Audiovox 2004 Annual Report Download - page 31

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From fiscal 2000 through 2004, several major events and trends have
affected the Company's results and financial conditions. Such events and trends
are discussed below.
Divestiture of Cellular Business
On November 1, 2004, the Company completed the divestiture of its Cellular
business to UTSI. The Cellular business was a major driver in the Company's
growth over the past twenty years. However, consolidation within the Cellular
industry, extensive price competition and the inability to successfully partner
with a manufacturer created a difficult challenge for the Company to compete
within the Cellular industry. The competitive nature of the Cellular business
caused inconsistency in Cellular results, which led to the Company's sale of
selected assets and certain liabilities of ACC to UTSI for a purchase price of
$165,170, subject to a working capital adjustment of $8,472 and the retention of
certain account receivables of $148,494 for a total of $322,136.
The following is a summary of the expected net proceeds as a result of the
sale of the Cellular business and related transactions:
Purchase price $165,170
Working capital adjustment 8,472
Cellular receivables retained, net 148,494
−−−−−−−−
Gross proceeds 322,136
Less: cash paid to Toshiba for minority interest and note 13,645
Less: payment to former Cellular employees 25,019
Less: payment of long term incentive award 1,916
Less: acquisition costs for legal, accounting and other 4,603
Less: accrued expenses of Cellular 3,092
Less: estimated taxes 36,311
Less: payment for domestic bank obligations 99,266
−−−−−−−−
Expected net cash proceeds from sale of Cellular business and related
transactions $138,284
========
Currently and subsequent to the sale of the Cellular business, the net
proceeds have been invested in short−term investments with the intention of
maintaining principal while generating a moderate return and maintaining
liquidity in the account's holdings. The Company plans to utilize the proceeds
to pursue strategic and complementary acquisitions or invest in the Company's
Electronics subsidiary, which has had a history of sales and profit growth.
Specifically, sales and gross profit for the Electronics Group have increased
52.1% and 49.4%, respectively from fiscal 2002. However, the Company may use all
or a portion of the proceeds for other purposes and is considering all market
opportunities.
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