicly traded and substantially all of which is beneficially owned by Mr. Shalam. Each share of Class A common stock is entitled to one voteper share and each share of Class B common stock is entitled to ten votes per share. Both classes vote together as a single class, except in certaincircumstances, for the election and removal of directors and as otherwise may be required by Delaware law. Since our charter permits shareholder action bywritten consent, Mr. Shalam may be able to take significant corporate actions without prior notice and a shareholder meeting.We exercise our option for the "controlled company" exemption under NASDAQ rules.15The Company has exercised its right to the "controlled company" exemption under NASDAQ rules which enables us to forego certain NASDAQ requirementswhich include: (i) maintaining a majority of independent directors; (ii) electing a nominating committee composed solely of independent directors; (iii) ensuringthe compensation of our executive officers is determined by a majority of independent directors or a compensation committee composed solely of independentdirectors; and (iv) selecting, or recommending for the Board's selection, director nominees, either by a majority of the independent directors or a nominatingcommittee composed solely of independent directors. Although we do not maintain a nominating committee and do not have a majority of independentdirectors, the Company notes that at the present time we do maintain a compensation committee comprised solely of independent directors who approveexecutive compensation, and the recommendations for director nominees are governed by a majority of independent directors. However, election of the"controlled company" exemption under NASDAQ rules allows us to modify our position at any time.Other Risks Other risks and uncertainties include:•changes in U.S federal, state and local law,•our ability to implement operating cost structures that align with revenue growth,•trade sanctions against or for foreign countries,•successful integration of business acquisitions and new brands in our distribution network,•compliance with the Sarbanes-Oxley Act, and•compliance with complex financial accounting and tax standards.Item 1B-Unresolved Staff CommentsAs of the filing of this annual report on Form 10-K, there were no unresolved comments from the staff of the Securities and Exchange Commission.Item 2-PropertiesOur Corporate headquarters is located at 180 Marcus Blvd. in Hauppauge, New York. In addition, as of February 28, 2013, the Company leased a total of24 operating facilities or offices located in 7 states as well as Germany, China, Canada, Mexico, Hong Kong, England and France. The leases have beenclassified as operating leases, with the exception of one, which is recorded as a capital lease. Within the United States, these facilities are located in Florida,Georgia, New York, Ohio, California, Arkansas and Michigan. The Company also owns 9 of its operating facilities or offices located in Indiana andArkansas in the United States, as well as in Germany, Venezuela and Hungary. These facilities serve as offices, warehouses, distribution centers or retaillocations. Additionally, we utilize public warehouse facilities located in Virginia, Nevada, Indiana, Florida, Mexico, China, the Netherlands, Germany andCanada.Item 3-Legal ProceedingsThe Company is currently, and has in the past been, a party to various routine legal proceedings incident to the ordinary course of business. If managementdetermines, based on the underlying facts and circumstances, that it is probable a loss will result from a litigation contingency and the amount of the loss canbe reasonably estimated, the estimated loss is accrued for. The Company believes its outstanding litigation matters will not have a material adverse effect on theCompany's financial statements, individually or in the aggregate; however, due to the uncertain outcome of these matters, the Company disclosed thesespecific matters below:The products the Company sells are continually changing as a result of improved technology. As a result, although the Company and its suppliers attempt toavoid infringing known proprietary rights, the Company may be subject to legal proceedings and claims for alleged infringement by its suppliers ordistributors, of third party patents, trade secrets, trademarks or copyrights. Any claims relating to the infringement of third-party proprietary rights, even ifnot meritorious, could result in costly litigation, divert management’s attention and resources, or require the Company to either enter into royalty or licenseagreements which are not advantageous to the Company, or pay material amounts of damages.The Company has been party to a breach of license agreement lawsuit brought against it by MPEG LA, LLC ("MPEG"). During the third quarter of Fiscal2012, the Company's claim for summary judgment was denied and the case was tried in the New York Supreme Court, Suffolk County. In December 2011,the Company received advisory judgment in the case, concluding that the Company owed MPEG penalties related to license agreement obligations arising fromthe manufacture and sale of its products. The Company recorded a charge of approximately $3.6 million in Fiscal 2012 and, based on the advisory jury'sverdict, remitted payment of $2.6 million to MPEG in December 2011 in order to resolve this matter. On May 29, 2012, the Company received16notice that the advisory judgment was overturned by the presiding Judge in the case. The Judge's ruling gave the Company and MPEG the option to (a) reachan agreement on the balance still owed; (b) allow the Judge to determine the balance; or (c) proceed to another trial and have a new jury determine the balanceowed. On June 29, 2012, the Company reached a settlement agreement with MPEG and agreed to pay an additional $10.5 million in final resolution of thematter. The payment is in addition to the funds paid in December 2011, bringing the total settlement to $13.1 million. As a result of this settlement, theCompany recorded a charge of $9.5 million during the first quarter of Fiscal 2013. The charge was recorded in "Other (Expense) Income" in the ConsolidatedStatement of Operations and Comprehensive Income. The Company has continued to seek indemnification from its suppliers for royalty payments previouslypaid to them that it maintains they were responsible to remit to MPEG and has vigorously pursued its option under its indemnification agreements. TheCompany completed negotiations with one vendor for an amount of $1.1 million during the first quarter of Fiscal 2013. In February 2013, the Companycompleted negotiations with one additional vendor for an amount totaling $6 million, which will be received over a period exceeding one year and has beenrecorded at a fair value of $5.7 million. Both amounts were recorded as an offset to the settlement expense as recoveries in "Other (Expense)Income" on theConsolidated Statement of Operations and Comprehensive Income, for a net charge of $2.7 million during Fiscal 2013. At this time, the Company is not awareof any additional vendors that it may recover funds from related to this matter.Item 4-Removed and ReservedNone17PART IIItem 5-Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecuritiesMarket InformationThe Class A Common Stock of Voxx is traded on the Nasdaq Stock Market under the symbol "VOXX." The following table sets forth the low and high saleprice of our Class A Common Stock, based on the last daily sale in each of the last eight fiscal quarters:Year ended February 28, 2013 High LowFirst Quarter $13.95 $9.86Second Quarter 9.89 7.10Third Quarter 7.82 5.65Fourth Quarter 10.39 6.25 Year ended February 29, 2012 High LowFirst Quarter $8.16 $7.03Second Quarter 7.74 5.73Third Quarter 7.49 4.88Fourth Quarter 14.29 6.96DividendsWe have not paid or declared any cash dividends on our common stock. We have retained, and currently anticipate that we will continue to retain, all of ourearnings for use in developing our business. Future cash dividends, if any, will be paid at the discretion of our Board of Directors and will depend, amongother things, upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and such otherfactors as our Board of Directors may deem relevant giving consideration to any requirements or restrictions under the Company's recently negotiated creditagreement (see Note 6(a)).HoldersThere are approximately 815 holders of record of our Class A Common Stock and 4 holders of Class B Convertible Common Stock.Issuer Purchases of Equity Securities In September 2000, we were authorized by the Board of Directors to repurchase up to 1,563,000 shares of Class A Common Stock in the open market under ashare repurchase program (the "Program"). In July 2006, the Board of Directors authorized an additional repurchase up to 2,000,000 Class A Common Stockin the open market in connection with the Program. As of February 28, 2013, the cumulative total of acquired shares (net of reissuances of 8,615) pursuantto the program was 1,816,132, with a cumulative value of $18,360 reducing the remaining authorized share repurchase balance to 1,738,243. During theyear ended February 28, 2013, the Company did not purchase any shares. Performance GraphThe following table compares the annual percentage change in our cumulative total stockholder return on our common Class A common stock during a periodcommencing on February 28, 2008 and ending on February 28, 2013 with the cumulative total return of the Nasdaq Stock Market (US) Index and our SICCode Index, during such period.18*$100 invested on 2/29/08 in stock or index, including reinvestment of dividends.Item 6-Selected Consolidated Financial DataThe following selected consolidated financial data for the last five years should be read in conjunction with the consolidated financial statements and relatednotes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Form 10-K. 19 YearEnded YearEnded YearEnded YearEnded YearEnded February 28, 2013(3) February 29,2012 (2) February 28,2011 February 28,2010 (1) February 28,2009Consolidated Statement of Operations Data Net sales$835,577 $707,062 $561,672 $550,695 $603,099Operating income (loss)41,696 43,874 9,017 3,760 (53,443)Net income (loss)22,492 25,649 23,031 22,483 (71,029) Net income (loss) per common share: Basic$0.96 $1.11 $1.00 $0.98 $(3.11)Diluted$0.95 $1.10 $1.00 $0.98 $(3.11) As of As of As of As of As of February 28, February 29, February 28, February 28, February 28, 2013 2012 2011 2010 2009Consolidated Balance Sheet Data Total assets$829,272 $632,882 $501,097 $488,978 $461,296Working capital200,703 184,282 258,528 239,787 241,080Long-term obligations (4)228,197 88,255 25,849 32,176 31,651Stockholders' equity444,536 421,797 392,946 364,263 340,502 (1)2010 amounts reflect the acquisition of Schwaiger and Invision.(2)2012 amounts reflect the acquisition of Klipsch (see Note 2 of the Notes to Consolidated Financial Statements).(3)2013 amounts reflect the acquisition of Hirschmann (see Note 2 of the Notes to Consolidated Financial Statements).(4)Long-term obligations include long-term debt, capital lease obligations, deferred compensation, deferred and other tax liabilities, as well as other longterm liabilities.Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A")This section should be read in conjunction with the "Cautionary Statements" and "Risk Factors" in Item 1A of Part I, and Item 8 of Part II, "ConsolidatedFinancial Statements and Supplementary Data."We begin Management’s Discussion and Analysis of Financial Condition and Results of Operations with an overview of the business, including our strategyto give the reader a summary of the goals of our business and the direction in which our business is moving. This is followed by a discussion of the CriticalAccounting Policies and Estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financialresults. In the next section, we discuss our Results of Operations for the year ended February 28, 2013 compared to the years ended February 29, 2012 andFebruary 28, 2011. Next, we present adjusted EBITDA and diluted adjusted EBIDTA per common share for the year ended February 28, 2013 compared tothe years ended February 29, 2012 and February 28, 2011 in order to provide a useful and appropriate supplemental measure of our performance. We thenprovide an analysis of changes in our balance sheet and cash flows, and discuss our financial commitments in the sections entitled "Liquidity and CapitalResources, including Contractual and Commercial Commitments." We conclude this MD&A with a discussion of "Related Party Transactions" and "RecentAccounting Pronouncements."Business Overview and StrategyEffective December 1, 2011, Audiovox Corporation changed its name to VOXX International Corporation ("Voxx," "We," "Our," "Us" or "Company"). TheCompany believes that the name VOXX International would be a name that better represents the widely diversified interests of the Company, and the more than30 global brands it has acquired and grown throughout the years, achieving a powerful international corporate image and creating a vehicle for each of theserespective brands to emerge with its own identity.20Voxx is a leading international distributor and value added service provider in the automotive, premium audio and consumer accessory industries. We conductour business through nineteen wholly-owned subsidiaries. Voxx has a broad portfolio of brand names used to market our products as well as private labelsthrough a large domestic and international distribution network. We also function as an OEM ("Original Equipment Manufacturer") supplier to severalcustomers.Over the last several years, we have focused on our intention to acquire synergistic businesses with the addition of nine new subsidiaries. These subsidiarieshelped us to expand our core business and broaden our presence in the accessory and OEM markets. Our acquisitions of Hirschmann, Klipsch and Invisionhave provided the opportunity to enter the manufacturing arena. Our intention is to continue to pursue business opportunities which will allow us to furtherexpand our business model while leveraging overhead and exploring specialized niche markets in the electronics industry.During the fourth quarter of Fiscal 2013, the Company realigned its subsidiaries into three operating and reporting segments, based upon our products andinternal organizational structure. The operating and reporting segments consist of the Automotive, Premium Audio and Consumer Accessories segments. Thecharacteristics of our operations that are relied on in making and reviewing business decisions within these segments include the similarities in our products,the commonality of our customers, suppliers and product developers across multiple brands, our unified marketing and distribution strategy, our centralizedinventory management and logistics, and the nature of the financial information used by our Chief Operating Decision Maker ("CODM"). The CODMreviews the financial results of the Company based on the performance of the Automotive, Premium Audio and Consumer Accessories groups.The Company’s domestic and international business is subject to retail industry conditions and the sales of new and used vehicles. The recent worldwideeconomic condition had an adverse impact on consumer spending and vehicle sales. If the global macroeconomic environment does not continue to improve orif it deteriorates further, this could have a negative effect on the Company’s revenues and earnings. In an attempt to offset the recent market conditions, theCompany continues to explore strategies and alternatives to reduce its operating expenses, such as consolidation of facilities and IT systems, and has beenintroducing new product to obtain a greater market share. The Company continues to focus on cash flow and anticipates having sufficient resources to operateduring Fiscal 2014 and 2015.Although we believe our product groups have expanding market opportunities, there are certain levels of volatility related to domestic and internationalmarkets, new car sales, increased competition by manufacturers, private labels, technological advancements, discretionary consumer spending and generaleconomic conditions. Also, all of our products are subject to price fluctuations which could affect the carrying value of inventories and gross margins in thefuture.AcquisitionsWe have acquired and integrated several acquisitions which are outlined in the Acquisitions section of Part I and presented in detail in Note 2.Net Sales GrowthNet sales over a five-year period have increased 38.5% from $603,099 for the year ended February 28, 2009 to $835,577 for the year ended February 28,2013. During this period, our sales were impacted by the following items: •the introduction of new products and lines such as digital antennas and mobile multi-media devices, mobile iPad and iPod interfaces and the Tagg™GPS tracking device,•acquisition of Hirschmann's mobile communications and infotainment business,•acquisition of Klipsch's high-end speaker business,•acquisition of Invision’s mobile entertainment business,•acquisition of Schwaiger’s accessory business.Partially offset by:•The discontinuance of various high volume/low margin product lines such as navigation, GMRS radios, flat-panel TV’s, camcorders, clock radios,digital players and digital voice recorders,•volatility in core mobile, consumer and accessories sales due to increased competition, lower selling prices and the decline in the national and globaleconomy.Critical Accounting Policies and Estimates21GeneralOur consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. Thepreparation of these financial statements requires us to make certain estimates, judgments and assumptions that we believe are reasonable based upon theinformation available. These estimates and assumptions can be subjective and complex and may affect the reported amounts of assets and liabilities, revenuesand expenses reported in those financial statements. As a result, actual results could differ from such estimates and assumptions. The significant accountingpolicies and estimates which we believe are the most critical in fully understanding and evaluating the reported consolidated financial results include thefollowing:Revenue RecognitionWe recognize revenue from product sales at the time of passage of title and risk of loss to the customer either at FOB Shipping Point or FOB Destination, basedupon terms established with the customer. Any customer acceptance provisions, which are related to product testing, are satisfied prior to revenue recognition.We have no further obligations subsequent to revenue recognition except for returns of product from customers. We do accept returns of products, if properlyrequested, authorized and approved. We continuously monitor and track such product returns and record the provision for the estimated amount of suchfuture returns at point of sale, based on historical experience and any notification we receive of pending returns.Sales IncentivesWe offer sales incentives to our customers in the form of (1) co-operative advertising allowances; (2) market development funds; (3) volume incentive rebates;and (4) other trade allowances. We account for sales incentives in accordance with ASC 605-50 "Customer Payments and Incentives" ("ASC 605-50").Except for other trade allowances, all sales incentives require the customer to purchase our products during a specified period of time. All sales incentivesrequire customers to claim the sales incentive within a certain time period (referred to as the "claim period") and claims are settled either by the customerclaiming a deduction against an outstanding account receivable or by the customer requesting a check. All costs associated with sales incentives are classifiedas a reduction of net sales, and the following is a summary of the various sales incentive programs:Co-operative advertising allowances are offered to customers as a reimbursement towards their costs for print or media advertising in which our product isfeatured on its own or in conjunction with other companies' products. The amount offered is either a fixed amount or is based upon a fixed percentage of salesrevenue or fixed amount per unit sold to the customer during a specified time period.Market development funds are offered to customers in connection with new product launches or entrance into new markets. The amount offered for newproduct launches is based upon a fixed amount or fixed percentage of our sales revenue to the customer or a fixed amount per unit sold to the customer during aspecified time period. We accrue the cost of co-operative advertising allowances and market development funds at the latter of when the customer purchases ourproducts or when the sales incentive is offered to the customer.Volume incentive rebates offered to customers require that minimum quantities of product be purchased during a specified period of time. The amount offeredis either based upon a fixed percentage of our sales revenue to the customer or a fixed amount per unit sold to the customer. We make an estimate of theultimate amount of the rebate customers will earn based upon past history with the customer and other facts and circumstances. We have the ability to estimatethese volume incentive rebates, as there does not exist a relatively long period of time for a particular rebate to be claimed. Any changes in the estimated amountof volume incentive rebates are recognized immediately using a cumulative catch-up adjustment.Other trade allowances are additional sales incentives that we provide to customers subsequent to the related revenue being recognized. In accordance with ASC605-50, we record the provision for these additional sales incentives at the latter of when the sales incentive is offered or when the related revenue is recognized.Such additional sales incentives are based upon a fixed percentage of the selling price to the customer, a fixed amount per unit, or a lump-sum amount.The accrual balance for sales incentives at February 28, 2013 and February 29, 2012 was $16,821 and $18,154, respectively. The decrease in Fiscal 2013is due to the effects of the European markets, which resulted in decreases in the Company's international sales. Although we make our best estimate of salesincentive liabilities, many factors, including significant unanticipated changes in the purchasing volume and the lack of claims from customers could have asignificant impact on the liability for sales incentives and reported operating results.22We reverse earned but unclaimed sales incentives based upon the expiration of the claim period of each program. Unclaimed sales incentives that have nospecified claim period are reversed in the quarter following one year from the end of the program. We believe that the reversal of earned but unclaimed salesincentives upon the expiration of the claim period is a disciplined, rational, consistent and systematic method of reversing unclaimed sales incentives.For the years ended February 28, 2013, February 29, 2012 and February 28, 2011, reversals of previously established sales incentive liabilities amounted to$3,350, $3,662 and $1,725, respectively. These reversals include unearned and unclaimed sales incentives. Unearned sales incentives are volume incentiverebates where the customer did not purchase the required minimum quantities of product during the specified time. Volume incentive rebates are reversed intoincome in the period when the customer did not reach the required minimum purchases of product during the specified time. Reversals of unearned salesincentives for the years ended February 28, 2013, February 29, 2012 and February 28, 2011 amounted to $2,933, $2,200 and $977, respectively.Unclaimed sales incentives are sales incentives earned by the customer but the customer has not claimed payment within the claim period (period afterprogram has ended). Reversals of unclaimed sales incentives for the years ended February 28, 2013, February 29, 2012 and February 28, 2011 amounted to$417, $1,462 and $748, respectively.Accounts ReceivableWe perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and current credit worthiness, as determined bya review of current credit information. We continuously monitor collections from our customers and maintain a provision for estimated credit losses basedupon historical experience and any specific customer collection issues that have been identified. We record charges for estimated credit losses against operatingexpenses and charges for price adjustments against net sales in the consolidated financial statements. The reserve for estimated credit losses at February 28,2013 and February 29, 2012 were $7,840 and $5,737, respectively. The increase in the reserve is due to the Company's acquisition of Hirschmann and therelated increases in sales and accounts receivable. While such credit losses have historically been within management's expectations and the provisionsestablished, we cannot guarantee that we will continue to experience the same credit loss rates that have been experienced in the past. Since our accountsreceivable are concentrated in a relatively few number of large customers, a significant change in the liquidity or financial position of any one of thesecustomers could have a material adverse impact on the collectability of accounts receivable and our results of operations.InventoriesWe value our inventory at the lower of the actual cost to purchase (primarily on a weighted moving average basis, with a portion valued at standard cost)and/or the current estimated market value of the inventory less expected costs to sell the inventory. We regularly review inventory quantities on-hand and recorda provision, in cost of sales, for excess and obsolete inventory based primarily from selling price reductions subsequent to the balance sheet date, indicationsfrom customers based upon current negotiations, and purchase orders. A significant sudden increase in the demand for our products could result in a short-term increase in the cost of inventory purchases while a significant decrease in demand could result in an increase in the amount of excess inventory quantitieson-hand. In addition, our industry is characterized by rapid technological change and frequent new product introductions that could result in an increase in theamount of obsolete inventory quantities on-hand. During the years ended February 28, 2013, February 29, 2012 and February 28, 2011, we recordedinventory write-downs of $4,300, $2,942 and $3,911, respectively.Estimates of excess and obsolete inventory may prove to be inaccurate, in which case we may have understated or overstated the provision required for excessand obsolete inventory. Although we make every effort to ensure the accuracy of our forecasts of future product demand, any significant unanticipatedchanges in demand or technological developments could have a significant impact on the carrying value of inventory and our results of operations.Goodwill and Other Intangible AssetsGoodwill and other intangible assets, which consists of the excess cost over fair value of assets acquired (goodwill) and other intangible assets (patents,contracts, licenses, trademarks and customer relationships) amounted to $352,078 at February 28, 2013 and $261,418 at February 29, 2012. Goodwilland other intangible assets are determined in accordance with ASC 805 "Business Combinations" ("ASC 805") and ASC 350 "Intangibles – Goodwill andOther" ("ASC 350"), (see Goodwill and Other Intangible Assets (Note 1(k)).Goodwill is calculated as the excess of the cost of purchased businesses over the value of their underlying net assets. The Company has used the DiscountedFuture Cash Flow Method (DCF) as the principle method to determine the Fair Value ("FV") of acquired businesses. The discount rates used for our analysisranged from 10.4% to 15.6%. A five-year period was analyzed using a risk adjusted discount rate.23 The value of potential intangible assets separate from goodwill is evaluated and assigned to the respective categories using certain methodologies (see Note1(k)). Certain estimates and assumptions are used in applying these methodologies, including projected sales, which include incremental revenue to begenerated from the product markets that the Company has not been previously exposed to, disclosed future contracts and adjustments for declines in existingcore sales; ongoing market demand for the relevant products; and required returns on tangible and intangible assets. In the event that actual results or marketconditions deviate from these estimates and assumptions used, the future FV may be different than that determined by management and may result in animpairment loss.The Company categorizes its intangible assets between goodwill and intangible assets. Goodwill and other intangible assets that have an indefinite useful lifeare not amortized. Intangible assets that have a definite useful life are amortized over their estimated useful lives.On an annual basis, or as needed for a triggering event, we test goodwill and other indefinite lived intangible assets for impairment (see Note 1(k)). Todetermine the fair value of these intangible assets, there are many assumptions and estimates used that directly impact the results of the testing. We have theability to influence the outcome and ultimate results based on the assumptions and estimates we choose. To mitigate undue influence, we set criteria that arereviewed and approved by various levels of management. Additionally, we may evaluate our recorded intangible assets with the assistance of a third-partyvaluation firm, as necessary. All reports and conclusions are reviewed by management who has ultimate responsibility for their content. Goodwill is testedusing a two-step process. The first step is to identify a potential impairment, and the second step measures the amount of the impairment loss, if any.Goodwill is considered impaired if the carrying amount of the reporting unit's goodwill exceeds its estimated fair value. Based upon our most recent annualimpairment test completed as of December 1, 2012 as a result of the realigning of our segments, and rolled forward to February 28, 2013, the fair value ofeach of the Company's reporting units is in excess of its related carrying value. For Fiscal 2013, management determined that its intangible assets were notimpaired.Determining whether impairment of indefinite lived intangibles has occurred requires an analysis of each identifiable asset. If estimates used in the valuation ofeach identifiable asset proved to be inaccurate based on future results, there could be additional impairment charges in subsequent periods.WarrantiesWe offer warranties of various lengths depending upon the specific product. Our standard warranties require us to repair or replace defective product returnedby both end users and customers during such warranty period at no cost. We record an estimate for warranty related costs, in cost of sales, based upon actualhistorical return rates and repair costs at the time of sale. The estimated liability for future warranty expense, which has been included in accrued expenses andother current liabilities, amounted to $12,788 at February 28, 2013 and $6,425 at February 29, 2012. The increase in warranty liability is a result of ourHirschmann acquisition on March 14, 2012, as well as due to a recall initiated by Subaru in the fourth quarter of Fiscal 2013. While warranty costs havehistorically been within expectations and the provisions established, we cannot guarantee that we will continue to experience the same warranty return rates orrepair costs that have been experienced in the past. A significant increase in product return rates, or a significant increase in the costs to repair products, couldhave a material adverse impact on our operating results.Stock-Based CompensationWe use the Black-Scholes option pricing model to compute the estimated fair value of stock-based awards. The Black-Scholes option pricing model includesassumptions regarding dividend yields, expected volatility, expected option term and risk-free interest rates. The assumptions used in computing the fair valueof stock-based awards reflect our best estimates, but involve uncertainties relating to market and other conditions, many of which are outside of ourcontrol. We estimate expected volatility by considering the historical volatility of our stock, the implied volatility of publicly traded stock options in our stockand our expectations of volatility for the expected term of stock-based compensation awards. As a result, if other assumptions or estimates had been used foroptions granted in the current and prior periods, the total stock-based compensation expense of $435 that was recorded for the year ended February 28, 2013could have been materially different. Furthermore, if different assumptions are used in future periods, stock-based compensation expense could be materiallyimpacted in the future.Income TaxesWe account for income taxes in accordance with the guidance issued under Statement ASC 740, "Income Taxes" with consideration for uncertain taxpositions. 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. 