CLST, Part of the reason for the pop today was Moody's confirmed a stable outlook this afternoon before close. From what I gather this also removes some speculation about an SEC probe. This report apparently allays those fears by not making mention of it.
Tomorrow could be interesting, the chart is.
MOODY'S CONFIRMS CELLSTARS SUB NOTES AT B2, SENIOR DEBT AT Ba3
Approximately $265 Million in Debt Affected
New York, October 27, 1999 -- Moody's Investors Service confirmed the B2 rating of Cellstar Corp.'s $150 million 5%
convertible subordinated notes due 2002, and confirmed the Ba2 rating on the company's $115 million revolving credit
facility expiring 2002, and its B1 issuer rating. Cellstar's senior implied rating of Ba3 was also confirmed. The rating outlook
is stable. The ratings had been placed on review for possible downgrade in April 1999.
The ratings continue to reflect the volatility of Cellstar's operating environment, which will result in fluctuating margins and
rapidly changing business strategies. About 80% of Cellstar's business is done outside of the U.S., most of it in fast growing
markets in Latin America and Asia. The market for cellular handsets and accessories is also still in development with regards
to the technology, and to the relationships among manufacturers, carriers, distributors, and resellers in different parts of the
world. As a result, Cellstar's business model continues to shift as it seeks ways to continually provide value to its customers -
the manufacturers and carriers - and maintain its competitive position. The company's medium term growth objectives may
also be challenged by capital constraints, although Moody's believes the company is likely to obtain sufficient financing to
carry out its growth objectives.
The ratings are supported by Cellstar's size; by its operating flexibility, demonstrated by the company's recovery from
adverse developments over the last year and enabling it to maintain its position and expand its presence in key markets;
increased diversity in its base of customers and suppliers; and by a relatively low level of fixed expenses, which help to
protect the company's prospective profitability and cash flow.
Cellstar still has not filled key management positions, including the president and chief financial officer positions. Existing
management, including stable regional management, has provided continuity in operations and controls, however. The
company has also been successful at reducing relative SG&A expenses per its plan, despite recent systemic handset
shortages and unexpected declines in sales in the U.S., as a result of its overhead reduction efforts and expansion in
international markets.
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