<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________to______________
COMMISSION FILE NUMBER 0-22972
CELLSTAR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 75-2479727
- ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1730 Briercroft Court 75006
Carrollton, Texas -----
---------------------- (Zip Code)
(Address of principal executive
offices)
(972) 466-5000
---------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
On April 9, 1999, there were 59,614,096 outstanding shares of Common Stock,
$0.01 par value per share.
1
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CELLSTAR CORPORATION
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page
PART I - FINANCIAL INFORMATION Number
- ------ --------------------- ------
<S> <C>
Item 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS (unaudited)
February 28, 1999 and November 30, 1998 3
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Three months ended February 28, 1999 and 1998 4
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY AND
COMPREHENSIVE INCOME (unaudited)
Three months ended February 28, 1999 5
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Three months ended February 28, 1999 and 1998 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 10
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 16
PART II - OTHER INFORMATION
- ------- -----------------
Item 1. LEGAL PROCEEDINGS 18
Item 2. CHANGES IN SECURITIES 19
Item 3. DEFAULTS UPON SENIOR SECURITIES 19
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 19
Item 5. OTHER INFORMATION 19
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 19
</TABLE>
2
<PAGE>
PART I- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CELLSTAR CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
February 28, November 30,
1999 1998
---------------- -----------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 55,261 47,983
Accounts receivable (less allowance for doubtful
accounts of $35,259 and $33,361, respectively) 248,656 349,760
Inventories 250,902 274,438
Deferred income tax assets 21,632 18,670
Prepaid expenses 30,377 16,806
---------------- ----------------
Total current assets 606,828 707,657
Property and equipment, net 27,267 27,858
Goodwill (less accumulated amortization of $4,507
and $4,032, respectively) 32,346 32,910
Other assets 7,485 7,100
---------------- ----------------
$ 673,926 775,525
================ ================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 197,488 311,326
Notes payable to financial institutions 88,873 85,023
Accrued expenses 37,208 39,395
Income taxes payable 4,948 8,601
Deferred income tax liabilities 812 3,389
----------------- ----------------
Total current liabilities 329,329 447,734
Long-term debt 150,000 150,000
----------------- ----------------
Total liabilities 479,329 597,734
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares
authorized; none issued - -
Common stock, $.01 par value, 200,000,000 shares
authorized; 59,612,346 and 58,963,218 shares
issued and outstanding, respectively 596 590
Additional paid-in capital 78,385 76,962
Common stock warrant - 4
Accumulated other comprehensive income - foreign currency
translation adjustments (8,391) (8,181)
Retained earnings 124,007 108,416
----------------- ----------------
Total stockholders' equity 194,597 177,791
----------------- ----------------
$ 673,926 775,525
================= ================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE>
CELLSTAR CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
Three months ended February 28, 1999 and 1998
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
Revenues $ 515,348 406,745
Cost of sales 471,709 365,335
----------- ----------
Gross profit 43,639 41,410
Selling, general and
administrative expenses 25,618 22,737
----------- ----------
Operating income 18,021 18,673
Other income (expense):
Equity in income of
affiliated companies 6,023 185
Gain on sale of assets 2,200 -
Interest expense (4,681) (2,520)
Other, net (1,587) 424
----------- ----------
Total other income (expense) 1,955 (1,911)
----------- ----------
Income before income taxes 19,976 16,762
Provision for income taxes 4,385 2,514
----------- ----------
Net income $ 15,591 14,248
=========== ==========
Net income per share:
Basic $ 0.26 0.24
=========== ==========
Diluted $ 0.26 0.23
=========== ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE>
CELLSTAR CORPORATION AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity and Comprehensive Income
Three months ended February 28, 1999
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Accumulated
Additional Common other
Common Stock paid-in stock comprehensive Retained
-------------------
Shares Amount capital warrant income earnings Total
-------- -------- --------- ------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at November 30, 1998 58,963 $590 76,962 4 (8,181) 108,416 177,791
Comprehensive income:
Net income - - - - - 15,591 15,591
Foreign currency translation
adjustment - - - - (210) - (210)
---------
Total comprehensive
income 15,381
Common stock issued under
stock option plans 88 - 1,425 - - - 1,425
Exercise of common stock warrant 561 6 (2) (4) - - -
-------- -------- --------- ------- ------------ -------- ---------
Balance at February 28, 1999 59,612 $596 78,385 - (8,391) 124,007 194,597
======== ======== ========= ======= ============ ======== =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE>
CELLSTAR CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three months ended February 28, 1999 and 1998
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 15,591 14,248
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 2,886 1,356
Gain on sale of assets (2,200) -
Deferred income taxes (5,539) (2,300)
Changes in operating assets and liabilities
net of effects from acquisition of business:
Accounts receivable 100,984 (38,544)
Inventories 23,536 12,174
Prepaid expenses (13,571) (1,579)
Other assets (1,127) (403)
Accounts payable (113,838) (26,715)
Accrued expenses (2,187) (1,754)
Income taxes payable (2,816) 6,871
-------------- ---------------
Net cash provided by (used in) operating activities 1,719 (36,646)
Cash flows from investing activities:
Proceeds from sale of assets 3,300 -
Purchases of property and equipment (2,179) (1,302)
Acquisition of business, net of cash acquired - (2,442)
-------------- ---------------
Net cash provided by (used in) investing activities 1,121 (3,744)
Cash flows from financing activities:
Net borrowings on notes payable to financial institutions 3,850 21,400
Checks not presented for payment - 23,296
Net proceeds from issuance of common stock 588 2,004
--------------- ---------------
Net cash provided by financing activities 4,438 46,700
Net increase in cash and cash equivalents 7,278 6,310
Cash and cash equivalents at beginning of period 47,983 74,646
--------------- ---------------
Cash and cash equivalents at end of period $ 55,261 80,956
=============== ===============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
6
<PAGE>
CELLSTAR CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
Although the interim consolidated financial statements of CellStar
Corporation (the "Company") are unaudited, it is the opinion of the
Company's management that all adjustments (consisting of only normal
recurring adjustments) necessary for a fair statement of the results
have been reflected therein. Operating revenues and net earnings for
any interim period are not necessarily indicative of results that may
be expected for the entire year.