24During Fiscal 2013, the Company recorded an income tax provision of $13.2 million related to federal, state and foreign taxes. The Company's effective taxrate differs from the U.S. federal statutory rate of 35% primarily due to state and local taxes, non-deductible expenses, and the U.S. effect of foreign operationsincluding tax rate differences in foreign jurisdictions. The Company maintains a valuation allowance against deferred tax assets in certain foreign jurisdictionsand with respect to its foreign tax credits and various investments which are more likely than not to generate capital losses in the future. Any decline in thevaluation allowance could have a favorable impact on our income tax provision and net income in the period in which such determination is made.Since March 1, 2007, the Company has accounted for uncertain tax positions in accordance with the authoritative guidance issued under ASC 740, whichaddresses the determination of whether tax benefits claimed or expected to be claimed on tax returns should be recorded in the financial statements. TheCompany 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 examinationby the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such position should bemeasured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. The Company provides losscontingencies for federal, 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 theCompany's financial condition and results of operations. The Company classifies interest and penalties associated with income taxes as a component ofincome tax expense (benefit) on the consolidated statement of operations and comprehensive income.Results of OperationsIncluded in Item 8 of this annual report on Form 10-K are the consolidated balance sheets at February 28, 2013 and February 29, 2012 and the consolidatedstatements of operations and comprehensive income, consolidated statements of stockholders’ equity and consolidated statements of cash flows for the yearsended February 28, 2013, February 29, 2012 and February 28, 2011. In order to provide the reader meaningful comparison, the following analysis providescomparison of the audited year ended February 28, 2013 with the audited years ended February 29, 2012, and February 28, 2011. We analyze and explainthe differences between periods in the specific line items of the consolidated statements of operations and comprehensive income.Year Ended February 28, 2013 Compared to the Years Ended February 29, 2012 and February 28, 2011Continuing OperationsThe following table sets forth, for the periods indicated, certain Statement of Operations data for the years ended February 28, 2013 ("Fiscal 2013"),February 29, 2012 ("Fiscal 2012") and February 28, 2011 ("Fiscal 2011").Net Sales Fiscal Fiscal Fiscal 2013 2012 2011Automotive$426,983 $297,145 $298,126Premium Audio192,987 191,427 20,071Consumer Accessories214,275 215,604 240,128Corporate1,332 2,886 3,347Total net sales$835,577 $707,062 $561,672 Fiscal 2013Automotive sales, which include both OEM and aftermarket automotive electronics, represented 51.1% of the net sales for the year ended February 28, 2013,compared to 42.0% in the prior year. For the year ended February 28, 2013, approximately $153 million of our sales from this product group was the result ofour recent acquisition of Hirschmann. In addition, the Automotive group experienced increases in its OEM manufacturing lines during the year endedFebruary 28, 2013 due to the launch of new programs with Ford and Nissan in the second quarter of Fiscal 2013, as well as due to new productintroductions, such as the mobile iPad and iPod interfaces. These increases were partially offset by a decline in satellite fulfillment sales and slower mobileaudio sales in Europe and the United States.25Premium Audio sales increased $1,560 during the year ended February 28, 2013 as compared to the prior year. The increase in Premium Audio wasprimarily related to increased sales of on-ear and in-ear headphones and soundbars, offset by declines in our European sales.Consumer Accessories represented 25.6% of our net sales for the year ended February 28, 2013, compared to 30.5% in the prior year. The decrease in theConsumer Accessories group was primarily related to decreased sales in our international markets as a result of European market conditions as well as thedecrease in low margin products, such as camcorders, clock radios and digital players that the Company has been exiting throughout the year. Thesedecreases were offset by sales of new wireless speaker products and increased sales of portable power lines and power supply systems due to the growingpredominance of electronic devices in consumer homes.Fiscal 2012Automotive sales decreased $981 in Fiscal 2012 as a result of a decline in satellite fulfillment sales, as well as the absence of FLO-TV products, whoseprogram ended in the third quarter of Fiscal 2011. These decreases were offset by increases in the Company's OEM manufacturing lines due to increases indomestic automotive sales and the launch of new programs, both domestically and internationally.Premium Audio sales increased $171,356 in Fiscal 2012, due primarily to our acquisition of Klipsch. Approximately $169,500 of our sales in this segmentwere contributed by Klipsch in Fiscal 2012.Consumer Accessories sales decreased $24,524 in Fiscal 2012 primarily as a result of decreased sales in such products as camcorders, clock radios, digitalplayers, digital voice recorders, rechargeable batteries and surge protectors as a result of the economy, competition, and changes in demand, as well as changesin technology. Certain car chargers and cables were also phased out by the Company in Fiscal 2012 to make way for new offerings in the coming fiscal year.The decreases were offset by increased sales in our international markets, as well as certain domestic products such as antennas, wireless speakers andpersonal sound amplifiers. Sales incentive expenses were $32,286, $40,009 and $26,279 for Fiscal 2013, 2012 and 2011, respectively, which included reversals for unclaimed andunearned sales incentives of $3,350, $3,662 and $1,725, respectively. We believe the reversal of unearned and earned but unclaimed sales incentives uponthe expiration of the claim period is a disciplined, rational, consistent and systematic method of reversing unearned and earned but unclaimed sales incentives.These sales incentive programs are expected to continue and will either increase or decrease based upon competition and customer demands.Gross Profit and Gross Margin Percentage Fiscal Fiscal Fiscal 2013 2012 2011Automotive$114,675 $73,440 $61,519 26.9% 24.7% 20.6%Premium Audio65,352 72,647 7,323 33.9% 38.0% 36.5%Consumer Accessories55,472 53,392 51,762 25.9% 24.8% 21.6%Corporate1,323 3,476 3,333 $236,822 $202,955 $123,937 28.3% 28.7% 22.1%Fiscal 2013Gross margins in the Automotive segment increased 220 basis points due primarily to the acquisition of Hirschmann, increased sales in OEM related productsand the net impact of the currency devaluation in Venezuela. This was offset by a decrease in sales of higher margin car speakers at Audiovox Germany andunfavorable swings between hedged costs and related sales.Gross margins in the Premium Audio segment decreased 410 basis points primarily as a result of declines in international sales due to European marketconditions, as well as due to the cost of shifting warehouse facilities in Asia, and a moderate increase in26inventory provisions related to various products. This was partially offset by increases in sales of certain higher margin products, such as on-ear and in-earheadphones and soundbars.Gross margins in the Consumer Accessories segment increased 110 basis points primarily as a result of an increase in sale of higher margin consumerproducts, such as bluetooth speakers and a decrease in sales of lower margin products, such as camcorders, clock radios and digital players that theCompany has been exiting during the year. This was offset by decreases in international sales due to European economic conditions and unfavorable swingsbetween hedged costs and related sales.Fiscal 2012Gross margins in the Automotive segment increased 410 basis points due to increased sales in our OEM manufacturing lines and the launch of new programs,both domestically and internationally. These increases were offset by declines in satellite fulfillment sales.Gross margins in the Premium Audio segment increased 150 basis points due primarily to the acquisition of Klipsch, which took place on March 1, 2011.Gross margins in the Consumer Accessories segment increased 320 basis points due to better sales in our existing product lines and decreased sales in lowermargin products, such as camcorders, clock radios, digital players and digital voice recorders, which the Company has begun to exit. In addition, decreasesin required inventory provisions and warehouse assembly expenses improved gross margins.Operating Expenses and Operating Income / (Loss) Fiscal Fiscal Fiscal 2013 2012 2011Operating Expenses: Selling$51,976 $47,282 $34,517General and administrative114,653 93,219 67,262Engineering and technical support26,971 15,825 11,934Acquisition related costs1,526 2,755 1,207Total Operating Expenses$195,126 $159,081 $114,920 Operating income$41,696 $43,874 $9,017Fiscal 2013Operating expenses increased $36,045 in Fiscal 2013 as compared to Fiscal 2012. The increase in total operating expenses was due primarily to our recentacquisition of Hirschmann which accounted for $43 million of our operating expenses during the year ended February 28, 2013, as well as an increase inadvertising expense Company-wide, not including Hirschmann. Not taking into account the acquisition of Hirschmann, the increases were partially offset byreductions in depreciation expense, headcount reduction in select groups, reductions of commissions as a result of lower net sales, reduced occupancy costsdue to the purchase of Klipsch headquarters in Indianapolis, IN, which had previously been leased, as well as lower professional fees as a result of theconclusion of the MPEG lawsuit in June 2012.Fiscal 2012Operating expenses increased $44,161 in Fiscal 2012 as compared to Fiscal 2011. The increase in total operating expenses was due primarily to our recentacquisition of Klipsch which accounted for $39.2 million of our operating expenses during the year ended February 29, 2012, as well as an increase in legalfees to defend a patent suit, compensation expense as a result of performance related targets and acquisition costs incurred during the fourth quarter of Fiscal2012 related to the purchase of Hirschmann on March 14, 2012. These increases were partially offset by reductions in depreciation expense, headcountreduction in select groups and a benefit recorded related to a put option.Other Income/(Expense)27 Fiscal Fiscal Fiscal 2013 2012 2011Interest and bank charges$(8,288) $(5,630) $(2,630)Equity in income of equity investees4,880 4,035 2,905Other, net(2,633) (3,387) 3,204Total other income (expense)$(6,041) $(4,982) $3,479Fiscal 2013Other, net, for the year ended February 28, 2013 includes net charges in connection with a patent suit of approximately $2,700, and losses on foreignexchange contracts of approximately $2,700 incurred in conjunction with the Hirschmann acquisition and settled during the first quarter of Fiscal 2013. Thesecharges were partially offset by income recorded related to favorable legal settlements received by Klipsch of approximately $1,000 during the first and thirdquarters of Fiscal 2013 and rental income of approximately $1,100. Other, net for the year ended February 29, 2012 included charges in connection with apatent lawsuit of approximately $3,600, a contingent consideration adjustment of approximately $2,000 related to a prior acquisition and an other thantemporary impairment of an investment in marketable securities of approximately $1,200. These charges were partially offset by gains of approximately$1,600 in forward exchange contracts in the fourth quarter of Fiscal 2012 related to the Hirschmann acquisition and a rental income of approximately $500.Interest and bank charges represent expenses for bank obligations of VOXX International Corporation and Audiovox Germany, interest for a capital lease, andamortization of deferred financing costs on our credit facility. The increase in these expenses for the year ended February 28, 2013, is due primarily to interestexpense, fees and amortization of deferred financing costs related to the Credit Facility entered into on March 14, 2012 primarily to fund our Hirschmannacquisition.Equity in income of equity investees increased due to increased equity income of ASA Electronics, LLC (ASA) as a result of improved sales and profitability,as well as market expansion.Fiscal 2012Other, net, for the year ended February 29, 2012 included charges in connection with a patent lawsuit of approximately $3,600, a contingent considerationadjustment of approximately $2,000 related to a prior acquisition and an other than temporary impairment of an investment in marketable securities ofapproximately $1,200. These charges were partially offset by gains of approximately $1,600 in forward exchange contracts in the fourth quarter of Fiscal2012 related to the Hirschmann acquisition. Other, net for the year ended February 28, 2011 included the net foreign exchange gain in U.S. dollar denominatedassets and liabilities in Venezuela of $1,400.Interest and bank charges represent expenses for bank obligations of VOXX International Corporation and Audiovox Germany, interest for a capital lease, andamortization of deferred financing costs on our credit facility. The increase in these expenses for the year ended February 29, 2012, is due primarily to interestexpense, fees and amortization of deferred financing costs related to the Credit Facility entered into on March 1, 2011 primarily to fund our Klipschacquisition.Equity in income of equity investees increased due to increased equity income of ASA Electronics, LLC (ASA) as a result of improved sales and profitability.Income Tax ProvisionThe effective tax rate in Fiscal 2013 was an income tax provision of 36.9% on pre-tax income from operations of $35,655 as compared to a benefit of 34% ona pre-tax income of $38,892 from continuing operations in the prior year. The effective tax rate in Fiscal 2013 differs from the statutory rate of 35% primarilydue to state and local taxes, non-deductible expenses and the U.S. effect of foreign operations including tax rate differences in foreign jurisdictions.The effective tax rate in Fiscal 2012 differs from the statutory rate due to state and local taxes, non-deductible expenses, the generation of research anddevelopment credits and the U.S. effect of foreign operations including tax rate differences in foreign jurisdictions.28The effective tax rate in Fiscal 2011 was lower than the statutory tax rate due the Company's ability to record an income tax benefit as a significant portion ofthe Company's deferred tax assets became realizable on a more-likely-than-not basis based on current operating results and forecasts of pre-tax earnings andU.S. taxable income. Net IncomeThe following table sets forth, for the periods indicated, selected statement of operations data beginning with operating income from operations to reported netincome and basic and diluted net income per common share: Fiscal Fiscal Fiscal 2013 2012 2011Operating income$41,696 $43,874 $9,017Other income (expense), net(6,041) (4,982) 3,479Income from operations before income taxes35,655 38,892 12,496Income tax expense (benefit)13,163 13,243 (10,535)Net income$22,492 $25,649 $23,031 Net income per common share: Basic$0.96 $1.11 $1.00Diluted$0.95 $1.10 $1.00Net income for Fiscal 2013 was $22,492 as compared to $25,649 in Fiscal 2012 and $23,031 in Fiscal 2011. Fiscal 2013 net income was unfavorablyimpacted by losses on forward exchange contracts and a decrease in sales in European markets, offset by the acquisition of Hirschmann, an increase in salesin domestic markets and a net foreign currency gain related to the devaluation of the bolivar fuerte in Venezuela.During Fiscal 2012, net income was favorably impacted by the acquisition of Klipsch.During Fiscal 2011, net income was favorably impacted by the net tax benefits of approximately $10,500 as a result of a partial reduction of a valuationallowance on deferred taxes.Adjusted EBITDA and Adjusted Diluted Earnings per Common ShareAdjusted EBITDA and diluted adjusted earnings per common share are not financial measures recognized by GAAP. Adjusted EBITDA represents netincome, computed in accordance with GAAP, before interest expense and bank charges, taxes, depreciation and amortization, stock-based compensationexpense, restructuring charges, litigation settlements and costs and foreign exchange gains or losses relating to our acquisitions. Depreciation, amortization,and stock-based compensation expense are non-cash items. Diluted adjusted earnings per common share represent the Company's diluted earnings percommon share based on adjusted EBITDA.We present adjusted EBITDA and diluted adjusted earnings per commons share in this Form 10-K because we consider them to be useful and appropriatesupplemental measures of our performance. Adjusted EBITDA and diluted adjusted earnings per common share help us to evaluate our performance withoutthe effects of certain GAAP calculations that may not have a direct cash impact on our current operating performance. In addition, the exclusion of costsrelating to the Company's acquisitions, restructuring and litigation settlements allows for a more meaningful comparison of our results from period-to-period.These non-GAAP measures, as we define them, are not necessarily comparable to similarly entitled measures of other companies and may not be anappropriate measure for performance relative to other companies. Adjusted EBITDA should not be assessed in isolation from or construed as a substitute forEBITDA prepared in accordance with GAAP. Adjusted EBITDA and diluted adjusted earnings per common share are not intended to represent, and shouldnot be considered to be more meaningful measures than, or alternatives to, measures of operating performance as determined in accordance with GAAP.Reconciliation of GAAP Net Income to Adjusted EBITDA and Adjusted Diluted Earnings per Common Share29 Fiscal Fiscal Fiscal 2013 2012 2011Net income $22,492 $25,649 $23,031Adjustments: Interest expense and bank charges 8,288 5,630 2,630Depreciation and amortization 16,446 10,295 7,865Income tax expense (benefit) 13,163 13,243 (10,535)EBITDA 60,389 54,817 22,991Stock-based compensation 435 1,082 1,284Net settlement charges related to MPEG suit 2,676 3,621 —Klipsch settlement recovery (1,015) — —Asia restructuring charges 789 — —Acquisition related costs 1,526 2,755 1,207Loss/(gain) on foreign exchange as a result of Hirschmann acquisition 2,670 (1,581) —Adjusted EBITDA $67,470 $60,694 $25,482Diluted earnings per common share $0.97 $1.10 $1.00Diluted adjusted EBITDA per common share $2.86 $2.61 $1.10Liquidity and Capital ResourcesCash Flows, Commitments and ObligationsAs of February 28, 2013, we had working capital of $200,703 which includes cash and cash equivalents of $19,777 compared with working capital of$184,282 at February 29, 2012, which included cash and cash equivalents of $13,606. The increase in cash is primarily due to draws on the Company'sAmended Credit Facility (a portion of which was used to finance the purchase of Hirschmann). These increases were partially offset by the purchase andrenovation of the Klipsch headquarters, repayment of outstanding bank obligations, and an increase in inventory. We plan to utilize our current cash positionas well as collections from accounts receivable, the cash generated from our operations and the income on our investments to fund the current operations of thebusiness. However, we may utilize all or a portion of current capital resources to pursue other business opportunities, including acquisitions or pay down ourdebt. The following table summarizes our cash flow activity for all periods presented: YearEnded YearEnded YearEnded February 28, 2013 February 29, 2012 February 28, 2011Cash (used in) provided by: Operating activities$25,523 $62,867 $32,130Investing activities(125,574) (179,410) 1,420Financing activities108,254 31,416 (4,382)Effect of exchange rate changes on cash(2,032) 103 (49)Net (decrease) increase in cash and cash equivalents$6,171 $(85,024) $29,119Operating activities provided cash of $25,523 for Fiscal 2013 from: i) net income generated from operations of $22,492, and depreciation and amortization of$16,446, and ; ii) increased accounts payable, partially offset by increased accounts receivable and inventory, due primarily to the acquisition ofHirschmann. Investing activities used cash of $125,574 during Fiscal 2013, primarily due to the acquisition of Hirschmann on March 14, 2012, as well as due to thepurchase and renovation of the Klipsch headquarters facility, the purchase of buildings in Germany and Venezuela and the Company's system upgrade.Financing activities provided cash of $108,254 during Fiscal 2013, primarily from cash draws from the Company's Amended Credit Facility to finance theacquisition of Hirschmann, offset by the repayment of those obligations, as well as other bank obligations and mortgages.30From March 1, 2012 through March 13, 2012, we had a revolving credit facility ("the Credit Facility") with an aggregated committed availability of up to$175 million. The Company could borrow under the Credit Facility as needed, provided the aggregate amounts outstanding did not exceed 85% of certaineligible accounts receivable, plus 65% of certain eligible inventory balances less the outstanding amounts for Letters of Credit Usage, if applicable. Thisamount could be further reduced by the aggregated amounts of reserves that may be required at the reasonable discretion of Wells Fargo in its role as theAdministrative Agent. Generally, the Company could designate specific borrowings under the Credit Facility as either Base Rate Loans or LIBOR Rate Loans,except that Swing Loans could only be designated as Base Rate Loans. Loans designated as LIBOR Rate Loans bear interest at a rate equal to the thenapplicable LIBOR rate plus a range of 2.25 - 2.75% based on excess availability in the borrowing base. Loans designated as Base Rate loans bear interest at arate equal to the base rate plus an applicable margin ranging from 1.25 - 1.75% based on excess availability in the borrowing base. This facility was amendedand restated as indicated below on March 14, 2012.On March 14, 2012, the Company amended and restated its Credit Facility (the "Amended Facility"). The Amended Facility provides for senior secured creditfacilities in an aggregate principal amount of $205 million, consisting of a revolving credit facility of $130 million (comprised of a U.S. revolving creditfacility of $80 million and a $50 million multicurrency revolving facility, of which up to the equivalent of $50 million is available only to VOXXInternational (Germany) GmbH in euros) and a five year term loan facility in the aggregate principal amount of $75 million. $60 million of the U. S.revolving credit facility is available on a revolving basis for five years from the closing date. An additional $20 million is available during the periods fromSeptember 1, 2012 through January 31, 2013 and from September 1, 2013 through November 30, 2013. The Amended Facility includes a $25 millionsublimit for issuers of letters of credit for domestic borrowings and a $10 million sublimit for Swing Loans.Generally, the Company may designate specific borrowings under the Amended Facility as either Alternate Base Rate Loans or LIBOR Rate Loans, except thatSwing Loans may only be designated as Alternate Base Rate Loans. VOXX International (Germany) GmbH may only borrow euros, and only as LIBOR rateloans. Loans designated as LIBOR Rate Loans shall bear interest at a rate equal to the then applicable LIBOR rate plus a range of 1.25 - 2.25% based uponleverage, as defined in the agreement. Loans designated as Alternate Base Rate loans shall bear interest at a rate equal to the base rate plus an applicable marginranging from 0.25 - 1.25% based on leverage.All amounts outstanding under the Amended Facility will mature and become due on March 13, 2017. The Company may prepay any amounts outstanding atany time, subject to payment of certain breakage and redeployment costs relating to LIBOR Rate Loans. The commitments under the Amended Facility may beirrevocably reduced at any time without premium or penalty. The $75 million five year term loan facility is payable in twenty quarterly installments ofprincipal commencing May 31, 2012, each in the amount of $3,750.The Amended Facility requires compliance with financial covenants calculated as of the last day of each fiscal quarter, consisting of a Total Leverage Ratio, aConsolidated EBIT to Consolidated Interest Expense Ratio and Capital Expenditures.The Amended Facility contains covenants that limit the ability of certain entities of the Company to, among other things: (i) incur additional indebtedness; (ii)incur liens; (iii) merge, consolidate or exit a substantial portion of their respective businesses; (iv) make any material change in the nature of their business;(v) prepay or otherwise acquire indebtedness; (vi) cause any Change of Control; (vii) make any Restricted Payments; (viii) change their fiscal year or methodof accounting; (ix) make advances, loans or investments; (x) enter into or permit any transaction with an Affiliate of certain entities of the Company; or (xi)use proceeds for certain items (including capital expenditures). On May 14, 2013, the Company received a waiver for non-compliance with the covenantlimiting the use of proceeds for capital expenditures. As of February 28, 2013, the Company was in compliance with all other debt covenants.The Amended Facility contains customary events of default, including, without limitation: failure to pay principal thereunder when due; failure to pay anyinterest or other amounts thereunder for a period of three (3) business days after becoming due; failure to comply with certain agreements or covenantscontained in the Amended Facility; failure to satisfy certain judgments against a Loan Party or any of its Subsidiaries (other than Immaterial Subsidiaries);certain insolvency and bankruptcy events; and failure to pay when due certain other indebtedness in an amount in excess of $5 million.The Obligations under the Amended Facility are secured by a general lien on and security interest in the assets of certain entities of the Company, includingaccounts receivable, equipment, substantially all of the real estate, general intangibles and inventory provided that the assets of Hirschmann CarCommunication GmbH and the foreign guarantors will only secure the Foreign Obligations. All Guarantors other than subsidiaries of Hirschmann CarCommunication GmbH have jointly and severally guaranteed (or will jointly and severally guarantee) the obligations of any and all Credit Party Obligations,and each Foreign Guarantor will jointly and severally guarantee the obligations of Hirschmann Car Communications GmbH under the Credit Agreement (i.e.,the Foreign Obligations).31On March 14, 2012, the Company borrowed approximately $148 million under this amended credit facility as a result of its stock purchase agreement relatedto Hirschmann (see Note 2 of the Consolidated Financial Statements).In addition, Audiovox Germany has accounts receivable factoring arrangements totaling 16,000 Euro, a 4,000 Euro Asset-Based Lending ("ABL") creditfacility and a 2,000 Euro credit line.Certain contractual cash obligations and other commitments will impact our short and long-term liquidity. At February 28, 2013, such obligations andcommitments are as follows: Amount of Commitment Expiration per Period (9) Less than 1-3 4-5 AfterContractual Cash Obligations Total 1 Year Years Years 5 YearsCapital lease obligation (1) $9,509 $574 $1,148 $1,949 $5,838Operating leases (2) 16,704 9,052 5,796 1,195 661Total contractual cash obligations $26,213 $9,626 $6,944 $3,144 $6,499 Other Commitments Bank obligations (3) $155,676 $16,341 $— $139,335 $—Stand-by letters of credit (4) 817 817 — — —Commercial letters of credit (4) 273 273 — — —Other (5) 23,661 9,677 6,964 2,629 4,391Contingent earn-out payments and other (6) 3,914 1,998 1,916 — —Pension obligation (7) 8,440 560 1,216 510 6,154Unconditional purchase obligations (8) 105,193 105,193 — — —Total commercial commitments $297,974 $134,859 $10,096 $142,474 $10,545Total Commitments $324,187 $144,485 $17,040 $145,618 $17,044(1)Represents total payments (interest and principal) due under a capital lease obligation which has a current (included in other current liabilities) and longterm principal balance of $164 and $5,764, respectively at February 28, 2013.(2)We enter into operating leases in the normal course of business.(3)Represents amounts outstanding under the Company's Amended Credit Facility and amounts outstanding under the Audiovox Germany Euro asset-basedlending facility at February 28, 2013.(4)Commercial letters of credit are issued during the ordinary course of business through major domestic banks as requested by certain suppliers. We alsoissue standby letters of credit to secure certain insurance requirements.(5)The amount includes amounts outstanding under a call-put option with certain employees of Audiovox Germany; amounts outstanding under a term loanagreement for Audiovox Germany; an assumed mortgage on a facility in connection with our Klipsch acquisition; and amounts outstanding undermortgages for facilities purchased at Schwaiger and Klipsch. (6)Represents contingent payments and other liabilities in connection with the Thomson Audio/Video, Invision and Klipsch acquisitions (see Note 2 of theConsolidated Financial Statements).(7)Represents the liability for an employer defined benefit pension plan covering certain eligible Hirschmann employees, as well as a retirement incentiveaccrual for certain Hirschmann employees.