Audiovox 1999 Annual Report Download - page 27

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AUDIOVOX
owns 95% of ACC; prior to the transaction ACC was a wholly-owned sub-
sidiary. As a result of the issuance of ACC’s shares, the Company recog-
nized a gain of $3,800 ($2,204 after provision for deferred taxes). The gain
on the issuance of the subsidiary’s shares have been recognized in the
statements of income in accordance with the Company’s policy on the
recognition of such transactions.
(4) Supplemental Cash Flow Information
The following is supplemental information relating to the consolidated
statements of cash flows: For the Years Ended
November 30,
1997 1998 1999
Cash paid during the years for:
Interest, excluding bank charges,
net of $801 capitalized in 1998................. $ 1,560 $1,587 $ 2,994
Income taxes.................................................. $23,530 $4,496 $12,039
Non-cash Transactions:
During January 1997, the Company completed an exchange of
$21,479 of its $65,000 61⁄4% convertible subordinated debentures
(Subordinated Debentures) into 2,860,925 shares of Class A common
stock (Note 12).
During 1997, the Company issued a credit of $1,250 on open accounts
receivable and issued 250,000 shares of its Class A common stock, valued
at five dollars per share, in exchange for a 20% interest in Bliss-tel
Company, Limited (Bliss-tel) (Note 10).
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 10).
As of November 30, 1997, the Company recorded an unrealized hold-
ing gain relating to the equity collar, net of deferred income taxes, of $773
as a separate component of stockholders’ equity (Note 19).
During 1998, a capital lease obligation of $6,340 was incurred when
the Company entered into a building lease (Note 18).
During 1998, the Company sold its equity collar for $1,499. The trans-
action resulted in a net gain on hedge of available-for-sale securities
of $929 which is reflected as a separate component of stockholders’
equity (Note 19).
During 1998 and 1999, the Company exercised its option to convert
1,137,212 and 2,882,788 Japanese yen (approximately $8,176 and
$24,026) of Shintom Co. Ltd. (Shintom) convertible debentures (Shintom
debentures) into approximately 7,500,000 and 48,100,000 shares of
Shintom common stock, respectively (Note 8).
During the years ended November 30, 1997, 1998 and 1999, the
Company recorded an unrealized holding gain relating to available-for-
sale marketable equity securities, net of deferred income taxes, of
$1,917, $(8,040) and $5,775, respectively, as a separate component of
accumulated other comprehensive income (Note 16).
During 1999, $1,249 of its $65,000 61⁄4% subordinated debentures
were converted into 70,565 shares of Class A common stock (Note 12).
(5) Transactions With Major Suppliers
The Company engages in transactions with Shintom and TALK
Corporation (TALK). Shintom is a stockholder who owns all of the out-
standing Preferred Stock of the Company at November 30, 1998 and 1999.
The Company has a 30.8% interest in TALK (Note 10).
Transactions with Shintom and TALK include financing arrangements
and inventory purchases which approximated 29%, 19% and 11% for the
years ended November 30, 1997, 1998 and 1999, respectively, of total
inventory purchases. At November 30, 1998 and 1999, the Company had
recorded $15 and $20, respectively, of liability due to TALK for inventory
purchases included in accounts payable. The Company also has documen-
tary acceptance obligations payable to TALK as of November 30, 1998
and 1999 (Note 11(b)). At November 30, 1998 and 1999, the Company had
recorded a receivable from TALK in the amount of $734 and $3,741,
respectively, a portion of which is payable with interest (Note 10), which
is reflected as receivable from vendor on the accompanying consolidated
financial statements.
TALK, which holds world-wide distribution rights for product manufac-
tured by Shintom, has given the Company exclusive distribution rights on
all wireless personal communication products for all countries except
Japan, China, Thailand and several mid-eastern countries.
Inventory purchases from another major supplier approximated 32%,
42% and 39% of total inventory purchases for the years ended November
30, 1997, 1998 and 1999, respectively. Although there are a limited num-
ber of manufacturers of its products, management believes that other
suppliers could provide similar products on comparable 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.
(6) Accounts Receivable
Accounts receivable is comprised of the following:
November 30,
1998 1999
Trade accounts receivable............................................... $142,211 $254,477
Receivables from equity investments (Note 10) ............. 1,035 1,057
143,246 255,534
Less:
Allowance for doubtful accounts................................. 2,944 5,645
Allowance for cellular deactivations........................... 875 1,261
Allowance for co-operative advertising, cash
discounts and market development funds .............. 8,307 11,356
$131,120 $237,272
(7) Receivable from Vendor
The Company recorded receivable from vendor in the amount of $956
and $9,327 as of November 30, 1998 and 1999, respectively. Receivable
from vendor represents prepayments on product shipments, defective
product reimbursements and interest receivable at a rate of 6.5% on
amounts due from TALK (Note 10).