These statements should be read in conjunction with the consolidated
financial statements and related notes included in the Company's
Annual Report on Form 10-K for the year ended November 30, 1998.
Certain prior period financial statement amounts have been
reclassified to conform to the current year presentation.
(2) Investment in Topp Telecom, Inc.
In February 1999, the Company sold part of its equity investment in
Topp Telecom, Inc. ("Topp") to a wholly-owned subsidiary of Telefonos
de Mexico S.A. de C.V. At the closing, the Company also sold a portion
of its debt investment to certain other shareholders of Topp. As a
result of these transactions, the Company received cash in the amount
of $7.0 million, retained a $22.5 million note receivable and a 19.5%
equity ownership interest in Topp and recorded a gain of $5.8 million.
The gain is recorded in equity in income of affiliated companies in
the consolidated statement of operations for the three months ended
February 28, 1999.
(3) Stock Split
On May 19, 1998, the Board of Directors approved a two-for-one common
stock split, which was effected in the form of a stock dividend that
was distributed on June 23, 1998 to stockholders of record on June 5,
1998. All historical share, dilutive securities and net income per
share amounts have been retroactively adjusted for the stock split.
(4) Net Income Per Share
Basic net income per common share is based on the weighted average
number of common shares outstanding for the relevant period. Diluted
net income per common share is based on the weighted average number of
common shares outstanding plus the dilutive effect of potentially
issuable common shares pursuant to a warrant, stock options and
convertible notes.
7
<PAGE>
A reconciliation of the numerators and denominators of the basic and
diluted net income per share computations for the three months ended
February 28, 1999 and 1998 follows (in thousands, except per share
data):
<TABLE>
<CAPTION>
1999 1998
------------- ------------
<S> <C> <C>
Basic:
Net income $ 15,591 14,248
Weighted average number of shares outstanding 59,513 58,628
------------- ------------
Net income per share $ 0.26 0.24
============= ============
Diluted:
Net income $ 15,591 14,248
Interest on convertible notes, net of tax effect 1,125 1,125
------------- ------------
Adjusted net income 16,716 15,373
Weighted average number of shares outstanding 59,513 58,628
Effect of dilutive securities:
Stock options and warrant 611 1,848
Convertible notes 5,422 5,422
------------- ------------
Weighted average number of shares outstanding
and effect of dilutive securities 65,546 65,898
------------- ------------
Net income per share $ 0.26 0.23
============= ============
</TABLE>
(5) Segment and Related Information
Effective November 30, 1998, the Company adopted Statement of
Financial Accounting Standards No. 131, "Disclosures About Segments of
an Enterprise and Related Information." Segment information for the
three months ended February 28, 1998 has been restated to conform to
the new presentation.
The Company operates predominantly within one industry, wholesale and
retail sales of wireless telecommunications products. The Company's
management evaluates operations primarily on income before interest
and income taxes in the following reportable geographical regions:
North America, primarily the United States, Asia-Pacific, Latin
America, which includes Mexico and the Company's Miami, Florida
operations ("Miami"), and Europe. Revenues and operating results of
Miami are included in Latin America since Miami's activities are
primarily for exporter customers. The Corporate segment includes
headquarter operations, income and expenses not allocated to
reportable segments, and interest expense on the Company's
Multicurrency Revolving Credit Facility and long-term debt.
Intersegment sales and transfers are not significant.
8
<PAGE>
Segment information for the three months ended February 28, 1999 and 1998
follows (in thousands):
<TABLE>
<CAPTION>
NORTH ASIA- LATIN
AMERICA PACIFIC AMERICA EUROPE CORPORATE TOTAL
------------ ------------ ------------ ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Three months ended
February 28, 1999:
Revenues from external customers $ 102,138 133,703 170,252 109,255 - 515,348
Income (loss) before
interest and taxes 11,844 8,111 4,882 2,899 (4,028) 23,708
Net income (loss) 6,102 7,099 1,610 1,191 (411) 15,591
Three months ended
February 28, 1998:
Revenues from external customers $ 104,170 78,364 189,393 34,818 - 406,745
(Loss) income before
interest and taxes (519) 9,486 11,929 681 (3,182) 18,395
Net (loss) income (1,783) 10,114 7,978 584 (2,645) 14,248
</TABLE>
(6) Foreign Currency Non-deliverable Forward Contracts
At February 28, 1999, the Company had Brazilian real non-deliverable
forward ("NDF") contracts aggregating $13.7 million outstanding with
maturities from March 2, 1999 through March 10, 1999 and at strike prices
ranging from 1.2610 to 1.9180 between the Brazilian real and the U.S.
dollar. These NDF contracts and other settled NDF contracts of similar
nature were used to manage the Company's foreign currency exposure to the
Brazilian real with respect to certain credit sales made to E.A.
Electronicos e Componentes Ltda. ("E.A."), a Brazilian importer. Foreign
currency rate fluctuations caused bad debt expense of $26.9 million related
to the payments remitted by E.A. This expense was recorded in selling,
general and administrative expenses for the three months ended February 28,
1999, but this expense was completely offset by gains realized on NDF
contract settlements. A net mark-to-market gain of $0.4 million was
recognized with respect to accounts receivable from E.A. and open NDF
contracts at February 28, 1999 in other income (expense) in the
consolidated statements of operations.
(7) Subsequent Events
(a) Sale of Prepaid Operation in Venezuela
In March 1999, the Company sold its Movil Amigo prepaid cellular operation
in Venezuela to Telecomunicaciones Movilnet, C.A. in Venezuela and
recognized a gain of approximately $4.0 million.
(b) Settlements of Foreign Currency Non-deliverable Forward Contracts
By March 31, 1999, all of the NDF contracts associated with product sales
to E.A. in Brazil were settled and the Company realized a cumulative gain
of $0.2 million since the inception of the NDF contracts in November 1998.
