Audiovox 1997 Annual Report Download - page 23

During 1997, the Company contributed $6,475 in net assets in
exchange for a 50% ownership interest in Audiovox Specialized
Applications, LLC (ASA) which resulted in $5,595 of excess cost over
fair value of net assets (Note 8).
As of November 30, 1997, the Company recorded an unrealized
holding gain relating to the equity collar, net of deferred income
taxes, of $773 as a separate component of stockholders’ equity (Note
16).
As of November 30, 1997 and 1996, the Company recorded an
unrealized holding gain relating to available-for-sale marketable
equity securities, net of deferred income taxes, of $12,194 and
$10,277, respectively, as a separate component of stockholders’ equity
(Note 6).
On February 9, 1996, the Company’s 10.8% Series AA and 11.0%
Series BB convertible debentures matured. As of February 9, 1996,
$1,100 of the Series BB convertible debentures converted into 206,046
shares of Common Stock (Note 10).
On November 25, 1996, the Company completed an exchange of
$41,252 of its $65,000 6 1/4% convertible subordinated debentures
into 6,806,580 shares of Common Stock (Note 10).
During 1996, the Company contributed $97 of property, plant and
equipment in exchange for a 50% ownership interest in a newly-
formed joint venture (Note 8).
During 1995, the Company contributed $36 of property, plant,
and equipment in exchange for a 50% ownership interest in a newly-
formed joint venture (Note 8).
(4) Transactions With Major Suppliers
The Company engaged in transactions with Shintom Co., Ltd.
(Shintom), a stockholder who owned approximately 1.7% at
November 30, 1996 of the outstanding Class A Common Stock and all
of the outstanding Preferred Stock of the Company at November 30,
1997 and 1996. During 1994, the Company formed TALK Corporation
(TALK), a 30.8%-owned joint venture in Japan (Note 8), with
Shintom and other companies.
Transactions with Shintom and TALK included financing arrange-
ments and inventory purchases which approximated 26% and 20%
for the years ended November 30, 1996 and 1995, respectively, of total
inventory purchases. Transactions with TALK included financing
arrangements and inventory purchases which approximated 29% for
the year ended November 30, 1997 of total inventory purchases. At
November 30, 1997 and 1996, the Company had recorded $9,702 and
$3,501, respectively, of liabilities due to TALK for inventory purchases
included in accounts payable. The Company also has documentary
acceptance obligations outstanding from TALK as of November 30,
1997 and 1996 (Note 9(b)). At November 30, 1996, the Company had
recorded a receivable from TALK in the amount of $4,565 payable
with interest (Note 8).
Inventory purchases from a major supplier approximated 32%,
28%, and 44% of total inventory purchases for the years ended
November 30, 1997, 1996, and 1995, respectively. Although there are
a limited number of manufacturers of its products, management
believes that other suppliers could provide similar products on com-
parable terms. A change in suppliers, however, could cause a delay in
product availability and a possible loss of sales, which would affect
operating results adversely.
AUDIOVOX CORPORATION AND SUBSIDIARIES
N o t e s t o C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
(continued)
22
(5) Accounts Receivable
Accounts receivable is comprised of the following:
November 30,
1997 1996
Trade accounts receivable $113,498 $127,854
Receivables from equity investments (Note 8) 1,921 2,626
115,419 130,480
Less:
Allowance for doubtful accounts 3,497 3,115
Allowance for cellular deactivations 1,363 1,666
Allowance for co-operative advertising and
cash discounts 5,861 7,291
$104,698 $118,408
See Note 16(c) for concentrations of credit risk.
(6) Investment Securities
The Company’s investment securities consist primarily of 865,000
and 2,375,000 shares of CellStar Common Stock, which were classi-
fied as available-for-sale marketable equity securities at November
30, 1997 and 1996, respectively. The aggregate fair value of available-
for-sale marketable equity securities were $22,382 and $27,758 at
November 30, 1997 and 1996, respectively, which is comprised of a
cost basis of $2,715 and $11,181 and a gross unrealized holding gain of
$19,667 and $16,577 recorded as a separate component of stockhold-
ers’ equity at November 30, 1997 and 1996, respectively. A related
deferred tax liability of $7,473 and $6,300 was recorded at November
30, 1997 and 1996, respectively, as a reduction to the unrealized hold-
ing gain included as a separate component of stockholders’ equity.
During 1997, the Company sold 1,835,000 shares of CellStar
Common Stock yielding net proceeds of approximately $45,937 and a
gain, net of taxes, of approximately $23,232.
(7) Property, Plant, and Equipment
A summary of property, plant, and equipment, net, is as follows:
November 30,
1997 1996
Land $ 363 $ 363
Buildings 2,099 1,782
Furniture, fixtures and displays 3,418 3,277
Machinery and equipment 4,341 3,221
Computer hardware and software 14,307 12,658
Automobiles 800 954
Leasehold improvements 3,510 3,454
28,838 25,709
Less accumulated depreciation and
amortization (20,285) (18,953)
$ 8,553 $ 6,756
Computer software includes approximately $1,672 and $690 of
unamortized costs as of November 30, 1997 and 1996, respectively,
related to the acquisition and installation of management informa-
tion systems for internal use which are being amortized over a five-
year period.