(8)Open purchase obligations represent inventory commitments. These obligations are not recorded in the consolidated financial statements untilcommitments are fulfilled and such obligations are subject to change based on negotiations with manufacturers.32(9)At February 28, 2013, the Company had unrecognized tax benefits of $11,463. A reasonable estimate of the timing related to these liabilities is notpossible, therefore such amounts are not reflected in this contractual obligation and commitments schedule.We regularly review our cash funding requirements and attempt to meet those requirements through a combination of cash on hand, cash provided byoperations, available borrowings under bank lines of credit and possible future public or private debt and/or equity offerings. At times, we evaluate possibleacquisitions of, or investments in, businesses that are complementary to ours, which transactions may require the use of cash. We believe that our cash, otherliquid assets, operating cash flows, credit arrangements, access to equity capital markets, taken together, provides adequate resources to fund ongoingoperating expenditures. In the event that they do not, we may require additional funds in the future to support our working capital requirements or for otherpurposes and may seek to raise such additional funds through the sale of public or private equity and/or debt financings as well as from other sources. Noassurance can be given that additional financing will be available in the future or that if available, such financing will be obtainable on terms favorable whenrequired.Off-Balance Sheet ArrangementsWe do not maintain any off-balance sheet arrangements, transactions, obligations or other relationships with unconsolidated entities that would be expected tohave a material current or future effect upon our financial condition or results of operations.Impact of Inflation and Currency FluctuationTo the extent that we expand our operations in Europe, Canada, Latin America and the Pacific Rim, the effects of inflation and currency fluctuations couldimpact our financial condition and results of operations. While the prices we pay for products purchased from our suppliers are principally denominated inUnited States dollars, price negotiations depend in part on the foreign currency of foreign manufacturers, as well as market, trade and political factors. TheCompany also has exposure related to transactions in which the currency collected from customers is different from the currency utilized to purchase theproduct sold in its foreign operations, and U. S. dollar denominated purchases in its foreign subsidiaries. The Company enters forward contracts to hedgecertain euro-related transactions. The Company minimizes the risk of nonperformance on the forward contracts by transacting with major financialinstitutions. During Fiscal 2013, 2012 and 2011, the Company held forward contracts specifically designated for hedging (see Note 1(e)). As of February 28,2013 and February 29, 2012, unrealized gains of $197 and unrealized losses of $(123), respectively, were recorded in other comprehensive income associatedwith these contracts. During the fourth quarter of Fiscal 2012, the Company entered two forward contracts in the amount of $63,750 to hedge the eurosrequired to close its pending Hirschmann acquisition in the first quarter of Fiscal 2013. These contracts were not designated for hedging, and as such, werevalued at February 29, 2012. A gain of $1,581 associated with these contracts was recorded through other income during Fiscal 2012 and a loss of $2,670was recorded during the first quarter of Fiscal 2013 when the contracts were settled. Additionally, the Company acquired 36 contracts in conjunction with theHirschmann acquisition that were unable to qualify for hedge accounting during the year ended February 28, 2013. Thirty two of these contracts were settledduring Fiscal 2013 for a gain of $106 and recorded through other income.Effective January 1, 2010, according to the guidelines in ASC 830, Venezuela had been designated as a hyper-inflationary economy. A hyper-inflationaryeconomy designation occurs when a country has experienced cumulative inflation of approximately 100 percent or more over a 3 year period. The hyper-inflationary designation requires the local subsidiary in Venezuela to record all transactions as if they were denominated in U.S. dollars. The Companytransitioned to hyper-inflationary accounting on March 1, 2010 and continues to account for Venezuela under this method.In February 2013, the Venezuelan government announced the devaluation of the Bolivar fuerte, moving the official exchange rate from 4.30 to 6.30 per U.S.dollar. The devaluation resulted in a one-time net currency exchange gain of approximately $2,400 in the fourth quarter of Fiscal 2013.The Company has certain U. S. dollar denominated assets and liabilities in its Venezuelan operations. Our TICC bond investment (see Note 1(f)) and our U.S dollar denominated intercompany debt have been subject to currency fluctuations associated with the devaluation of the Bolívar fuerte, the most recentdevaluation taking place in February 2013, and the temporary institution in 2010 of a two-tier exchange rate by the Venezuelan government. The TICC bond isvalued at the current Venezuelan exchange rate of 6.3 and classified as a held-to-maturity investment at amortized cost at February 28, 2013.Seasonality33We typically experience seasonality in our operations. We generally sell a substantial amount of our products during September, October and November due toincreased promotional and advertising activities during the holiday season. Our business is also significantly impacted by the holiday season.Related Party TransactionsDuring 1996, we entered into a 30-year capital lease for a building with our principal stockholder and chairman, which was the headquarters of thediscontinued Cellular operation sold in 2004. Payments on the capital lease were based upon the construction costs of the building and the then-current interestrates. This capital lease was refinanced in December 2006 and the lease expires on November 30, 2026. The effective interest rate on the capital leaseobligation is 8%. The Company subleases the building to Airtyme Communications LLC for monthly payments of $60 for a term of three years, whichexpires on October 15, 2015. We also lease another facility from our principal stockholder which expires on November 30, 2016. As a result of the acquisition of Klipsch, the Company assumed a lease for the facility housing the Klipsch headquarters in Indianapolis, IN. The lessor wasWoodview, LLC ("Woodview"), of which certain partners are executives of Klipsch. On April 20, 2012, the Company purchased this building fromWoodview for $10.9 million. The Company paid cash of $3.1 million at closing plus $106 in closing costs, and assumed the mortgage held by Woodview inthe amount of $7.8 million. The mortgage is due in June 2013 and bears interest at 5.85%.Total lease payments required under all related party leases for the five-year period ending February 28, 2018 are $5,987.Recent Accounting PronouncementsWe are required to adopt certain new accounting pronouncements. See Note 1(w) to our consolidated financial statements of this Annual Report on Form 10-K.Item 7A-Quantitative and Qualitative Disclosures About Market RiskThe market risk inherent in our market instruments and positions is the potential loss arising from adverse changes in marketable equity security prices,interest rates and foreign currency exchange rates.Marketable SecuritiesMarketable securities at February 28, 2013, which are recorded at fair value of $3,660, include an unrealized gain of $3 and have exposure to pricefluctuations. This risk is estimated as the potential loss in fair value resulting from a hypothetical 10% adverse change in prices quoted by stock exchangesand amounts to $366 as of February 28, 2013. Actual results may differ.Interest Rate RiskOur earnings and cash flows are subject to fluctuations due to changes in interest rates on investment of available cash balances in money market funds andinvestment grade corporate and U.S. government securities. Currently, we do not use interest rate derivative instruments to manage exposure to interest ratechanges. In addition, our bank loans expose us to changes in short-term interest rates since interest rates on the underlying obligations are either variable orfixed.Foreign Exchange RiskWe are subject to risk from changes in foreign exchange rates for our subsidiaries and marketable securities that use a foreign currency as their functionalcurrency and are translated into U.S. dollars. These changes result in cumulative translation adjustments, which are included in accumulated othercomprehensive income (loss). At February 28, 2013, we had translation exposure to various foreign currencies with the most significant being the Euro, HongKong Dollar, Mexican Peso, Venezuelan Bolivar, Hungarian Forint and Canadian Dollar. The potential loss resulting from a hypothetical 10% adverse changein quoted foreign currency exchange rates, as of February 28, 2013 amounts to $3,688. Actual results may differ.The Company continues to monitor the political and economic climate in Venezuela. Venezuela represents 1.4% of year to date sales. The majority of assetsinvested in Venezuela are cash related and are subject to government foreign exchange controls including its investment in Venezuelan government bonds (seeNote 1(f)).Item 8-Consolidated Financial Statements and Supplementary Data34The information required by this item begins on page 37 of this Annual Report on Form 10-K and is incorporated herein by reference.Item 9-Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNot applicable.Item 9A-Controls and Procedures Evaluation of Disclosure Controls and Procedures VOXX International Corporation and subsidiaries (the "Company") maintains disclosure controls and procedures that are designed to ensure that informationrequired to be disclosed in the reports that the Company files or submits under the Securities and Exchange Act is recorded, processed, summarized, andreported within the time periods specified in accordance with the SEC's rules and regulations, and that such information is accumulated and communicated tothe Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding requiredfinancial disclosures. As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’smanagement, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls andprocedures pursuant to the Securities and Exchange Act Rule 13a-15. Based upon this evaluation as of February 28, 2013, the Chief Executive Officer andChief Financial Officer concluded that the Company’s disclosure controls and procedures are effective and adequately designed. Management's Report on Internal Control Over Financial Reporting The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting; as such term is defined in theSecurities and Exchange Act Rules 13a-15(f) and 15d-15(f). The Company’s internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles and includes those policies and procedures that: •Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of theCompany;•Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations ofmanagement and directors of the Company; and•Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets thatcould have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate. Management evaluated the effectiveness of the Company’s internal control over financial reporting using the criteria set forth by the Committee of SponsoringOrganizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Under the supervision and with the participation of theCompany’s management, including the Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of itsinternal control over financial reporting as of February 28, 2013. Based on that evaluation, management concluded that the Company's internal control overfinancial reporting was effective as of February 28, 2013 based on the COSO criteria. The certifications of the Company’s Chief Executive Officer and Chief Financial Officer included in Exhibits 31.1 and 31.2 to this Annual Report on Form10-K includes, in paragraph 4 of such certifications, information concerning the Company’s disclosure controls and procedures and internal control overfinancial reporting. Such certifications should be read in conjunction with the information contained in this Item 9A. Controls and Procedures, for a morecomplete understanding of the matters covered by such certifications. The effectiveness of the Company’s internal control over financial reporting as of February 28, 2013, has been audited by Grant Thornton LLP, anindependent registered public accounting firm who also audited the Company’s consolidated financial statements.35Grant Thornton LLP’s attestation report on the effectiveness of the Company’s internal control over financial reporting is included below.36REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMBoard of Directors and StockholdersVOXX International CorporationWe have audited the internal control over financial reporting of Voxx International Corporation (a Delaware corporation) and subsidiaries(the “Company”) as ofFebruary 28, 2013, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of theTreadway Commission (COSO). The Company's management is responsible for maintaining effective internal control over financial reporting and for itsassessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control OverFinancial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all materialrespects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testingand evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considerednecessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting andthe preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control overfinancial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflectthe transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 28, 2013, based on criteriaestablished in Internal Control - Integrated Framework issued by COSO.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financialstatements of the Company as of and for the year ended February 28, 2013, and our report dated May 14, 2013 expressed an unqualified opinion on thosefinancial statements./s/ GRANT THORNTON LLPMelville, New YorkMay 14, 201337Changes in Internal Controls Over Financial ReportingThere were no material changes in our internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) duringthe most recently completed fiscal fourth quarter ended February 28, 2013 covered by this report, that have materially affected, or are reasonably likely tomaterially affect, our internal controls over financial reporting.Item 9B - Other InformationNot ApplicablePART IIIThe information required by Item 10 (Directors, Executive Officers and Corporate Governance), Item 11 (Executive Compensation), Item 12 (SecurityOwnership of Certain Beneficial Owners and Management and Related Stockholder Matters), Item 13 (Certain Relationships and Related Transactions, andDirector Independence) and Item 14 (Principal Accounting Fees and Services) of Form 10-K, will be included in our Proxy Statement for the Annual meeting ofStockholders, which will be filed on or before June 28, 2013, and such information is incorporated herein by reference.PART IVItem 15-Exhibits, Financial Statement Schedules(1 and 2) Financial Statements and Financial Statement Schedules. See Index to Consolidated Financial Statements attached hereto.(3) Exhibits. A list of exhibits is included subsequent to Schedule II on page S-1.38VOXX INTERNATIONAL CORPORATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSFinancial Statements:PageReport of Independent Registered Public Accounting Firm40Consolidated Balance Sheets as of February 28, 2013 and February 29, 201241Consolidated Statements of Operations and Comprehensive Income for the years ended February 28, 2013, February 29, 2012 and February28, 201142Consolidated Statements of Stockholders’ Equity for the years ended February 28, 2013, February 29, 2012 and February 28, 201143Consolidated Statements of Cash Flows for the years ended February 28, 2013, February 29, 2012 and February 28, 201144Notes to Consolidated Financial Statements45Financial Statement Schedule: Schedule II - Valuation and Qualifying Accounts10239REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMBoard of Directors and StockholdersVOXX International CorporationWe have audited the accompanying consolidated balance sheets of Voxx International Corporation (a Delaware corporation) and subsidiaries (the“Company”) as of February 28, 2013 and February 29, 2012, and the related consolidated statements of operations and comprehensive income,stockholders' equity and cash flows for each of the three years in the period ended February 28, 2013. Our audits of the basic consolidated financialstatements included the financial statement schedule listed in the index appearing under Item 15. These financial statements and financial statementschedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financialstatement schedule based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Anaudit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statementpresentation. We believe that our audits provide a reasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of VoxxInternational Corporation and subsidiaries as of February 28, 2013 and February 29, 2012, and the results of their operations and their cash flows foreach of the three years in the period ended February 28, 2013 in conformity with accounting principles generally accepted in the United States ofAmerica. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements takenas a whole, presents fairly, in all material respects, the information set forth therein.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internalcontrol over financial reporting as of February 28, 2013, based on criteria established in Internal Control - Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated May 14, 2013 expressed an unqualifiedopinion./s/ GRANT THORNTON LLPMelville, New YorkMay 14, 201340VOXX International Corporation and SubsidiariesConsolidated Balance SheetsFebruary 28, 2013 and February 29, 2012(In thousands, except share data) February 28, 2013 February 29, 2012Assets Current assets: Cash and cash equivalents$19,777 $13,606Accounts receivable, net152,596 142,585Inventory159,099 129,514Receivables from vendors9,943 4,011Prepaid expenses and other current assets12,017 13,549Income tax receivable448 698Deferred income taxes3,362 3,149Total current assets357,242 307,112Investment securities13,570 13,102Equity investments17,518 14,893Property, plant and equipment, net76,208 31,779Goodwill146,680 86,069Intangible assets, net205,398 175,349Deferred income taxes924 796Other assets11,732 3,782Total assets$829,272 $632,882Liabilities and Stockholders' Equity Current liabilities: Accounts payable$56,894 $42,026Accrued expenses and other current liabilities51,523 52,679Income taxes payable5,103 5,864Accrued sales incentives16,821 18,154Deferred income taxes178 515Current portion of long-term debt26,020 3,592Total current liabilities156,539 122,830Long-term debt148,996 34,860Capital lease obligation5,764 5,196Deferred compensation4,914 3,196Other tax liabilities9,631 2,943Deferred tax liabilities43,944 34,220Other long-term liabilities14,948 7,840Total liabilities384,736 211,085Commitments and contingencies Stockholders' equity: Preferred stock— —Common stock254 250Paid-in capital283,971 281,213Retained earnings185,168 162,676Accumulated other comprehensive loss(6,497) (3,973)Treasury stock, at cost(18,360) (18,369)Total stockholders' equity444,536 421,797Total liabilities and stockholders' equity$829,272 $632,882See accompanying notes to consolidated financial statements.41VOXX International Corporation and SubsidiariesConsolidated Statements of Operations and Comprehensive IncomeYears Ended February 28, 2013, February 29, 2012 and February 28, 2011(In thousands, except share and per share data) YearEnded YearEnded YearEnded February 28, 2013 February 29, 2012 February 28, 2011Net sales$835,577 $707,062 $561,672Cost of sales598,755 504,107 437,735Gross profit236,822 202,955 123,937 Operating expenses: Selling51,976 47,282 34,517General and administrative114,653 93,219 67,262Engineering and technical support26,971 15,825 11,934Acquisition related costs1,526 2,755 1,207Total operating expenses195,126 159,081 114,920 Operating income41,696 43,874 9,017 Other (expense) income: Interest and bank charges(8,288) (5,630) (2,630)Equity in income of equity investee4,880 4,035 2,905Other, net(2,633) (3,387) 3,204Total other (expenses) income, net(6,041) (4,982) 3,479 Income from operations before income taxes35,655 38,892 12,496Income tax expense (benefit)13,163 13,243 (10,535)Net income22,492 25,649 23,031 Other comprehensive income (loss): Foreign currency translation adjustments(1,281) (1,153) 795Derivatives designated for hedging(174) (131) 238Reclassification adjustment of other-than-temporary impairment loss (gain) on available-for-sale investment into net income— 1,225 1,600Pension plan adjustments, net of tax(1,031) — —Unrealized holding gain (loss) on available-for-sale investment securities arising duringthe period, net of tax(38) (65) 796Other comprehensive income (loss), net of tax(2,524) (124) 3,429Comprehensive income$19,968 $25,525 $26,460 Net income per common share (basic)$0.96 $1.11 $1.00 Net income per common share (diluted)$0.95 $1.10 $1.00 Weighted-average common shares outstanding (basic)23,415,570 23,080,081 22,938,754Weighted-average common shares outstanding (diluted)23,617,101 23,265,206 23,112,518See accompanying notes to consolidated financial statements.42VOXX International Corporation and SubsidiariesConsolidated Statements of Stockholders' EquityYears Ended February 28, 2013, February 29, 2012 and February 28, 2011(In thousands, except share data) Class Aand Class BCommonStock Paid-inCapital RetainedEarnings Accumulatedothercomprehensiveincome (loss) Treasurystock TotalStock-holders'equityBalances at February 28, 2010 $247 $275,684 $113,996 $(7,278) $(18,386) $364,263Net income — — 23,031 — — 23,031Other comprehensive income, net of tax — — — 3,429 — 3,429Exercise of stock options into 189,125 shares ofcommon stock 1 931 — — — 932Stock-based compensation expense — 1,284 — — — 1,284Issuance of 975 shares of treasury stock — (3) — — 10 7Balances at February 28, 2011 248 277,896 137,027 (3,849) (18,376) 392,946Net income — — 25,649 — — 25,649Other comprehensive income, net of tax — — — (124) — (124)Exercise of stock options into 61,875 shares ofcommon stock 2 2,235 — — — 2,237Stock-based compensation expense — 1,082 — — — 1,082Issuance of 720 shares of treasury stock — — — — 7 7Balances at February 29, 2012 250 281,213 162,676 (3,973) (18,369) 421,797Net income — — 22,492 — — 22,492Other comprehensive income, net of tax — — — (2,524) — (2,524)Exercise of stock options into 404,852 shares ofcommon stock 4 2,323 — — — 2,327Stock-based compensation expense — 435 — — — 435Issuance of 1,000 shares of treasury stock — — — — 9 9Balances at February 28, 2013 $254 $283,971 $185,168 $(6,497) $(18,360) $444,536 See accompanying notes to consolidated financial statements. 43VOXX International Corporation and SubsidiariesConsolidated Statements of Cash FlowsYears Ended February 28, 2013, February 29, 2012 and February 28, 2011 (Amounts in thousands) YearEnded YearEnded YearEnded February 28, 2013 February 29, 2012 February 28, 2011Cash flows from operating activities: Net income$22,492 $25,649 $23,031Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization16,446 10,295 7,865Amortization of deferred financing costs1,210 680 —Bad debt expense1,377 1,771 1,022Equity in income of equity investee(4,880) (4,035) (2,905)Distribution of income from equity investees2,256 1,906 1,413Deferred income tax (benefit) expense, net(407) 4,075 (13,566)Loss on disposal of property, plant and equipment1 237 64Non-cash compensation adjustment523 (139) 717Non-cash stock based compensation expense435 1,082 1,284Realized loss on sale of investment— — 182Impairment loss on marketable securities— 1,225 1,600Tax benefit on stock options exercised(117) (1,846) —Changes in operating assets and liabilities (net of assets and liabilities acquired): Accounts receivable13,382 (8,834) 22,462Inventory(9,982) 13,269 (12,007)Receivables from vendors(5,824) 4,363 2,802Prepaid expenses and other(2,865) (5,908) 4,657Investment securities-trading(210) 357 (646)Accounts payable, accrued expenses, accrued sales incentives and other currentliabilities(13,511) 12,698 (9,273)Income taxes payable5,197 6,022 3,428Net cash provided by operating activities25,523 62,867 32,130Cash flows from investing activities: Purchases of property, plant and equipment(20,210) (12,364) (3,055)Purchase of short-term investments— — (23,981)Sale of short-term investments— — 24,210Sale of long-term investment— — 4,368Purchase of long-term investment(261) — (245)Decrease in notes receivable34 214 180Purchase of acquired businesses, less cash acquired(105,137) (167,260) (57)Net cash (used in) provided by investing activities(125,574) (179,410) 1,420Cash flows from financing activities: Repayment of short-term debt(141) (927) (3,950)Borrowings from bank obligations146,911 89,248 285Repayments on bank obligations(37,482) (55,765) (1,479)Principal payments on capital lease obligation(329) (102) (180)Proceeds from exercise of stock options and warrants2,623 399 942Deferred financing costs(3,445) (3,283) —Tax expense on stock options exercised117 1,846 —Net cash provided by (used in) financing activities108,254 31,416 (4,382)Effect of exchange rate changes on cash(2,032) 103 (49)Net increase (decrease) in cash and cash equivalents6,171 (85,024) 29,119Cash and cash equivalents at beginning of year13,606 98,630 69,511Cash and cash equivalents at end of year$19,777 $13,606 $98,630Supplemental Cash Flow Information: Cash paid during the period for: Interest, excluding bank charges$6,302 $3,520 $2,138Income taxes (net of refunds)$5,486 $1,499 $1,257 See accompanying notes to consolidated financial statements.44VOXX International Corporation and SubsidiariesNotes to Consolidated Financial StatementsFebruary 28, 2013(Amounts in thousands, except share and per share data)1)Description of Business and Summary of Significant Accounting Policiesa)Description of BusinessEffective December 1, 2011, Audiovox Corporation changed its name to VOXX International Corporation ("Voxx," "We," "Our," "Us" or"the Company"). The Company believes that the name VOXX International would be a name that better represents the widely diversifiedinterests of the Company, and the more than 30 global brands it has acquired and grown throughout the years, achieving a powerfulinternational vehicle for each of these respective brands to emerge with its own identity. Voxx is a leading international distributor in theaccessory, mobile and consumer electronics industries. We conduct our business through nineteen wholly-owned subsidiaries: AmericanRadio Corp., Audiovox Electronics Corporation ("AEC"), VOXX Accessories Corp. ("AAC"), Audiovox Consumer Electronics, Inc.("ACE"), Audiovox German Holdings GmbH ("Audiovox Germany"), Audiovox Venezuela, C.A., Audiovox Canada Limited, AudiovoxHong Kong Ltd., Audiovox International Corp., Audiovox Mexico, S. de R.L. de C.V. ("Audiovox Mexico"), Technuity, Inc., CodeSystems, Inc., Oehlbach Kabel GmbH ("Oehlbach"), Schwaiger GmbH ("Schwaiger"), Invision Automotive Systems, Inc. ("Invision"),Klipsch Holding LLC ("Klipsch"), Car Communication Holding GmbH ("Hirschmann"), Omega Research and Development, LLC("Omega") and Audiovox Websales LLC. We market our products under the Audiovox® brand name, other brand names and licensedbrands, such as Acoustic Research®, Advent®, Ambico®, Car Link®, Chapman®, Code-Alarm®, Discwasher®, Energizer®,Energy®, Heco®, Hirschmann Car Communication®, Incaar™, Invision®, Jamo®, Jensen®, Klipsch®, Mac Audio™, Magnat®,Mirage®, Movies2Go®, Oehlbach®, Omega®, Phase Linear®, Prestige®, Pursuit®, RCA®, RCA Accessories®, Recoton®, RoadGear®, Schwaiger®, Spikemaster® and Terk®, as well as private labels through a large domestic and international distributionnetwork. We also function as an OEM ("Original Equipment Manufacturer") supplier to several customers and presently have threereportable segments, which are organized by product category: Automotive, Premium Audio and Consumer Accessories. b)Principles of Consolidation, Reclassifications and Accounting PrinciplesThe consolidated financial statements include the financial statements of VOXX International Corporation and its wholly-ownedsubsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The Company acquired CarCommunication Holding GmbH ("Hirschmann") on March 14, 2012. The consolidated financial statements presented for the year endedFebruary 28, 2013 include the operations of Hirschmann beginning March 14, 2012. The Company acquired Klipsch Group, Inc. and itsworldwide subsidiaries ("Klipsch") on March 1, 2011. The consolidated financial statements for the full years ended February 28, 2013and February 29, 2012 include the operations of Klipsch. Equity investments in which the Company exercises significant influence but does not control and is not the primary beneficiary areaccounted for using the equity method. The Company's share of its equity method investees' earnings or losses are included in otherincome in the accompanying Consolidated Statements of Operations and Comprehensive Income. The Company eliminates its pro ratashare 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 whichthe Company is not able to exercise significant influence over the investee are accounted for under the cost method.Certain amounts in prior years have been reclassified to conform to the current year presentation. Effective December 1, 2012, theCompany realigned its subsidiaries into three operating segments based upon the Company's products and internal organization structure(see Note 13).The financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the UnitedStates of America. 45c)Use of Estimates The preparation of these financial statements require the Company to make estimates and assumptions that affect reported amounts ofassets, liabilities, revenue and expenses. Such estimates include the allowance for doubtful accounts, inventory valuation, recoverability ofdeferred tax assets, reserve for uncertain tax positions, valuation of long-lived assets, accrued sales incentives, warranty reserves, stock-based compensation, valuation and impairment assessment of investment securities, goodwill, trademarks and other intangible assets, anddisclosure of contingent assets and liabilities at the date of the consolidated financial statements. Actual results could differ from thoseestimates.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 threemonths or less when purchased. Cash and cash equivalents amounted to $19,777 and $13,606 at February 28, 2013 and February 29,2012, respectively. Cash amounts held in foreign bank accounts amounted to $12,121 and $5,828 at February 28, 2013 andFebruary 29, 2012, respectively. The majority of these amounts are in excess of government insurance. The Company places its cash andcash equivalents in institutions and funds of high credit quality. We perform periodic evaluations of these institutions and funds.e)Fair Value Measurements and DerivativesThe Company applies the authoritative guidance on "Fair Value Measurements," which among other things, requires enhanced disclosuresabout investments that are measured and reported at fair value. This guidance establishes a hierarchal disclosure framework that prioritizesand ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by anumber of factors, including the type of investment and the characteristics specific to the investment. Investments with readily availableactive quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market priceobservability and a lesser degree of judgment used in measuring fair value.Investments measured and reported at fair value are classified and disclosed in one of the following categories:Level 1 - Quoted market prices in active markets for identical assets or liabilities.Level 2 - Inputs other than Level 1 inputs that are either directly or indirectly observable.Level 3 - Unobservable inputs developed using the Company's estimates and assumptions, which reflect those that market participantswould use.The following table presents assets measured at fair value on a recurring basis at February 28, 2013: Fair Value Measurements at ReportingDate Using Level 1 Level 2Cash and cash equivalents: Cash and money market funds$19,777 $19,777 $—Derivatives Designated for hedging$(10) $— $(10)Not designated(21) — (21)Total derivatives$(31) $— $(31)Long-term investment securities: Trading securities$3,657 $3,657 $—Available-for-sale securities3 3 —Other investments at amortized cost (a)9,910 — —Total long-term investment securities$13,570 $3,660 $—46The following table presents assets measured at fair value on a recurring basis at February 29, 2012: Fair Value Measurements at Reporting DateUsing Level 1 Level 2Cash and cash equivalents: Cash and money market funds$13,606 $13,606 $—Derivatives Designated for hedging$(103) $— $(103)Not designated1,581 — 1,581Total derivatives$1,478 $— $1,478Long-term investment securities: Trading securities$3,447 $3,447 $—Available-for-sale securities3 3 —Other investments at amortized cost (a)9,652 — —Total long-term investment securities$13,102 $3,450 $—(a)There were no events or changes in circumstances that occurred to indicate a significant adverse effect on the cost of these investments.The carrying amount of the Company's accounts receivable, short-term debt, accounts payable, accrued expenses, bank obligations andlong-term debt approximates fair value because of (i) the short-term nature of the financial instrument; (ii) the interest rate on the financialinstrument being reset every quarter to reflect current market rates, and (iii) the stated or implicit interest rate approximates the currentmarket rates or are not materially different than market rates.Derivative InstrumentsThe Company's derivative instruments include forward foreign currency contracts utilized to hedge a portion of its foreign currencyinventory purchases as well as its general economic exposure to foreign currency fluctuations created in the normal course of business. Thederivatives qualifying for hedge accounting are designated as cash flow hedges and valued using observable forward rates for the same orsimilar instruments (Level 2). Forward foreign currency contracts not designated under hedged transactions were valued at spot rates for thesame or similar instruments (Level 2). The duration of open forward foreign currency contracts range from 1 - 12 months and areclassified in the balance sheet according to their terms.It is the Company's policy to enter into derivative instrument contracts with terms that coincide with the underlying exposure being hedged.As such, the Company's derivative instruments are expected to be highly effective. Hedge ineffectiveness, if any, is recognized as incurredthrough other income (expense) in the Company's Consolidated Statements of Operations and Comprehensive Income and amounted to $30and $8 for the years ended February 28, 2013 and February 29, 2012, respectively.Financial Statement ClassificationThe Company holds derivative instruments that are designated as hedging instruments as well as certain instruments not so designated.The following table discloses the fair value as of February 28, 2013 and February 29, 2012 for both types of derivative instruments:47 Derivative Assets and Liabilities Fair Value Account February 28, 2013 February 29, 2012Designated derivative instruments Foreign currency contracts Accrued expenses and other currentliabilities $(87) $(103) Prepaid expenses and other currentassets 77 — Derivatives not designated Foreign currency contracts Accrued expenses and other currentliabilities (21) — Prepaid expenses and other currentassets — 1,581 Total derivatives $(31) $1,478In connection with the acquisition of Hirschmann, on March 14, 2012, the Company acquired 36 contracts which were unable to qualifyfor hedge accounting during the year ended February 28, 2013. There were four contracts of this nature