Audiovox 2004 Annual Report Download - page 91

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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)
(c) Euro Factoring Obligation
The Company has a 16,000 Euro accounts receivable and inventory
factoring arrangement for the Company's subsidiary, Audiovox German
Holdings GmbH, (Audiovox Germany) which expires on October 25, 2005
and is renewable on an annual basis. Selected accounts receivable are
purchased from the Company on a non−recourse basis at 80% of face
value and payment of the remaining 20% upon receipt from the customer
of the balance of the receivable purchased. The rate of interest is
Euribor plus 2.5%, and the Company pays 0.4% of its gross sales as a
fee for this arrangement. As of November 30, 2003 and 2004, the amount
of accounts receivable and inventory available for factoring exceeded
the amounts outstanding under this obligation.
(d) Euro Loan Agreement
On September 2, 2003, the Company's subsidiary, Audiovox Germany,
borrowed 12 million Euros under a new term loan agreement. This
agreement was for a 5 year term loan with a financial institution
consisting of two tranches. Tranche A is for 9 million Euros and
Tranche B is for 3 million Euros. The term loan matures on August 30,
2008. Payments are due in 60 monthly installments and interest accrues
at (i) 2.75% over the Euribor rate for the Tranche A and (ii) 3.5%
over the three months Euribor rate for Tranche B. Any amount repaid
may not be reborrowed. The term loan becomes immediately due and
payable if a change of control occurs without permission of the
financial institution.
Audiovox Corporation guarantees 3 million Euros of this term loan. The
term loan is secured by the pledge of the stock of Audiovox German
Holdings GmbH and on all brands and trademarks of the Audiovox German
Holdings Group. The term loan requires the maintenance of certain
yearly financial covenants that are calculated according to German
Accounting Standards for Audiovox German Holdings. Should any of the
financial covenants not be met, the financial institution may charge a
higher interest rate on any outstanding borrowings. The short and long
term amounts outstanding under this agreement were $3,226 and $9,736,
respectively, at November 30, 2003 and $2,497 and $6,880,
respectively, at November 30, 2004.
(e) Long Term Debt to Toshiba
On May 29, 2002, an $8,107 convertible subordinated note (the Note)
was issued to Toshiba. The Note bore interest at a per annum rate
equal to 1.75% and interest is payable annually on May 31st of each
year, commencing May 31, 2003. As discussed in Notes 2 and 3 of Notes
to Consolidated Financial Statements, the Company repaid the total
amount outstanding under the Note, which approximated $8,162 at
November 1, 2004, to Toshiba during the sale of the Cellular business
to UTSI. The Note has been included in non−current liabilities of
discontinued operations at November 30, 2003 on the accompanying
consolidated balance sheet.
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