Foreign currency rate fluctuations caused bad debt expense of $26.4 million
related to payments remitted by E.A. The expense was completely offset by
gains realized on NDF contract settlements.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company reported net income of $15.6 million, or $0.26 per diluted
share, for the first quarter of 1999 compared with net income of $14.2 million,
or $0.23 per diluted share, for the same quarter last year. The first quarter of
1999 was impacted by several non-operating items, including (1) a non-recurring
charge of $2.6 million, or $0.04 per diluted share, related to the conversion of
a U.S. dollar-denominated loan into Brazilian reals and (2) after-tax gains
totaling $5.1 million, or $0.08 per diluted share, from the sale of part of
the Company's equity and debt investment in Topp and the sale of the Company's
retail stores in the Dallas-Fort Worth area. Without the effects of these items,
net income for the quarter would have been $13.1 million, or $0.22 per diluted
share.
The Company derives revenues from three categories: net product sales,
activation income and residual income. Substantially all of the Company's
revenues are net product sales, which include sales of handsets and other
wireless communications products, revenues from fulfillment services and
revenues from other value-added services. Activation income includes commissions
paid by a wireless carrier when a customer initially subscribes for wireless
service through the Company. Residual income includes payments received from
carriers based on the wireless handset usage by a customer activated by the
Company. The Company expects its activation and residual income to decrease as
it implements its plan to de-emphasize or eliminate certain businesses.
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements
relating to such matters as anticipated financial performance and business
prospects. When used in this Quarterly Report, the words "may," "expects,"
"anticipates," "will" and similar expressions are intended to be among the
statements that identify forward-looking statements. From time to time, the
Company may also publish forward-looking statements. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements. In order to comply with the terms of the safe harbor, the Company
notes that a variety of factors, including foreign currency risks, political
instability, changes in foreign laws, regulations and tariffs, new technologies,
competition, customer and vendor relationships, seasonality, inventory
obsolescence and availability, "gray market" resales, inflation, and Year 2000
issues and costs could cause the Company's actual results and experience to
differ materially from anticipated results or other expectations expressed in
the Company's forward-looking statements.
10
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain unaudited consolidated statements of
operations data for the Company expressed as a percentage of revenues for the
three months ended February 28, 1999 and 1998:
1999 1998
---------- ---------
Revenues 100.0% 100.0%
Cost of sales 91.5 89.8
------- ------
Gross profit 8.5 10.2
Selling, general and administrative expenses 5.0 5.6
------- ------
Operating income 3.5 4.6
Other income (expense):
Equity in income of
affiliated companies 1.2 -
Gain on sale of assets 0.4 -
Interest expense (0.9) (0.6)
Other, net (0.3) 0.1
------- ------
Total other income (expense) 0.4 (0.5)
------- ------
Income before income taxes 3.9 4.1
Provision for income taxes 0.9 0.6
------- ------
Net income 3.0% 3.5%
======= ======
11
<PAGE>
THREE MONTHS ENDED FEBRUARY 28, 1999 COMPARED TO THREE MONTHS ENDED FEBRUARY 28,
1998
Revenues. The Company's revenues increased $108.6 million, or 26.7%, from
$406.7 million to $515.3 million.
North American Region revenues were $102.1 million, a decrease of $2.1
million, or 2.0%, when compared to $104.2 million. The decrease was primarily
due to continued decreases in activation and residual income. The Company
expects activation and residual income to continue to decrease as the Company
continues to re-position itself to focus on its growth strategy of providing
value-added services to wireless carriers and manufacturers in direct
relationships. In December 1998, the Company sold its Dallas-Fort Worth retail
stores.
Revenues in the Asia-Pacific Region increased $55.3 million, or 70.5%, from
$78.4 million to $133.7 million. The Company's operations in the People's
Republic of China, including Hong Kong ("PRC"), provided $95.7 million in
revenues, an increase of $37.9 million, or 65.6%, from $57.8 million. This
increase was due to continued strong demand in the PRC, a broadened source of
product manufactured there and the impact of its tighter customs controls on
products beginning in August 1998. The Company's operations in Taiwan provided
$27.0 million of revenues, an increase of $14.4 million, or 114.3%, from $12.6
million. The increase was due to the entry of several new wireless carriers into
this market in 1998 and demand for a new high-end digital handset, which was
introduced in the fourth quarter of 1998. Revenues from the Company's Singapore
operations increased $3.0 million, or 37.5%, from $8.0 million to $11.0 million.
The Company's operations in the Latin American Region provided $170.3
million of revenues, compared to $189.4 million, or a 10.1% decrease. Revenues
in Miami, Mexico and Argentina decreased $99.8 million, $10.3 million and $5.3
million, respectively. The decrease in Miami was largely due to an increase in
demand for digital handsets and increased product availability from in-country
suppliers thereby reducing export sales from Miami. The decrease in Mexico was
due primarily to the termination of a promotion by the principal wireless
carrier, which started in the fourth quarter of 1997 and ran through the fourth
quarter of 1998. The decrease in revenues in Argentina was caused by significant
subscriber cancellations and excess inventory held by the carriers. Revenues in
the remainder of the region increased $96.3 million, primarily in Brazil,
Venezuela and Peru. The increase in Brazil was due to revenue growth in the
Company's majority-owned joint venture, which benefited from the privatization
of the telecommunication industry and the entry of additional carriers into the
wireless market during the latter half of 1998. The increase in Venezuela was a
result of the prepaid wireless business, which the Company sold in March 1999.
In connection with this sale, the Company was awarded an exclusive two-year
contract to supply services for prepaid phone kits. The Company began its
operations in Peru through the acquisition of a prepaid wireless business in the
second quarter of 1998. Activation and residual income generated by the
Company's operations in the Latin American Region increased from $8.0 million to
$15.3 million. Most of the increase was due to activation income from the
Company's prepaid cellular businesses in Venezuela and Peru.
The Company's European Region operations recorded revenues of $109.3
million, an increase of $74.5 million, or 214.1%, from $34.8 million. This
increase reflects continued growth from the Company's U.K. operation, arising
primarily from sales in international markets, as well as revenues from the
operations in Sweden and Poland, which were acquired in the first and second
quarters of 1998, respectively.
