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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JANUARY 14, 1998
CELLSTAR CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-22972 75-2479727
(STATE OF INCORPORATION) (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
IDENTIFICATION NO.)
1730 BRIERCROFT COURT, CARROLLTON, TEXAS 75006
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (972) 466-5000
ITEM 5. OTHER EVENTS
On January 14, 1998, CellStar Corporation issued a press release
announcing fourth quarter and fiscal year financial results. The entire text
of the press release is incorporated by reference herein, and a copy of the
press release has been filed as an exhibit to this report.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) EXHIBITS
99.1 Press Release dated January 14, 1998
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
CELLSTAR CORPORATION
January 22, 1998 By /s/ MARK Q. HUGGINS
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Mark Q. Huggins
Senior Vice President -- Administration,
Chief Financial Officer and Treasurer
2
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EXHIBIT INDEX
Exhibit Description
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99.1 Press release dated January 14, 1998
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EXHIBIT 99.1
[LOGO]
FOR IMMEDIATE RELEASE:
Media Contact: Dick Gozia 972/466-5031
Investor Contact: Mark Huggins 972/466-5014
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, JANUARY 14, 1998 -- CellStar Corporation [Nasdaq: CLST]
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
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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 UK 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
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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 our 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.
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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 in the United States.
[2 Pages of Tables Attached]
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CELLSTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
Three months Year ended
ended November 30, November 30,
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Revenues $406,501 293,465 1,482,814 947,601
Cost of sales 365,588 248,289 1,325,488 810,000
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Gross profit 40,913 45,176 157,326 137,601
Selling, general and
administrative expenses 17,129 37,713 81,319 135,585
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Operating income 23,784 7,463 76,007 2,016
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Other income (expense):
Interest expense (2,262) (1,489) (7,776) (8,350)
Other, net 489 189 2,725 (532)
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Total other income (expense) (1,773) (1,300) (5,051) (8,882)
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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)
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Net income (loss) $ 17,273 8,232 53,633 (6,413)
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Net income (loss) per share $ 0.57 0.29 1.78 (0.22)
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Weighted average number of shares and
equivalent shares outstanding 30,518 28,910 30,084 28,910
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</TABLE>
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CELLSTAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
November 30, 1997 and 1996
(Unaudited)
(In thousands)
1997 1996
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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
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Total current assets 446,200 259,368
Other 50,911 39,183
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Total assets $497,111 298,551
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Current liabilities $186,246 188,003
Long-term debt, less current portion 150,000 6,285
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Total liabilities 336,246 194,288
Stockholders' equity 160,865 104,263
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Total liabilities and stockholders' equity $497,111 298,551
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