Audiovox 2006 Annual Report Download - page 72

Audiovox Corporation and Subsidiaries
Notes to Consolidated Financial Statements, continued
February 28, 2007
(Dollars in thousands, except share and per-share data)
August 31, 2007 and allows aggregate borrowings of up to $25,000 at an interest rate of
Prime (or similar designations) plus 1%. As of February 28, 2007 and 2006, no direct amounts
are outstanding under this agreement. At February 28, 2007, the Company had $9,308 in
commercial and standby letters of credit outstanding, which reduces the amount available
under the unsecured credit line.
b) Venezuela Bank Obligations
In October 2005, Audiovox Venezuela entered into a credit facility borrowing arrangement
which allows for principal borrowings up to $1,000 plus accrued interest. The facility requires
minimum monthly interest payments at an annual interest rate of 13%until the expiration of
the facility on February 14, 2008. Audiovox Corporation has secured this facility with a
$1,200 standby letter of credit. As of February 28, 2007, no amounts are outstanding under
this agreement.
c) Euro Asset-Based Lending Obligation
The Company has a 16,000 Euro accounts receivable factoring arrangement and a 6,000 Euro
Asset-Based Lending (‘‘ABL’’) (finished goods inventory and non factored accounts
receivable) credit facility for the Company’s subsidiary, Audiovox Germany, which expires on
October 25, 2007 and is renewable on an annual basis. Selected accounts receivable are
purchased from the Company on a non-recourse basis at 85%of face value and payment of
the remaining 15%upon receipt from the customer of the balance of the receivable
purchased. In respect of the ABL credit facility, selected finished goods are advanced at a
60%rate and non factored accounts receivables are advanced at a 50%rate. The rate of
interest is the three month Euribor plus 2.5%, and the Company pays 0.4%of its gross sales
as a fee for the accounts receivable factoring arrangement. As of February 28, 2007, the
amount of accounts receivable and finished goods available for factoring exceeded the
amounts outstanding under this obligation.
d) Euro Term Loan Agreement
On September 2, 2003, 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. Tranche B has been fully repaid. Payments under Tranche A are due in monthly
installments and interest accrues at 2.75%over the Euribor rate. 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. In April 2005, the maturity of the term
loan was prolonged to August 30, 2010 with a pre-payment option.
Audiovox Corporation guarantees 3 million Euros of this term loan. The term loan is secured
by the pledge of the stock of Audiovox Germany on all brands and trademarks of Audiovox
Germany. The term loan requires the maintenance of certain yearly financial covenants that
are calculated according to German Accounting Standards. Should any of the financial
covenants not be met, the financial institution may charge a higher interest rate on any
outstanding borrowings and/or call the loan. The short and long term amounts outstanding
under this agreement were $1,524 and $3,937 respectively, at February 28, 2007 and $1,371
and $4,911, respectively, at February 28, 2006.
e) Other Debt
On August 29, 2003, the Company entered into a call/put option agreement with certain
employees of Audiovox Germany, whereby these employees can acquire up to a maximum of
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