Gross Profit. Gross profit increased $2.2 million, or 5.3%, from $41.4
million to $43.6 million, while gross profit as a percentage of revenues
decreased from 10.2% to 8.5%. The increase in gross profit was principally due
to increases in both the European and North American Regions. The increase in
the European Region was due to the continued growth of the U.K. operation and
the addition of revenues from the Company's operation in Sweden, which was
acquired during the first quarter of 1998. The increase in the North American
Region reflects an increased level of value-added services and sales to large
carrier partners. The decrease in gross profit as a percentage of revenues was
due primarily to the impact of lower margins in the PRC as compared to those
historically recognized in Hong Kong
12
<PAGE>
and to an increase in international sales by the U.K. operation, which sales
have lower margins than the Company's other regions.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $2.9 million, or 12.8%, from $22.7 million to
$25.6 million. This increase was principally due to costs incurred from the
continued build-out of infrastructure, costs associated with business expansion
activities and costs to de-emphasize or eliminate certain businesses. Overall
selling, general and administrative expenses as a percentage of revenues
decreased to 5.0% from 5.6%.
Equity in Income of Affiliated Companies. Equity in income of affiliated
companies increased $5.8 million to $6.0 million. In February 1999, the Company
sold part of its equity investment in Topp to a wholly-owned subsidiary of
Telefonos de Mexico S.A. de C.V. At the closing, the Company also sold a portion
of its debt investment to certain other shareholders of Topp. As a result of
these transactions, the Company received cash in the amount of $7.0 million,
retained a $22.5 million note receivable and a 19.5% equity ownership interest
in Topp and recorded a gain of $5.8 million.
Gain on Sale of Assets. The Company recorded a gain of $2.2 million
associated with the sale of all its retail stores in the Dallas-Fort Worth area.
Interest Expense. Interest expense increased to $4.7 million from $2.5
million primarily as a result of an increase in debt related to the Company's
operations in Brazil.
Other, Net. Other, net decreased $2.0 million from income of $0.4 million
to expense of $1.6 million. This decrease was primarily due to a $2.6 million
foreign currency transaction loss realized from the conversion of U.S. dollar
denominated debt in Brazil into a Brazilian real denominated credit facility.
Income Taxes. Income tax expense increased $1.9 million and the Company's
effective tax rate increased to 22.0% from 15.0%. The higher effective tax rate
was attributable to higher income before income taxes primarily in the North
American and European Regions where the statutory tax rates are generally
comparable to the statutory rate in the United States and higher than the
statutory rates in the Company's other regions. The utilization of net operating
loss carryforwards in certain jurisdictions during the prior year contributed to
the lower effective tax rate for 1998.
INTERNATIONAL OPERATIONS
During the latter half of 1998, the Company's sales from Miami to customers
exporting into South American countries began to decline as a result of an
increase in demand for digital handsets and increased in-country product
availability in Latin America, primarily Brazil. The Company expects to focus
its efforts on servicing large, financially-sound carrier partners from the
Company's Latin American subsidiaries.
The Company's Brazilian operations are conducted through a majority-owned
joint venture. The primary supplier of handsets to the joint venture is a
Brazilian importer who is serviced from Miami. Sales to the importer are
excluded from the Company's consolidated revenues, and the related gross profit
is deferred until the handsets are sold by the Brazilian joint venture to
customers. In January 1999, the Brazilian government allowed the value of the
real to float freely against other foreign currencies, which resulted in a
significant devaluation of the real against the U.S. dollar. From November 1998
through March 1999, the Company utilized Brazilian real NDF contracts to manage
currency exposure risk related to credit sales made to the Brazilian importer.
Payment for these sales was remitted by the importer using the Brazilian real
rate of exchange against the U.S. dollar on the day the Company recorded the
sale to the Brazilian importer. Bad debt expense caused by foreign currency rate
fluctuations was completely offset by gains realized on the settlements of the
Brazilian real NDF contracts for the three months ended February 28, 1999. A net
mark-to-market gain of $0.4 million for the three months ended February 28,
13
<PAGE>
1999, with respect to accounts receivable and open Brazilian real NDF contracts,
has been recorded in other income (expense) in the consolidated statements of
operations.
At April 12, 1999, the Company has no Brazilian real NDF contracts
outstanding. Currently, under agreements made in January 1999, the Brazilian
joint venture is paid by certain major customers at the current value of the
real against the U.S. dollar on the date of payment. The Company may be exposed
to bad debt expense caused by foreign currency rate fluctuations from the time
the Brazilian joint venture remits payment to the importer in Brazilian reals
and the importer pays the Company in U.S. dollars. The ability of the importer
to remit U.S. dollar payments to the Company may be restricted if the Brazilian
government imposes currency controls. As of March 31, 1999, the Company had
$35.3 million in accounts receivable due from the importer of which $6.0 million
had been collected at April 12, 1999.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended February 28, 1999, the Company relied
primarily on cash available at November 30, 1998, cash generated from operations
and borrowings under its Multicurrency Revolving Credit Facility (the
"Facility") to fund working capital, capital expenditures and expansions. As of
April 8, 1999, the amount of the Facility was reduced from $135.0 million to
$115.0 million due to the release of a syndication member bank. The Company
expects to replace this member bank in the near-term at the same level of
participation. At April 12, 1999, the Company had available $l1.4 million of
borrowing capacity under the Facility.
Accounts receivable, inventories and accounts payable decreased $101.0
million, $23.5 million and $113.8 million, respectively, primarily from a
decrease in revenues compared to the fourth quarter of 1998.
As of February 28, 1999 and March 31, 1999, the Company's Brazilian
operations had borrowed $8.4 million and $9.8 million, respectively, using
credit facilities denominated in Brazilian reals with Brazilian banks. In
conjunction therewith, the Company has $8.3 million of letters of credit
against its Facility to guarantee the repayment of the principal plus interest
and all other contractual obligations of its Brazilian operations to one of the
Brazilian banks.
The Company anticipates that it will have sufficient cash available to meet
its capital requirements and current expansion plans. Capital is expected to be
provided by available cash on hand, cash generated from operations, amounts
available from the Facility and various other funded debt sources. The Company
believes that it will have the ability to expand its borrowing sources to
accommodate expected capital needs in the future.