outstanding at February 28, 2013,with a current notional amount of approximately $700. Thirty-two of these contracts settled during the year ended February 28, 2013 for again of $106. The change in fair value of the open contracts not designated for hedging for the twelve months ended February 28, 2013 wasa gain of $48. As of February 29, 2012, the Company held two foreign currency contracts that were derivatives not designated in hedgedtransactions. These contracts were settled in March 2012. During the twelve months ended February 29, 2012, the Company recordedgains on the change in fair value of these derivatives of $1,581 in other income and expense on the Company's Consolidated Statement ofOperations and Comprehensive Income and a loss upon the settlement of these contracts in the first quarter of Fiscal 2013 of $2,670.Cash flow hedgesDuring Fiscal 2013, the Company entered into forward foreign currency contracts, which have a current outstanding notional value of$31,200 and are designated as cash flow hedges. For cash flow hedges, the effective portion of the gain or loss is reported as a component ofother comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affectsearnings.Activity related to cash flow hedges recorded during the twelve months ended February 28, 2013 and February 29, 2012 was as follows: February 28, 2013 February 29, 2012 Gain (Loss)Recognized inOtherComprehensiveIncome Gain (Loss)Reclassifiedinto Cost ofSales Gain (Loss)forIneffectivenessin OtherIncome Gain (Loss)Recognized inOtherComprehensiveIncome Gain (Loss)Reclassifiedinto Cost ofSales Gain (Loss)forIneffectivenessin OtherIncomeCash flow hedges Foreign currency contracts$197 $(326) $30 $(123) $52 $8The net loss recognized in other comprehensive income for foreign currency contracts is expected to be recognized in cost of sales within thenext fifteen months. No amounts were excluded from the assessment484950515253545556575859606162636465ofhedge effectiveness during the respective periods. As of February 28, 2013, no contracts originally designated for hedged accounting werede-designated or terminated.f)Investment Securities In accordance with the Company's investment policy, all long and short-term investment securities are invested in "investment grade" ratedsecurities. As of February 28, 2013 and February 29, 2012, the Company had the following investments: February 28, 2013 February 29, 2012 CostBasis Unrealizedholdinggain/(loss) FairValue CostBasis Unrealizedholdinggain/(loss) FairValueLong-Term Investments Marketable Securities Trading Deferred Compensation$3,657 $— $3,657 $3,447 $— $3,447Available-for-sale Cellstar— 3 3 — 3 3Bliss-tel— — — — — —Held-to-maturity Investment7,591 — 7,591 7,545 — 7,545Total Marketable Securities11,248 3 11,251 10,992 3 10,995Other Long-Term Investment2,319 — 2,319 2,107 — 2,107Total Long-Term Investments$13,567 $3 $13,570 $13,099 $3 $13,102Long-Term InvestmentsTrading SecuritiesThe Company’s trading securities consist of mutual funds, which are held in connection with the Company’s deferred compensation plan(see Note 10). Unrealized holding gains and losses on trading securities offset those associated with the corresponding deferredcompensation liability.Available-For-Sale SecuritiesThe Company’s available-for-sale marketable securities include a less than 20% equity ownership in CLST Holdings, Inc. ("Cellstar") andBliss-tel Public Company Limited ("Bliss-tel").Unrealized holding gains and losses, net of the related tax effect (if applicable), on available-for-sale securities are reported as a componentof accumulated other comprehensive income (loss) until realized. Realized gains and losses from the sale of available-for-sale securities aredetermined on a specific identification basis.A decline in the market value of any available-for-sale security below cost that is deemed other-than-temporary results in a reduction incarrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security is established. The Companyconsiders numerous factors, on a case-by-case basis, in evaluating whether the decline in market value of an available-for-sale securitybelow cost is other-than-temporary. Such factors include, but are not limited to, (i) the length of time and the extent to which the marketvalue has been less than cost; (ii) the financial condition and the near-term prospects of the issuer of the investment; and (iii) whether theCompany's intent to retain the investment for the period of time is sufficient to allow for any anticipated recovery in market value. DuringFiscal 2011 and Fiscal 2012, the Company monitored the performance of its Bliss-tel investment and determined that its investment in thecompany was other than temporarily impaired based on factors, such as its market price (which has consistently remained below cost inexcess of twelve months), Bliss-tel's continued losses, its deteriorating financial position, and conditions in the66local and global economy, as well as the political environment in Thailand. During Fiscal 2012, Bliss-tel stopped trading on the Thai stockexchange and has remained suspended from trading through February 28, 2013. As a result, the Company recorded other than temporaryimpairment losses of $1,225 and $1,600 for the years ended February 29, 2012 and February 28, 2011, respectively. As of February 28,2013, the Company owns 72,500,000 shares in Bliss-tel. 22,500,000 warrants expired unexercised in July 2012. As all of the above factorsremain present and the company remains suspended from trading, management's estimate of the value of this investment remains $0 atFebruary 28, 2013.Held-to-Maturity InvestmentLong-term investments include an investment in U.S. dollar-denominated bonds issued by the Venezuelan government, which is classifiedas held-to-maturity and accounted for under the amortized cost method.Other Long-Term InvestmentsOther long-term investments include an investment in a non-controlled corporation of $2,319 and $2,107 at February 28, 2013 andFebruary 29, 2012, respectively, accounted for by the cost method. During Fiscal 2011, the Company invested an additional $257 in thisinvestment as part of a capital infusion by four select investors. During Fiscal 2013, the Company loaned an additional $250 to thecompany. No investments or loans were made in or to the investment in Fiscal 2012. As of February 28, 2013 the Company holdsapproximately 16% of the outstanding shares of this company.g)Revenue Recognition The Company recognizes revenue from product sales at the time of passage of title and risk of loss to the customer either at FOB shippingpoint or FOB destination, based upon terms established with the customer. The Company's selling price to its customers is a fixed amountthat is not subject to refund or adjustment or contingent upon additional rebates. Any customer acceptance provisions, which are related toproduct testing, are satisfied prior to revenue recognition. There are no further obligations on the part of the Company subsequent to revenuerecognition except for product returns from the Company's customers. The Company does accept product returns, if properly requested,authorized, and approved by the Company. The Company records an estimate of product returns by its customers and records theprovision for the estimated amount of such future returns at point of sale, based on historical experience and any notification the Companyreceives of pending returns.The Company includes all costs incurred for shipping and handling as cost of sales and all amounts billed to customers as revenue.During the years ended February 28, 2013, February 29, 2012, and February 28, 2011, freight costs expensed through cost of salesamounted to $18,757, $18,172 and $13,399, respectively and freight billed to customers amounted to $990, $1,181 and $1,161,respectively.h)Accounts Receivable The majority of the Company's accounts receivable are due from companies in the retail, mass merchant and OEM industries. Credit isextended based on an evaluation of a customer's financial condition. Accounts receivable are generally due within 30-60 days and are statedat amounts due from customers, net of an allowance for doubtful accounts. Accounts outstanding longer than the contracted payment termsare considered past due. Accounts receivable is comprised of the following:67 February 28, 2013 February 29, 2012Trade accounts receivable and other$161,667 $149,787Less: Allowance for doubtful accounts7,840 5,737Allowance for cash discounts1,231 1,465 $152,596 $142,585 The Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and thecustomers' current credit worthiness, as determined by a review of their current credit information. The Company continuously monitorscollections and payments from its customers and maintains a provision for estimated credit losses based upon historical experience and anyspecific customer collection issues that have been identified. While such credit losses have historically been within management'sexpectations and the provisions established, the Company cannot guarantee it will continue to experience the same credit loss rates that havebeen experienced in the past. Since the Company's accounts receivable are concentrated in a relatively few number of customers, asignificant change in the liquidity or financial position of any one of these customers could have a material adverse impact on thecollectability of the Company's accounts receivable and future operating results. i)InventoryThe Company values its inventory at the lower of the actual cost to purchase (primarily on a weighted moving-average basis with a portionvalued at standard cost) and/or the current estimated market value of the inventory less expected costs to sell the inventory. The Companyregularly reviews inventory quantities on-hand and records a provision for excess and obsolete inventory based primarily on selling prices,indications from customers based upon current price negotiations and purchase orders. The Company's industry is characterized by rapidtechnological change and frequent new product introductions that could result in an increase in the amount of obsolete inventory quantitieson-hand. The Company recorded inventory write-downs of $4,300, $2,942 and $3,911 for the years ended February 28, 2013,February 29, 2012 and February 28, 2011, respectively.Inventories by major category are as follows: February 28, 2013 February 29, 2012Raw materials$35,240 $18,495Work in process5,316 1,888Finished goods118,543 109,131Inventory, net$159,099 $129,514j)Property, Plant and Equipment Property, plant and equipment are stated at cost less accumulated depreciation. Property under a capital lease is stated at the present value ofminimum lease payments. Major improvements and replacements that extend service lives of the assets are capitalized. Minor replacements,and routine maintenance and repairs are charged to expense as incurred. Upon retirement or disposal of assets, the cost and relatedaccumulated depreciation are removed from the consolidated balance sheets. A summary of property, plant and equipment, net, is as follows:68 February 28, 2013 February 29, 2012Land$6,421 $1,623Buildings42,670 15,101Property under capital lease6,981 6,981Furniture, fixtures and displays4,296 4,237Machinery and equipment26,758 11,331Construction-in-progress4,159 734Computer hardware and software24,325 29,227Automobiles914 915Leasehold improvements9,415 9,453 125,939 79,602Less accumulated depreciation and amortization49,731 47,823 $76,208 $31,779 Depreciation is calculated on the straight-line method over the estimated useful lives of the assets as follows: Buildings 20-30 yearsFurniture, fixtures and displays 5-10 yearsMachinery and equipment 5-10 yearsComputer hardware and software 3-5 yearsAutomobiles 3 yearsLeasehold improvements are depreciated over the shorter of the lease term or estimated useful life of the asset. Assets acquired under capitalleases are amortized over the term of the respective lease. Capitalized computer software costs obtained for internal use are depreciated on astraight-line basis.Depreciation and amortization of property, plant and equipment amounted to $10,440, $6,111 and $5,576 for the years endedFebruary 28, 2013, February 29, 2012 and February 28, 2011, respectively. Included in depreciation and amortization expense isamortization of computer software costs of $794, $553 and $562 for the years ended February 28, 2013, February 29, 2012 andFebruary 28, 2011, respectively. Also included in depreciation and amortization expense is $251 of amortization related to property undera capital lease for each of the years ended February 28, 2013, February 29, 2012 and February 28, 2011.k)Goodwill and Intangible Assets Goodwill and other intangible assets consist of the excess over the fair value of assets acquired (goodwill) and other intangible assets(patents, contracts, trademarks/tradenames and customer relationships). Values assigned to the respective assets are determined inaccordance with ASC 805 "Business Combinations" ("ASC 805") and ASC 350 "Intangibles – Goodwill and Other" ("ASC 350"). Goodwill is calculated as the excess of the cost of purchased businesses over the value of their underlying net assets. Generally, the primaryvaluation method used to determine the Fair Value ("FV") of acquired businesses is the Discounted Future Cash Flow Method ("DCF"). Afive-year period is analyzed using a risk adjusted discount rate, which ranged from 10.4% to 15.6%.The value of potential intangible assets separate from goodwill are evaluated and assigned to the respective categories. The largest categoriesfrom recently acquired businesses are Trademarks and Customer Relationships. The FV’s of trademarks acquired are determined using theRelief from Royalty Method based on projected sales of the trademarked products. The FV’s of customer relationships are determinedusing the Multi-Period Excess Earnings Method which includes a DCF analysis, adjusted for a required return on tangible and intangibleassets. The guidance in ASC 350, including management’s business intent for its use; ongoing market69demand for products relevant to the category and their ability to generate future cash flows; legal, regulatory or contractual provisions on itsuse or subsequent renewal, as applicable; and the cost to maintain or renew the rights to the assets, are considered in determining the usefullife of all intangible assets. If the Company determines that there are no legal, regulatory, contractual, competitive, economic or other factorswhich limit the useful life of the asset, an indefinite life will be assigned and evaluated for impairment as indicated below. Goodwill andother intangible assets that have an indefinite useful life are not amortized. Intangible assets that have a definite useful life are amortizedover their estimated useful life.Goodwill and intangible assets with indefinite useful lives are required to be tested for impairment at least annually or more frequently if anevent occurs or circumstances change that could more likely than not reduce the fair value of a reporting unit below its carrying amount. Intangible assets with estimable useful lives are required to be amortized over their respective estimated useful lives and reviewed forimpairment. Our impairment reviews require the use of certain estimates. If a significant change in these estimates occurs, the Companycould experience an impairment charge associated with these assets in future periods. Goodwill is tested using a two-step process. The first step is to identify a potential impairment, and the second step measures the amount ofthe impairment loss, if any. Goodwill is considered impaired if the carrying amount of the reporting unit's goodwill exceeds its estimatedfair value. Voxx's reporting units that carry goodwill are Hirschmann, Invision and Klipsch. Effective December 1, 2012, the Companyrealigned its subsidiaries into three operating segments based upon the Company's products and internal organizational structure (see Note13). These operating segments are the Automotive, Premium Audio and Consumer Accessories segments. The Hirschmann and Invisionreporting units are located within the Automotive segment with goodwill balances of $60,611 and $7,374, respectively, at February 28,2013 and the Klipsch reporting unit is located within the Premium Audio segment with a goodwill balance of $78,695 at February 28,2013, for the purposes of evaluating goodwill for impairment. The Company estimates the fair value of the reporting units based ondiscounted future cash flows, as well as consideration of each reporting unit's equity value to the market capitalization of the Company'sstock. We primarily relied on the discounted future cash flows as the full effect of the ongoing earning potential of the Company's newestKlipsch and Hirschmann acquisitions may not be fully reflected in the Company's stock value as of the measurement date; however, thediscounted future cash flows would fairly estimate these effects. The Company considered its segment realignment on December 1, 2012 atriggering event and evaluated the goodwill at the three reporting units for impairment as of this date and rolled forward this impairment testto February 28, 2013, the date at which the Company performs its annual impairment test. Based upon this impairment test and rollforward completed in the fourth quarter of Fiscal 2013, the fair values of the reporting units are in excess of the related carrying values.For intangible assets with indefinite lives, primarily trademarks, the Company compared the fair value of each intangible asset with itscarrying amount and determined that there were no impairments at February 28, 2013. We determined that the realignment of our segmentson December 1, 2012 did not result in a triggering event to test these assets at an interim date. To compute the fair value at February 28,2013, various considerations were evaluated including current sales associated with these brands, management’s expectations for futuresales and performance of the business. At the present time, management intends to continue the development, marketing and selling ofproducts associated with its intangible assets and there are no known restrictions on the continuation of their use. We utilized a Relief-from-Royalty Method, applying royalty rates of 0.5% to 8.5% for the relative trademarks and domain names after reviewing comparable marketrates, the profitability of the products associated with relative intangible assets, and other qualitative factors. We determined that risk-adjusted discount rates ranging from 12.7% to 16.3% were appropriate as a result of weighted average cost of capital analyses. Noimpairment losses were recorded related to indefinite lived intangible assets during the twelve months ended February 29, 2012 andFebruary 29, 2012.The cost of other intangible assets with definite lives are amortized on a straight-line basis over their respective lives. Management hasdetermined that the current lives of these assets are appropriate. Management has determined that there were no impairment triggering eventsthat would cause the carrying values related to intangible assets with definite lives to exceed their expected future cash flows and as such,were not impaired at February 28, 2013. Intangible assets with definite lives were not impaired at February 29, 2012 or February 29,2012.70During the fourth quarter of Fiscal 2013, the Company identified an error in the consolidated financial statements for the year endedFebruary 29, 2012, related to the purchase price of the Company's Klipsch acquisition that took place on March 1, 2011. Accountspayable acquired in the acquisition was incorrectly overstated and income taxes payable acquired was understated, which also resulted inan overstatement of goodwill from the purchase price. We evaluated the materiality of the error from a qualitative and quantitativeperspective. Based on such evaluation, we concluded that the correction was not material to any individual prior period or for the yearended February 28, 2013, taking into account the requirements of the Securities and Exchange Commission Staff Accounting Bulletin No.108, "Considering The Effects of Prior Year Misstatements in the Current Year Financial Statements," or SAB 108. As discussed inSAB108, though the error correction does require restating consolidated financial statements for prior periods, the error correction does notrequire the amendment of prior period filings. As a result, the accounting correction has reduced accounts payable by $1,729 and goodwillby $1,297 and has increased income taxes payable by $432 on the consolidated balance sheets at February 28, 2013 and February 29,2012.Goodwill The change in the carrying amount of goodwill is as follows: February 28, 2013 February 29, 2012 (restated)Net beginning balance$86,069 $7,373Goodwill related to Klipsch acquisition— 78,696Goodwill related to Hirschmann acquisition60,611 —Net ending balance$146,680 $86,069Intangible Assets February 28, 2013 GrossCarryingValue AccumulatedAmortization Total NetBookValueFinite-lived intangible assets: Customer relationships (5-20 years)$69,293 $12,029 $57,264Trademarks/Tradenames (3-12 years)1,237 810 427Patents (5-13 years)9,998 1,894 8,104License (5 years)1,400 1,400 —Contract subject to amortization (5 years)1,556 1,383 173Total finite-lived intangible assets$83,484 $17,516 65,968Indefinite-lived intangible assets Trademarks 139,430Total net intangible assets $205,39871 February 29, 2012 GrossCarryingValue AccumulatedAmortization Total NetBookValueFinite-lived intangible assets: Customer relationships (5-20 years)50,113 7,432 42,681Trademarks/Tradenames (3-12 years)1,237 722 515Patents (5-10 years)2,942 1,005 1,937License (5 years)1,400 1,213 187Contract subject to amortization (5 years)1,556 1,292 264Total finite-lived intangible assets$57,248 $11,664 45,584Indefinite-lived intangible assets Trademarks 129,765Total net intangible assets $175,349During the year ended February 28, 2013, the Company recorded $7,055 of patents subject to amortization, $19,392 of amortizingcustomer relationships and $10,400 of indefinite lived trade names, plus increases of $14,414 in both definite and indefinite life intangiblesin connection with the final purchase price allocation for its Hirschmann acquisition. The weighted-average remaining amortization periodfor amortizing intangibles as of February 28, 2013 is approximately 13 years. The Company expenses the renewal costs of patents asincurred. The weighted-average period before the next renewal is approximately 10 years.Amortization expense for intangible assets amounted to $5,790, $3,992 and $2,255 for the years ended February 28, 2013,February 29, 2012 and February 28, 2011, respectively. The estimated aggregate amortization expense for all amortizable intangibles foreach of the succeeding years ending February 28, 2018 is as follows:Fiscal Year Amount2014 $5,8102015 5,8032016 5,6972017 5,6832018 5,599l)Sales IncentivesThe Company offers sales incentives to its customers in the form of (1) co-operative advertising allowances; (2) market developmentfunds; (3) volume incentive rebates and (4) other trade allowances. The Company accounts for sales incentives in accordance with ASC605-50 "Customer Payments and Incentives" ("ASC 605-50"). Except for other trade allowances, all sales incentives require the customerto purchase the Company's products during a specified period of time. All sales incentives require customers to claim the sales incentivewithin a certain time period (referred to as the "claim period") and claims are settled either by the customer claiming a deduction against anoutstanding account receivable or by the customer requesting a cash payout. All costs associated with sales incentives are classified as areduction of net sales. The following is a summary of the various sales incentive programs:Co-operative advertising allowances are offered to customers as reimbursement towards their costs for print or media advertising in whichthe Company’s product is featured on its own or in conjunction with other companies' products. The amount offered is either a fixedamount or is based upon a fixed percentage of sales revenue or a fixed amount per unit sold to the customer during a specified time period.72Market development funds are offered to customers in connection with new product launches or entrance into new markets. The amountoffered for new product launches is based upon a fixed amount, or percentage of sales revenue to the customer or a fixed amount per unitsold to the customer during a specified time period. Volume incentive rebates offered to customers require minimum quantities of product to be purchased during a specified period of time. Theamount offered is either based upon a fixed percentage of sales revenue to the customer or a fixed amount per unit sold to the customer. TheCompany makes an estimate of the ultimate amount of the rebate their customers will earn based upon past history with the customers andother facts and circumstances. The Company has the ability to estimate these volume incentive rebates, as the period of time for a particularrebate to be claimed is relatively short. Any changes in the estimated amount of volume incentive rebates are recognized immediately using acumulative catch-up adjustment. The Company accrues the cost of co-operative advertising allowances, volume incentive rebates andmarket development funds at the latter of when the customer purchases our products or when the sales incentive is offered to the customer. Other trade allowances are additional sales incentives that the Company provides to customers subsequent to the related revenue beingrecognized. The Company records the provision for these additional sales incentives at the later of when the sales incentive is offered orwhen the related revenue is recognized. Such additional sales incentives are based upon a fixed percentage of the selling price to thecustomer, a fixed amount per unit, or a lump-sum amount. The accrual balance for sales incentives at February 28, 2013 and February 29, 2012 was $16,821 and $18,154, respectively. Althoughthe Company makes its best estimate of its sales incentive liability, many factors, including significant unanticipated changes in thepurchasing volume of its customers and the lack of claims made by customers could have a significant impact on the sales incentivesliability and reported operating results.For the years ended February 28, 2013, February 29, 2012 and February 28, 2011, reversals of previously established sales incentiveliabilities amounted to $3,350, $3,662 and $1,725, respectively. These reversals include unearned and unclaimed sales incentives.Reversals of unearned sales incentives are volume incentive rebates where the customer did not purchase the required minimum quantitiesof product during the specified time. Volume incentive rebates are reversed into income in the period when the customer did not reach therequired minimum purchases of product during the specified time. Unearned sales incentives for the years ended February 28, 2013,February 29, 2012 and February 28, 2011 amounted to $2,933, $2,200 and $977, respectively. Unclaimed sales incentives are salesincentives earned by the customer but the customer has not claimed payment from the Company within the claim period (period afterprogram has ended). Unclaimed sales incentives for the years ended February 28, 2013, February 29, 2012 and February 28, 2011amounted to $417, $1,462 and $748, respectively. The Company reverses earned but unclaimed sales incentives based upon the expiration of the claim period of each program. Unclaimedsales incentives that have no specified claim period are reversed in the quarter following one year from the end of the program. TheCompany believes the reversal of earned but unclaimed sales incentives upon the expiration of the claim period is a systematic, rational,consistent and conservative method of reversing unclaimed sales incentives. A summary of the activity with respect to accrued sales incentives is provided below: 73 YearEnded YearEnded YearEnded February 28, 2013 February 29, 2012 February 28, 2011Opening balance$18,154 $11,981 $10,606Liabilities acquired during acquisition— 7,149 —Accruals35,636 43,671 28,004Payments and credits(33,619) (40,985) (24,904)Reversals for unearned sales incentives(2,933) (2,200) (977)Reversals for unclaimed sales incentives(417) (1,462) (748)Ending balance$16,821 $18,154 $11,981The majority of the reversals of previously established sales incentive liabilities pertain to sales recorded in prior periods.m)Advertising Excluding co-operative advertising, the Company expensed the cost of advertising, as incurred, of $9,499, $7,786 and $6,076 for theyears ended February 28, 2013, February 29, 2012 and February 28, 2011, respectively.n)Research and DevelopmentExpenditures for research and development are charged to expense as incurred. Such expenditures amount to $15,890, $441 and $0 for theyears ended February 28, 2013, February 29, 2012 and February 28, 2011, respectively, and are included within engineering andtechnical support expenses on the Consolidated Statements of Operations and Comprehensive Income. o)Product Warranties and Product Repair CostsThe Company generally warranties its products against certain manufacturing and other defects. The Company provides warranties for allof its products ranging from 90 days to the lifetime of the product. Warranty expenses are accrued at the time of sale based on theCompany's estimated cost to repair expected product returns for warranty matters. This liability is based primarily on historical experiencesof actual warranty claims as well as current information on repair costs. The warranty liability of $12,788 and $6,425 is recorded inaccrued expenses in the accompanying consolidated balance sheets as of February 28, 2013 and February 29, 2012, respectively. Inaddition, the Company records a reserve for product repair costs which is based upon the quantities of defective inventory on hand and anestimate of the cost to repair such defective inventory. The reserve for product repair costs of $1,763 and $2,370 is recorded as a reductionto inventory in the accompanying consolidated balance sheets as of February 28, 2013 and February 29, 2012, respectively. Warrantyclaims and product repair costs expense for the years ended February 28, 2013, February 29, 2012 and February 28, 2011 were $13,798,$11,839 and $11,560, respectively.In March 2013, Subaru of America recalled certain vehicles as a result of potentially faulty remote start devices for which Voxx was thedistributor. During the fourth quarter of the fiscal year ended February 28, 2013, the Company recorded a reserve of $3 million in accruedproduct warranties in order to cover the cost of replacing these devices and a corresponding receivable of $2.1 million from one of theCompany's suppliers, who has agreed to replace a specified number of these devices.Changes in the Company's accrued product warranties and product repair costs are as follows:74 YearEnded YearEnded YearEnded February 28, 2013 February 29, 2012 February 28, 2011Beginning balance$8,795 $9,051 $13,058Liabilities acquired during acquisitions1,799 1,480 115Liabilities accrued for warranties issued during the year and repair cost13,798 11,839 11,560Warranty claims paid during the year(9,841) (13,575) (15,682)Ending balance$14,551 $8,795 $9,051p)Foreign Currency Assets and liabilities of those subsidiaries and former equity investees located outside the United States whose cash flows are primarily inlocal currencies have been translated at rates of exchange at the end of the period or historical exchange rates, as appropriate in accordancewith ASC 830, "Foreign Currency Matters" ("ASC 830"). Revenues and expenses have been translated at the weighted-average rates ofexchange in effect during the period. Gains and losses resulting from translation are recorded in the cumulative foreign currency translationaccount in accumulated other comprehensive income (loss). For the years ended February 28, 2013, February 29, 2012 and February 28,2011, the Company recorded foreign currency transaction (losses)/gains in the amount of $445, $1,748 and $2,241, respectively. The Company has certain operations in Venezuela. Venezuela has been operating in a difficult economic environment, which has beentroubled with local political issues and various foreign currency and price controls. The country has experienced high rates of inflation overthe last several years. The President of Venezuela has the authority to legislate certain areas by decree, which allows the government tonationalize certain industries or expropriate certain companies and property. These factors may have a negative impact on our business andour financial condition. In 2003, Venezuela created the Commission of Administration of Foreign Currency ("CADIVI") which establishesand administers currency controls and their associated rules and regulations. These controls include creating a fixed exchange rate betweenthe Bolivar and the U.S. Dollar, and the ability to restrict the exchange of Bolivar Fuertes for U.S. Dollars and vice versa.Effective January 1, 2010, according to the guidelines in ASC 