Audiovox 1997 Annual Report Download - page 32

The Board of Directors and Stockholders
Audiovox Corporation:
We have audited the accompanying consolidated balance sheets of
Audiovox Corporation and subsidiaries as of November 30, 1997 and
1996, and the related consolidated statements of income (loss), stock-
holders’ equity and cash flows for each of the years in the three-year
period ended November 30, 1997. These consolidated financial state-
ments are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and per-
form the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. 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
Audiovox Corporation and subsidiaries as of November 30, 1997 and
1996, and the results of their operations and their cash flows for each
of the years in the three-year period ended November 30, 1997, in
conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Jericho, New York
March 6, 1998
AUDIOVOX CORPORATION AND SUBSIDIARIES
I n d e p e n d e n t A u d i t o r s ’ R e p o r t
KPMG Peat Marwick LLP
Long-Term Debt Including Current Installments
The carrying amount of bank debt under the Company’s revolv-
ing Credit Agreement and Malaysian Credit Agreement approximates
fair value because of the short maturity of the related obligations.
With respect to the Subordinated Debentures, fair values are based
on published statistical data.
Forward Exchange Contracts (Derivative)
The fair value of the forward exchange contracts are based upon
exchange rates at November 30, 1997 and 1996 as the contracts are
short term.
The estimated fair value of the Company’s financial instruments
are as follows:
November 30, 1997 November 30, 1996
Carrying Fair Carrying Fair
Amount Value Amount Value
Equity collar (derivative) $1,246 $1,246 – –
Long-term obligations
including current
installments $30,491 $30,910 $59,865 $56,046
Forward exchange
contract obligation
(derivative) – $26,125 – 5,316
Limitations
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and, therefore,
cannot be determined with precision. Changes in assumptions could
significantly affect the estimates.
(17) Contingencies
The Company is a defendant in litigation arising from the normal
conduct of its affairs. The impact of the final resolution of these mat-
ters on the Company’s results of operations or liquidity in a particular
reporting period is not known. Management is of the opinion, how-
ever, that the litigation in which the Company is a defendant is either
subject to product liability insurance coverage or, to the extent not
covered by such insurance, will not have a material adverse effect on
the Company’s consolidated financial position.
The Company has guaranteed certain obligations of its equity
investments and has established standby letters of credit to guarantee
the bank obligations of Audiovox Communications and Audiovox
Venezuela (Note 16(b)).
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