YEAR 2000
Since June 1997, the Company has been implementing a plan to assess and
resolve Year 2000 issues that may affect it. The Company believes that the Year
2000 issues it must address include ensuring (i) that its information technology
systems (hardware and software) enable it to manage and operate its business,
(ii) that its non-information technology systems (including heating and air
conditioning systems and warehouse equipment) will continue to operate and (iii)
that assessments and planning has been conducted related to managing
interruption to its supply and demand chain.
14
<PAGE>
The phases and timetable for the Company's plans are as follows:
Phase I. Create awareness of and identify Year 2000 issues (June 1997-
July 1997)
Phase II. Assess and renovate existing systems (July 1997 - July 1999)
Phase III. Validate and test systems (July 1998 - July 1999)
Phase IV. Complete Year 2000 compliance (March 1999 - August 1999)
The Company is currently on schedule for implementing this plan. A
project structure is defined, progress and issues are tracked, and management is
provided updates. The Company does not believe it has material, potential
liability to third parties if its systems are not Year 2000 compliant.
The Company has made substantial progress in assessing Year 2000 issues
that affect third parties with which it has material relationships. The Company
has substantially completed the process of contacting manufacturers of products
that the Company sells and is reviewing each response. The responses and
continuing informal contact with the primary manufacturers and suppliers of
products indicates that the suppliers believe they are addressing and resolving
their Year 2000 issues and expect minimal operational impacts. The Company has
reviewed all electronic exchanges of data between customers and suppliers for
Year 2000 compliancy. The Company substantially completed all remediation
efforts related to exchange of data and is currently testing the processes. Even
though the Company does not believe that its customers' Year 2000 compliance
issues will have a significant impact on the Company, the Company plans to
continue to review and assess the progress of its major customers in each region
as to risk and exposure related to Year 2000 issues. The Company also recognizes
that demand for its products is affected by the ability of carriers and network
operators to continue operation without significant interruption. These risks
are being considered by the Company in developing pertinent business
interruption and contingency plans.
The Company's costs of compliance with Year 2000 requirements are
immaterial because it was in the process of upgrading or establishing systems to
keep pace with its growth.
The Company believes that it and its material suppliers will resolve their
Year 2000 issues in a timely fashion. However, if the Company or its material
suppliers do not become Year 2000 compliant, the Company could suffer a material
adverse effect on its business, results of operations and financial condition.
The Company believes that it is unlikely that any of these events will result,
but there can be no such assurance. The Company has decided to develop a
contingency plan to address potential, unplanned failures within the Company and
external entities that could impact operations. The Company currently
anticipates completing the planned Year 2000 work related to mission critical
applications and contingency planning by August 31, 1999.
15
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FOREIGN EXCHANGE RISK
The Company's international operations are subject to foreign currency
risk; however, the Company has not experienced any material foreign currency
transaction gains or losses during the last three fiscal years. Foreign currency
translation adjustments for subsidiaries domiciled in non-highly inflationary
countries are recorded to consolidated stockholders' equity under accumulated
other comprehensive income. In highly inflationary countries, the Company
records remeasurement gains and losses to the consolidated statements of
operations. For the three months ended February 28, 1999, the Company's
international subsidiary in Venezuela recorded an immaterial foreign currency
remeasurement loss because the Venezuelan economy is considered to be highly
inflationary.
The Company manages foreign currency risk by attempting to increase prices
of products sold at or above the anticipated exchange rate of the local currency
relative to the U.S. dollar, by indexing certain of its accounts receivable to
exchange rates in effect at the time of their payment, and by entering into
foreign currency hedging instruments in certain instances.
In January 1999, the Brazilian government allowed the value of the real to
float freely against other foreign currencies, which resulted in a significant
devaluation of the real against the U.S. dollar. Currently, under agreements
made in January 1999, the Company's majority-owned Brazilian joint venture is
paid by certain major customers at the current value of the real against the
U.S. dollar on the date of payment. The Company may be exposed to bad debt
expense caused by foreign currency rate fluctuations from the time the Brazilian
joint venture remits payment to the importer in Brazilian reals and the importer
pays the Company in U.S. dollars. The ability of the importer to remit U.S.
dollar payments to the Company may be restricted if the Brazilian government
imposes currency controls. As of March 31, 1999, the Company had $35.3 million
in accounts receivable due from the importer. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -International
Operations."
On February 18, 1999, all of the Company's U.S. dollar denominated debt in
Brazil, $5.7 million, was converted into a Brazilian real denominated credit
facility by the Company's majority-owned Brazilian joint venture. Upon
conversion, the joint venture realized a foreign currency transaction loss of
$2.6 million due to the devaluation of the Brazilian real against the U.S.
dollar. The Company's $9.8 million of debt at March 31, 1999 in Brazil is
denominated in Brazilian reals.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company does not use derivative instruments for trading purposes and
the Company has procedures in place to monitor and control derivative use. As of
February 28, 1999, the Company had Brazilian real NDF contracts aggregating
$13.7 million with maturities from March 2, 1999 through March 10, 1999 and at
strike prices ranging from 1.2610 to 1.9180 between the Brazilian real and the
U.S. dollar. The Company's counterparties to these contracts were Chase Bank of
Texas, N.A. and The First National Bank of Chicago. At March 31, 1999, the
Company had realized a cumulative gain of $0.2 million with respect to the
settlement of all the Brazilian NDF contracts since their inception in November
1998. As of April 12, 1999, the Company did not have any NDF contracts
outstanding. When the Company uses contracts of this nature, it monitors the
credit rating of the counterparties on a regular basis.
INTEREST RATE RISK
The interest rate of the Company's Facility is a market rate at the time of
borrowing plus an applicable margin on certain borrowings. The interest rate is
based on either the bank's prime lending rate or the London Interbank Offered
Rate. Additionally, the applicable margin is subject to increases if the
Company's ratio of consolidated funded debt to consolidated cash flow is greater
than or equal to 3.0 to 1.0, which ratio is determined at the end of each fiscal
quarter. During the twelve months ended March 31, 1999, the interest rates of
borrowings under the Facility ranged
16
<PAGE>
from 6.45% to 8.50%. The Company manages its borrowings under the Facility each
business day to minimize interest expense.
