Audiovox 2004 Annual Report Download - page 8

capital adjustment. In addition, the Company retained certain receivables of ACC
of $148,494 and, after collecting these receivables, the Company expects to
receive total gross proceeds of $322,136 from the divestiture of the Cellular
business. These proceeds were, or will be, reduced by aggregate payments of
$84,586 to Toshiba, estimated taxes, former Cellular employees and other
divestiture costs. In addition, the Company utilized a portion of the proceeds
to repay $99,266 of domestic bank obligations outstanding. The expected net
proceeds ("the net proceeds") is $138,284 from the divestiture of the Cellular
business. Please refer to "Management's Discussion and Analysis of Financial
Condition and Results of Operations" (Item 7) for additional information
regarding the divestiture of the Cellular business.
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 net
proceeds to pursue strategic and complementary acquisitions or invest in the
Company's Electronics Group, 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 net proceeds for other purposes and is considering all
opportunities.
The Company has presented Cellular's financial results in discontinued
operations for all periods presented due to the divestiture of the Cellular
business. As such, certain reclassifications have been made to prior year
amounts in order to conform to the current period presentation. Unless indicated
otherwise, all amounts presented herein exclude the results of the Cellular
business.
Acquisitions
On July 8, 2003, the Company, through a newly−formed, wholly−owned
subsidiary, acquired for cash (i) certain accounts receivable, inventory and
trademarks from the U.S. audio operations of Recoton Corporation (the "U.S.
audio business") or (Recoton) and (ii) the outstanding capital stock of Recoton
German Holdings GmbH (the "international audio business"), the parent holding
company of Recoton Corporation's Italian, German and Japanese subsidiaries, for
$40,046, net of cash acquired, including transaction costs of $1,900. The
primary reason for this transaction was to expand the product offerings of
Audiovox and to obtain certain long−standing trademarks such as Jensen(R),
Acoustic Research(R) and others. The Company also assumed an obligation of
$10,742 with a German financial institution as a result of the purchase of the
common stock of Recoton German Holdings GmbH.
On March 15, 2002, Code purchased certain assets of Code−Alarm, Inc., an
automotive security product company. The purpose of this acquisition was to
expand brand recognition and improve OEM production with manufacturers. The
purchase price consisted of approximately $7,100, paid in cash at the closing,
and a contingent debenture (CSI Debenture) whose value is linked to the future
earnings of Code.
Please refer to Note 5 "Business Acquisitions" of the Notes to Consolidated
Financial Statements for additional information regarding the aforementioned
acquisitions.
Subsequent Event
On January 4, 2005, the Company's wholly−owned subsidiary, Audiovox
Electronics Corporation, signed an asset purchase agreement to purchase certain
assets of Terk Technologies Corp. for a purchase price of $13,100, subject to a
working capital adjustment, plus contingent debentures based on achievement of
future revenue targets. This acquisition is expected to increase the Company's
market share for satellite radio products as well as accessories related to HDTV
products.
5