Audiovox 2006 Annual Report Download - page 31

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We believe the Electronics Group has an expanding market with a certain level of volatility
related to both domestic and international new car sales, increased competition by manufacturers,
technological advancements, price erosion and general economic conditions. As a result, all of our
products are subject to price fluctuations, which could affect the carrying value of inventories and
gross margins in the future.
Liquidity and Capital Resources
Cash Flows, Commitments and Obligations
As of February 28, 2007, we had working capital of $302,613, which includes cash and short-term
investments of $156,345 compared with working capital of $343,145 at February 28, 2006, which
included cash and short-term investments of $177,079. The decrease in short-term investments is
primarily due to the acquisition of Thomson’s Americas consumer electronics accessory business for
$60,485 partially offset by improved inventory turnover and collection of accounts receivable. We plan
to utilize our current cash position as well as collections from accounts receivable to fund the current
operations of the business. However, we may utilize all or a portion of current capital resources to
pursue other business opportunities, including acquisitions. The following table summarizes our cash
flow activity for all periods presented:
Year
Ended
February 28,
2007
Three
Months
Ended
February 28,
2006
Years ended
November 30,
2005 2004
Cash provided by (used in):
Operating activities ............................ $ 43,420 $ 55,298 $(42,085) $ 87,144
Investing activities ............................. (40,897) (51,018) 13,629 (4,177)
Financing activities............................. (3,449) (2,188) (555) (44,580)
Effect of exchange rate changes on cash .......... 119 24 (234) 320
Net (decrease) increase in cash and cash
equivalents.................................. $ (807) $ 2,116 $(29,245) $ 38,707
Operating activities provided cash of $43,420 for the year ended February 28, 2007 due to: i) net
income from continuing operations of $2,936, ii) decreased inventory balances as a result of increased
turnover due to improved inventory management and iii) collection of income tax refunds. Cash
provided or used by operating activities is primarily generated from net income from continuing
operations, the collection of accounts receivable, inventory turnover and payment of accounts payable
and income taxes. The timing of payments and collections can fluctuate and are often impacted by the
timing of sales and inventory purchases.
Investing activities used cash of $40,897 during the year ended February 28, 2007, primarily due
to the purchase of the Thomson Americas consumer electronics accessory business partially offset by
the sales (net of purchases) of short-term investments. Cash provided or used by investing activities is
primarily generated from activity related to investments as well as acquisitions and divestitures.
Financing activities used $3,449 during the year ended February 28, 2007, primarily from the
purchase of treasury stock and payment of bank obligations and debt partially offset by proceeds
received from the exercise of stock options and warrants. The increased cash usage from financing
activities during the year ended November 30, 2004 is primarily due to the full repayment of all
domestic bank obligations outstanding as a result of the sale of the Cellular business.
As of February 28, 2007, we have a domestic credit line to fund the temporary short-term
working capital needs of the Company. This line expires on August 31, 2007 and allows aggregate
borrowings of up to $25,000 at an interest rate of Prime (or similar designations) plus 1%. In addition,
Audiovox Germany has a 16,000 Euro accounts receivable factoring arrangement and a 6,000 Euro
Asset-Based Lending (‘‘ABL’’) credit facility and a $1,000 Venezuela credit facility.
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