Audiovox 1997 Annual Report Download - page 25

The Company’s net sales to the equity investments amounted to
$6,132, $6,483, and $17,864 for the years ended November 30, 1997,
1996, and 1995, respectively. The Company’s purchases from the
equity investments amounted to $144,488, $115,109, and $83,858 for
the years ended November 30, 1997, 1996, and 1995, respectively. The
Company recorded $2,027 and $2,130 of outside representative com-
mission expenses for activations and residuals generated by G.L.M.
on the Company’s behalf during fiscal year 1997 and 1996, respective-
ly, (Note 1(l)).
Included in accounts receivable at November 30, 1997 and 1996
are trade receivables due from its equity investments aggregating
$1,921 and $2,576, respectively. At November 30, 1996, a manage-
ment fee receivable of $50 was also included in accounts receivable.
Receivable from vendor is interest bearing and represents claims on
late deliveries, product modifications, and price protection from
TALK as well as prepayments on product shipments. Interest is
payable in monthly installments at rates which range from 6.5% to
8%. Amounts representing prepayments of $5,000 were repaid via
receipt of product shipments in December 1997. At November 30,
1997 and 1996, other long-term assets include equity investment
advances outstanding and management fee receivables of $1,496 and
$1,634, respectively. At November 30, 1997 and 1996, included in
accounts payable and other accrued expenses were obligations to
equity investments aggregating $9,783 and $3,773, respectively.
Documentary acceptance obligations were outstanding from TALK at
November 30, 1997 (Note 9(b)).
During 1997, the Company recorded interest income fromTALK
relating to the receivable from vendor, reimbursement of interest
expense incurred under the subordinated loan to hedge the TALK
investment (Note 10), and other short-term loans made to TALK dur-
ing 1997 at market interest rates. For the years ended November 30,
1997, 1996, and 1995, interest income earned on equity investment
notes and other receivables approximated $653, $725, and $573,
respectively. Interest expense on equity investment documentary
acceptances approximated $203 and $198 in 1997 and 1996, respec-
tively.
(9) Financing Arrangements
(a) Bank Obligations
During 1993, the Company had established a revolving credit
agreement with several financial institutions which was first amend-
ed on March 15, 1994. On May 5, 1995, the Company entered into the
Second Amended and Restated Credit Agreement (the Credit
Agreement) which superseded the first amendment in its entirety.
During 1997, the Credit Agreement was amended four times provid-
ing for various changes to the terms. The terms as of November 30,
1997 are summarized below.
Under the Credit Agreement, the Company may obtain credit
through direct borrowings and letters of credit. The obligations of the
Company under the Credit Agreement continue to be guaranteed by
certain of the Company’s subsidiaries and is secured by accounts
receivable and inventory of the Company and those subsidiaries.
The obligations were secured at November 30, 1997 by a pledge
agreement entered into by the Company for 100 shares of ACC.
Availability of credit under the Credit Agreement is a maximum
aggregate amount of $95,000, subject to certain conditions, and is
based upon a formula taking into account the amount and quality of
its accounts receivable and inventory. The Credit Agreement expires
on February 28, 2000. As a result, bank obligations under the Credit
Agreement have been classified as long-term at November 30, 1997.
Outstanding obligations under the Credit Agreement at
November 30, 1997 and 1996 were as follows:
November 30,
1997 1996
Revolving Credit Notes $18,300 $ 11,700
Eurodollar Notes 6,000 20,000
$24,300 $31,700
For the year ended November 30, 1995 through and including
February 8, 1996, interest on revolving credit notes were .25% above
the prime rate, which was 8.75% at November 30, 1995. For the
same period, interest on Eurodollar Notes were 2% above the Libor
rate which was approximately 5.1% at November 30, 1995 and interest
on bankers’ acceptances were 2% above the bankers’ acceptance rate
which was approximately 6.25% at November 30, 1995. Pursuant to
an amendment on February 9, 1996, the interest rates were increased
to the following: revolving credit notes at .50% above the prime rate,
which was approximately 8.5% at November 30, 1997 and Eurodollar
Notes at 2.75% above the Libor rate which was approximately 5.97%
at November 30, 1997. Interest on bankers’ acceptances remained at
2% above the bankers’ acceptance rate which was approximately
5.77% at November 30, 1997. The maximum commitment fee on the
unused portion of the line of credit is .25% as of November 30, 1997.
The Credit Agreement contains several covenants requiring,
among other things, minimum levels of pre-tax income and mini-
mum levels of net worth and working capital. Additionally, the agree-
ment includes restrictions and limitations on payments of dividends,
stock repurchases, and capital expenditures. During 1997, the
Company received amendments and waivers to allow the Company
to make stock repurchases (Note 12) and enter into the equity collar
(Note 16(a)(2)). Subsequent to year end, the Company received a
waiver which allowed for the delay in issuance of its financial state-
ments.
The Company also has a revolving credit facility with a Malaysian
bank (Malaysian Credit Agreement) to finance additional working
capital needs. As of November 30, 1997 and 1996, the available line of
credit for direct borrowing, letters of credit, bankers’ acceptances and
other forms of credit approximated $8,017 and $9,320, respectively.
The credit facility is partially secured by two standby letters of credit
totaling $5,320, issued under the Credit Agreement by the Company
and is payable upon demand or upon expiration of the standby let-
ters of credit on August 31, 1998. The obligations of the Company
under the Malaysian Credit Agreement are secured by the property
and building owned by Audiovox Communications. Outstanding
obligations under the Malaysian Credit Agreement at November 30,
1997 and 1996 were approximately $4,146 and $4,024, respectively. At
November 30, 1997, interest on the credit facility ranged from 8.25%
to 11.10%. At November 30, 1996, interest on the credit facility ranged
from 9.25% to 9.52%.
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)
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