Audiovox 2004 Annual Report Download - page 78

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AUDIOVOX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
November 30, 2002, 2003 and 2004
(Dollars in thousands, except share and per share data)
(w) Issuances of Subsidiary Stock
The Company's accounting policy on the issuances of subsidiary stock
is to recognize through earnings the gain on the sale of the shares as
long as the sale of the shares is not part of a broader corporate
reorganization planned or contemplated by the Company and realization
of the gain is assured.
(x) Reclassifications
Certain reclassifications have been made to the 2002 and 2003
consolidated financial statements in order to conform to the 2004
presentation.
(y) Allocating Interest Expense to Discontinued Operations
Interest expense of $3,554, $1,166 and $3,148 was allocated to
discontinued operations for the years ended November 30, 2002, 2003
and 2004, respectively. These allocations represent consolidated
interest that cannot be attributed to other operations of the Company
and such allocations were based on the required working capital needs
of the Cellular business (See Note 2 of Notes to Consolidated
Financial Statements).
(2) Discontinued Operations and Sale of Cellular Business
(a) Background and Proceeds
On November 1, 2004, the Company completed its sale (the "Sale") of
the Cellular Business ("ACC" or "Cellular ") to UTStarcom, Inc.
("UTSI") in connection with a definitive asset purchase agreement
("the agreement"),which was signed on June 11, 2004. In accordance
with the agreement, the Company's majority owned subsidiary, ACC, sold
selected assets and certain liabilities (excluding certain
receivables, inter−company accounts payable, income taxes payable,
subordinated debt and certain accrued expenses and other current
liabilities), to UTSI. The following summarizes the assets and
liabilities which were sold to UTSI:
Accounts receivable, net $ 1,628
Inventory 116,341
Prepaid expenses and other assets 985
Receivables from vendors 3,101
Property, plant and equipment, net 1,759
−−−−−−−−
Total assets sold 123,814
Accounts payable 56,750
Accrued expenses and other liabilities 12,827
Accrued sales incentives 4,639
−−−−−−−−
Total liabilities sold 74,216
−−−−−−−−
Net assets sold $ 49,598
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