Audiovox 2006 Annual Report Download - page 65

Audiovox Corporation and Subsidiaries
Notes to Consolidated Financial Statements, continued
February 28, 2007
(Dollars in thousands, except share and per-share data)
2) Discontinued Operations
a) Sale of Audiovox Malaysia
On November 7, 2005, the Company completed the sale of its majority owned subsidiary,
Audiovox Malaysia (‘‘AVM’’), to the then current minority interest stockholder. The
Company discontinued ownership of AVM due to increased competition from Original
Equipment Manufacturers and deteriorating credit quality of local customers. The Company
sold its remaining equity in AVM in exchange for a $550 face-value promissory note ($404
after discount) payable in 60 equal monthly installments with an effective interest rate of
6.2%. As a result of the sale of AVM, the Company was released from all of its Malaysian
liabilities, including bank obligations, and recorded the following loss on the sale for the year
ended November 30, 2005:
Purchase Price ........................................................... $ 404
Equity (after discount) of AVM at time of sale .............................. (1,418)
Non-cash cumulative translation losses ...................................... (1,365)
Income tax benefit ....................................................... 300
Loss on sale of AVM, included in discontinued operations..................... $(2,079)
b) Sale of Cellular Business
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
As consideration for the sale, the Company received $165,170 (‘‘Purchase Price’’) and an
additional $8,472 pursuant to a net working capital adjustment (‘‘the adjustment’’) based on
the working capital of ACC at the time of closing. The adjustment was collected during the
year ended November 30, 2005.
A portion of the Purchase Price proceeds were utilized for the following payments:
• ACC repaid Toshiba Corporation (‘‘Toshiba’’), a former minority interest shareholder of
ACC, $8,162 as payment in full of the outstanding principal and interest of a
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