Audiovox 2008 Annual Report Download - page 88

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Audiovox Corporation and Subsidiaries
Notes to Consolidated Financial Statements, continued
February 29, 2008
(Dollars in thousands, except share and per share data)
7) Financing Arrangements
The Company has the following financing arrangements:
February 29, February 28,
2008 2007
Bank Obligations
Domestic bank obligations (a) $ - $ -
Venezuela bank obligations (b) - -
Euro asset-based lending
obligation (c) 3,070 2,890
Total bank obligations $ 3,070 $ 2,890
Debt
Euro term loan agreement (d) $ - $ 5,461
Oehlbach (e) 850 -
Other (f) 853 1,493
Total debt $ 1,703 $ 6,954
a) Domestic Bank Obligations
At February 29, 2008, the Company has an unsecured credit line to fund the temporary short-term working capital needs
of the domestic operations. This line expires on June 30, 2008 and allows aggregate borrowings of up to $25,000 at an
interest rate of Prime (or similar designations) plus 1%. As of February 29, 2008 and February 28, 2007, no direct
amounts are outstanding under this agreement. At February 29, 2008, the Company had $6,202 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 had secured this
facility with a $1,200 standby letter of credit. As of February 28, 2007, no amounts were 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, 2008 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. The activity under this ABL is
accounted for as a sale of accounts receivable in accordance with Statement of Financial Accounting Standards No. 140,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities" ("SFAS No. 140"), as
such transfers met the critera in SFAS No. 140. 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 29, 2008, the amount of accounts receivable and finished goods available for
factoring exceeded the amounts outstanding under this obligation.
F-31
Source: AUDIOVOX CORP, 10-K, May 14, 2008