830, Venezuela was designated as a hyper-inflationary economy. A hyper-inflationary economy designation occurs when a country has experienced cumulative inflation of approximately 100 percent or more over a 3year period. The hyper-inflationary designation requires the local subsidiary in Venezuela to record all transactions as if they weredenominated in U.S. dollars. The Company transitioned to hyper-inflationary accounting on March 1, 2010 and continues to account forits Venezuela operations under this method.On June 9, 2010, the Venezuelan government introduced a newly regulated foreign currency exchange system, Sistema de Transaccionescon Titulos en Moneda Extranjera ("SITME"), which is controlled by the Central Bank of Venezuela ("BCV"). The SITME imposesvolume restrictions on the conversion of Venezuelan Bolivar Fuertes to U.S. Dollars, currently limiting such activity to a maximumequivalent of $350 per month. As a result of this restriction, we have limited new U.S. dollar purchases to remain within the guidelinesimposed by SITME.The Company has certain U.S. dollar denominated assets and liabilities in its Venezuelan operations. Our TICC bond investment (See Note1(f)) and our U.S. dollar denominated intercompany debt have been subject to currency fluctuations associated with the devaluation of theBolivar Fuerte and the temporary institution in 2010 of a two-tier exchange rate by the Venezuelan government. The TICC bond is valued atthe current Venezuela exchange rate of 6.30 and classified as a held-to-maturity investment at amortized cost at February 28, 2013.In February 2013, the Venezuelan government announced the devaluation of the Bolivar Fuerte, moving the official exchange rate from 4.30to 6.30 per U.S. dollar. The devaluation resulted in a one time net currency gain of approximately $2,400 recognized by the Company in thefourth quarter of Fiscal 2013, which is included in75cost of sales and other income (expenses) on the Consolidated Statement of Operations and Comprehensive Income.q)Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future taxconsequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and theirrespective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax ratesexpected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled (see Note 7). Theeffect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.Uncertain Tax Positions The Company adopted guidance included in ASC 740 "Income Taxes" ("ASC 740") as it relates to uncertain tax positions. The guidanceaddresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financialstatements. Under ASC 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than notthat the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefitsrecognized in the financial statements from such position should be measured based on the largest benefit that has a greater than fiftypercent likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on derecognition, classification, interest andpenalties, accounting in interim periods and disclosure requirements. Tax interest and penalties The Company classifies interest and penalties associated with income taxes as a component of income tax expense (benefit) on theconsolidated statement of operations.r)Net Income Per Common Share Basic net income per common share is based upon the weighted-average number of common shares outstanding during the period. Dilutednet income per common share reflects the potential dilution that would occur if securities or other contracts to issue common stock wereexercised or converted into common stock. There are no reconciling items which impact the numerator of basic and diluted net income per common share. A reconciliation between thedenominator of basic and diluted net income per common share is as follows: YearEnded YearEnded YearEnded February 28, 2013 February 29,2012 February 28,2011Weighted-average number of common shares outstanding (basic)23,415,570 23,080,081 22,938,754Effect of dilutive securities: Stock options, warrants and restricted stock201,531 185,125 173,764Weighted-average number of common and potential common shares outstanding (diluted)23,617,101 23,265,206 23,112,518 Stock options and stock warrants totaling 90,735, 361,464 and 165,802 for the years ended February 28, 2013, February 29, 2012 andFebruary 28, 2011, respectively, were not included in the net income per common share calculation because the exercise price of theseoptions and warrants was greater than the average market price of the Company's common stock during the period.s)Other Income (Expense)76 Other income (expense) is comprised of the following: YearEnded YearEnded YearEnded February 28, 2013 February 29, 2012 February 28, 2011Other-than-temporary impairment of investment in Bliss-tel marketable securities$— $(1,225) $(1,600)(Loss) gain on foreign currency contracts related to Hirschmann acquisition(2,670) 1,581 —Net settlement charges related to patent lawsuit(2,676) (3,621) —Foreign currency gain445 1,748 2,241Interest Income685 744 1,453Rental income1,120 531 530Miscellaneous463 (3,145) 580Total other, net$(2,633) $(3,387) $3,204Miscellaneous for the year ended February 28, 2013 includes income related to legal settlements received by Klipsch of approximately$1,000. Miscellaneous for the year ended February 29, 2012 includes charges related to a contingent consideration adjustment ofapproximately $2,000. Net foreign currency gain for the year ended February 28, 2013 includes a $447 loss related to the February 2013devaluation of the Bolivar Fuerte by the Venezuelan government. Net foreign currency gain for the year ended February 28, 2011 includes atranslation gain of approximately $1,400 related to the elimination of the 2.6 exchange rate in Venezuela.t)Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed ofLong-lived assets and certain identifiable intangibles are reviewed for impairment in accordance with ASC 360 whenever events or changesin circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used ismeasured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset.Recoverability of assets held for sale is measured by comparing the carrying amount of the assets to their estimated fair market value. Ifsuch assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of theassets exceed the fair value of the assets.u)Accounting for Stock-Based Compensation The Company has a stock-based compensation plan under which employees and non-employee directors may be granted incentive stockoptions ("ISO's") and non-qualified stock options ("NQSO's") to purchase shares of Class A common stock. Under the plan, the exerciseprice of the ISO's will not be less than the market value of the Company's Class A common stock or greater than 110% of the market valueof the Company's Class A common stock on the date of grant. The exercise price of the NQSO's may not be less than 50% of the marketvalue of the Company's Class A common stock on the date of grant. The plan permits for options to be exercised at various intervals asdetermined by the Board of Directors. However, the maximum expiration period is ten years from date of grant. The vesting requirementsare determined by the Board of Directors at the time of grant. Exercised options are issued from authorized Class A common stock. As ofFebruary 28, 2013, approximately 1,784,000 shares were available for future grants under the terms of these plans.Options are measured at the fair value of the award at the date of grant and are recognized as an expense over the requisite service period.Compensation expense related to stock-based awards with vesting terms are amortized using the straight-line attribution method. 77The Company granted 256,250 options during December of 2012, which vest on July 1, 2013, expire two years from date of vesting (June30, 2015), have an exercise price equal to $6.79, $0.25 above the sales price of the Company's stock on the day prior to the date of grant,have a contractual term of 2.5 years and a grant date fair value of $1.99 per share, determined on a Black-Scholes valuation model (referto the tables below for assumptions used to determine fair value).In addition, the Company issued 17,500 warrants during December of 2012 to purchase the Company's common stock with the sameterms as those of the options above as consideration for future legal and professional services. These warrants are included in theoutstanding options and warrants table below and will be exercisable on July 1, 2013.The Company granted 246,250 options during May of 2011, which vested on February 29, 2012, expire two years from date of vesting(February 28, 2014), have an exercise price equal to $7.75, $0.25 above the sales price of the Company's stock on the day prior to the dateof grant, have a contractual term of 2.75 years and a grant date fair value of $3.08 per share determined based on a Black-Scholesvaluation model. (Refer to the table below for assumptions used to determine fair value.)In addition, the Company issued 22,500 warrants during May of 2011 to purchase the Company's common stock with the same terms asthose of the options above as consideration for future legal and professional services. These warrants are included in the outstandingoptions and warrant table below and considered exercisable at February 29, 2012.The Company granted 861,250 options in September of 2009, one-half vested on November 30, 2009 and one-half vested on November30, 2010, expire three years from date of vesting (November 30, 2012 and November 30, 2013, respectively), have an exercise price equal to$6.37 (the sales price of the Company’s stock on the day prior to the date of grant) have a contractual term between 3.2 and 4.2 years, anda grant date fair value of $2.69 per share determined based upon a Black-Scholes valuation model (refer to the table below for assumptionsused to determine fair value). 20,000 of these options expired unexercised on November 30, 2012.In addition, the Company issued 17,500 warrants in September of 2009 to purchase the Company’s common stock with the same terms asthose above as consideration for future legal services. These warrants are included in the outstanding options and warrants table below andconsidered exercisable at February 29, 2012. 6,250 of these warrants expired unexercised on November 30, 2012. The per share weighted-average fair value of stock options granted during the years ended February 28, 2013 and February 29, 2012 was$1.99 and $3.08, respectively on the date of grant. There were no stock options granted during the year ended February 28, 2011.The fair value of stock options and warrants on the date of grant, and the assumptions used to estimate the fair value of the stock optionsand warrants using the Black-Scholes option valuation model granted during the year was as follows: YearEnded YearEnded February 28, 2013 February 29, 2012Dividend yield0% 0%Volatility51.3% 65.4%Risk-free interest rate0.32% 0.94%Expected life (years)2.5 2.8The expected dividend yield is based on historical and projected dividend yields. The Company estimates expected volatility basedprimarily on historical price changes of the Company’s stock equal to the expected life of the option. The Company uses monthly stockprices as the Company’s stock experiences low-volume trading. We believe that daily fluctuations are distortive to the volatility and as suchwill continue to use monthly inputs78in the future. The risk free interest rate is based on the U.S. Treasury yield in effect at the time of the grant. The expected option term is thenumber of years the Company estimates the options will be outstanding prior to exercise based on employment termination behavior. The Company recognized stock-based compensation expense (before deferred income tax benefits) for awards granted under the Company’sstock option plans in the following line items in the consolidated statement of operations and comprehensive income: YearEnded YearEnded YearEnded February 28, 2013 February 29, 2012 February 28, 2011Cost of sales$5 $23 $18Selling expense25 116 89General and administrative expenses149 681 1,172Engineering and technical support3 8 5Stock-based compensation expense before income tax benefits$182 $828 $1,284Net income was impacted by $113 (after tax), $505 (after tax) and $783 (after tax) in stock based compensation expense or $0.00, $0.02and $0.03 per diluted share for the years ended February 28, 2013, February 29, 2012 and February 28, 2011, respectively. TheCompany recorded an income tax benefit in Fiscal 2011, as the Company believes it is more likely than not that the tax benefit will berealized in future periods.Information regarding the Company's stock options and warrants are summarized below: Numberof Shares Weighted-AverageExercisePriceOutstanding and exercisable at February 28, 20101,315,584 $6.91Granted— —Exercised(189,125) 4.93Forfeited/expired(240,209) 10.38Outstanding and exercisable at February 28, 2011886,250 6.40Granted268,750 7.75Exercised(61,875) 6.37Forfeited/expired(22,500) 7.36Outstanding and exercisable at February 29, 20121,070,625 6.72Granted273,750 6.79Exercised(404,852) 6.49Forfeited/expired(26,250) 6.37Outstanding and exercisable at February 28, 2013913,273 $6.85At February 28, 2013, the Company had unrecognized compensation costs of $363 related to non-vested options. These unrecognizedcompensation costs will be fully recognized by July 3, 2013. At February 29, 2012, the Company had no unrecognized compensation costsas all stock options were fully vested.Summarized information about stock options outstanding as of February 28, 2013 is as follows:79 Outstanding and ExercisableExercisePriceRange Numberof Shares Weighted-AverageExercisePriceof Shares Weighted-AverageLifeRemainingin Years 6.37 406,123 $6.37 0.38 7.75 233,400 $7.75 1.00 6.79 273,750 $6.79 2.336.37-7.75 913,273 $6.85 1.12The aggregate pre-tax intrinsic value (the difference between the Company’s average closing stock price for the last quarter of Fiscal 2013and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all optionholders exercised their options on February 28, 2013 was $1,162. This amount changes based on the fair market value of the Company’sstock. The total intrinsic values of options exercised for the years ended February 28, 2013, February 29, 2012 and February 28, 2011were $1,845, $387 and $444, respectivelyIn May of 2011, the Company granted 100,000 shares of restricted stock. A restricted stock award is an award of common stock that issubject to certain restrictions during a specified period. Restricted stock awards are independent of option grants and are subject to forfeitureif employment terminates prior to the release of the restrictions. Shares under the above grant will not be issued to the grantee before theyvest. The grantee cannot transfer the rights to receive shares before the restricted shares vest. The restricted stock awards vest one-third onFebruary 29, 2012, one-third on February 28, 2013 and one-third on February 28, 2014. The Company expenses the cost of the restrictedstock awards on a straight-line basis over the period during which the restrictions lapse. The fair market value of the restricted stock of$7.60 was determined based on the closing price of the Company's common stock on the grant date.The following table presents a summary of the Company's restricted stock activity for the year ended February 28, 2013: Number of shares (inthousands) Weighted Average GrantDate Fair ValueBalance at February 28, 2011— $—Granted100,000 7.60Vested(33,333) 7.60Forfeited— —Balance at February 29, 201266,667 $7.60Granted— $—Vested(33,333) $7.60Forfeited— $—Balance at February 28, 201333,334 $7.60During both of the years ended February 28, 2013 and February 29, 2012, the Company recorded $253 in stock-based compensationrelated to restricted stock awards. As of February 28, 2013, there was $253 of unrecognized stock-based compensation expense related tounvested restricted stock awards. This expense is expected to be fully recognized by February 28, 2014.v)Accumulated Other Comprehensive Loss 80 February 28, 2013 February 29, 2012 Accumulated other comprehensive losses: Foreign exchange losses $(5,340) $(4,059)Unrealized losses on investments, net of tax (59) (21)Pension plan adjustments, net of tax (1,031) —Derivatives designated in hedging relationship (67) 107Total accumulated other comprehensive losses $(6,497) $(3,973)During the year ended February 29, 2012, $1,225 of unrealized losses on available-for-sale investment securities were transferred intoearnings. The Fiscal 2012 charge was as a result of declines deemed other-than-temporary. The currency translation adjustments are notadjusted for income taxes as they relate to indefinite investments in non-U.S. subsidiaries and equity investments. w)New Accounting Pronouncements In January 2010, the FASB issued authoritative guidance under ASC 820 "Fair Value Measurements and Disclosures" that improvesdisclosures around fair value measurements. This pronouncement requires additional disclosures regarding transfers between Levels 1, 2and 3 of the fair value hierarchy of this pronouncement as well as a more detailed reconciliation of recurring Level 3 measurements. Certaindisclosure requirements of this pronouncement were effective and adopted by the Company on March 1, 2010, and did not have a materialimpact on the Company's financial statements. The remaining disclosure requirements of this pronouncement were effective for theCompany's first quarter in Fiscal 2012. The adoption of this pronouncement did not have a material impact on the Company's financialstatements. In May 2011, ASC 820 was further amended to clarify certain disclosure requirements and improve consistency withinternational reporting standards. This amendment is to be applied prospectively and was effective for the Company's first quarter in Fiscal2013. The adoption has not had a material effect on the Company's financial statements.In June 2011, the FASB issued authoritative guidance included in ASC 220 "Comprehensive Income" related to the presentation ofcomprehensive income. Specifically, the new guidance allows an entity to present components of net income and other comprehensiveincome in one continuous statement, referred to as the statement of comprehensive income, or in two separate, but consecutive statements.The new guidance eliminates the current option to report other comprehensive income and its components in the statement of changes inequity. While the new guidance changes the presentation of comprehensive income, there are no changes to the components that arerecognized in net income or other comprehensive income under current accounting guidance. The adoption of this disclosure-only guidancedid not have an impact on the Company's consolidated financial results and was adopted by the Company beginning in the first quarter ofFiscal 2013.In September 2011, the FASB issued authoritative guidance in ASC 350 "Intangibles - Goodwill and other" intended to simplify goodwillimpairment testing. Entities will be allowed to perform a qualitative assessment on goodwill impairment to determine whether it is morelikely than not (defined as having a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carryingamount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. This guidance is effective forgoodwill impairment tests performed in interim and annual periods for fiscal years beginning after December 15, 2011, or the Company'sfirst quarter of Fiscal 2013. The Company adopted this guidance as of March 1, 2012 and does not expect the guidance to have a materialimpact on its financial statements.In February 2013, the FASB issued ASU 2013-02 "Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income,"which requires an entity to report, either on the face of the statement where net income is presented, or in the notes, the effect of significantreclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassifiedis required under U.S. GAAP to be reclassified in their entirety to net income. For other amounts that are not required under U.S. GAAP tobe reclassified in their entirety to net income in the same reporting period, an entity is required81to cross-reference other disclosures required under U.S. GAAP that provide additional detail about those amounts. This disclosure onlyguidance is effective prospectively for fiscal years beginning after December 15, 2012, 2) Business Acquisitions HirschmannOn March 14, 2012 (the "Closing Date"), Voxx, through its wholly-owned subsidiary VOXX International (Germany) GmbH ("Voxx Germany"),purchased the stock of Car Communication Holding GmbH, a recognized tier-1 supplier of communications and infotainment solutions, primarilyto the automotive industry, pursuant to the Sale and Purchase Agreement for €87,571 ($114,397 based upon the rate of exchange as of the close ofbusiness on the Closing Date) subject to an adjustment for working capital plus related transaction fees and expenses. The acquisition ofHirschmann further diversifies Voxx's offerings and creates strategic opportunities for the Company to leverage Hirschmann's advanced technologies.The Company believes this will lead to more advanced and creative mobile electronics products and continued growth with car manufacturersworldwide.On the Closing Date, the Company, certain of its directly and indirectly wholly-owned domestic subsidiaries, and Voxx Germany (collectively, the"Borrowers") entered into an Amended and Restated Credit Agreement (the "Amended Facility") with Wells Fargo Bank, National Association("Wells Fargo"), as Agent, and the other lenders party thereto. The Company borrowed $148 million under the Amended Facility on the Closing Dateand used a portion of the proceeds from such borrowing to fund Voxx Germany's acquisition of Hirschmann. On the Closing Date, the Companyalso repaid and terminated its existing asset-based loan facility with Wells Fargo Capital Finance, LLC.In order to hedge the fluctuation in the exchange rate before closing, the Company entered into two forward contracts totaling $63,750, both due inMarch 2012. The forward contracts were not designated for hedging, and as such, were marked to market at February 29, 2012 and when they weresettled in the first quarter of Fiscal 2013. A foreign currency gain of $1,581 was recorded in the fourth quarter of Fiscal 2012 when the contractswere marked to market at year-end and a foreign currency loss of $2,670 was recorded during the three months ended May 31, 2012, when thecontracts were settled, reflecting the loss on settlement.Net sales attributable to Hirschmann in the Company's consolidated statements of operations for the year ended February 28, 2013 wereapproximately $153 million.The following table summarizes the fair values of the assets acquired and liabilities assumed, as of the Closing Date, and the amounts assigned togoodwill and intangible asset classifications:82 March 14, 2012 (asinitially reported) Measurement PeriodAdjustments March 14, 2012 (asadjusted)Cash $6,769 $31 $6,800Accounts receivable 25,921 (3,029) 22,892Inventory 20,178 — 20,178Prepaid expenses and other current assets 2,281 (227) 2,054Property, plant and equipment 18,659 — 18,659Goodwill 70,864 (10,253) 60,611Intangible assets 22,433 14,414 36,847Other assets 940 — 940Total assets acquired 168,045 936 168,981Accounts payable and accrued expenses 26,953 (4,778) 22,175Income taxes payable 2,848 — 2,848Deferred taxes, net 5,639 3,933 9,572Bank obligations 11,430 — 11,430Capital lease obligations 911 — 911Other long-term liabilities 5,867 1,749 7,616Net tangible and intangible assets acquired $114,397 $32 $114,429During the measurement period, the Company recorded $10.7 million of net deferred tax liabilities related to the basis difference between the financialreporting value and the tax value, and the adjustments to the intangible assets value in connection with our preliminary purchase price valuation.The amounts assigned to goodwill and intangible assets for the acquisition are as follows: March 14, 2012 (asinitially reported) Measurement PeriodAdjustments March 14, 2012 (asadjusted) Amortization Period(Years)Goodwill (non-deductible)$70,864 $(10,253) $60,611 N/ATradenames (non-deductible)6,761 3,639 10,400 IndefiniteCustomer relationships9,376 10,016 19,392 15Patents6,296 759 7,055 10 $93,297 $4,161 $97,458 Acquisition related costs relating to this acquisition of $1,131 and $1,526 were expensed as incurred during the latter half of the year endedFebruary 29, 2012 and during the year ended February 28, 2013, respectively, and are included in acquisition-related costs for these respectiveperiods in the consolidated statements of operations and comprehensive income.KlipschOn March 1, 2011, Soundtech LLC, a Delaware limited liability company and wholly-owned subsidiary of Voxx, acquired all of the issued andoutstanding shares of Klipsch Group, Inc. and its worldwide subsidiaries for a total purchase price of $169.6 million, consisting of cash paid atclosing of $167.4 million, including a working capital adjustment, and contingent consideration of $2.2 million as a result of a contractualarrangement with former shareholders, plus related transaction fees and expenses. Klipsch is a global provider of high-end speakers for audio, multi-media and home theater applications. The acquisition of Klipsch adds world-class brand names to Voxx's offerings, increases its distributionnetwork, both domestically and abroad, and provides the Company with entry into the high-end installation market at both the residential andcommercial level. In addition to the Klipsch® brand, the Klipsch portfolio includes Jamo®, Mirage®, and Energy®.83In connection with the acquisition, the Company entered into a $175 million credit agreement with Wells Fargo Capital Finance, LLC to fund aportion of the acquisition and future working capital needs, as applicable. At closing, approximately $89 million was borrowed under the CreditAgreement to fund the balance of the purchase price.Net sales attributable to Klipsch in the Company's consolidated statements of operations and comprehensive income for the years endedFebruary 28, 2013 and February 29, 2012 were approximately $174 million and $170 million, respectively.During the fourth quarter of Fiscal 2013, the Company identified an error in the consolidated financial statements for the year ended February 29,2012, related to the Klipsch purchase price. Accounts payable acquired in the acquisition was incorrectly overstated and income taxes payableacquired was understated, which also resulted in an overstatement of goodwill from the purchase price. We evaluated the materiality of the error froma qualitative and quantitative perspective. Based on such evaluation, we concluded that the correction was not material to any individual prior periodor for the year ended February 28, 2013, taking into account the requirements of the Securities and Exchange Commission Staff Accounting BulletinNo. 108, "Considering The Effects of Prior Year Misstatements in the Current Year Financial Statements," or SAB 108. As discussed in SAB108,though the error correction does require restating consolidated financial statements for prior periods, the error correction does not require theamendment of prior period filings. As a result, the accounting correction has reduced accounts payable by $1,729 and goodwill by $1,297 and hasincreased income taxes payable by $432 on the consolidated balance sheets at February 28, 2013 and February 29, 2012.The following table summarizes the final allocation of the purchase price to the fair values of the assets acquired and liabilities assumed at the date ofthe acquisition and adjusted for the error identified in Fiscal 2013: March 1, 2011Accounts receivable$28,614Inventory30,167Prepaid expenses and other current assets846Property, plant and equipment, net6,347Goodwill78,696Intangible assets82,563Deferred tax assets3,086Total assets acquired230,319Accounts payable14,067Accrued expenses and other liabilities13,096Deferred tax liabilities33,557Net assets acquired$169,599During the measurement period, the Company recorded $30.5 million of net deferred tax liabilities related to the basis difference between the financialreporting value and the tax value, and the adjustments to the intangible asset values in connection with our preliminary purchase price valuation. Inaddition, the original purchase price allocation was adjusted by $2.2 million during the quarter ended August 31, 2011 to account for contingentpurchase price consideration. As a result of these changes, goodwill associated with this transaction was adjusted accordingly.The amounts assigned to goodwill and intangible assets for the acquisition are as follows and adjusted for the error identified in Fiscal 2013:84 March 1, 2011 Amortization Period (Years)Goodwill (non-deductible)$78,696 N/ATradenames (non-deductible)49,316 IndefiniteCustomer relationships32,000 15Patents1,247 13 $161,259 Acquisition related costs of $374 and $988 were expensed as incurred in the years ended February 29, 2012 and February 28, 2011, respectivelyand are included in general and administrative expenses in the accompanying consolidated statements of operations and comprehensive income.Approximately $1,250 of costs were contingent upon the completion of the acquisition and were expensed on March 1, 2011.Pro-forma Financial InformationThe following unaudited pro-forma financial information for the years ended February 28, 2013, February 29, 2012 and February 28, 2011represents the combined results of the Company's operations as if Klipsch was included for the full year of Fiscal 2011 and as if the Hirschmannacquisition had occurred at March 1, 2011. The unaudited pro-forma financial information does not necessarily reflect the results of operations thatwould have occurred had the Company constituted a single entity during such periods. YearEnded YearEnded YearEnded February 28, 2013 February 29, 2012 February 28, 2011Net Sales$843,091 $860,372 $728,266Net income26,624 22,225 32,430Net income per share-diluted$1.13 $0.96 $1.40The above pro-forma results include certain adjustments for the periods presented to adjust the financial results and give consideration to theassumption that the acquisitions of Hirschmann and Klipsch occurred on the first day of Fiscal 2012 and Fiscal 2011, respectively. Theseadjustments include costs such as an estimate for amortization and depreciation associated with intangible and fixed assets acquired, additionalfinancing costs as a result of the acquisitions, and the movement of expenses specific to the acquisitions from Fiscal 2013 and Fiscal 2012 to Fiscal2012 and Fiscal 2011, respectively. These pro-forma results of operations have been estimated for comparative purposes only and may not reflect theactual results of operations that would have been achieved had the transactions occurred on the dates presented or be indicative of results to beachieved in the future.3)Receivables from VendorsThe Company has recorded receivables from vendors in the amount of $9,943 and $4,011 as of February 28, 2013 and February 29, 2012,respectively. Receivables from vendors represent prepayments on product shipments and product reimbursements. 