Audiovox 2004 Annual Report Download - page 52

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Seasonality
The Company typically experiences some seasonality in its operations. The
Company generally experiences a substantial amount of its sales during
September, October and November from increased promotional and advertising
activities from the Company's customers to end−users during the holiday season.
Off−Balance Sheet Arrangements
The Company does 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.
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 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. The effective interest rate on the capital lease
obligation is 8%. On November 1, 2004 the Company entered into an agreement to
sub−lease the building to UTStarcom for monthly payments of $46 through October
31, 2009. The Company also leases another facility from its principal
stockholder. 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, 2009 are $5,199.
During 1998, the discontinued Cellular operations entered into a
sale/leaseback transaction with the Company's principal stockholder and chief
executive officer for $2,100 of equipment, which was classified as an operating
lease. The lease required monthly payments of $34 and was terminated on November
1, 2004.
Transactions with Toshiba
Toshiba Corporation ("Toshiba") had been a minority interest shareholder in
the Company's Cellular Business ("ACC" or "Cellular ") since 1999. As previously
discussed, the Company completed its sale of the Cellular Business ("ACC" or
"Cellular ") to UTStarcom ("UTSI") on November 1, 2004. As such, Toshiba is no
longer a minority interest shareholder in the Company's former Cellular
business.
On May 29, 2002, Toshiba Corporation (Toshiba) purchased an additional 20%
of Audiovox Communications Corp. (ACC). Such purchase accounted for
approximately 31 shares at approximately $774 per share, for approximately
$23,900 in cash, increasing Toshiba's total ownership interest in ACC to 25%. In
addition, Toshiba paid $8,107 in exchange for an $8,107 convertible subordinated
note (the Note) which was paid in full during the sale of Cellular to UTSI (see
Note 2 of Notes to Consolidated Financial Statements). The Note bore interest at
a per annum rate equal to 1.75% and interest was payable annually on May 31st of
each year, commencing May 31, 2003.
As a result of the issuance of ACC's shares, the Company recognized a gain,
net of expenses of $1,735, of $14,269 ($8,847 after provision for deferred
taxes) during the year ended November 30, 2002. The gain represents the excess
of the sale price per share over the carrying amount per share multiplied by the
number of shares issued to Toshiba. The gain on the issuance of the subsidiary's
shares has been included in discontinued operations in the accompanying
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