The borrowings of the Company's Brazilian operations are short-term in
nature, typically less than six months. Through November 30, 1998, annual rates
on borrowings by the Brazilian joint venture operations ranged from
approximately 36% to 48%. As a result of the recent devaluation of the Brazilian
real against the U.S. dollar, annual interest rates for the Company have
increased to approximately 41% to 53% in Brazil at March 31, 1999. The Brazilian
operations have decreased their borrowings, including accrued interest, from
$11.5 million at November 30, 1998 to $9.8 million at March 31, 1999. The
Company continues to evaluate financing alternatives to reduce interest expense
for its Brazilian operations.
The Company's $150.0 million in long-term debt has a fixed coupon interest
rate of 5.0%.
17
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
During the period from May 1996 through July 1996, four purported class
action lawsuits were filed in the United States District Court for the Northern
District of Texas, Dallas Division, styled as follows: (1) Sidney Gluck, John
Dolcemaschio, James Miller and Nancy L. Miller v. CellStar Corporation, Alan H.
Goldfield, Terry S. Parker, John S. Bain, Kenneth W. Sanders, and KPMG Peat
Marwick, L.L.P.; (2) Diane Larson against CellStar Corporation, Alan H.
Goldfield, Terry S. Parker and Evelyn M. Henry; (3) Elvia H. Goggin and R. Heath
Larry vs. CellStar Corporation, Alan H. Goldfield and Terry S. Parker; and (4)
Reed and Lillian Riemer v. CellStar Corporation, Alan H. Goldfield, Terry S.
Parker, John S. Bain, Kenneth W. Sanders and KPMG Peat Marwick, L.L.P.
These four lawsuits were consolidated into the case styled State of
Wisconsin Investment Board, Diane Larson, Martin Katz, Mostafa Aboul-Fetouh,
Ahmed Aboul-Fetouh and Enass Aboul-Fetouh on behalf of themselves and others
similarly situated v. Alan H. Goldfield, Terry S. Parker, Kenneth W. Sanders,
John S. Bain, Evelyn M. Henry, Michael S. Hedge, Kenneth E. Kerby, Daniel T.
Bogar, Leonard C. Ratley, James L. Johnson, Ronald J. Kramer, CellStar
Corporation and KPMG Peat Marwick LLP, Civil Action No. 3:96-CV-1353-R. The
State of Wisconsin Investment Board was appointed lead plaintiff in the
consolidated action and filed a Consolidated Amended Complaint asserting claims
against the Company and certain of its present and former officers and directors
for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") and Rule 10b-5 promulgated thereunder,
Section 27.01 of the Texas Civil Statutes, common law fraud, negligent
misrepresentation, and breach of fiduciary duty to disclose under Delaware
common law. The Consolidated Amended Complaint alleged, among other things, that
the defendants misrepresented or failed to disclose material facts regarding the
business, financial condition, performance and future prospects of the Company
and that, as a result of such statements or omissions, the value of the
Company's Common Stock was artificially inflated. Claims were also asserted
against the Company's auditors, KPMG LLP. The plaintiffs sought compensatory
damages, exemplary damages and costs and expenses, including attorneys' fees and
expert fees. Although the plaintiffs did not specify the amount of damages
sought, they argued that the alleged class sustained damages in excess of $50
million.
In December 1996, defendants filed motions to dismiss all claims asserted
in the Consolidated Amended Complaint. By orders dated August and September
1998, the Court (i) dismissed all claims as to defendants KPMG LLP, Michael S.
Hedge, Kenneth E. Kerby, Daniel T. Bogar, James L. Johnson and Ronald J. Kramer;
(ii) dismissed the claim alleging breach of fiduciary duty as to all defendants;
and (iii) denied the motions to dismiss all other claims as to all other
defendants.
Although the Company believes it had meritorious defenses to these claims,
on November 19, 1998, the Company entered into a Stipulation of Settlement
resolving all claims pending in the suit. The settlement was approved by the
Court on January 25, 1999 and all remaining claims were dismissed. On March 1,
1999, the Company paid its portion of the settlement, $6.8 million, to the
plaintiffs pursuant to the Stipulation of Settlement.
The Company is a party to various other claims, legal actions and
complaints arising in the ordinary course of business. Management believes that
the disposition of these other matters will not have a materially adverse effect
on the consolidated financial condition or results of operations of the Company.
18
<PAGE>
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS.
3.1 Amended and Restated Certificate of Incorporation of CellStar
Corporation ("Certificate of Incorporation"). (1)
3.2 Certificate of Amendment to Certificate of Incorporation. (7)
3.3 Amended and Restated Bylaws of CellStar Corporation. (3)
4.1 The Certificate of Incorporation, Certificate of Amendment to
Certificate of Incorporation and Amended and Restated Bylaws of
CellStar Corporation filed as Exhibits 3.1, 3.2 and 3.3 are
incorporated into this item by reference. (1)(7)(3)
4.2 Specimen Common Stock Certificate of CellStar Corporation. (2)
4.3 Rights Agreement, dated as of December 30, 1996, by and between
CellStar Corporation and ChaseMellon Shareholder Services, L.L.C., as
Rights Agent ("Rights Agreement"). (4)
4.4 First Amendment to Rights Agreement, dated as of June 18, 1997. (5)
4.5 Form of Certificate of Designation, Preferences and Rights of Series A
Preferred Stock of CellStar Corporation ("Certificate of Designation").
(4)
4.6 Form of Rights Certificate. (4)
4.7 Certificate of Correction of Certificate of Designation. (5)
4.8 Indenture, dated as of October 14, 1997, by and between CellStar
Corporation and the Bank of
19
<PAGE>
New York, as Trustee. (6)
10.1 Fourth Amendment to Credit Agreement, dated as of March 5, 1999, among
CellStar Corporation, each of the banks or other lending institutions
signatory thereto, The First National Bank of Chicago and National City
Bank, as co-agents, and Chase Bank of Texas, National Association, as
agent. (8)
10.2 Fifth Amendment to Credit Agreement, dated as of April 8, 1999, among
CellStar Corporation, each of the banks or other lending institutions
signatory thereto, The First National Bank of Chicago and National City
Bank, as co-agents, and Chase Bank of Texas, National Association, as
agent. (8)
27.1 Financial Data Schedule. (8)
27.2 Restated Financial Data Schedule. (8)
____________________
(1) Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended August 31, 1995, and incorporated herein by
reference.
