4Q Earnings:
biz.yahoo.com
Wednesday January 14, 8:45 pm Eastern Time
Company Press Release
SOURCE: CellStar Corporation
CellStar Announces Record Fourth Quarter and Full Year
Revenues and Net Income
Company Reports Q4 Net Income of $17.3 Million on $406.5 Million in
Revenues; 1997 Fiscal Year Net Income of $53.6 Million on $1.5 Billion in
Revenues
CARROLLTON, Texas, Jan. 14 /PRNewswire/ -- CellStar Corporation (Nasdaq: CLST - news)
today reported $406.5 million in revenues for the fourth quarter ended November 30, 1997, a
38.5% increase compared to $293.5 million for the quarter ended November 30, 1996. Net income
for the quarter was $17.3 million compared to net income of $8.2 million in the year-earlier period.
Fourth quarter primary earnings per share were $0.57 compared to $0.29 for the fourth quarter of
1996.
CellStar finished 1997 with its fifth consecutive year of record revenues since becoming a public
company in 1993. Revenues for the year ended November 30, 1997, were $1,482.8 million
compared to $947.6 million for the prior year. Net income was also a record at $53.6 million
compared to a net loss of $6.4 million for the year ended November 30, 1996. Primary earnings per
share generated in 1997 were $1.78 compared to a net loss per share in 1996 of ($0.22).
''We are very pleased to be able to report to our stockholders a record year in both revenues and
net income,'' said Alan Goldfield, Chief Executive Officer of CellStar. ''In 1997, we focused our
efforts on increasing our global presence and capabilities, particularly in providing fulfillment services.
We expect to continue to expand globally in 1998 and participate in the rapidly growing wireless
telecommunications industry.''
Dick Gozia, President of CellStar, said, ''1997 was another year of significant growth for the
Company, not only in terms of record revenues and net income but also growth in other important
areas that will help CellStar expand in the future. We continued to strengthen our executive
management team and enhance our Information Technology systems to better support our customers.
We also raised significant capital for future growth and expanded geographically. We are optimistic
about the wireless industry in 1998 and our ability to be a key part of the logistics solutions for the
industry.''
Revenues from U.S. operations in the fourth quarter were $254.6 million compared to $182.3 million
for the year-earlier period. U.S. revenues for fiscal year 1997 were $866.9 million compared to
$568.7 million in fiscal year 1996. The increases occurred primarily from revenues from providing
products and value-added services to Pacific Bell Mobile Services and from sharp growth in sales
from the Company's Miami, Florida warehouse to customers exporting to South America.
Revenues from Asia-Pacific operations for the quarter were $96.9 million compared to $74.9 million
for the year-earlier period, increasing principally due to the Company's new business in the People's
Republic of China (''PRC''). The Company experienced slightly lower revenues in the region from
those in the previous quarter, primarily as a result of temporary shortages of products in the PRC and
reduced demand for wireless products due to the general economic, financial and currency problems
in certain countries in the region in the fourth quarter. Fiscal year revenues were $422.8 million
compared to $248.5 million in fiscal year 1996, resulting from the dramatic expansion in 1997 in
overall demand for wireless phones in the region coupled with the improved ability early in the year of
manufacturers to supply product to meet that demand, particularly in the PRC. Overall, the Company
expects this region to grow in 1998, especially in the Greater China area, and also has a goal of
expanding geographically in the Region, in part by acquisition, as appropriate opportunities become
available.
Latin American revenues were $31.1 million in the fourth quarter of 1997 compared to $26.9 million
in the fourth quarter of 1996, attributable principally to higher product sales in Mexico. Annual sales
in the region were $124.1 million compared to $119.8 million in fiscal year 1996 reflecting growth in
the business in Mexico but lower sales in Brazil as the Company shifted sales to its Miami, Florida
warehouse.
The Company's operations in the U.K. recorded revenues of $23.9 million in the quarter, compared
to revenues of $9.4 million in the same quarter last year. Annual revenues this year were $69.1
million compared to $10.6 million in 1996, reflecting maturation of the U.K. operation in 1997, which
was commenced in June 1996. Earlier this month CellStar announced that it has signed a definitive
agreement to acquire TA Intercall in Sweden. The Company expects to complete this transaction in
the first fiscal quarter. The Company is actively pursuing other potential acquisitions of distribution
companies in the European region in 1998.
Gross profit, as a percentage of revenues, was 10.1% for the fourth quarter of 1997 compared to
15.4% for the fourth quarter of 1996. The gross margin percentage for the fourth quarter decreased
primarily due to the sale of the Company's retail Communication Centers late last year and to the
inclusion of revenues in providing products and value-added services to Pacific Bell Mobile Services,
which reflect lower margins and lower risk than the Company's traditional wholesale business.
