Audiovox 2010 Annual Report Download - page 96

Audiovox Corporation and Subsidiaries
Notes to Consolidated Financial Statements, continued
February 28, 2010
(Dollars in thousands, except share and per share data)
12) Financial Instruments
a) Off-Balance Sheet Risk
Commercial letters of credit are issued by the Company during the ordinary course of business through major domestic
banks as requested by certain suppliers. The Company also issues standby letters of credit principally to secure certain
bank obligations and insurance policies. The Company had $319 and $0 open commercial letters of credit at February
28, 2010 and February 28, 2009, respectively. Standby letters of credit amounted to $1,294 and $2,380 at February 28,
2010 and February 28, 2009, respectively. The terms of these letters of credit are all less than one year. No material loss
is anticipated due to nonperformance by the counter parties to these agreements. The fair value of the standby letters of
credit is estimated to be the same as the contract values based on the short-term nature of the fee arrangements with the
issuing banks.
At February 28, 2010, the Company had unconditional purchase obligations for inventory commitments of
$76,580. These obligations are not recorded in the consolidated financial statements until commitments are fulfilled and
such obligations are subject to change based on negotiations with manufacturers.
b) Concentrations of Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade
receivables. The Company's customers are located principally in the United States, Canada and Germany and consist of,
among others, distributors, mass merchandisers, warehouse clubs and independent retailers. The Company generally
grants credit based upon analyses of customers' financial condition and previously established buying and payment
patterns. For certain customers, the Company establishes collateral rights in accounts receivable and inventory and
obtains personal guarantees from certain customers based upon management's credit evaluation.
At February 28, 2010, two customers accounted for approximately 43% of accounts receivable, while at February 28,
2009, these two customers accounted for 42% of accounts receivable. During the year ended February 28, 2010, two
customers accounted for 28% of sales, while at February 28, 2009 one customer accounted for 22% of net sales.
A portion of the Company's customer base may be susceptible to downturns in the retail economy, particularly in the
consumer electronics industry. Additionally, customers specializing in certain automotive sound, security and accessory
products may be impacted by fluctuations in automotive sales.
13) Financial and Product Information About Foreign and Domestic Operations
Segment
We have determined that we operate in one reportable segment, the Electronics Group, based on review of ASC 280
“Segment Reporting” (“ASC 280”). The characteristics of our operations that are relied on in making and reviewing business
decisions include the similarities in our products, the commonality of our customers, suppliers and product developers across
multiple brands, our unified marketing and distribution strategy, our centralized inventory management and logistics, and the
nature of the financial information used by our Executive Officers. Management reviews the financial results of the
Company based on the performance of the Electronics Group.
Locations
Net sales and long-lived assets by location were as follows:
Net Sales
Year Year Year
Ended Ended Ended
February 28, February 28, February 29,
2010 2009 2008
North America $ 460,582 $ 507,798 $ 501,952
Latin America 23,232 30,165 13,666
Germany 59,261 52,252 61,746
Other foreign countries 7,620 12,884 13,991
Total net sales $ 550,695 $ 603,099 $ 591,355
Source: AUDIOVOX CORP, 10-K, May 14, 2010 Powered by Morningstar® Document Research℠