Audiovox 2008 Annual Report Download - page 63

Audiovox Corporation and Subsidiaries
Notes to Consolidated Financial Statements, continued
February 29, 2008
(Dollars in thousands, except share and per share data)
g) Accounts Receivable
The majority of the Company's accounts receivable are due from companies in the retail, mass merchant and OEM
industries. Credit is extended based on an evaluation of a customer's financial condition. Accounts receivable are
generally due within 30-60 days and are stated at amounts due from customers, net of an allowance for doubtful
accounts. Accounts outstanding longer than the contracted payment terms are considered past due.
Accounts receivable is comprised of the following:
February 29, February 28,
2008 2007
Trade accounts receivable and other $ 119,349 $ 91,330
Less:
Allowance for doubtful accounts 6,386 5,062
Allowance for cash discounts 275 265
$ 112,688 $ 86,003
The Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history
and the customer's current credit worthiness, as determined by a review of their current credit information. The Company
continuously monitors collections and payments from its customers and maintains a provision for estimated credit losses
based upon historical experience and any specific customer collection issues that have been identified. While such credit
losses have historically been within management's expectations and the provisions established, the Company cannot
guarantee it will continue to experience the same credit loss rates that have been experienced in the past. Since the
Company's accounts receivable are concentrated in a relatively few number of customers, a significant change in the
liquidity or financial position of any one of these customers could have a material adverse impact on the collectability of
the Company's accounts receivable and future operating results.
h) Inventory
The Company values its inventory (finished goods) at the lower of the actual cost to purchase (primarily on a weighted
moving-average basis) and/or the current estimated market value of the inventory less expected costs to sell the
inventory. The Company regularly reviews inventory quantities on-hand and records a provision for excess and obsolete
inventory based primarily from selling prices, indications from customers based upon current price negotiations and
purchase orders. The Company's industry is characterized by rapid technological change and frequent new product
introductions that could result in an increase in the amount of obsolete inventory quantities on-hand. The Company
recorded inventory write-downs of $4,925, $2,977, $689, and $16,924 for the years ended February 29, 2008, February
28, 2007, the three months ended February 28, 2006 and the year ended November 30, 2005, respectively.
As a result of the Company’s: a) post holiday season review of inventory and sales projections, b) review of products
which were at the end of their product life cycle at the completion of the fourth quarter and c) market information
obtained from industry competitors and customers regarding pricing and product demand at the January 2006 Consumer
Electronics trade show, the Company decided to discontinue certain product lines resulting in a $9,972 inventory
writedown in the fourth quarter of fiscal 2005.
In addition, the Company recorded a $3,789 inventory writedown during the third quarter of fiscal 2005 primarily for
satellite radio plug and play products as a result of sudden reduced pricing by a competitor.
F-11
Source: AUDIOVOX CORP, 10-K, May 14, 2008