Selling, general and administrative expenses (''SG&A'') for the quarter were $17.1 million compared
to $37.7 million in the year-earlier period. The substantially higher level of expense in 1996 was
principally attributable to provisions recorded for a deterioration in the trade accounts receivable
portfolio in the Company's South American operations, primarily in Brazil, and to expenses
associated with the retail Communication Centers. SG&A for the fourth quarter was also lower than
prior quarters in 1997 due in large part to the Company's ability to improve its collection position on
accounts receivable by acquiring increased collateral, increasing the use of credit insurance and
collecting certain amounts that were considered at risk in prior quarters. The Company also closed
the remaining Communication Centers in August, resulting in an additional decrease in SG&A as
compared to the third quarter.
The effective income tax rate for the fourth quarter was 21.5%, down from 28.6% in the third
quarter. The Company benefited from certain tax advantages in Hong Kong in the fourth quarter that
allow the Company to exempt offshore sales from tax, lowering the Company's overall tax rate.
As of November 30, 1997, the Company had $74.6 million of cash and cash equivalents, compared
to $27.3 million at November 30, 1996. The increase resulted primarily from net proceeds to the
Company on its fourth quarter offering of $150.0 million of 5% Convertible Subordinated Notes,
after repayment of revolving credit borrowings and long-term debt.
Accounts receivable at the end of the fourth quarter were $176.0 million compared to $131.8 million
at the end of last year. Inventories were $190.4 million at the end of the fourth quarter compared to
$94.5 million at the end of last year.
There were over 38 days of sales in accounts receivable at the end of the fourth quarter, compared
to last year's fourth quarter level of 40 days. The annualized inventory turn rate at the end of the
fourth quarter was almost eight times, compared to approximately ten times at the end of the fourth
quarter of 1996. This change resulted primarily from increases in inventories of high-end wireless
phones for Latin America and for the Company's fulfillment contract with Pacific Bell Mobile
Services.
The current ratio for the Company at November 30, 1997 was 2.4 to 1.0 compared to 1.4 to 1.0 at
November 30, 1996.
The Company also completed a new $135.0 million multicurrency revolving credit facility that
replaced its previous $90.0 million revolving credit facility. The new facility was not drawn upon at
November 30, 1997.
''Forward-looking statements'' as defined in the Private Securities Litigation Reform Act of 1995
may be included in this news release. A variety of factors, including political instability, changes in
foreign laws, regulations and tariffs, new technologies, competition and other factors discussed in the
Company's Form 10-K filed with the SEC as well as certain recent general economic, financial and
currency problems in certain Asia-Pacific countries could cause CellStar's actual results and
experience to differ materially from anticipated results or other expectations expressed in the
Company's forward-looking statements.
CellStar Corporation is a global integrated wholesaler and retailer of wireless phones and other
wireless communications products with operations in the United States, the Asia-Pacific Region,
Latin America and the United Kingdom. The Company is one of the world's largest non-carrier
wholesale distributors of wireless phones for Motorola, Inc. and Ericsson, Inc., and also distributes
wireless phones for Nokia Mobile Phones, Inc. The Company is also a wholesale distributor of
wireless phones for QUALCOMM, Sony and NEC Corporation [Nasdaq:NIPNY - news] in the
United States.
CELLSTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three months Year ended
ended November 30, November 30,
1997 1996 1997 1996
Revenues $406,501 293,465 1,482,814 947,601
Cost of sales 365,588 248,289 1,325,488 810,000
Gross profit 40,913 45,176 157,326 137,601
Selling, general and
administrative expenses 17,129 37,713 81,319 135,585
Operating income 23,784 7,463 76,007 2,016
Other income (expense):
Interest expense (2,262) (1,489) (7,776) (8,350)
Other, net 489 189 2,725 (532)
Total other income
(expense) (1,773) (1,300) (5,051) (8,882)
Income (loss) before
income taxes 22,011 6,163 70,956 (6,866)
Provision (benefit) for
income taxes 4,738 (2,069) 17,323 (453)
Net income (loss) $17,273 8,232 53,633 (6,413)
Net income (loss)
per share:
Primary $0.57 0.29 1.78 (0.22)
Fully diluted $0.52 0.29 1.63 (0.22)
Weighted average number of
shares and equivalent shares
outstanding:
Primary 30,518 28,910 30,084 28,910
Fully diluted 33,229 28,910 32,855 28,910
CELLSTAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
November 30, 1997 and 1996
(Unaudited)
(In thousands)
1997 1996
Cash and cash equivalents $74,646 $27,296
Accounts receivable, net 176,032 131,812
Inventories 190,404 94,473
Other current assets 5,118 5,787
Total current assets 446,200 259,368
Other 50,911 39,183
Total assets $497,111 $298,551
Current liabilities $186,246 $188,003
Long-term debt, less current portion 150,000 6,285
Total liabilities 336,246 194,288
Stockholders' equity 160,865 104,263
Total liabilities and stockholders'
equity $497,111 $298,551
SOURCE: CellStar Corporation
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