Audiovox 2008 Annual Report Download - page 40

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2. We enter into operating leases in the normal course of business.
3. Represents amounts outstanding under the Audiovox Germany factoring agreement at February 29, 2008.
4. Commercial letters of credit are issued during the ordinary course of business through major domestic banks as requested by
certain suppliers. We also issue standby letters of credit to secure certain bank obligations and insurance requirements.
5. Represents amounts outstanding under term loan agreements in connection with the Oehlbach acquisition. This amount also
includes amounts due under a call-put option with certain employees of Audiovox Germany.
6. Represents contingent payments in connection with the Thomson Accessory, Oehlbach and Incaar acquisitions (see Note 3 of the
Consolidated Financial Statements).
7. Open purchase obligations represent inventory commitments. These obligations are not recorded in the consolidated financial
statements until commitments are fulfilled and such obligations are subject to change based on negotiations with manufacturers.
We regularly review our cash funding requirements and attempt to meet those requirements through a combination of cash on hand,
cash provided by operations, available borrowings under bank lines of credit and possible future public or private debt and/or equity
offerings. At times, we evaluate possible acquisitions of, or investments in, businesses that are complementary to ours, which
transactions may require the use of cash. We believe that our cash, other liquid assets, operating cash flows, credit arrangements,
access to equity capital markets, taken together, provides adequate resources to fund ongoing operating expenditures. In the event that
they do not, we may require additional funds in the future to support our working capital requirements or for other purposes and may
seek to raise such additional funds through the sale of public or private equity and/or debt financings as well as from other
sources. No assurance can be given that additional financing will be available in the future or that if available, such financing will be
obtainable on terms favorable when required.
Off-Balance Sheet Arrangements
We do not maintain any off-balance sheet arrangements, transactions, obligations or other relationships with unconsolidated
entities that would be expected to have a material current or future effect upon our financial condition or results of operations.
Impact of Inflation and Currency Fluctuation
To the extent that we expand our operations into Europe, Canada, Latin America and the Pacific Rim, the effects of inflation and
currency fluctuations could impact our financial condition and results of operations. While the prices we pay for products purchased
from our suppliers are principally denominated in United States dollars, price negotiations depend in part on the foreign currency of
foreign manufacturers, as well as market, trade and political factors.
Seasonality
We typically experience seasonality in our operations. We generally sell a substantial amount of our products during September,
October and November due to increased promotional and advertising activities during the holiday season. Our business is also
significantly impacted by the holiday season and electronic trade shows in December and January.
Related Party Transactions
During 1998, we entered into a 30-year capital lease for a building with our principal stockholder and chairman, which was the
headquarters of the discontinued Cellular operation. Payments on the capital lease were based upon the construction costs of the
building and the then-current interest rates. This capital lease was refinanced in December 2006 and the lease expires on November
30, 2026. The effective interest rate on the capital lease obligation is 8%. On November 1, 2004, we entered into an agreement to
sublease the building to UTStarcom for monthly payments of $46 until November 1, 2009. We also lease another facility from our
principal stockholder which expires on November 30, 2016. Total lease payments required under all related party leases for the
five-year period ending February 28, 2012 are $6,089.
36
Source: AUDIOVOX CORP, 10-K, May 14, 2008