Audiovox 2009 Annual Report Download - page 43

We regularly review our cash funding requirements and attempt to meet those requirements through a combination of cash on hand,
cash provided by operations, available borrowings under bank lines of credit and possible future public or private debt and/or equity
offerings. At times, we evaluate possible acquisitions of, or investments in, businesses that are complementary to ours, which
transactions may require the use of cash. We believe that our cash, other liquid assets, operating cash flows, credit arrangements,
access to equity capital markets, taken together, provides adequate resources to fund ongoing operating expenditures. In the event that
they do not, we may require additional funds in the future to support our working capital requirements or for other purposes and may
seek to raise such additional funds through the sale of public or private equity and/or debt financings as well as from other
sources. No assurance can be given that additional financing will be available in the future or that if available, such financing will be
obtainable on terms favorable when required.
Off-Balance Sheet Arrangements
We do not maintain any off-balance sheet arrangements, transactions, obligations or other relationships with unconsolidated entities
that would be expected to have a material current or future effect upon our financial condition or results of operations.
Impact of Inflation and Currency Fluctuation
To the extent that we expand our operations into Europe, Canada, Latin America and the Pacific Rim, the effects of inflation and
currency fluctuations could impact our financial condition and results of operations. While the prices we pay for products purchased
from our suppliers are principally denominated in United States dollars, price negotiations depend in part on the foreign currency of
foreign manufacturers, as well as market, trade and political factors.
Recently there has been an increase in the inflationary rate in Venezuela. The country’s ability to translate bolivars to dollars and
transfer funds from our Venezuelan subsidiary to Audiovox Corporation has been delayed due to lack of U.S. dollars. The Company
currently has an intercompany receivable from Venezuela. Any decrease in the fixed rate of exchange could cause the Company to
suffer foreign exchange losses.
Seasonality
We typically experience seasonality in our operations. We generally sell a substantial amount of our products during September,
October and November due to increased promotional and advertising activities during the holiday season. Our business is also
significantly impacted by the holiday season and electronic trade shows in December and January.
Related Party Transactions
During 1998, we entered into a 30-year capital lease for a building with our principal stockholder and chairman, which was the
headquarters of the discontinued Cellular operation. Payments on the capital lease were based upon the construction costs of the
building and the then-current interest rates. This capital lease was refinanced in December 2006 and the lease expires on November
30, 2026. The effective interest rate on the capital lease obligation is 8%. On November 1, 2004, we entered into an agreement to
sublease the building to UTStarcom for monthly payments of $46 until November 1, 2009. We also lease another facility from our
principal stockholder which expires on November 30, 2016. Total lease payments required under all related party leases for the
five-year period ending February 28, 2014 are $6,381.
Recent Accounting Pronouncements
In February 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 159, The Fair
Value Option for Financial Assets and Financial Liabilities (“SFAS No. 159”), to provide companies the option to report selected
financial assets and liabilities at fair value. Upon adoption of the provisions of SFAS No. 159 on March 1, 2008, the Company did not
elect the fair value option to report its financial assets and liabilities at fair value. Accordingly, the adoption of SFAS No. 159 did not
have an impact on the Company's financial position or results of operations.
On December 4, 2007, the Financial Accounting Standards Board (“FASB”) issued Statement No. 141(R), Business Combinations
(“Statement No. 141(R)”) and Statement No. 160, Accounting and Reporting of Noncontrolling Interests in Consolidated Financial
Statements, an amendment of ARB No. 51 (“Statement No. 160”). These new standards will significantly change the financial
accounting and reporting of business combination transactions and noncontrolling (or minority) interests in consolidated financial
statements. Issuance of these standards is also noteworthy in that they represent the culmination of the first major collaborative
convergence project between the International Accounting Standards Board and the FASB. Statement No. 141(R) is required to be
adopted concurrently with Statement No. 160 and is effective for business combination transactions for which the acquisition date is
on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Early adoption is prohibited.
Application of Statement No. 141(R) and Statement No. 160 is required to be adopted prospectively, except for certain provisions of
Statement No. 160, which are required to be adopted retrospectively. Business combination transactions accounted for before adoption
of Statement No. 141(R) should be accounted for in accordance with Statement No. 141 and that accounting previously completed
under Statement No. 141 should not be modified as of or after the date of adoption of Statement No. 141(R). All of the Company’s
recent acquisitions fall under the scope of Statement No. 141. The Company will evaluate the impact of Statement No. 141 and
Statement No. 160 as they relate to any future acquisitions, as applicable.
Source: AUDIOVOX CORP, 10-K, May 14, 2009 Powered by Morningstar® Document Research℠