Audiovox 2005 Annual Report Download - page 26

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The Electronics Group is supported by the Corporate Administrative Services
Group, which provides treasury, legal, human resources, management information,
and corporate financial and accounting services to the Electronics Group, as
well as management information services to equity investments and UTStarcom.
On January 4, 2005, we purchased certain assets and liabilities of Terk
Technologies Corp. ("Terk") for $15,345. The purpose of this acquisition was to
increase our market share for satellite radio products as well as accessories
such as antennas for HDTV products.
Divestitures
On November 7, 2005, we completed the sale of our majority owned
subsidiary, Audiovox Malaysia ("AVM"), to the current minority interest
stockholder due to increased competition from non−local OEM's and deteriorating
credit quality of local customers. We sold our remaining equity in AVM in
exchange for a $550 promissory note and were released from all of our Malaysian
liabilities including bank obligations resulting in a loss of $2,079.
On November 1, 2004, we completed the divestiture of our Cellular business
to UTSI. The Cellular business was a major driver in our 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 to compete within the Cellular industry. The
competitive nature of the Cellular business caused inconsistency in Cellular
results, which led to the sale of selected assets and certain liabilities of our
Cellular business to UTSI for an initial purchase price of $165,170, a working
capital adjustment of $8,472 and the retention of certain account receivables of
$148,494 for total gross proceeds of $322,136. After paying outstanding domestic
obligations, taxes and other costs associated with the divestiture, we received
net proceeds of approximately $138,284. As a result of the sale of the Cellular
business, we recorded a gain of $67,000 within discontinued operations in fiscal
2004.
Currently, the net proceeds from the Cellular divestiture has 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. We plan to utilize the proceeds to pursue strategic and complementary
acquisitions or invest in our current business. However, we may use all or a
portion of the proceeds for other purposes and are considering all market
opportunities.
Growth of Electronics Group
Electronics net sales have increased 89% from $285,132 in 2001 to $539,716
in 2005. During this period, our sales were impacted by the following items:
o acquisition of Terk Technologies in fiscal 2005,
o sales of Jensen and Code−Alarm branded products,
o the growth in sales of consumer electronic products to
$200,361 in fiscal 2005 due to the introduction of new consumer models
such as, portable DVD players and flat−panel TVs, and
o the introduction of satellite radio and mobile video entertainment
systems, caused Mobile Electronics sales to grow to $339,355 in fiscal
2005
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