Audiovox 2001 Annual Report Download - page 24

The Company has certain contractual cash obligations and other
commercial commitments which will impact its short and long-term
liquidity. At November 30, 2001, such obligations and commitments
are as follows:
Payments Due By Period
Contractual Less
Cash than 1–3 4–5 After
Obligations Total 1 Year Years Years 5 years
Capital lease
obligations $ 14,758 $ 553 $ 1,659 $1,137 $11,409
Operating leases 5,297 2,045 3,075 177 —
Other current
obligations 5,267 5,267 — — —
Total contractual
cash obligations $ 25,322 $ 7,865 $ 4,734 $1,314 $11,409
Amount of Commitment
Expiration per Period
Other Total Less
Commercial Amounts than 1–3 4–5 Over
Commitments Committed 1 Year Years Years 5 years
Lines of credit $ 92,213 $ 92,213 — — —
Standby letters
of credit 7,704 7,704 — — —
Guarantees 300 300 — — —
Commercial
letters of credit 37,635 37,635 — — —
Total commercial
commitments $137,852 $137,852 — — —
The Company regularly reviews its cash funding requirements and
attempts 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, the Company evaluates possible acquisi-
tions of, or investments in, businesses that are complementary to
those of the Company, which transactions may requires the use
of cash. The Company believes that its cash, other liquid assets,
operating cash flows, credit arrangement, access to equity capital
markets, taken together, provide adequate resources to fund ongoing
operating expenditures.
In the event that they do not, the Company may require additional
funds in the future to support its 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 financ-
ing will be available in the future or that if available, such financing will
be obtainable on terms favorable to the Company when required.
Related Party Transactions
The Company has entered into several related party transactions
which are described below.
Leasing Transactions
During 1998, the Company entered into a 30-year capital lease for a
building with its principal stockholder and chief executive officer, which
is the headquarters of the Wireless operation. Payments on the lease
were based upon the construction costs of the building and the then-
current interest rates. In connection with the capital lease, the
Company paid certain costs on behalf of its principal stockholder and
chief executive officer in the amount of $1,301. During 2000 and 2001,
$800 was repaid to the Company.
During 1998, the Company entered into a sale/leaseback transaction
with its principal stockholder and chief executive officer for $2,100 of
equipment, which has been classified as an operating lease.The lease
is a five-year lease with monthly payments of $34. No gain or loss was
recorded on the transaction as the book value of the equipment
equaled the fair market value.
The Company also leases certain facilities from its principal stock-
holder and several officers. Rentals for such leases are considered by
management of the Company to approximate prevailing market rates.
Total lease payments required under the leases for the five-year period
ending November 30, 2005 are $2,919.
Amounts Due from Officer
During 2000, the Company advanced $620 to an officer/director of the
Company which has been included in prepaid expenses and other cur-
rent assets on the accompanying consolidated balance sheet. On
December 1, 2000, the Company obtained an unsecured note in the
amount of $620 for the advance. The note, which bears interest at the
LIBOR rate, to be adjusted quarterly, plus 1.25% per annum, was due,
principle and interest, on November 30, 2001. Subsequently, the note
was reissued for $651, including accrued interest, under the same
terms, due November 30, 2002. In addition, the Company has out-
standing notes due from various officers of the Company aggregating
$235 as of November 30, 2001, which have been included in other
assets on the accompanying consolidated balance sheet. The notes
bear interest at the LIBOR rate plus 0.5% per annum. Principle and
interest are payable in equal annual installments beginning July 1,
1999 through July 1, 2003.
Transactions with Shintom and TALK
In April 2000, AX Japan purchased land and a building (the Property)
from Shintom Co., Ltd. (Shintom) for 770,000,000 Yen (approximately
$7,300) and entered into a leaseback agreement whereby Shintom
has leased the Property from AX Japan for a one-year period. This
lease is being accounted for as an operating lease by AX Japan.
Shintom is a stockholder who owns all of the outstanding preferred
stock of the Company and is a manufacturer of products purchased by
the Company through its previously-owned equity investment, TALK
Corporation (TALK). The Company currently holds stock in Shintom
and has previously invested in Shintom convertible debentures.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
22 Audiovox Corporation and Subsidiaries