Audiovox 2000 Annual Report Download - page 41

The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate that value:
INVESTMENT SECURITIES
The carrying amount represents fair value, which is based upon
quoted market prices and conversion features at the reporting date
(Note 8).
LONG-TERM OBLIGATIONS
The carrying amount of bank debt under the Company’s revolving
credit agreement approximates fair value because the interest rate on
the bank debt is reset every quarter to reflect current market rates.
With respect to the subordinated debentures, fair values are based on
quoted market price.
FORWARD EXCHANGE CONTRACTS (DERIVATIVE)
The fair value of the forward exchange contracts are based upon
exchange rates at November 30, 2000 as the contracts are short term.
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, can-
not be determined with precision. Changes in assumptions could sig-
nificantly affect the estimates.
(22) Segment Information
The Company has two reportable segments which are organized by prod-
ucts: Wireless and Electronics. The Wireless segment markets wireless
handsets and accessories through domestic and international wireless
carriers and their agents, independent distributors and retailers. The
Electronics segment sells autosound, mobile electronics and consumer
electronics, primarily to mass merchants, power retailers, specialty retail-
ers, new car dealers, original equipment manufacturers (OEM), independ-
ent installers of automotive accessories and the U.S. military.
The Company evaluates performance of the segments based upon income
before provision for income taxes. The accounting policies of the seg-
ments are the same as those described in the summary of significant
accounting policies (Note 1). The Company allocates interest and certain
shared expenses, including treasury, legal and human resources, to the
segments based upon estimated usage. Intersegment sales are reflected
at cost and have been eliminated in consolidation. A royalty fee on the
intersegment sales, which is eliminated in consolidation, is recorded by
the segments and included in other income (expense). Certain items are
maintained at the Company’s corporate headquarters (Corporate) and are
not allocated to the segments. They primarily include costs associated
with accounting and certain executive officer salaries and bonuses and
certain items including investment securities, equity investments,
deferred income taxes, certain portions of excess cost over fair value of
assets acquired, jointly-used fixed assets and debt. The jointly-used fixed
assets are the Company’s management information systems, which is
jointly used by the Wireless and Electronics segments and Corporate. A
portion of the management information systems costs, including depreci-
ation and amortization expense, are allocated to the segments based
upon estimates made by management. Segment identifiable assets are
those which are directly used in or identified to segment operations.
During the year ended November 30, 1998, two customers of the
Wireless segment accounted for approximately 18.3% and 14.9% of the
Company’s 1998 sales. During the year ended November 30, 1999, three
customers of the Wireless segment accounted for approximately 19.6%,
14.9% and 12.7% of the Company’s 1999 sales. During the year ended
November 30, 2000, one customer of the Wireless segment accounted for
approximately 50.5% of the Company’s 2000 sales. No customers in the
Electronics segment exceeded 10% of the consolidated sales in fiscal
1998, 1999 or 2000.
AUDIOVOX CORPORATION AND SUBSIDIARIES
AUDIOVOX 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)