4)Equity InvestmentThe Company has a 50% non-controlling ownership interest in ASA Electronics, LLC and Subsidiary ("ASA") which acts as a distributor tomarkets for specialized vehicles, such as RV’s, van conversions and marine vehicles, of televisions and other automotive sound, security andaccessory products. ASC 810 requires the Company to evaluate non-consolidated entities periodically, and as circumstances change, to determine ifan implied controlling interest exists. During Fiscal 2013, the Company evaluated this equity investment and concluded that this is still a variableinterest entity and the Company is not the primary beneficiary. ASA’s fiscal year end is November 30, 2012, however, the proportionate results ofASA as of and through February 28, 2013 have been recorded in the consolidated financial statements.85The following presents unaudited summary financial information for ASA. Such summary financial information has been provided herein basedupon the individual significance of this unconsolidated equity investment to the consolidated financial information of the Company. February 28, 2013 February 29, 2012 (unaudited) (unaudited)Current assets$34,409 $28,934Non-current assets4,980 5,068Current liabilities4,353 4,216Members' equity35,036 29,786The equity balance carried on the Company’s balance sheet amounts to $17,518 and $14,893 at February 28, 2013 and February 29, 2012,respectively. YearEnded YearEnded YearEnded February 28, 2013 February 29, 2012 February 28, 2011 (unaudited) (unaudited) (unaudited)Net sales$88,062 $73,392 $68,796Gross profit25,452 21,735 18,478Operating income9,728 8,039 5,756Net income9,760 8,071 5,810The Company's share of income from ASA for the years ended February 28, 2013, February 29, 2012 and February 28, 2011 was $4,880, $4,035and $2,905, respectively. In addition, the Company received cash distributions from ASA totaling $2,256, $1,906 and $1,413 during the yearsended February 28, 2013, February 29, 2012 and February 28, 2011, respectively.Undistributed earnings from equity investments included in retained earnings amounted to $12,192 and $9,567 at February 28, 2013 andFebruary 29, 2012, respectively.The following represents summary information of transactions between the Company and ASA: YearEnded YearEnded YearEnded February 28, 2013 February 29, 2012 February 28, 2011 (unaudited) (unaudited) (unaudited)Net Sales$396 $633 $477 February 28, 2013 February 29, 2012Accounts receivable$59 $45)Accrued Expenses and Other Current LiabilitiesAccrued expenses and other current liabilities consist of the following:86 February 28, 2013 February 29, 2012Commissions$787 $737Employee compensation18,521 21,609Professional fees and accrued settlements2,107 4,970Future warranty12,788 6,425Freight and duty2,565 2,297Payroll and other taxes1,539 1,141Royalties, advertising and other13,216 15,500Total accrued expenses and other current liabilities$51,523 $52,6796)Financing ArrangementsThe Company has the following financing arrangements: February 28, 2013 February 29, 2012Domestic bank obligations (a) $154,335 $31,510Euro asset-based lending obligation (b) 1,341 1,818Euro term loan agreement (c) 695 2,024Schwaiger mortgage (d) 1,888 2,230Klipsch notes (e) 8,388 870Audiovox Germany mortgage (f) 8,369 —Hirschmann line of credit (g) — —Total debt 175,016 38,452Less: current portion of long-term debt 26,020 3,592 Total long-term debt $148,996 $34,860a)Domestic Bank ObligationsFrom March 1, 2012 through March 13, 2012, we had a revolving credit facility (the "Credit Facility"). Funds from the Credit Facilitywere used to complete the acquisition of Klipsch in March 2011, as well as to fund the temporary short-term working capital needs of theCompany. The Credit Facility had an aggregated committed availability of up to $175 million, which could be increased at the option ofthe Company up to a maximum of $200 million. The Credit Facility included a $25 million sublimit for issuances of letters of credit and a$20 million sublimit for Swing Loans.The Credit Agreement contained covenants that limited the ability of certain entities of the Company to, among other things: (i) incuradditional indebtedness: (ii) incur liens; (iii) merge, consolidate or exit a substantial portion of their business; (iv) transfer or dispose ofassets; (v) change their names, organizational identification number, state or province of organization or organizational identity; (vi) makeany material change in their nature of business; (vii) prepay or otherwise acquire indebtedness; (viii) cause any Change of Control; (ix)make any Restricted Junior Payment; (x) change their fiscal year or method of accounting; (xi) make advances, loans or investments; (xii)enter into or permit any transactions with an Affiliate of certain entities of the Company; (xiii) use proceeds for certain items; (xiv) issue orsell any of their stock; and/or (xv) consign or sell any of their inventory on certain terms.As a result of the addition of the Credit Facility, the Company incurred debt financing costs of approximately $3.3 million in Fiscal 2012,which are recorded as deferred financing costs and are included in other assets and amortized through interest and bank charges over theterm of the Credit Facility.87On March 14, 2012, the Company amended and restated its Credit Facility (the "Amended Facility"). The Amended Facility provides forsenior secured credit facilities in an aggregate principal amount of $205 million, consisting of a revolving credit facility of $130 million(comprised of a U.S. revolving credit facility of $80 million and a $50 million multicurrency revolving facility, of which up to theequivalent of $50 million is available only to VOXX International (Germany) GmbH in euros) and a five year term loan facility in theaggregate principal amount of $75 million. $60 million of the U. S. revolving credit facility is available on a revolving basis for five yearsfrom the closing date. An additional $20 million is available during the periods from September 1, 2012 through January 31, 2013 andfrom September 1, 2013 through November 30, 2013. The Amended Facility includes a $25 million sublimit for issuers of letters of creditfor domestic borrowings and a $10 million sublimit for Swing Loans.Generally, the Company may designate specific borrowings under the Amended Facility as either Alternate Base Rate Loans or LIBOR RateLoans, except that Swing Loans may only be designated as Alternate Base Rate Loans. VOXX International (Germany) GmbH may onlyborrow euros, and only as LIBOR rate loans. Loans designated as LIBOR Rate Loans shall bear interest at a rate equal to the thenapplicable LIBOR rate plus a range of 1.25 - 2.25% based upon leverage, as defined in the agreement. Loans designated as Alternate BaseRate loans shall bear interest at a rate equal to the base rate plus an applicable margin ranging from 0.25 - 1.25% based on excessavailability in the borrowing base. As of February 28, 2013, the interest rate on the facility was 2.54%.The $75 million five year term loan facility is payable in twenty quarterly installments of principal commencing May 31, 2012, each inthe amount of $3,750. All other amounts outstanding under the Amended Facility will mature and become due on March 13, 2017. TheCompany may prepay any amounts outstanding at any time, subject to payment of certain breakage and redeployment costs relating toLIBOR Rate Loans. The commitments under the Amended Facility may be irrevocably reduced at any time without premium or penalty.The Amended Facility requires compliance with financial covenants calculated as of the last day of each fiscal quarter consisting of a TotalLeverage Ratio, a Consolidated EBIT to Consolidated Interest Expense Ratio and Capital Expenditures.The Amended Facility contains covenants that limit the ability of certain entities of the Company to, among other things: (i) incur additionalindebtedness; (ii) incur liens; (iii) merge, consolidate or exit a substantial portion of their respective businesses; (iv) make any materialchange in the nature of their business; (v) prepay or otherwise acquire indebtedness; (vi) cause any Change of Control; (vii) make anyRestricted Payments; (viii) change their fiscal year or method of accounting; (ix) make advances, loans or investments; (x) enter into orpermit any transaction with an Affiliate of certain entities of the Company; or (xi) use proceeds for certain items (including capitalexpenditures). On May 14, 2013, the Company received a waiver for non-compliance with the covenant limiting the use of proceeds forcapital expenditures. As of February 28, 2013, the Company was in compliance with all other debt covenants.The Amended Facility contains customary events of default, including, without limitation: failure to pay principal thereunder when due;failure to pay any interest or other amounts thereunder for a period of three (3) business days after becoming due; failure to comply withcertain agreements or covenants contained in the Amended Facility; failure to satisfy certain judgments against a Loan Party or any of itsSubsidiaries (other than Immaterial Subsidiaries); certain insolvency and bankruptcy events; and failure to pay when due certain otherindebtedness in an amount in excess of $5 million.The Obligations under the Amended Facility are secured by a general lien on and security interest in the assets of certain entities of theCompany, including accounts receivable, equipment, substantially all of the real estate, general intangibles and inventory provided that theassets of Hirschmann Car Communication GmbH and the foreign guarantors will only secure the Foreign Obligations. All Guarantors otherthan subsidiaries of Hirschmann Car Communication GmbH have jointly and severally guaranteed (or will jointly and severally guarantee)the obligations of any and all Credit Party Obligations, and each Foreign Guarantor will jointly and severally guarantee the obligations ofHirschmann Car Communications GmbH under the Credit Agreement (i.e., the Foreign Obligations).88On March 14, 2012, the Company borrowed approximately $148 million under this amended credit facility as a result of its stockpurchase agreement related to Hirschmann (see Note 2). As of February 28, 2013, approximately $154 million was outstanding under theline.As a result of the amendment to the Credit Facility, the Company incurred additional debt financing costs of approximately $3.4 million,which are recorded as deferred financing costs. The Company has accounted for the amendment as a modification of debt and has addedthese costs to the remaining financing costs related to the original Credit Facility. These deferred financing costs have been included in otherassets on the accompanying consolidated balance sheets and are being amortized through interest and bank charges over the five year termof the Amended Facility. During the years ended February 28, 2013 and February 29, 2012, the Company amortized $1,210 and $680 ofthese costs, respectively.b)Euro Asset-Based Lending ObligationForeign bank obligations include a financing arrangement entered into in October 2000, totaling 16,000 Euros and consisting of a Euroaccounts receivable factoring arrangement and a Euro Asset-Based Lending ("ABL") (up to 60% of eligible non-factored accountsreceivable) credit facility for the Company's subsidiary, Audiovox Germany, which expires on November 1, 2013. Selected accountsreceivable are purchased from the Company on a non-recourse basis at 85% of face value and payment of the remaining 15% upon receiptfrom the customer of the balance of the receivable purchased. The activity under the factoring agreement is accounted for as a sale ofaccounts receivable. The rate of interest is the three month Euribor plus 1.9% (2.11% at February 28, 2013), and the Company pays0.22% of its gross sales as a fee for the accounts receivable factoring arrangement. As of February 28, 2013, the amount of accountsreceivable available for factoring exceeded the amounts outstanding under this obligation.c)Euro Loan AgreementOn March 30, 2008, Audiovox Germany entered into a 5,000 Euro term loan agreement. This agreement is for a five year term with afinancial institution and was used to repay the Audiovox Germany intercompany debt to VOXX International Corporation. Payments underthe term loan are to be made in two semi-annual installments of 500 Euros beginning on September 30, 2008 and ending on March 30,2013. Interest accrues at a fixed rate of 4.82%. Any amount repaid cannot be reborrowed. The term loan is secured by a pledge of the stockof Audiovox Germany and the Magnat brand name, prohibits the distribution of dividends, and takes precedence to all other intercompanyloans with VOXX International Corporation. d)Schwaiger Mortgage In January 2012, the Company's Schwaiger subsidiary purchased a building, entering into a mortgage note payable. The mortgage notebears interest at 3.75% and will be fully paid by December 2019. e)Klipsch NotesIncluded in this balance is a note payable on a facility included in the assets acquired in connection with the Klipsch transaction on March1, 2011 and assumed by Voxx. The balance at February 28, 2013 is $724 and will be fully paid by the end of Fiscal 2018.On April 20, 2012, the Company purchased the building housing Klipsch's headquarters in Indianapolis, IN for $10.9 million. TheCompany paid $3.1 million cash at closing, plus $106 in closing costs, and assumed the mortgage held by the seller, Woodview LLC, inthe amount of $7.8 million. The mortgage is due in June 2013 and bears interest at 5.85% and the balance at February 28, 2013 is $7.7million. Woodview LLC is a related party, as certain partners are executives of Klipsch. f)Audiovox Germany Mortgage89In January 2013, Audiovox Germany purchased the land and building housing their headquarters in Pulheim, Germany, entering into amortgage note payable. The mortgage bears interest at 2.85%, payable in twenty-six quarterly installments through June 2019.g)Hirschmann Line of CreditOn July 15, 2012, Hirschmann entered into an agreement for a €6,000 working capital line of credit with a financial institution. Theagreement is payable on demand and is mutually cancelable. The rate of interest is the three month Euribor plus 2% (2.21% atFebruary 28, 2013) and the line of credit is guaranteed by VOXX International Corporation. There was no outstanding balance on the lineof credit as of February 28, 2013.The following is a maturity table for debt and bank obligations outstanding at February 28, 2013: 2014$26,02020151,32120161,32120171,3142018140,649Thereafter4,391Total$175,016The weighted-average interest rate on short-term debt was 4.52% and 4.64% for Fiscal 2013 and 2012 , respectively. Interest expense for the yearsended February 28, 2013, February 29, 2012 and February 28, 2011 was $6,302, $3,520 and $2,138, respectively, of which $4,133 was relatedto the Credit Facility for the year ended February 28, 2013.7) Income TaxesThe components of income before the provision for income taxes are as follows: YearEnded YearEnded YearEnded February 28, 2013 February 29, 2012 February 28, 2011Domestic Operations$27,485 $28,229 $6,276Foreign Operations8,170 10,663 6,220 $35,655 $38,892 $12,496The provision (benefit) for income taxes is comprised of the following:90 YearEnded YearEnded YearEnded February 28, 2013 February 29, 2012 February 28, 2011Current provision Federal$8,349 $5,296 $278State1,075 629 (35)Foreign4,327 3,324 3,120Total current provision$13,751 $9,249 $3,363Deferred (benefit) provision Federal$1,739 $4,396 $(12,103)State42 (561) (1,355)Foreign(2,369) 159 (440)Total deferred (benefit) provision$(588) $3,994 $(13,898)Total provision (benefit) Federal$10,088 $9,692 $(11,825)State1,117 68 (1,390)Foreign1,958 3,483 2,680Total provision (benefit)$13,163 $13,243 $(10,535)The effective tax rate before income taxes varies from the current statutory U.S. federal income tax rate as follows: YearEnded YearEnded YearEnded February 28, 2013 February 29, 2012 February 28, 2011Tax provision at Federal statutory rates$12,479 35.0 % $13,612 35.0 % $4,373 35.0 %State income taxes, net of Federal benefit637 1.8 1,145 2.9 167 1.3Change in valuation allowance1,034 2.9 192 0.5 (16,254) (130.1)Change in tax reserves315 0.9 (241) (0.6) 159 1.3US effects of foreign operations(1,090) (3.1) (135) (0.4) 92 0.8Permanent differences and other388 1.1 921 2.3 928 7.4Change in tax rate(270) (0.8) (885) (2.2) — —Research & development credits(330) (0.9) (1,366) (3.5) — —Effective tax rate$13,163 36.9 % $13,243 34.0 % $(10,535) (84.3)% The U.S. effects of foreign operations include differences in the statutory tax rate of the foreign countries as compared to the statutory tax rate in theU.S. and foreign operating losses for which no tax benefit has been provided. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingand tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows: 91 February 28, 2013 February 29, 2012Deferred tax assets: Accounts receivable$419 $480Inventory2,657 3,028Property, plant and equipment447 170Accruals and reserves8,340 6,599Unrealized gains and losses1,696 1,894Foreign and state operating losses3,685 3,180Tax credits6,266 5,244Deferred tax assets before valuation allowance23,510 20,595Less: valuation allowance(10,413) (9,035)Total deferred tax assets13,097 11,560Deferred tax liabilities: Intangible assets(50,723) (39,546)Prepaid expenses(1,378) (1,802)Deferred financing fees(832) (1,002)Total deferred tax liabilities(52,933) (42,350)Net deferred tax liability$(39,836) $(30,790)The Company recorded net deferred tax liabilities of $10.7 million in connection with the Hirschmann acquisition.In assessing the realizability of deferred tax assets, Management considers whether it is more-likely-than-not that some portion or all of the deferredtax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in those periods inwhich temporary differences become deductible and/or net operating loss carryforwards can be utilized. We consider the level of historical taxableincome, scheduled reversal of temporary differences, tax planning strategies and projected future taxable income in determining whether a valuationallowance is warranted.During Fiscal 2013, the Company increased its valuation allowance by $1.4 million. The Company maintains a valuation allowance against deferredtax assets in certain foreign jurisdictions and with respect to its foreign tax credits and various investments which are more likely than not to generatecapital losses in the future. Any decline in the valuation allowance could have a favorable impact on our income tax provision and net income in theperiod in which such determination is made. The Company has not provided for U.S. federal and foreign withholding taxes on its foreign subsidiaries undistributed earnings in Germany as ofFebruary 28, 2013, because such earnings are intended to be indefinitely reinvested overseas. The amount of unrecognized deferred tax liabilities fortemporary differences related to investments in undistributed earnings is not practicable to determine at this time. A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows:92Balance at February 28, 2011$3,335Additions based on tax positions taken in the current and prior years1,192Additions in connection with acquisitions624Settlements(30)Lapse in statute of limitations(471)Recognition of excess tax benefits(1,738)Balance at February 29, 2012$2,912Additions based on tax positions taken in the current and prior years8,744Lapse in statute of limitations(25)Decrease in prior year tax positions(168)Balance at February 28, 2013$11,463Of the amounts reflected in the table above at February 28, 2013, $8.9 million, if recognized, would reduce our effective tax rate. The Companyrecords accrued interest and penalties related to income tax matters in the provision for income taxes in the accompanying consolidated statement ofoperations. The balance as February 28, 2013 of was $752. In addition, the Company believes that the uncertain tax positions will not materiallychange within the next twelve months. The Company, or one of its subsidiaries, files its tax returns in the U.S. and certain state and foreign income tax jurisdictions with varying statutesof limitations. The earliest years' tax returns filed by the Company that are still subject to examination by the tax authorities in the majorjurisdictions are as follows: Jurisdiction Tax Year U.S. 2009Netherlands 2009Germany 2009Canada 20108) Other Long-Term LiabilitiesOn August 29, 2003, the Company entered into a call/put option agreement with certain employees of Audiovox Germany, whereby these employeescan acquire up to a maximum of 20% of the Company's stated share capital in Audiovox Germany at a call price equal to the same proportion of theactual price paid by the Company for Audiovox Germany. The put options become immediately exercisable upon (i) the sale of Audiovox Germany or(ii) the termination of employment or death of the employee. The put price to be paid to the employee upon exercise will be the then net asset value pershare of Audiovox Germany. Accordingly, the Company recognizes compensation expense based on 20% of the increase in Audiovox Germany's netassets, subject to certain adjustments as defined in the agreement, representing the incremental change of the put price over the call option price. Thebalance of the call/put option included in other long-term liabilities on the Consolidated Balance Sheets at February 28, 2013 and February 29, 2012was $4,322 and $3,898, respectively. Compensation expense for these options amounted to $148, $127 and $727 for the years ended February 28,2013, February 29, 2012 and February 28, 2011, respectively.Also included in other long-term liabilities are the non-current portions of contingent considerations related to certain acquisitions of the Companyand the non-current portion of a pension liability for Hirschmann employees (see Note 10).9)Capital Structure The Company's capital structure is as follows: 93 Shares Authorized Shares Outstanding Security ParValue February 28, 2013 February 29, 2012 February 28, 2013 February 29, 2012 VotingRights perShare LiquidationRightsPreferred Stock $50.00 50,000 50,000 — — — $50 per shareSeries PreferredStock $0.01 1,500,000 1,500,000 — — — Class A CommonStock $0.01 60,000,000 60,000,000 21,300,670 20,875,600 one Ratably with ClassBClass B CommonStock $0.01 10,000,000 10,000,000 2,260,954 2,260,954 ten Ratably with ClassAThe holders of Class A and Class B common stock are entitled to receive cash or property dividends declared by the Board of Directors. The Boardof Directors can declare cash dividends for Class A common stock in amounts equal to or greater than the cash dividends for Class B commonstock. Dividends other than cash must be declared equally for both classes. Each share of Class B common stock may, at any time, be convertedinto one share of Class A common stock.Stock held in treasury by the Company is accounted for using the cost method which treats stock held in treasury as a reduction to totalstockholders' equity and amounted to 1,816,132 and 1,817,112 shares at February 28, 2013 and February 29, 2012, respectively. The cost basisfor subsequent sales of treasury shares is determined using an average cost method. As of February 28, 2013, 1,738,243 shares of the Company'sClass A common stock are authorized to be repurchased in the open market. During the years ended February 28, 2013, February 29, 2012 andFebruary 28, 2011, the Company did not purchase any shares.10)Other Stock and Retirement Plans a)Restricted Stock PlanThe Company has restricted stock plans under which key employees and directors may be awarded restricted stock. Awards under therestricted stock plan may be performance-accelerated shares or performance-restricted shares. No performance accelerated shares orperformance-restricted shares were granted or outstanding during the year ended February 28, 2011. (See Note 1(u)).As of February 28, 2013, approximately 1,784,000 shares of the Company's Class A common stock are reserved for issuance under theCompany's Restricted and Stock Option Plan.b)Profit Sharing PlansThe Company has established two non-contributory employee profit sharing plans for the benefit of its eligible employees in the UnitedStates and Canada. The plans are administered by trustees appointed by the Company. No contributions were made during the years endedFebruary 28, 2013, February 29, 2012 and February 28, 2011. Contributions required by law to be made for eligible employees in Canadawere not material for all periods presented. c)401(k) Plans(1)The VOXX International 401(k) plan is for all eligible domestic employees, with the exception of Klipsch employees, whocontinued to participate in a separate 401(k) plan for the years ended February 28, 2013 and February 29, 2012. The Companymatches a portion of the participant's contributions after three months of service under a predetermined formula based on theparticipant's contribution level. As of February 1, 2008, the Company suspended all matching contributions to contain operatingexpenses until economic conditions improved. Shares of the Company's Common Stock are not an investment option in theSavings Plan and the Company does not use such shares to match participants' contributions.94(2)Klipsch sponsors a 401(k) plan for the subsidiary's eligible employees. All of Klipsch's full-time employees are eligible toparticipate. Klipsch contributes a matching amount to participants who are at least 21 years of age and have attained six monthsof service as of entry dates of January 1 or July 1. Klipsch matches 25% of the participants first 4% of salary. During the yearended February 28, 2013, the Company contributed, net of forfeitures, approximately $157 to the 401(k) Plan. d)Cash Bonus Profit Sharing Plan During Fiscal 2009, the Board of Directors authorized a Cash Bonus Profit Sharing Plan that allows the Company to make profit sharingcontributions for the benefit of eligible employees, for any fiscal year based on a pre-determined formula on the Company's pre-tax profits.The size of the contribution is dependent upon the performance of the Company. A participant’s share of the contribution is determinedpursuant to the participant’s eligible wages for the fiscal year as a percentage of total eligible wages for all participants. For the year endedFebruary 28, 2011, this plan was temporarily suspended and the Company elected to pay back previous temporary salary reductions to allemployees, in lieu of contributions to the Profit Sharing Plan. The plan has remained suspended for the years ended February 28, 2013 andFebruary 29, 2012 and will be reinstated only after all other suspended benefits of the Company have been restored.e)Deferred Compensation Plan Effective December 1, 1999, the Company adopted a Deferred Compensation Plan (the Plan) for Vice Presidents and above. The Plan isintended to provide certain executives with supplemental retirement benefits as well as to permit the deferral of more of their compensationthan they are permitted to defer under the Profit Sharing and 401(k) Plan. The Plan provides for a matching contribution equal to 25% ofthe employee deferrals up to $20. As of February 1, 2008, the Company has temporarily suspended all matching contributions to containoperating expenses until economic conditions improve. The Plan is not intended to be a qualified plan under the provisions of the InternalRevenue Code. All compensation deferred under the Plan is held by the Company in an investment trust which is considered an asset of theCompany. The Company has the option of amending or terminating the Plan at any time. The investments, which amounted to $3,657 and $3,447 at February 28, 2013 and February 29, 2012, respectively, have been classifiedas long-term marketable securities and are included in investment securities on the accompanying consolidated balance sheets and acorresponding liability is recorded with $250 recorded in accrued expenses and the balance in deferred compensation which is classified asa long-term liability. Unrealized gains and losses on the marketable securities and corresponding deferred compensation liability net to zeroin the accompanying consolidated statements of operations and comprehensive income.f)Defined Benefit Pension PlanThe Company sponsors an employer financed defined benefit pension plan ("the plan") at its Hirschmann subsidiary, which coverseligible Hirschmann regular full-time employees. The plan provides for retirement and disability benefits for participating employees, andare only granted if the participating employee is at least 25 years of age and has completed ten years of service. The retirement age as itpertains to the plan is 65. Benefits available under the plan are generally determined by years of service and the levels of compensationduring those years. In October 1994, the benefits under this plan at Hirschmann were closed to new participants and pension benefitscontinue to accrue only for previously existing plan members still employed by Hirschmann. No contributions were made to the planduring the year ended February 28, 2013 and the plan has no assets. The unfunded balance of the plan at February 28, 2013 is equal to thetotal plan liability of $6,911. The Company did not have a defined benefit pension plan prior to the acquisition of Hirschmann on March14, 2012.Following is the reconciliation of the pension benefit obligation for the year ended February 28, 2013.95Pension benefit obligationFiscal 2013Balance, March 14, 2012$5,300Interest cost284Benefits paid(110)Actuarial loss1,437 $6,911As of February 28, 2013 the following amounts were recognized in the balance sheet and in accumulated other comprehensive income:Balance SheetFebruary 28, 2013As a current liability$157As a non-current liability$6,754 Accumulated Other Comprehensive IncomeFiscal 2013Actuarial loss$1,437Pension expense for Fiscal 2013 comprised the following: Fiscal 2013Interest cost$284 $284Pension expense is recorded within general and administrative expenses on the Consolidated Statement of Operations and ComprehensiveIncome. 11)Lease Obligations During 1996, the Company entered into a 30-year capital lease for a building with its principal stockholder and current chairman, which was theheadquarters of the discontinued Cellular operation. Payments on the capital lease were based upon the construction costs of the building and thethen-current interest rates. The effective interest rate on the capital lease obligation is 8%. This lease was refinanced in December 2006 and expires onNovember 30, 2026. The Company currently subleases the building to Airtyme Communications LLC for monthly payments of $60 for a term ofthree years, terminating on October 15, 2015. We also lease another facility from our principal stockholder which expires on November 30, 2016. The Company leases certain facilities from its principal stockholder. At February 28, 2013, minimum annual rental payments on these related partyleases, including capital lease payments, which are included in the table below, are as follows:2014$1,35420151,37720161,40220171,2232018631Thereafter5,837Total$11,82496Total lease payments required under all related party leases for the five-year period ending February 28, 2018 are $5,987. At February 28, 2013, the Company was obligated under non-cancellable capital and operating leases for equipment and warehouse facilities forminimum annual rental payments as follows: CapitalLease OperatingLeases2014$574 $9,0522015574 3,3832016574 2,4132017588 96220181,361 233Thereafter5,838 661Total minimum lease payments9,509 $16,704Less: minimum sublease income1,920 Net7,589 Less: amount representing interest1,661 Present value of net minimum lease payments5,928 Less: current installments included in accrued expenses and other current liabilities164 Long-term capital obligation$5,764 Rental expense for the above-mentioned operating lease agreements and other leases on a month-to-month basis was $5,531, $4,797 and $2,741 forthe years ended February 28, 2013, February 29, 2012 and February 28, 2011, respectively.12)Financial Instruments a)Off-Balance Sheet Risk Commercial letters of credit are issued by the Company during the ordinary course of business through major domestic banks as requestedby certain suppliers. The Company also issues standby letters of credit principally to secure certain bank obligations and insurancepolicies. The Company had $273 open commercial letters of credit at both February 28, 2013 and February 29, 2012. Standby letters ofcredit amounted to $817 at both February 28, 2013 and February 29, 2012. The terms of these letters of credit are all less than one year.No material loss is anticipated due to nonperformance by the counter parties to these agreements. The fair value of the standby letters ofcredit is estimated to be the same as the contract values based on the short-term nature of the fee arrangements with the issuing banks. At February 28, 2013, the Company had unconditional purchase obligations for inventory commitments of $105,193. These obligationsare not recorded in the consolidated financial statements until commitments are fulfilled and such obligations are subject to change based onnegotiations with manufacturers.b)Concentrations of Credit Risk Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade receivables. TheCompany's customers are located principally in the United States, Canada, Europe and Asia Pacific and consist of, among others,distributors, mass merchandisers, warehouse clubs and independent retailers. The Company generally grants credit based upon analysesof customers' financial condition and previously established buying and payment patterns. For certain customers, the Company establishescollateral rights in accounts receivable and inventory and obtains personal guarantees from certain customers based upon management'scredit evaluation. Certain customers in Europe and Latin America have credit insurance equaling their credit limit. 