Audiovox 2000 Annual Report Download - page 19

OTHER INCOME AND EXPENSE
Interest expense and bank charges decreased $57 during fiscal 1999 from
fiscal 1998.
Equity in income of equity investments, net, increased by approximately
$3,150 for fiscal 1999 compared to fiscal 1998. The majority of the
increases were due to increases in the equity income of ASA and TALK.
During 1998, the Company purchased 400,000 Japanese yen (approxi-
mately $3,132) of Shintom debentures and exercised its option to convert
the Shintom debentures into shares of Shintom common stock. These
shares are included in the Company’s available-for-sale marketable secu-
rities at November 30, 1998. During the fourth quarter of 1999, the
Company recorded an other-than-temporary decline in market value of its
Shintom common stock in the amount of $1,953 and a related deferred
tax benefit of $761. The write-down has been recorded as a component of
other expense in the consolidated statements of income.
During 1998, the Company purchased an additional 1,400,000 Japanese
yen (approximately $9,586) of Shintom Debentures and exercised its
option to convert 737,212 Japanese yen of Shintom debentures into
shares of Shintom common stock. The Company sold the Shintom com-
mon stock yielding net proceeds of $5,830 and a gain of $787.
During 1999, the Company purchased an additional 3,100,000 Japanese
yen (approximately $27,467) of Shintom Debentures and exercised its
option to convert 2,882,788 Japanese yen of Shintom debentures into
shares of Shintom common stock. The Company sold the Shintom com-
mon stock yielding net proceeds of $27,916 and a gain of $3,501.
As of December 1999, the Company completed the liquidation of Audiovox
Pacific Pty. Ltd.
PROVISION FOR INCOME TAXES
The effective tax rate for 1998 and 1999 was 21.8% and 36.2%, respec-
tively. In 1998, the valuation allowance was reduced by $340. In addition,
the Company received a benefit in the amount of $350, resulting from con-
cluded state tax examinations, thus reducing the 1998 effective tax rate.
Liquidity and Capital Resources
The Company’s cash position at November 30, 2000 was $904 above the
November 30, 1999 level. Operating activities used approximately $6,628,
primarily from increases in accounts receivable partially offset by an
increase in accounts payable, accrued expenses and other current liabili-
ties. Even though accounts receivable has increased, days on hand have
decreased approximately 6%. Investing activities provided approximately
$3,388, primarily from proceeds from the sale of investment securities,
partially offset by the purchase of property, plant and equipment.
Financing activities provided approximately $4,198, primarily from the
sale of common stock and issuance of notes payable, partially offset by
net repayments of bank obligations.
The Company maintains a revolving credit agreement with various finan-
cial institutions. During the year ended November 30, 1999, the credit
agreement was amended and restated in its entirety, extending the expi-
ration date to July 27, 2004. The amended and restated credit agreement
provides for $200,000 of available credit, including $15,000 for foreign
currency borrowings. In December 1999, the credit agreement was further
amended, resulting in an increase in available credit to $250,000.
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 are guaranteed by certain of the Company’s
subsidiaries and is secured by accounts receivable, inventory and the
Company’s shares of ACC. As of November 30, 2000, availability of credit
under the credit agreement is a maximum aggregate amount of $250,000,
subject to certain conditions, based upon a formula taking into account
the amount and quality of its accounts receivable and inventory. At
November 30, 2000, the amount of unused available credit is $145,433.
The credit agreement also allows for commitment up to $50,000 in for-
ward exchange contracts.
The credit agreement contains several covenants requiring, among other
things, minimum levels of pre-tax income and minimum levels of net
worth and working capital. Additionally, the agreement includes restric-
tions and limitations on payments of dividends, stock repurchases and
capital expenditures.
The Company also has revolving credit facilities in Malaysia to finance
additional working capital needs. As of November 30, 2000, the available
line of credit for direct borrowing, letters of credit, bankers’ acceptances
and other forms of credit approximately $8,158. The Malaysian credit facil-
ities are partially secured by the Company under one standby letter of
credit totaling $1,300 and two standby letters of credit totaling $4,800 and
are payable upon demand or upon expiration of the standby letters of
credit on January 15, 2002 and August 31, 2001, respectively. The obliga-
tions of the Company under the Malaysian credit facilities are secured by
the property and building in Malaysia owned by Audiovox Communications
Sdn. Bhd.
The Company also has revolving credit facilities in Venezuela to finance
additional working capital needs. The Venezuelan credit facility is secured
by the Company under a standby letter of credit in the amount of $3,500
which expires on May 31, 2001 and is payable upon demand or upon expi-
ration of the standby letter of credit.
AUDIOVOX CORPORATION AND SUBSIDIARIES
AUDIOVOX 17