(2) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended November 30, 1995, and incorporated herein by
reference.
(3) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended February 29, 1996, and incorporated herein by
reference.
(4) Previously filed as an exhibit to the Company's Registration Statement on
Form 8 - A (File No. 000-22972), filed January 3, 1997, and incorporated
herein by reference.
(5) Previously filed as an exhibit to the Company's Registration Statement on
Form 8 -A/A, Amendment No. 1 (File No. 000-22972), filed June 30, 1997, and
incorporated herein by reference.
(6) Previously filed as an exhibit to the Company's Current Report on Form 8-K
dated October 8, 1997, filed October 24, 1997, and incorporated herein by
reference.
(7) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended May 31, 1998, and incorporated herein by
reference.
(8) Filed herewith.
(B) REPORTS ON FORM 8-K.
None.
20
<PAGE>
SIGNATURE
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 thereunto duly authorized.
CELLSTAR CORPORATION
By: /s/ Evelyn Henry Miller
____________________________________
Evelyn Henry Miller
Senior Vice President-Finance
and Chief Financial Officer
(On behalf of the Registrant and as
Principal Financial Officer)
Date: April 14, 1999
21
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
No. Description
- ------- -----------
3.1 Amended and Restated Certificate of Incorporation of CellStar
Corporation ("Certificate of Incorporation"). (1)
3.2 Certificate of Amendment to Certificate of Incorporation. (7)
3.3 Amended and Restated Bylaws of CellStar Corporation. (3)
4.1 The Certificate of Incorporation, Certificate of Amendment to
Certificate of Incorporation and Amended and Restated Bylaws of
CellStar Corporation filed as Exhibits 3.1, 3.2 and 3.3 are
incorporated into this item by reference. (1)(7)(3)
4.2 Specimen Common Stock Certificate of CellStar Corporation. (2)
4.3 Rights Agreement, dated as of December 30, 1996, by and between
CellStar Corporation and ChaseMellon Shareholder Services, L.L.C., as
Rights Agent ("Rights Agreement"). (4)
4.4 First Amendment to Rights Agreement, dated as of June 18, 1997. (5)
4.5 Form of Certificate of Designation, Preferences and Rights of Series A
Preferred Stock of CellStar Corporation ("Certificate of Designation").
(4)
4.6 Form of Rights Certificate. (4)
4.7 Certificate of Correction of Certificate of Designation. (5)
4.8 Indenture, dated as of October 14, 1997, by and between CellStar
Corporation and the Bank of New York, as Trustee. (6)
22
<PAGE>
10.1 Fourth Amendment to Credit Agreement, dated as of March 5, 1999, among
CellStar Corporation, each of the banks or other lending institutions
signatory thereto, The First National Bank of Chicago and National City
Bank, as co-agents, and Chase Bank of Texas, National Association, as
agent. (8)
10.2 Fifth Amendment to Credit Agreement, dated as of April 8, 1999, among
CellStar Corporation, each of the banks or other lending institutions
signatory thereto, The First National Bank of Chicago and National City
Bank, as co-agents, and Chase Bank of Texas, National Association, as
agent. (8)
27.1 Financial Data Schedule. (8)
27.2 Restated Financial Data Schedule. (8)
________________
(1) Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended August 31, 1995, and incorporated
herein by reference.
(2) Previously filed as an exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended November 30, 1995, and incorporated
herein by reference.
(3) Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended February 29, 1996, and incorporated
herein by reference.
(4) Previously filed as an exhibit to the Company's Registration Statement
on Form 8 - A (File No. 000-22972), filed January 3, 1997, and
incorporated herein by reference.
(5) Previously filed as an exhibit to the Company's Registration Statement
on Form 8 -A/A, Amendment No. 1 (File No. 000-22972), filed June 30,
1997, and incorporated herein by reference.
(6) Previously filed as an exhibit to the Company's Current Report on Form
8-K dated October 8, 1997, filed October 24, 1997, and incorporated
herein by reference.
(7) Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended May 31, 1998, and incorporated herein
by reference.
(8) Filed herewith.
23
<PAGE>
EXHIBIT 10.1
FOURTH AMENDMENT TO
CREDIT AGREEMENT
----------------
This FOURTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of
---------
March 5, 1999, is among CELLSTAR CORPORATION, a Delaware corporation (the
"Borrower"), each of the banks or other lending institutions which is or may
- ---------
from time to time become a signatory to the Agreement (hereinafter defined) or
any successor or permitted assignee thereof (each a "Bank" and collectively, the
----
"Banks"), THE FIRST NATIONAL BANK OF CHICAGO and NATIONAL CITY BANK, as co-
-----
agents ("Co-Agents"), and CHASE BANK OF TEXAS, NATIONAL ASSOCIATION (formerly
---------
known as Texas Commerce Bank National Association), a national banking
association ("Chase"), as agent for itself and the other Banks, as issuer of
-----
Letters of Credit under the Agreement, and as the swing line lender (in such
capacity, together with its successors in such capacity, the "Agent").
-----
RECITALS:
A. The Borrower, the Banks, the Co-Agents and the Agent have
entered into that certain Credit Agreement dated as of October
15, 1997, as amended by (i) that certain First Amendment to
Credit Agreement dated as of February 20, 1998, (ii) that certain
Second Amendment to Credit Agreement dated as of July 24, 1998,
and (iii) that certain Third Amendment to Credit Agreement dated
as of September 11, 1998 (as amended, the "Agreement").
---------
B. The Borrower, the Banks, the Co-Agents and the Agent now
desire to amend the Agreement as provided herein.
NOW, THEREFORE, in consideration of the premises herein contained and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
---------
Definitions
-----------
1.1 Definitions. Capitalized terms used in this Amendment, to the
-----------
extent not otherwise defined herein, shall have the same meanings as
in the Agreement, as amended hereby.
