Audiovox 2008 Annual Report Download - page 84

Contemporaneous with this transaction, the Company entered into a license agreement with Multimedia Device Ltd., a
Chinese manufacturer, to market certain product categories acquired in the acquisition for an upfront fee of $10,000, the
purchase of certain inventory, which amounted to approximately $4,700, plus a 1% royalty payment on future net RCA sales
beginning in 2008 and continuing in perpetuity. Beginning in 2010 through 2014, this royalty fee increases to 2% of future
net sales. Accordingly, the upfront license fee of $10,000 will reduce the Company’s cost of the transaction (refer to purchase
price above).
The results of operations of this acquisition have been included in the consolidated financial statements from the date of
acquisition. The purpose of this acquisition was to control the RCA trademark for the audio/video field of use and to expand
our core product offerings into certain developing markets.
The following summarizes the preliminary allocation of the purchase price to the fair value of the assets acquired and
liabilities assumed at the date of acquisition:
Assets acquired:
Inventory $ 22,062
Tooling 150
Tradename (less license fee) 11,785
Total assets acquired $ 33,997
Liabilities assumed:
Warranty accrual $ 12,848
Other liabilities acquired 6,308
Total liabilities assumed $ 19,156
Total purchase price $ 14,841
The allocation of the purchase price to assets acquired and liabilities assumed is preliminary (see Note 1(j)).
Terk
On January 4, 2005, the Company signed an asset purchase agreement to purchase certain assets of Terk Technologies Corp.
("Terk"). The purchase price was subject to a working capital adjustment based on the working capital of Terk at the time of
closing, plus contingent debentures with a maximum value of $9,280 based on the achievement of future revenue targets. The
total purchase price, which included a working capital adjustment of $1,730 and acquisition costs of $514, approximated
$15,274, as adjusted. No amount has been recorded with respect to the debentures and any amount paid under the debentures
to date would be recorded as additional goodwill.
The results of operations of this acquisition have been included in the consolidated financial statements from the date of
acquisition. The purpose of this acquisition is to increase the Company's market share for satellite radio products as well as
accessories such as antennas for HDTV products.
The following summarizes the final allocation of the purchase price to the fair value of the assets acquired and liabilities
assumed at the date of acquisition:
Assets acquired:
Accounts receivable $ 10,916
Inventory 9,349
Prepaid expenses and other current assets 293
Property, plant and equipment 1,210
Goodwill 8,798
Customer contract (5 years) 1,104
Tradename 1,999
Total assets acquired $ 33,669
Liabilities assumed:
Accounts payable accrued expenses and other liabilities 14,296
Bank obligations 4,099
Total liabilities assumed $ 18,395
Total purchase price $ 15,274
The allocation of the purchase price to assets and liabilities acquired was based upon an independent valuation study and is
final (see Note 1(j)).
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Source: AUDIOVOX CORP, 10-K, May 14, 2008