Audiovox 1997 Annual Report Download - page 26

On October 28, 1997, AudiovoxVenezuela issued a note payable to
a Venezuelan bank in the amount of 994,000 Venezuelan Bolivars
(approximately $1,986 at November 30, 1997) to finance additional
working capital needs.The note is scheduled to be repaid within one
year and as such, is classified as short-term. Interest on the note
payable is 20%. The note payable is secured by a standby letter of
credit in the amount of $2,000, issued under the Credit Agreement by
the Company and is payable upon demand or upon expiration of the
standby letter of credit on August 31, 1998.
The maximum month-end amounts outstanding under the Credit
Agreement and Malaysian Credit Agreement borrowing facilities dur-
ing the years ended November 30, 1997, 1996, and 1995 were $28,420,
$44,213, and $59,315, respectively. Average borrowings during the
years ended November 30, 1997, 1996, and 1995 were $11,478,
$33,662, and $43,470, respectively, and the weighted average interest
rates were 11.3%, 8.9%, and 8.7%, respectively.
(b) Documentary Acceptances
During 1997, the Company had various unsecured documentary
acceptance lines of credit available with suppliers to finance invento-
ry purchases. The Company does not have written agreements speci-
fying the terms and amounts available under the lines of credit. At
November 30, 1997, $3,914 of documentary acceptances were out-
standing of which all was due to TALK.
The maximum month-end documentary acceptances outstand-
ing during the years ended November 30, 1997, 1996, and 1995 were
$4,162, $9,792, and $9,977, respectively. Average borrowings during
the years ended November 30, 1997, 1996, and 1995 were $3,199,
$5,845, and $5,876, respectively, and the weighted average interest
rates, including fees, were 6.3%, 5.1%, and 4.4%, respectively.
(10) Long-Term Debt
A summary of long-term debt follows:
November 30,
1997 1996
Convertible subordinated debentures:
6 1/4%, due 2001, convertible at
$17.70 per share $2,269 $23,748
Subordinated note payable 3,922 4,417
6,191 28,165
Less current installments – –
$6,191 $28,165
On March 15, 1994, the Company completed the sale of $65,000, 6
1/4% convertible subordinated debentures (Subordinated
Debentures) due 2001 and entered into an Indenture Agreement. The
Subordinated Debentures are convertible into shares of the
Company’s Class A Common Stock, par value $.01 per share at an ini-
tial conversion price of $17.70 per share, subject to adjustment under
certain circumstances. The Indenture Agreement contains various
covenants. The bonds are subject to redemption by the Company in
whole, or in part, at any time after March 15, 1997, at certain specified
amounts. On May 9, 1995, the Company issued warrants to certain
beneficial holders of these Subordinated Debentures (Note 13(d)).
On November 25, 1996, the Company completed an exchange of
$41,252 of its $65,000 Subordinated Debentures for 6,806,580 shares
of Class A Common Stock (Exchange). As a result of the Exchange, a
charge of $26,318 was recorded. The charge to earnings represents (i)
the difference in the fair market value of the shares issued in the
Exchange and the fair market value of the shares that would have
been issued under the terms of the original conversion feature plus
(ii) a write-off of the debt issuance costs associated with the
Subordinated Debentures (Note 1(h)) plus (iii) expenses associated
with the Exchange offer. The Exchange resulted in taxable income
due to the difference in the face value of the bonds converted and the
fair market value of the shares issued and, as such, a current tax
expense of $2,888 was recorded. An increase to paid in capital was
reflected for the face value of the bonds converted, plus the difference
in the fair market value of the shares issued in the Exchange and the
fair market value of the shares that would have been issued under the
terms of the original conversion feature for a total of $63,564.
During January 1997, the Company completed additional
exchanges totaling $21,479 of it $65,000 Subordinated Debentures
for 2,860,925 shares of Class A Common Stock (Additional
Exchanges). As a result of the Additional Exchanges, similar to that of
the Exchange described earlier, a charge of $12,686, tax expense of
$158 and an increase to paid in capital of $33,592, was recorded. As a
result of the Exchange and Additional Exchanges, the remaining
Subordinated Debentures are $2,269.
On March 8, 1994, the Company entered into a Debenture
Exchange Agreement and exchanged certain debentures for Series
AA and Series BB Convertible Debentures (Debentures). The
Debentures were convertible at any time at $5.34 per share, which is
subject to adjustment in certain circumstances, and were secured by
a standby letter of credit. Although the Debenture Exchange
Agreement provides for optional prepayments under certain circum-
stances, such prepayments are restricted by the Credit Agreement
(Note 9(a)). On February 9, 1996, the holders of $1,100 of the Series
BB Convertible Debentures exercised their right to convert into
206,046 shares of Class A Common Stock. The remaining balance of
the Debentures were repaid during 1996; thereby extinguishing the
remaining conversion features of these Debentures.
On October 20, 1994, the Company issued a note payable for
500,000 Japanese Yen (approximately $3,922 and $4,417 on
November 30, 1997 and 1996, respectively) to finance its investment
in TALK (Note 8). The note is scheduled to be repaid on October 20,
2004 and bears interest at 4.1%. The note can be repaid by cash pay-
ment or by giving 10,000 shares of its TALK investment to the lender.
The lender has an option to acquire 2,000 shares of TALK held by the
Company in exchange for releasing the Company from 20% of the
face value of the note at any time after October 20, 1995. This note
and the investment in TALK are both denominated in Japanese Yen,
and, as such, the foreign currency translation adjustments are
accounted for as a hedge. Any foreign currency translation adjust-
ment resulting from the note will be recorded in stockholders’ equity
to the extent that the adjustment is less than or equal to the adjust-
ment from the translation of the investment in TALK. Any portion of
the adjustment from the translation of the note that exceeds the
adjustment from the translation of the investment in TALK is a trans-
action gain or loss that will be included in earnings.
25