97At February 28, 2013 and February 29, 2012, one customer accounted for approximately 32% and 22.3% of accounts receivable,respectively. During the years ended February 28, 2013, February 29, 2012 and February 28, 2011 one customer accounted for 8.7%,10.3% and 13.5% of net sales, respectively. The Company's five largest customers represented 28% of net sales during the year endedFebruary 28, 2013, 26% for the year ended February 29, 2012 and 30% for the year ended February 28, 2011. A portion of the Company's customer base may be susceptible to downturns in the retail economy, particularly in the consumer electronicsindustry. Additionally, customers specializing in certain automotive sound, security and accessory products may be impacted byfluctuations in automotive sales.13)Financial and Product Information About Foreign and Domestic Operations SegmentIn connection with recent acquisitions, effective December 1, 2012, we reorganized our financial reporting into three distinct operating segmentsbased upon our products and our internal organizational structure. The three operating segments, which are also the Company's reportable segments,are Automotive, Premium Audio and Consumer Accessories.Our Automotive segment designs, manufactures, distributes start systems, digital TV tuners, mobile antennas, mobile multimedia, aftermarket/OE-styled radios, car link-smartphone telematics application,collision avoidance systems and location-based services.Our Premium Audio segment designs, manufactures, distributes and markets home theater systems, high-end loudspeakers, outdoor speakers,iPod/computer speakers, business music systems, cinema speakers, flat panel speakers, soundbars, headphones and Apple AirPlay.Our Consumer Accessories segment designs and markets remote controls, reception products, wireless speakers, iPod docks/iPod sound, A/Vconnectivity, portable/home charging, rechargeable battery packs, digital consumer products and personal sound amplifier.Each operating segment is individually reviewed and evaluated by our Chief Operating Decision Maker (CODM), who allocates resources andassesses performance of each segment individually. Prior to December 1, 2012 our CODM reviewed financial information presented on aconsolidated basis, accompanied by disaggregated information about revenues for purposes of making operating decisions and assessing financialperformance.The Company's Chief Executive Officer has been identified as the CODM. The CODM evaluates performance and allocates resources based upon anumber of factors, the primary profit measure being income before income taxes of each segment. Certain costs and royalty income are not allocatedto the segments and are reported as Corporate/Eliminations. Costs not allocated to the segments include professional fees, public relations costs,acquisition cost and costs associated with executive and corporate management departments including salaries, benefits, depreciation, rent andinsurance.The segments share many common resources, infrastructures and assets in the normal course of business. Thus, the Company does not reportassets or capital expenditures by segment to the CODM.The accounting principles applied at the consolidated financial statement level are generally the same as those applied at the operating segment leveland there are no material intersegment sales. The segments are allocated interest expense, based upon a pre-determined formula, which utilizes apercentage of each operating segment's intercompany balance, which is offset in corporate/eliminations.Prior period disclosure of net sales by product category has been reclassified to conform with the new operating segment structure which had noimpact on our consolidated financial statements. Segment data for each of the Company's segments are presented below:98 Automotive PremiumAudio ConsumerAccessories Corporate/Eliminations TotalFiscal Year Ended February 28, 2013 Net sales$426,983 $192,987 $214,275 $1,332 $835,577Equity in income of equity investees4,880 — — — 4,880Interest expense and bank charges7,414 7,651 9,753 (16,530) 8,288Depreciation and amortization expense8,579 3,548 2,575 1,744 16,446Income before income taxes15,542 16,983 2,322 808 35,655 Fiscal Year Ended February 29, 2012 Net sales$297,145 $191,427 $215,604 $2,886 $707,062Equity in income of equity investees4,035 — — — 4,035Interest expense and bank charges4,894 8,836 9,502 (17,602) 5,630Depreciation and amortization expense1,654 3,989 2,742 1,910 10,295Income (loss) before income taxes24,854 17,612 (1,064) (2,510) 38,892 Fiscal Year Ended February 28, 2011 Net sales$298,126 $20,071 $240,128 $3,347 $561,672Equity in income of equity investees2,905 — — — 2,905Interest expense and bank charges6,412 347 9,816 (13,945) 2,630Depreciation and amortization expense2,138 188 3,483 2,056 7,865Income (loss) before income taxes12,341 583 (5,530) 5,102 12,496One customer during fiscal years ended February 29, 2012 and February 28, 2011 accounted for more than 10% of consolidated net sales. Suchcustomer sales of $72.6 million and $75.5 million, respectively, are recorded in the Automotive, Premium Audio and Consumer Accessoriessegments during the year ended February 29, 2012 and in the Automotive and Consumer Accessories segments during the year ended February 28,2011. No one customer accounted for more than 10% of consolidated net sales during the fiscal year ended February 28, 2013.Geographic net sales information in the table below is based on the location of the selling entity. Long-lived assets, primarily fixed assets, are reportedbelow based on the location of the asset. NorthAmerica LatinAmerica Germany Other TotalFiscal Year Ended February 28, 2013 Net sales$575,481 $27,090 $229,033 $3,973 $835,577Long-lived assets274,527 11,983 141,663 113 428,286 Fiscal Year Ended February 29, 2012 Net sales$585,293 $26,728 $90,042 $4,999 $707,062Long-lived assets265,870 7,405 19,748 174 293,197 Fiscal Year Ended February 28, 2011 Net sales$457,349 $20,258 $76,845 $7,220 $561,672Long-lived assets107,657 423 17,805 240 126,12514)Contingencies 99The Company is currently, and has in the past been a party to various routine legal proceedings incident to the ordinary course of business. Ifmanagement determines, based on the underlying facts and circumstances, that it is probable a loss will result from a litigation contingency and theamount of the loss can be reasonably estimated, the estimated loss is accrued for. The Company believes its outstanding litigation matters disclosedbelow will not have a material adverse effect on the Company's financial statements, individually or in the aggregate; however, due to the uncertainoutcome of these matters, the Company disclosed these specific matters below: The products the Company sells are continually changing as a result of improved technology. As a result, although the Company and its suppliersattempt to avoid infringing known proprietary rights, the Company may be subject to legal proceedings and claims for alleged infringement by itssuppliers or distributors, of third party patents, trade secrets, trademarks or copyrights. Any claims relating to the infringement of third-partyproprietary rights, even if not meritorious, could result in costly litigation, divert management’s attention and resources, or require the Company toeither enter into royalty or license agreements which are not advantageous to the Company, or pay material amounts of damages.The Company has been party to a breach of license agreement lawsuit brought against it by MPEG LA, LLC ("MPEG"). During the third quarter ofFiscal 2012, the Company's claim for summary judgment was denied and the case was tried in the New York Supreme Court, Suffolk County. InDecember 2011, the Company received advisory judgment in the case, concluding that the Company owed MPEG penalties related to licenseagreement obligations arising from the manufacture and sale of its products. The Company recorded a charge of approximately $3.6 million in Fiscal2012 and, based on the advisory jury's verdict, remitted payment of $2.6 million to MPEG in December 2011 in order to resolve this matter. OnMay 29, 2012, the Company received notice that the advisory judgment was overturned by the presiding Judge in the case. The Judge's ruling gavethe Company and MPEG the option to (a) reach an agreement on the balance still owed; (b) allow the Judge to determine the balance; or (c) proceed toanother trial and have a new jury determine the balance owed. On June 29, 2012, the Company reached a settlement agreement with MPEG andagreed to pay an additional $10.5 million in final resolution of the matter. The payment is in addition to the funds paid in December 2011, bringingthe total settlement to $13.1 million. As a result of this settlement, the Company recorded a charge of $9.5 million during the first quarter of Fiscal2013. The charge is recorded in "Other (Expense) Income" in the Consolidated Statement of Operations and Comprehensive Income. The Companyhas continued to seek indemnification from its suppliers for royalty payments previously paid to them that it maintains they were responsible toremit to MPEG and has vigorously pursued its option under its indemnification agreements. The Company completed negotiations with one vendorfor an amount of $1.1 million during the first quarter of Fiscal 2013. In February 2013, the Company completed negotiations with one additionalvendor for an amount of $6 million, which will be received over a period exceeding one year and has been recorded at a fair value of $5.7 million.The total amount of the settlements with these two vendors has been recorded as an offset to the settlement expense as a recovery in "Other (Expense)Income" on the Consolidated Statement of Operations and Comprehensive Income, for a net charge of $2.7 million for the year ended February 28,2013. At this time, the Company is not aware of any additional vendors that it may recover funds from related to this matter.15)Unaudited Quarterly Financial DataSelected unaudited, quarterly financial data of the Company for the years ended February 28, 2013 and February 29, 2012 appear below: 100 Quarters Ended Feb 28, 2013 Nov 30, 2012 Aug 31, 2012 May 31, 20122013 Net sales $206,790 $243,036 $191,715 $194,036Gross profit 61,691 69,949 54,686 50,496Net income (loss) 10,270 13,202 3,720 (4,700) Net income (loss) per common share (basic) 0.44 0.56 0.16 (0.20) Net income (loss) per common share (diluted) 0.43 0.56 0.16 (0.20) Quarters Ended Feb 29, 2012 Nov 30, 2011 Aug 31, 2011 May 31, 20112012 Net sales $176,597 $206,803 $158,337 $165,325Gross profit 55,562 59,843 43,862 43,688Net income 10,866 8,858 3,439 2,487 Net income per common share (basic) 0.47 0.38 0.15 0.11 Net income per common share (diluted) 0.46 0.38 0.15 0.11 Net income per common share are computed separately for each quarter. Therefore, the sum of such quarterly per share amounts may differ from thetotal for the years.16)Subsequent EventsWith the exception of the matter discussed in Note 1(o) with regard to the recall initiated by Subaru of America, there were not material subsequentevents that required recognition or additional disclosure in these financial statements.101SCHEDULE IIAUDIOVOX CORPORATION AND SUBSIDIARIESValuation and Qualifying AccountsYears ended February 28, 2013, February 29, 2012 and February 28, 2011(In thousands)Column A Column B Column C Column D Column EDescription Balance atBeginningof Year GrossAmountCharged toCosts andExpenses Reversals ofPreviouslyEstablishedAccruals Deductions (a) Balanceat Endof YearYear ended February 28, 2011 Allowance for doubtful accounts $5,742 $827 $— $390 $6,179Cash discount allowances 785 4,723 — 4,623 885Accrued sales incentives 10,606 28,004 (1,725) 24,904 11,981Reserve for warranties and product repair costs (b) 13,058 11,561 — 15,568 9,051 $30,191 $45,115 $(1,725) $45,485 $28,096Year ended February 29, 2012 Allowance for doubtful accounts $6,179 $1,067 $— $1,509 $5,737Cash discount allowances 885 28,723 — 28,143 1,465Accrued sales incentives 11,981 50,820 (3,662) 40,985 18,154Reserve for warranties and product repair costs (b) 9,051 11,839 — 12,095 8,795 $28,096 $92,449 $(3,662) $82,732 $34,151Year ended February 28, 2013 Allowance for doubtful accounts $5,737 $4,170 $— $2,067 $7,840Cash discount allowances 1,465 26,246 — 26,480 1,231Accrued sales incentives 18,154 35,636 (3,350) 33,619 16,821Reserve for warranties and product repair costs (b) 8,795 13,798 — 8,042 14,551 $34,151 $79,850 $(3,350) $70,208 $40,443(a)For the allowance for doubtful accounts, cash discount allowances, and accrued sales incentives deductions represent currency effects, chargebacks andpayments made or credits issued to customers. For the reserve for warranties and product repair costs, deductions represent currency effects andpayments for labor and parts made to service centers and vendors for the repair of units returned under warranty.(b)Column C includes $115 of liabilities acquired during our Invision acquisition for Fiscal 2011, as well as $1,480 of liabilities acquired during ourKlipsch acquisition for Fiscal 2012 and $1,799 of liabilities acquired during our Hirschmann acquisition for Fiscal 2013.102ExhibitNumber Description 3.1 Amended and Restated Certificate of Incorporation of the Company as filed with the Delaware Secretary of State on April 17, 2000(incorporated by reference to the Company's Annual Report on Form 10-K for the year ended November 30, 2000). 3.2 Certificate of Ownership and Merger (incorporated by reference to the Company's Form 8-K filed on December 6, 2011). 3.3 Amended and Restated Bylaws of the Company (incorporated by reference to the Company's Form 8-K filed on December 6, 2011). 10.1 First amendment dated as of November 29, 2012, to Amended and Restated Credit Agreement, among VOXX International Corporation,as Parent and certain of its directly and indirectly wholly-owned subsidiaries with, Wells Fargo Bank, National Association asAdministrative Agent, Fifth Third Bank and HSBC Bank USA N. A., as Co-Syndication Agents and Citibank, N. A. and RBSCitizens, N. A., as Co-Documentation Agents (filed herewith). 21 Subsidiaries of the Registrant (filed herewith). 23 Consent of Grant Thornton LLP (filed herewith). 31.1 Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) and rule 15d-14(a) of the Securities Exchange Act of 1934 (filedherewith). 31.2 Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) and rule 15d-14(a) of the Securities Exchange Act of 1934 (filedherewith). 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnishedherewith). 32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnishedherewith). 99.1 Consolidated Financial Report of Audiovox Specialized Applications LLC (ASA) as of November 30, 2012 and 2011 and for the YearsEnded November 30, 2012, 2011 and 2010 (filed herewith). 99.2 Consent of McGladrey LLP (filed herewith). 101 The following materials from VOXX International Corporation's Annual Report on Form 10-K for the period ended February 28, 2013,formatted in eXtensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets , (ii), the Consolidated Statements ofIncome, (iii) the Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated Financial Statements. (d) All other schedules are omitted because the required information is shown in the financial statements or notes thereto or because they are not applicable.103SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto duly authorized. VOXX INTERNATIONAL CORPORATION May 14, 2013By: /s/ Patrick M. Lavelle Patrick M. Lavelle, President and Chief Executive Officer104Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant andin the capacities and on the dates indicated. Signature Title Date /s/ Patrick M. LavellePatrick M. Lavelle President; Chief Executive Officer(Principal Executive Officer) and DirectorMay 14, 2013 /s/ Charles M. StoehrCharles M. Stoehr Senior Vice President,Chief Financial Officer (PrincipalFinancial and Accounting Officer) and DirectorMay 14, 2013 /s/ John J. ShalamJohn J. Shalam Chairman of the Board of DirectorsMay 14, 2013 /s/ Philip ChristopherPhilip Christopher DirectorMay 14, 2013 /s/ Paul C. Kreuch, Jr.Paul C. Kreuch, Jr. DirectorMay 14, 2013 /s/ Dennis McManusDennis McManus DirectorMay 14, 2013 /s/ Peter A. LesserPeter A. Lesser DirectorMay 14, 2013 /s/ Ari ShalamAri Shalam DirectorMay 14, 2013 /s/ Fred KlipschFred Klipsch DirectorMay 14, 2013105EXECUTION COPYFIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENTTHIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”), dated as ofNovember 29, 2012, is by and among VOXX INTERNATIONAL CORPORATION, a Delaware corporation (the “Company”), AUDIOVOXACCESSORIES CORPORATION, a Delaware corporation (“ACC”), AUDIOVOX ELECTRONICS CORPORATION, a Delawarecorporation (“AEC”), AUDIOVOX CONSUMER ELECTRONICS, INC., a Delaware corporation (“ACEI”), AMERICAN RADIO CORP.,a Georgia corporation (“ARC”), CODE SYSTEMS, INC., a Delaware corporation (“CSI”), INVISION AUTOMOTIVE SYSTEMS INC., aDelaware corporation (“IAS”), BATTERIES.COM, LLC, an Indiana limited liability company (“Batteries”), KLIPSCH GROUP, INC., anIndiana corporation (“Klipsch”, and together with the Company, ACC, AEC, ACEI, ARC, CSI, IAS and Batteries, each, a “Domestic Borrower”and collectively, the “Domestic Borrowers”), VOXX INTERNATIONAL (GERMANY) GMBH, a Gesellschaft mit beschränkter Haftung underthe laws of the Federal Republic of Germany (the “Foreign Borrower”, and together with the Domestic Borrowers, each a “Borrower” andcollectively the “Borrowers”), the Subsidiaries of the Company party hereto (collectively, the “Guarantors”), the Lenders (as hereinafter defined)party hereto and WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent on behalf of the Lenders under the CreditAgreement (as hereinafter defined) (in such capacity, the “Administrative Agent”). Capitalized terms used herein and not otherwise defined hereinshall have the meanings ascribed thereto in the Credit Agreement.W I T N E S S E T HWHEREAS, the Borrowers, the Guarantors, certain banks and financial institutions from time to time party thereto (the “Lenders”) and theAdministrative Agent are parties to that certain Amended and Restated Credit Agreement dated as of March 14, 2012 (as amended, modified,extended, restated, replaced, or supplemented from time to time, the “Credit Agreement”);WHEREAS, the Credit Parties have requested that the Required Lenders amend certain provisions of the Credit Agreement; andWHEREAS, the Required Lenders are willing to make such amendments to the Credit Agreement, in accordance with and subject to theterms and conditions set forth herein.NOW, THEREFORE, in consideration of the agreements hereinafter set forth, and for other good and valuable consideration, the receiptand adequacy of which are hereby acknowledged, the parties hereto agree as follows:ARTICLE I AMENDMENT TO CREDIT AGREEMENT1.1 Amendment to Definition of Revolving Availability Amount. The definition of Revolving Availability Amount set forth inSection 1.1 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:“Revolving Availability Amount” shall mean, with respect to the U.S. Revolving Loans, (a) on the Closing Date,$40,000,000, (b) for the period from and including the day following the Closing Date to and including August 31, 2012,$60,000,000, (c) for the period from and including September 1, 2012 to and including January 31, 2013, $80,000,000, (d)for the period from and includingFebruary 1, 2013 to and including August 31, 2013, $60,000,000, (e) for the period from and including September 1, 2013to and including November 30, 2013, $80,000,000 and (f) for the period from and including December 1, 2013 to andincluding the Maturity Date, $60,000,000.ARTICLE II CONDITIONS TO EFFECTIVENESS2.1 Closing Conditions. This Amendment shall become effective as of the day and year set forth above (the “Amendment EffectiveDate”) upon satisfaction of the following conditions (in each case, in form and substance reasonably acceptable to the Administrative Agent):(a) Executed Amendment. The Administrative Agent shall have received a copy of this Amendment duly executed by each of theCredit Parties, the Required Lenders, each Revolving Lender and the Administrative Agent.(b) Default. After giving effect to this Amendment, no Default or Event of Default shall exist.(c) Fees and Expenses.(i) The Administrative Agent shall have received from the Borrowers, for the account of each Lender that executes anddelivers a signature page to the Administrative Agent by 12:00 p.m. (EST) on or before November 29, 2012 (each such Lender, a“Consenting Lender”, and collectively, the “Consenting Lenders”), an amendment fee in an amount equal to five (5) basis pointson the aggregate Revolving Commitments of such Consenting Lender (prior to giving effect to this Amendment) (i.e., the totalamendment fee will be $65,000).(ii) The Administrative Agent shall have received from the Borrowers such other fees and expenses that are payable inconnection with the consummation of the transactions contemplated hereby.(d) Miscellaneous. All other documents and legal matters in connection with the transactions contemplated by this Amendmentshall be reasonably satisfactory in form and substance to the Administrative Agent and its counsel.ARTICLE III MISCELLANEOUS3.1 Amended Terms. On and after the Amendment Effective Date, all references to the Credit Agreement in each of the Credit Documentsshall hereafter mean the Credit Agreement as amended by this Amendment. Except as specifically amended hereby or otherwise agreed, the CreditAgreement is hereby ratified and confirmed and shall remain in full force and effect according to its terms.3.2 Representations and Warranties of Credit Parties. Each of the Credit Parties represents and warrants as follows:(a) It has taken all necessary action to authorize the execution, delivery and performance of this Amendment.2(b) This Amendment has been duly executed and delivered by such Person and constitutes such Person’s legal, valid and bindingobligation, enforceable in accordance with its terms, except as such enforceability may be subject to (i) bankruptcy, insolvency,reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors’ rights generally and (ii) general principlesof equity (regardless of whether such enforceability is considered in a proceeding at law or in equity).(c) No consent, approval, authorization or order of, or filing, registration or qualification with, any court or governmentalauthority or third party is required in connection with the execution, delivery or performance by such Person of this Amendment.(d) The representations and warranties set forth in Article III of the Credit Agreement are true and correct as of the date hereof(except for those which expressly relate to an earlier date).(e) After giving effect to this Amendment, no event has occurred and is continuing which constitutes a Default or an Event ofDefault.(f) The Security Documents continue to create a valid security interest in, and Lien upon, the Collateral, in favor of theAdministrative Agent, for the benefit of the Lenders, which security interests and Liens are perfected in accordance with the terms of theSecurity Documents and prior to all Liens other than Permitted Liens.(g) Except as specifically provided in this Amendment, the Credit Party Obligations are not reduced or modified by thisAmendment and are not subject to any offsets, defenses or counterclaims.3.3 Reaffirmation of Credit Party Obligations. Each Credit Party hereby ratifies the Credit Agreement and acknowledges and reaffirms(a) that it is bound by all terms of the Credit Agreement applicable to it and (b) that it is responsible for the observance and full performance of itsrespective Credit Party Obligations.3.4 Credit Document. This Amendment shall constitute a Credit Document under the terms of the Credit Agreement.3.5 Expenses. The Borrowers agree to pay all reasonable costs and expenses of the Administrative Agent in connection with thepreparation, execution and delivery of this Amendment, including without limitation the reasonable fees and expenses of the Administrative Agent’slegal counsel.3.6 Further Assurances. The Credit Parties agree to promptly take such action, upon the request of the Administrative Agent, as isnecessary to carry out the intent of this Amendment.3.7 Entirety. This Amendment and the other Credit Documents embody the entire agreement among the parties hereto and supersede allprior agreements and understandings, oral or written, if any, relating to the subject matter hereof.3.8 Counterparts; Telecopy. This Amendment may be executed in any number of counterparts, each of which when so executed anddelivered shall be an original, but all of which shall constitute one and3the same instrument. Delivery of an executed counterpart to this Amendment by telecopy or other electronic means shall be effective as an original andshall constitute a representation that an original will be delivered.3.9 No Actions, Claims, Etc. As of the date hereof, each of the Credit Parties hereby acknowledges and confirms that it has noknowledge of any actions, causes of action, claims, demands, damages and liabilities of whatever kind or nature, in law or in equity, against theAdministrative Agent, the Lenders, or the Administrative Agent’s or the Lenders’ respective officers, employees, representatives, agents, counsel ordirectors arising from any action by such Persons, or failure of such Persons to act under the Credit Agreement on or prior to the date hereof.3.10 GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED ANDENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTIONS 5-1401 AND 5-1402OF THE NEW YORK GENERAL OBLIGATIONS LAW).3.11 Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respectivesuccessors and assigns.3.12 Consent to Jurisdiction; Service of Process; Waiver of Jury Trial. The jurisdiction, service of process and waiver of jury trialprovisions set forth in Sections 9.13 and 9.16 of the Credit Agreement are hereby incorporated by reference, mutatis mutandis.[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]4IN WITNESS WHEREOF the parties hereto have caused this Amendment to be duly executed on the date first above written.BORROWERS: VOXX INTERNATIONAL CORPORATION,a Delaware corporation, as the CompanyBy: /s/ Charles M. StoehrName: Charles M. StoehrTitle: CFO/Senior Vice PresidentVOXX ACCESSORIES CORP., a Delaware corporation, as a BorrowerBy: /s/ :Loriann SheltonName: Loriann SheltonTitle: CFO/Vice President/TreasurerAUDIOVOX ELECTRONICS CORPORATION, a Delaware corporation, as a BorrowerBy: /s/ :Loriann SheltonName: Loriann SheltonTitle: CFO/Secretary/TreasurerAUDIOVOX CONSUMER ELECTRONICS, INC., a Delaware corporation, as aBorrowerBy: /s/ :Loriann SheltonName: Loriann SheltonTitle: CFO/Secretary/TreasurerAMERICAN RADIO CORP., a Georgia corporation, as a BorrowerBy: /s/ Charles M. StoehrName: Charles M. StoehrTitle: Vice PresidentCODE SYSTEMS, INC., a Delaware corporation, as a BorrowerBy: /s/ Charles M. StoehrName: Charles M. StoehrTitle: Chief Financial OfficerSignature Page to First Amendment toAmended and Restated Credit AgreementINVISION AUTOMOTIVE SYSTEMS INC., a Delaware corporation, as a BorrowerBy: /s/ Charles M. StoehrName: Charles M. StoehrTitle: Vice PresidentBATTERIES.COM, LLC, an Indiana limited liability company, as a BorrowerBy: /s/ :Loriann SheltonName: Loriann SheltonTitle: SecretaryKLIPSCH GROUP, INC., an Indiana corporation, as a BorrowerBy: /s/ Charles M. StoehrName: Charles M. StoehrTitle: Vice PresidentVOXX INTERNATIONAL (GERMANY) GMBH, a Gesellschaft mit beschränkterHaftung under the laws of the Federal Republic of Germany, as the Foreign BorrowerBy: /s/ Klaus von GierkeName: Klaus von GierkeTitle: Managing Director 6GUARANTORS: ELECTRONICS TRADEMARK HOLDING COMPANY, LLC, a Delaware corporationBy: /s/ Chris Lis JohnsonName: Chris Lis JohnsonTitle: SecretaryTECHNUITY, INC., an Indiana corporationBy: /s/ :Loriann SheltonName: Loriann SheltonTitle: SecretaryOMEGA RESEARCH AND DEVELOPMENT TECHNOLOGY LLC, a Delawarelimited liability companyBy: /s/ :Loriann SheltonName: Loriann SheltonTitle: SecretaryLATIN AMERICA EXPORTS CORP., a Delaware corporationBy: /s/ Charles M. StoehrName: Charles M. StoehrTitle: Treasurer KLIPSCH HOLDING LLC, a Delaware limited liability companyBy: /s/ Charles M. StoehrName: Charles M. StoehrTitle: Vice President/SecretaryKD SALES, LLC, an Indiana limited liability companyBy: /s/ Frederick L. FarrarName: Frederick L. FarrarTitle:Executive Vice President/CFO/Treasurer7AUDIOVOX WEBSALES LLC, a Delaware limited liability companyBy: /s/ Charles M. StoehrName: Charles M. StoehrTitle: Vice PresidentAUDIOVOX LATIN AMERICA LTD., a Delaware corporationBy: /s/ Charles M. StoehrName: Charles M. Stoehr Title: Vice PresidentAUDIOVOX INTERNATIONAL CORP., a Delaware corporationBy: /s/ Charles M. StoehrName: Charles M. StoehrTitle: Vice PresidentAUDIOVOX COMMUNICATIONS CORP., a Delaware corporationBy: /s/ Charles M. StoehrName: Charles M. StoehrTitle: Vice President/TreasurerAUDIOVOX GERMAN CORPORATION, a Delaware corporationBy: /s/ Charles M. StoehrName: Charles M. StoehrTitle: CFO/Vice PresidentAUDIOVOX ASIA INC., a Delaware corporationBy: /s/ Charles M. StoehrName: Charles M. StoehrTitle: Vice President/Secretary/Treasurer8CAR COMMUNICATION HOLDING GMBH,a Gesellschaft mit beschränkter Haftung under the laws of the Federal Republic of GermanyBy: /s/ Charles M. StoehrName: Charles M. StoehrTitle: Managing DirectorHIRSCHMANN CAR COMMUNICATION GMBH, a Gesellschaft mit beschränkterHaftung under the laws of the Federal Republic of GermanyBy: /s/ Charles M. StoehrName: Charles M. StoehrTitle: Managing DirectorHIRSCHMANN CAR COMMUNICATION KFT., a limited liability corporation(Korlátolt Felelõsségû Társaság) organized under the laws of HungaryBy: /s/ Peter InzenhoferName: Peter InzenhoferTitle: Managing DirectorAUDIOVOX VENEZUELA C.A., a company organized under the laws of VenezuelaBy: /s/ Charles M. StoehrName: Charles M. StoehrTitle: Vice PresidentAUDIOVOX MEXICO, S DE RL DE CV, a company organizad under the laws of MexicoBy: /s/ Charles M. StoehrName: Charles M. StoehrTitle: Board of ManagersKLIPSCH GROUP EUROPE, B.V., a private company with limited liability with itscorporate seat in Leiden, the NetherlandsBy: /s/ Frederick L: FarrarName: Frederick L. Farrar9Title: ManagerAUDIO PRODUCTS INTERNATIONAL CORP., a corporation formed under the laws ofProvince of OntarioBy: /s/ T. Paul JacobsName: T. Paul JacobsTitle: PresidentAUDIOVOX CANADA LIMITED, a corporation formed under the laws of Province ofOntarioBy: /s/ Charles M. StoehrName: Charles M. StoehrTitle: Vice President10ADMINISTRATIVE AGENT:WELLS FARGO BANK, NATIONAL ASSOCIATION, as a Lender and as Administrative AgentBy: /s/ Robert MilasName: Robert MilasTitle: Relationship Manager V.P.11LENDERS:Fifth Third Bank,as a LenderBy: /s/ Neil KiernanName: Neil KiernanTitle: Vice PresidentHSBC Bank USA, N.A.,as a LenderBy: /s/ William ConlanName: William ConlanTitle: Vice PresidentCitibank, N.A.,as a LenderBy: /s/ Stuart N. BermanName: Stuart N. BermanTitle: Vice PresidentRBS Citizens, N.A.,as a LenderBy: /s/ Paul DarrigoName: Paul DarrigoTitle: Senior Vice PresidentPeople's United Bank,as a LenderBy: /s/ Matthew HarrisonName: Matthew HarrisonTitle: Assistant Vice President12Sovereign Bank, N.A.,as a LenderBy: /s/ Christine GerulaName: Christine GerulaTitle: Senior Vice PresidentCapital One, National Association,as a LenderBy: /s/ Jed PomerantzName: Jed PomerantzTitle: Senior Vice President13Exhibit 21SUBSIDIARIES OF REGISTRANTSubsidiariesJurisdiction of Incorporation VOXX Accessories Corp.DelawareAudiovox Electronics CorporationDelawareAmerican Radio Corp.GeorgiaAudiovox Venezuela C.A.VenezuelaAudiovox German Holdings GmbHGermanyCode Systems, Inc.DelawareAudiovox Canada LimitedCanadaEntretenimiento Digital Mexico, S.de C.VMexicoKlipsch Holding, LLCDelawareSchwaiger GmbHGermanyInvision Automotive Systems, Inc.DelawareHirschmann Car Communications GmbHGermanyVOXX International (Germany) GmbHGermanyEXHIBIT 23CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe have issued our reports dated May 14, 2013, with respect to the consolidated financial statements, financial statement schedule andinternal control over financial reporting included in the Annual Report of Voxx International Corporation and subsidiaries on Form 10-Kfor the year ended February 28, 2013. We hereby consent to the incorporation by reference of said reports in the RegistrationStatements of Voxx International Corporation on Form S-3 (File No. 333-187427) and Forms S-8 (File No. 333-162569, File No.333-138000, File No. 333-131911, File No. 333-36762, and File No. 333-82073)./s/ GRANT THORNTON LLPMelville, New YorkMay 14, 2013Exhibit 31.1CERTIFICATION PURSUANT TO RULE 13a-14(a) AND RULE 15d-14(a)OF THE SECURITIES EXCHANGE ACT OF 1934I, Patrick M. Lavelle, President and Chief Executive Officer of Audiovox Corporation, certify that:1.I have reviewed this annual report on Form 10-K of Audiovox Corporation (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared;b.Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting.May 14, 2013 /s/Patrick M. Lavelle Patrick M. Lavelle Exhibit 31.2CERTIFICATION PURSUANT TO RULE 13a-14(a) AND RULE 15d-14(a)OF THE SECURITIES EXCHANGE ACT OF 1934I, C. Michael Stoehr, Senior Vice President and Chief Financial Officer of Audiovox Corporation, certify that:1.I have reviewed this annual report on Form 10-K of Audiovox Corporation (the “Company”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared;b.Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting.May 14, 2013 /s/ C. Michael Stoehr C. Michael Stoehr Exhibit 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Audiovox Corporation (the “Company”) on Form 10-K for the period ended February 28, 2013 (the “Report”) as filedwith the Securities and Exchange Commission on the date hereof, I, Patrick M. Lavelle, President and Chief Executive Officer of the Company, certify,pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:1)The Report fully complies with Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.May 14, 2013 /s/ Patrick M. Lavelle Patrick M. Lavelle *A signed original of this written statement required by Section 906 has been provided to Audiovox Corporation and will be retained by Audiovox Corporationand furnished to the Securities and Exchange Commission or its staff upon request.The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350,Chapter 63 of Title 18, United States Code) and is not being filed as part of the Form 10-K or as a separate disclosure documentExhibit 32.2CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Audiovox Corporation (the “Company”) on Form 10-K for the period ended February 28, 2013 (the “Report”) as filedwith the Securities and Exchange Commission on the date hereof, I, C. Michael Stoehr, Senior Vice President and Chief Financial Officer of the Company,certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:1)The Report fully complies with Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.May 14, 2013 /s/ C. Michael Stoehr C. Michael Stoehr *A signed original of this written statement required by Section 906 has been provided to Audiovox Corporation and will be retained by Audiovox Corporationand furnished to the Securities and Exchange Commission or its staff upon request.The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350,Chapter 63 of Title 18, United States Code) and is not being filed as part of the Form 10-K or as a separate disclosure documentASA Electronics, LLCAnd Subsidiary(A Limited Liability Company)Consolidated Financial Report11/30/2012McGladrey LLPCertified Public AccountantsMcGladrey LLP is a member firm of RSM International-- an affiliation of separate and independent legal entities.1Contents Report of Independent Registered Public Accounting Firm1 Consolidated Financial Statements Consolidated balance sheets2Consolidated statements of income3Consolidated statements of members' equity4Consolidated statements of cash flows5Notes to financial statements6 McGladrey LLP is a member firm of RSM International-- an affiliation of separate and independent legal entities.2McGladrey LLPCertified Public AccountantsReport of Independent Registered Public Accounting FirmTo the MembersASA Electronics, LLC and SubsidiaryElkhart, IndianaWe have audited the accompanying consolidated balance sheets of ASA Electronics, LLC and Subsidiary as of November 30, 2012 and2011, and the related consolidated statements of income, members' equity, and cash flows for each of the three years in the period endedNovember 30, 2012. These financial statements are the responsibility of the Company's management. Our responsibility is to express anopinion on these financial statements based on our audits.We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of materialmisstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate inthe circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financialreporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as wellas evaluating the overall financial statement presentation. We believe that our audits provided a reasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ASAElectronics, LLC and Subsidiary as of November 30, 2012 and 2011 and the results of their operations and their cash flows for each ofthe three years in the period ended November 30, 2012, in conformity with U.S. generally accepted accounting principles./s/ McGladrey LLPElkhart, IndianaFebruary 1, 2013McGladrey LLP is a member firm of RSM International-- an affiliation of separate and independent legal entities.1ASA Electronics, LLC and Subsidiary(A Limited Liability Company)Notes to the Financial StatementsConsolidated Balance SheetsNovember 30, 2012 and 2011 2012 2011 ASSETS Current Assets Cash and cash equivalents$5,899,638 $8,291,354Available-for-sale securities4,000,000 1,055,000Trade receivables7,024,480 5,671,130Inventories17,363,413 15,077,806Prepaid expenses332,320 218,723Total current assets34,619,851 30,314,013 Leasehold Improvements and Equipment at depreciated cost2,019,338 2,366,399 Intangible Assets, trademark rights2,742,123 2,647,623 $39,381,312 $35,328,035 LIABILITIES AND MEMBERS' EQUITY Current Liabilities Accounts payable$1,324,756 $1,857,337Accrued expenses: Payroll and related taxes1,774,755 1,611,731Warranty2,245,000 2,296,000Other120,487 102,315Total current liabilities5,464,998 5,867,383 Commitments and Contingencies Members' Equity33,916,314 29,460,652 $39,381,312 $35,328,035See Notes to Financial Statements2ASA Electronics, LLC and Subsidiary(A Limited Liability Company)Notes to the Financial StatementsConsolidated Statements of IncomeNovember 30, 2012, 2011 and 2010 2012 2011 2010 Net sales$84,641,165 $71,234,236 $67,678,360 Cost of goods sold65,928,392 55,022,015 54,354,915 Gross profit18,712,773 16,212,221 13,323,445 Selling, general and administrative expenses9,726,938 8,623,131 7,725,352 Operating income8,985,835 7,589,090 5,598,093 Nonoperating income (expense): Investment income36,229 32,870 57,726Miscellaneous income— 1,548 —Interest expense— — (2,532) 36,229 34,418 55,194Net income$9,022,064 $7,623,508 $5,653,287See Notes to Financial Statements3ASA Electronics, LLC and Subsidiary(A Limited Liability Company)Notes to the Financial StatementsConsolidated Statements of Members' EquityNovember 30, 2012, 2011 and 2010 2012 2011 2010 Balance, beginning$29,460,652 $25,852,688 $22,037,789Net income9,022,064 7,623,508 5,653,287Member distributions(4,566,402) (4,015,544) (1,838,388)Balance, ending$33,916,314 $29,460,652 $25,852,688See Notes to Financial Statements4ASA Electronics, LLC and Subsidiary(A Limited Liability Company)Notes to the Financial StatementsConsolidated Statements of Cash FlowsNovember 30, 2012, 2011 and 2010 2012 2011 2010 Cash Flows From Operating Activities Net income$9,022,064 $7,623,508 $5,653,287Adjustments to reconcile net income to net cash provided by operatingactivities: Depreciation1,168,476 1,071,232 1,069,005Inventory writedowns and reserves75,900 145,639 335,299Loss on sale of equipment11,062 (4,812) 10,095Change in assets and liabilities: Decrease (increase) in: Trade receivables(1,353,350) (1,486,048) (172,821)Inventories(2,361,507) (2,351,146) (4,834,444)Prepaid expenses(113,597) 19,582 (80,593)Increase (decrease) in: Accounts payable(532,581) 832,529 (571,051)Accrued expenses130,196 301,612 556,799Net cash provided by operating activities6,046,663 6,152,096 1,965,576 Cash Flows From Investing Activities Proceeds on sale of equipment9,940 55,688 235Purchase of leasehold improvements and equipment(786,917) (1,112,315) (1,165,836)Other(150,000) — —Proceeds from sale of available-for-sale securities1,395,000 8,315,000 9,820,000Purchase of available-for-sale securities(4,340,000) (2,695,000) (8,490,000)Net cash provided by (used in) investing activities(3,871,977) 4,563,373 164,399 Cash Flows From Financing Activities Member distributions(4,566,402) (4,015,544) (1,838,388)Increase (decrease) in cash and cash equivalents(2,391,716) 6,699,925 291,587 Cash and cash equivalents, beginning8,291,354 1,591,429 1,299,842 Cash and cash equivalents, ending$5,899,638 $8,291,354 $1,591,429 Supplemental disclosures of cash flow information: Cash payments for interest$— $— $2,532See Notes to Financial Statements5ASA Electronics, LLC And Subsidiary(A Limited Liability Company)Notes To Financial StatementsNote 1. Nature of Business and Significant Accounting PoliciesSince 1977, ASA Electronics, LLC, formerly known as Audiovox Specialized Applications, LLC, (“ASA” or the “Company”) has built areputation developing mobile electronics specifically designed and tested to withstand the rigors of niche markets in the Automotive Industryincluding: Recreational Vehicle; Commercial Vehicle, Heavy Duty Truck, Agricultural, Construction, Bus, Powersports, Marine and Spa industries.Its proprietary line of products include: Jensen 12 Volt LCD and LED flat panel televisions, stereos and speakers, Voyager Observation Systems,and Advent microwaves, refrigerators and rooftop air conditioners. These high quality mobile electronics and appliances are designed and tested in aresearch and development lab located at the Company's corporate offices. ASA's engineering team works in conjunction with its customers'designers, engineers and sales team to develop customized solutions. In 2012, ASA expanded its product offerings to also distribute products fromPolk Audio. Polk Audio, also established in the 1970's, is an award-winning designer and manufacturer of high performance audio products, whohas become the market share leader in premium home and marine speakers, sound bars, amplifiers and other high end audio products. The addition ofPolk products compliments ASA's existing product lineup and provides a full spectrum of audio/video options for our customers. The variousproducts offered by ASA are sold throughout the world to Original Equipment Manufacturers as well as the respective Aftermarket segments. Inaddition to the headquarters in Elkhart, Indiana, ASA also has two public distribution centers in Oregon and California, and a trading office in theShenzhen province of China. In 2012, ASA achieved an 18.9% increase in sales compared to 2011 results. Growth was not limited to just oneindustry, but was spread across all five industries (recreational vehicles, recreational vehicle after market, marine, heavy duty vehicles, andcommercial vehicles). Specifically, year over year industry sales increases ranged from 9% to 57% over 2011.Significant accounting policies:Use of estimates:The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets andliabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results coulddiffer from those estimates.Principles of consolidation:The consolidated financial statements include the accounts of the Company and a wholly-owned subsidiary. All significant intercompany accountshave been eliminated in consolidation.Revenue recognition:The Company recognizes revenue from product sales at the time of passage of title and risk of loss to the customer either at F.O.B. Shipping Point orF.O.B. Destination, based upon terms established with the customer. The Company's selling price is fixed and determined at the time of shipment andcollectability is reasonably assured and not contingent upon the customer's resale of the product. The customers are generally not given rights ofreturn. In the event customers are granted rights of return, the Company estimates and records an allowance for future returns. At November 30, 2012and 2011, no such allowance was deemed necessary. Product sales are generally not subject to acceptance or installation by Company or customerpersonnel.6ASA Electronics, LLC And Subsidiary(A Limited Liability Company)Notes To Financial StatementsAll sales transactions are denominated in U.S. dollars.Shipping and delivery:The Company recognizes shipping and delivery costs in selling, general and administrative expenses in the accompanying statements of income.These costs for the years ended November 30, 2012, 2011 and 2010 were approximately $649,000, $554,000 and $440,000 respectively.Sales incentives:The Company offers sales incentives to its customers primarily in the form of co-operative advertising allowances and rebates. All significant salesincentives require the customer to purchase the Company's products during a specified period of time, and are based on either a fixed dollar amount orset percentage of sales. Claims are settled either by the customer claiming a deduction against an outstanding account receivable or by the customerrequesting a check. Rebates and co-op advertising allowances offered to customers require that product be purchased during a specified period oftime. The amount offered is generally based upon a fixed percentage of sales revenue to the customer. Since the rebate percentage can be reasonablyestimated, the Company records the related rebate at the time of sale. The Company has also entered into the RV Aftermarket segment, with several ofthose customer's having dollar specific co-op advertising programs for participation in trade shows, placement in catalogues, countertop displayunits, and other marketing programs. These co-op advertising programs are reviewed and adjusted, as necessary, on a quarterly basis.Members' equity and subsequent event:In accordance with the generally accepted method of presenting limited liability company financial statements, the accompanying financial statementsdo not include other corporate assets and liabilities of the members, including their obligation for income taxes on the net income of the limited liabilitycompany nor any provision for income tax expense.It is the Company's intent to distribute funds to members to cover their income tax liabilities. Subsequent to November 30, 2012, the Company paidapproximately $1,180,000 of member distributions relating to the fourth quarter.The LLC operating agreement does not provide for separate classes of ownership. Voxx International (Voxx) and ASA Electronics Corporation shareequally in all LLC events and the related member accounts are considered equal on a fair value basis.Cash and cash equivalents:For purposes of the statement of cash flows, the Company considers investments in various repurchase agreements with its bank, money marketaccounts and treasury bills with a maturity of three months or less to be cash equivalents. Cash equivalents amounted to approximately $4,560,000 and$7,998,000 for the years ended November 30, 2012 and 2011 respectively.The Company maintains its cash accounts in amounts which, at times, may be in excess of insurance limits provided by the Federal DepositInsurance Corporation.Available-for-sale securities:Available-for-sale securities consist of investments in marketable debt securities. Debt securities consist primarily7ASA Electronics, LLC And Subsidiary(A Limited Liability Company)Notes To Financial Statementsof obligations of municipalities and industrial revenue bonds, which are not subject to principal risk or fluctuation due to these securities being backedby bank letters of credit.Management determines the appropriate classification of securities at the date individual investment securities are acquired and the appropriateness ofsuch classification is reassessed at each balance sheet date. Since the Company neither buys investment securities in anticipation of short-termfluctuation in market prices nor commits to holding debt securities to their maturities, the investments in marketable debt securities have been classifiedas available-for-sale in accordance with accounting standards. Available-for-sale securities are stated at fair value, and unrealized holding gains andlosses, if any, are reported as a separate component of members' equity.The amount classified as current assets on the accompanying balance sheets represents the amount of marketable debt securities expected to be soldduring the next year.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 carryingamount to fair value. The impairment is charged to earnings and a new cost basis for the security is established. The Company considers numerousfactors, 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 financialcondition and the near-term prospects of the issuer or the investment and, (iii) whether the Company's intent to retain the investment for the period oftime is sufficient to allow for any anticipated recovery in market value. During the year ended November 30, 2012, the Company did not hold anyinvestments that had such a decline in value.Trade receivables:Trade receivables are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts ona monthly basis. Trade receivables in the accompanying balance sheets at November 30, 2012 and 2011 are stated net of an allowance for doubtfulaccounts of approximately $50,000. Management determines the allowance for doubtful accounts by identifying troubled accounts and by usinghistorical experience applied to an aging of accounts. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivablespreviously written off are recorded when received. Generally, a trade receivable is considered to be past due if any portion of the receivable balance isoutstanding for more than 30 days.Inventories:The Company values its inventory at the lower of the actual cost to purchase (primarily on a weighted moving average basis) and/or the currentestimated market value of the inventory less expected costs to sell the inventory. The Company regularly reviews inventory quantities on-hand andrecords a provision for excess and obsolete inventory based primarily from selling prices, indications from customers based upon current pricenegotiations and purchase orders. The Company's industry is characterized by rapid technological change and frequent new product introductions thatcould result in an increase in the amount of obsolete inventory quantities on-hand.During the years ended November 30, 2012, 2011 and 2010, the Company recorded write downs of inventory of approximately $98,000, $146,000,and $419,000 respectively related to lower of cost or market adjustments. These charges to income are included in cost of goods sold in theaccompanying consolidated statements of income. As of November 30, 2012 and 2011 the Company maintained an inventory write down reserve of$60,000 and $82,000 respectively.Depreciation:8ASA Electronics, LLC And Subsidiary(A Limited Liability Company)Notes To Financial StatementsDepreciation of leasehold improvements is computed over the lesser of the underlying lease term or the estimated useful lives and equipment iscomputed principally by the straight-line method over the following estimated useful lives: YearsLeasehold improvements 5-9Machinery and equipment 5-10Tooling and molding 1-3Transportation equipment 5Office furniture and fixtures 10Computer equipment 3Booth displays 7Tooling is amortized on a per unit basis. The Company estimates the annual sales volume produced and life expectancy of the tooling to determine theper unit amortization amount. This per unit amount increases inventory cost upon receipt into a U.S. warehouse and is subsequently charged to cost ofgoods sold upon sale of the related product.Warranties:The Company provides a limited warranty primarily for a period of up to two years for its products. The Company's standard warranties require theoriginal equipment manufacturer, its dealers or the end user to repair or replace defective products during such warranty periods at no cost to theconsumer. The Company estimates the costs that may be incurred under its basic limited warranty and records a liability in the amount of such costs atthe time product revenue is recognized. The related expense is included in cost of goods sold in the accompanying consolidated statements of income.Factors that affect the Company's warranty liability include the number of units sold, historical and anticipated rates of warranty claims, the historicallag time between product sales and product claims, and cost per claim. The Company periodically assesses the adequacy of its recorded warrantyliabilities and adjusts the amounts as necessary. The Company utilizes historical trends and analytical tools to assist in determining the appropriate lossreserve levels.Changes in the Company's warranty liability during the years ended November 30, 2012, 2011 and 2010 are as follows: 2012 2011 2010 Balance, beginning$2,296,000 $2,256,000 $2,329,000Accruals for products sold1,905,353 1,742,859 1,347,389Payments made(1,956,353) (1,702,859) (1,420,389)Balance, ending$2,245,000 $2,296,000 $2,256,000Income taxes:As a limited liability Company, the Company's taxable income is allocated to members in accordance with their respective percentage ownership.Therefore, no provision or liability for income taxes has been included in the9ASA Electronics, LLC And Subsidiary(A Limited Liability Company)Notes To Financial Statementsfinancial statements.Management evaluated the Company's tax positions and concluded that the Company had taken no uncertain tax positions that require adjustment tothe financial statements to comply with the provisions of this guidance. With few exceptions, the Company is no longer subject to tax examinationsby the U.S. federal, state or local tax authorities for years before 2009.Advertising costs:The Company expenses the cost of advertising (including trade shows), as incurred. Advertising costs in the accompanying consolidated statementsof income were approximately $545,000, $493,000, and $379,000, for the years ended November 30, 2012, 2011 and 2010 respectively.Long-lived assets and other intangible assets:The Company acquired certain trademark rights from Voxx in August 2003. In connection with the acquisition, Voxx sublicensed its rights in relationto the trademark to the Company and cannot terminate these rights under the terms of the acquisition agreement. The Company has accounted fortrademark rights as an indefinite lived intangible asset. Accounting standards require that intangible assets with indefinite useful lives be tested forimpairment at least annually or more frequently if an event occurs or circumstances change that could more likely than not reduce the fair value belowits carrying amount. When determining the fair value of trademark rights, the Company uses the relief from royalty method which requires thedetermination of fair value based on if the Company was licensing the right to the trademark in exchange for a royalty fee. The Company utilizes theincome approach to determine future revenues to which to apply a royalty rate. The royalty rate is based on market approach concepts. In consideringthe value of trademark rights, the Company looks to relative age, consistent use, quality, expansion possibilities, relative profitability and relativemarket potential. The Company has performed its annual impairment test for the years ended November 30, 2012, 2011 and 2010 and no impairmentwas identified.In accordance with accounting standards, the Company reviews its long-lived assets periodically to determine potential impairment. If indicators arepresent, the Company compares the carrying value of the long-lived assets with the estimated future net undiscounted cash flows expected to resultfrom the use of the assets, including cash flows from disposition. Should the sum of the expected future net cash flows be less that the carryingvalue, the Company would recognize an impairment loss at that date. An impairment loss would be measured by comparing the amount by which thecarrying value exceeds the fair value of the long-lived assets. There was no impairment of long-lived assets for the years ended November 30, 2012,2011 and 2010.Subsequent events:The Company has evaluated subsequent events for potential recognition and/or disclosure through February 1, 2013, the date the financial statementswere available to be issued.Note 2. Fair Value MeasurementsFair value measurements:Accounting standards specify a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptionsother market participants would use based upon market data obtained from independent sources (observable inputs), or reflect the Company's ownassumptions of market participant valuation (unobservable inputs). In accordance with the accounting standards, these two types of inputs havecreated the following fair value hierarchy:10ASA Electronics, LLC And Subsidiary(A Limited Liability Company)Notes To Financial StatementsLevel 1Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets orliabilities.Level 2Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in activemarkets or financial instruments for which significant inputs are observable, either directly or indirectly.Level 3Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. The standard requires the use of observable market data if such data is available without undue cost and effort. For the year ended November 30,2012, the application of valuation techniques applied to similar assets and liabilities has been consistent. The following is a description of the valuationmethodologies used for instruments measured at fair value:Investments in available-for-sale securities:As of November 30, 2012, the fair value of the Company's investments in available-for-sale Level 2 governmental bonds was approximately$4,000,000. The bonds contain a put feature that allows the Company to periodically sell the bonds to a brokerage house at par value. The bonds alsohave a floating interest rate which is reset on a periodic basis and are backed by third party letters of credit. As of November 30, 2012, the bondshad a weighted-average yield of 0.22%. To estimate their fair value, the Company considered the par value of the bonds, potential defaultprobabilities, market yield curves and the seven day put feature. Subsequent to November 30, 2012, the Company liquidated approximately $5,000of bonds at par value, and also exchanged approximately $20,000 of holdings for securities with higher yields.Fair value of financial instruments:The following methods and assumptions were used to estimate the fair value of financial instruments for which it is practicable to estimate that value:Cash and cash equivalents, accounts receivable, accounts payable:The carrying amounts approximate fair value due to the short maturity of those instruments.Note 3. Available-For-Sale SecuritiesThe following is a summary of the Company's investment securities as of November 30, 2012 and 2011:11ASA Electronics, LLC And Subsidiary(A Limited Liability Company)Notes To Financial Statements 2012 Gross Gross Unrealized Unrealized Fair Cost Gains Losses Value Government bonds$4,000,000 $— $— $4,000,000 11/30/2011 Gross Gross Unrealized Unrealized Fair Cost Gains Losses Value Government bonds$1,055,000 $— $— $1,055,000The cost and fair value of debt securities by contractual maturities as of November 30, 2012 are as follows: Fair Cost Value Due after three years $4,000,000 $4,000,000The government bonds contain a put feature which allows the Company to sell the bonds to a brokerage house at par value on seven day terms and afloating interest rate which is reset on a periodic basis.Expected maturities may differ from contractual maturities because the issuers of certain debt securities have the right to prepay their obligationswithout penalty.A summary of proceeds from the sale of available-for-sale securities and investment earnings for the years ended November 30, 2012, 2011, and2010 is as follows: 2012 2011 2010 Proceeds from the sale of available-for-sale securities$1,395,000 $8,315,000 $9,820,000 Interest earned$36,229 $32,870 $57,726Note 4. Leasehold Improvements and EquipmentThe cost of leasehold improvements and equipment and the related accumulated depreciation at November 30, 2012 and 2011 are as follows:12ASA Electronics, LLC And Subsidiary(A Limited Liability Company)Notes To Financial Statements 2012 2011 Leasehold improvements$1,057,412 $1,057,412Machinery and equipment1,389,439 1,296,791Tooling and molding2,703,168 2,344,773Transportation equipment561,241 604,687Office furniture and fixtures403,195 403,195Computer equipment1,376,701 1,214,376Booth displays248,237 211,562Construction in progress229,009 320,213 7,968,402 7,453,009Less accumulated depreciation5,949,064 5,086,610 $2,019,338 $2,366,399Note. 5 Pledged Assets and Notes PayableThe terms of a loan agreement with a bank permit the Company to borrow a maximum of $10,000,000. At November 30, 2012, no amount wasoutstanding under this agreement. Borrowings under the agreement bear interest at prime minus .50% or LIBOR plus 2.00%, at the Company's option,are collateralized by accounts receivable and inventories, and are subject to a tangible net worth covenant. The agreement expires July 3, 2013.Note. 6 Major VendorsFor the years ended November 30, 2012, 2011 and 2010, the Company purchased approximately 75%, 75%, and 82% respectively of its productsfor resale from their top five vendors. The top five vendors varied during the years presented.Note 7. Transactions with Related Parties and Lease CommitmentsThe Company is affiliated with various entities through common ownership by Voxx. Transactions with Voxx, its affiliates and subsidiaries for theyears ended November 30, 2012, 2011, and 2010 are approximately as follows: 2012 2011 2010 Net product sales$7,000 $23,000 $18,000Purchases295,000 711,000 532,000At November 30, 2012 and 2011, amounts included in trade receivables and accounts payable resulting from the above transactions are approximatelyas follows: 2012 2011 Trade receivables$— $6,000Accounts payable4,000 13,000The Company leases warehouse, manufacturing, and office facilities from Irions Investments, LLC, an entityASA Electronics, LLC And Subsidiary(A Limited Liability Company)Notes To Financial Statementsrelated through common ownership, for approximately $45,000 per month, plus the payment of property taxes, normal maintenance, and insurance onthe property under an agreement which expires August 2016, with two five-year options to extend, at the Company's discretion. The lease with IrionsInvestments contains a clause that increases the monthly rent amount each year, and is based on the Consumer Price Index (CPI). The Company alsoleases warehouse space for $3,000 per month. This arrangement is temporary in nature and the term of the lease agreement is defined as month tomonth. Finally, the Company leases office space in the Shenzhen province of China, with a monthly rent of $2,030 through February 1, 2013.The Company leases certain equipment from unrelated parties under agreements that require monthly payments totaling approximately $1,400 andexpire through December 2014.ASA utilizes two public warehouses, with locations in California and Oregon. The leases at both locations are considered month to month and can beterminated with 90 days' notice. As a result, the commitment schedule below includes three months of outside warehouse rent charges for 2013 only.The total rental expense included in the statements of income for the years ended November 30, 2012, 2011, and 2010 is approximately $634,000,$607,000 and $587,000, respectively, of which approximately $535,000, $518,000, and $510,000 respectively was paid to Irions Investments,LLC.The total approximate minimum rental commitment at November 30, 2012 under the leases is due as follows: Related Party Other Total During the year ending November 30, 2013$545,000 $19,000 $564,0002014555,000 13,000 568,0002015566,000 — 566,0002016431,000 — 431,000 $2,097,000 $32,000 $2,129,000Note 8. Employee Benefit PlansThe Company has profit-sharing and 401(k) plans for the benefit of all eligible employees. The Company's contributions are discretionary and arelimited to amounts deductible for federal income tax purposes. Discretionary contributions were approximately $310,000, $257,000, and $226,000for the years ended November 30, 2012, 2011, and 2010 respectively.The Company also maintains a discretionary employee bonus plan for the benefit of its key executive, operating officers, managers and selectsalespersons. The total bonus expense included in the statements of income for the years ended November 30, 2012, 2011, and 2010 is approximately$2,044,000, $1,800,000, and $1,451,000 respectively.The Company offers a health plan for its employees, which is self-insured for medical and pharmaceutical claims up to $35,000 per participant and,after that, stop loss insurance coverage is in place. If the Company's aggregate medical claims, including prescriptions, had exceeded approximately$434,000 in 2012, the stop loss coverage policy would have taken effect. In 2012 the stop loss policy was not utilized, however, as the medical claimstotaled approximately $329,000. The stop loss portion of the coverage has been reinsured with an A rated commercial carrier. The total health planexpense included in the consolidated statements of income for the years ended November 30, 2012, 2011, and 2010 is approximately $621,000,$560,000, and $585,000 respectively. These14ASA Electronics, LLC And Subsidiary(A Limited Liability Company)Notes To Financial Statementsexpense figures include medical, vision and dental claims and third party administration fees, in addition to wellness program expenses and Companycontributions to Health Savings Accounts.Note 9. LitigationAs of November 30, 2012, the Company had no pending legal proceedings. When a legal claim occurs, those proceedings have been, in the opinionof management, ordinary routine matters incidental to the normal business conducted by the Company. In the opinion of management the ultimatedisposition of any such proceedings are not expected to have a material adverse effect on the Company's consolidated financial position, results ofoperations or cash flows.Note 10. Major CustomerNet sales to customers comprising 10% of more of total net sales for the years ended November 30, 2012, 2011, and 2010 and the related tradereceivables balance at those dates are approximately as follows: Net SalesTrade Receivable Balance 201220112010201220112010Customer A$13,505,000$13,119,000$17,002,000$768,000$590,000$339,000Customer B14,986,00010,985,0008,972,000539,000912,000333,000 $28,491,000$24,104,000$25,974,000$1,307,000$1,502,000$672,000* Customer comprised less than 10% of total net salesConsent of Independent Registered Public Accounting FirmWe consent to the incorporation by reference in the Registration Statements (Nos. 333-82073, 333-36762, 333-138000, 333-131911, and 333-162569) on Form S-8 of VOXX International Corporation of our report, dated February 1, 2013, on the consolidated financial statements of ASAElectronics, LLC which is included in the Annual Report on Form 10-K of VOXX International Corporation and Subsidiaries for the year endedFebruary 28, 2013./s/ MCGLADREY LLPElkhart, IndianaMay 14, 2013

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