ARTICLE II
----------
Amendments
----------
2.1 Amendments to Definitions. Effective as of the date hereof, the
-------------------------
following definitions set forth in Section 1.1 of the Agreement are hereby
-----------
amended to read as follows:
<PAGE>
"Alternate Currency" means the following so long as they are Eligible
------------------
Currencies: British pounds sterling, Japanese yen, Canadian dollars, Hong Kong
dollars and Euro Units. For purposes of this definition of Alternate Currency,
"Eligible Currency" means, subject to the provisions of Section 4.9, any
----------------- -----------
currency other than Dollars that is readily available, freely traded, in which
deposits are customarily offered to banks in the London interbank market,
convertible into Dollars in the international interbank market and as to which
an Equivalent Amount is available in Dollars in the London interbank market (or
other market where the Agent's currency exchange operations in respect of the
applicable currency are then being conducted).
"Alternate Currency Rate" means, for any Alternate Currency Advance for any
-----------------------
Interest Period therefor, an interest rate per annum determined by the Agent by
dividing: (i) the rate per annum determined by the Agent to be the rate per
- --------
annum at which deposits in the relevant Alternate Currency are offered by the
Principal Office of the Agent to first class banks in the interbank euro
alternate currency market selected by the Agent at or before 11:00 a.m. (London
time) (or as soon thereafter as practicable) for a period equal to such Interest
Period and in an amount substantially equal to the amount of such Alternate
Currency Advance during such Interest Period; by (ii) Statutory Reserves.
"Business Day" means (a) any day on which national banks in Dallas, Texas
------------
are open for the conduct of commercial banking business, and (b) with respect to
all borrowings, payments, Conversions, Continuations, Interest Periods, and
notices in connection with each Eurodollar Advance or Alternate Currency
Advance, any day which is a Business Day described in clause (a) above and which
---------
above and which a day on which dealings in Dollar or Alternate Currency deposits
are carried out in the relevant interbank market referred to by the Agent to
determine the Eurodollar Rate for such Eurodollar Advance or the Alternate
Currency Rate for such Alternate Currency Advance and which is also a day on
which banks and foreign exchange markets are open for business in London and (if
applicable) for the purpose of payments in an Alternate Currency in the
principal financial center of the country of such currency; provided, however,
that (i) for purposes of determining the Alternate Currency Rate for Advances in
Euro Units, "Business Day" means a TARGET Operating Day; and (ii) with respect
------------
to any amount denominated or to be denominated in the Euro Unit or a National
Currency Unit, "Business Day" means a day (other than a Saturday or Sunday) on
------------
which banks are generally open for business in London, in Dallas, Texas and in
Frankfurt am Main, Germany (or such principal financial center or centers in
such Participating Member State(s) as the Agent may from time to time nominate
for this purpose).
"Eurodollar Rate" means, for any Eurodollar Advance for any Interest
---------------
Period therefor, an interest rate per annum determined by the Agent by dividing:
(i) the rate per annum equal to the annual rate of interest shown on the
appropriate reference page of Reuters America, Inc. at or before 11:00 a.m.
(London time) (or as soon thereafter as practicable) for a period equal to such
Interest Period, or if such page is not available, the annual rate of interest
shown on the Bloomberg Screen British Banker's LIBOR Fixing at or before 11:00
a.m. (London time) (or as soon thereafter as practicable) for a period equal to
such Interest Period, or if neither of the foregoing is available, the rate per
annum determined by the Agent
-2-
<PAGE>
to be the rate per annum at which deposits of Dollars are offered by the
Principal Office of the Agent to first class banks in the interbank
Eurodollar market selected by the Agent at or before 11:00 a.m. (London
time) (or as soon thereafter as practicable) for a period equal to such
Interest Period and in an amount substantially equal to the amount of such
Eurodollar Advance during such Interest Period; by (ii) Statutory Reserves.
"Obligations" means all of the following obligations, indebtedness,
-----------
and liabilities of the Borrower or any Subsidiary to the Agent and the
Banks, or any of them, now existing or hereafter arising, whether direct,
indirect, related, unrelated, fixed, contingent, liquidated, unliquidated,
joint, several, or joint and several, and all interest accruing thereon and
all attorneys' fees and other expenses incurred in the enforcement or
collection thereof: (a) all obligations, indebtedness and liabilities of
the Borrower or any Subsidiary under the Loan Documents (including, without
limitation, all contingent reimbursement obligations in respect of Letters
of Credit), and (b) all Hedging Obligations of the Borrower or any
Subsidiary to the Agent or any Bank.
2.2 Addition of New Definitions. Effective as of the date hereof,
---------------------------
the following definitions are added to Section 1.1 of the Agreement
-----------
in alphabetical order to read as follows:
"Commencement of the Third Stage of EMU" means January 1, 1999, the
--------------------------------------
date of commencement of the third stage of EMU.
"EMU" means the economic and monetary union as contemplated in the
---
Treaty on European Union.
"EMU Legislation" means legislative measures of the European Council
---------------
for the introduction of, changeover to, or operation of, a single or
unified European currency, being in part the implementation of the third
stage of EMU.
"Euro" means the single currency of Participating Member States.
----
"Euro Unit" means the currency unit of the Euro.
---------
"National Currency Unit" means the unit of currency (other than a Euro
----------------------
Unit) of a Participating Member State.
"Participating Member State" means each state so described in any EMU
--------------------------
Legislation.
"TARGET Operating Day" means any day that is not (i) a Saturday or
--------------------
Sunday, (ii) Christmas Day or New Year's Day or (iii) any other day on
which the Trans-European Automated Real-time Gross Settlement Express
Transfer System (or any successor settlement system) is not operating (as
determined by the Agent).
-3-
<PAGE>
"Treaty on European Union" means the Treaty of Rome of March 25, 1957,
------------------------
as amended by the Single European Act of 1986 and the Maastricht Treaty
(which was signed at Maastricht on February 7, 1992 and came into force on
November 1, 1993), as amended from time to time.
2.3 Deletion of Definitions. Effective as of the date hereof, the
-----------------------
definitions of "ECU" and "Hedging Agreements" are deleted from
--- ------------------
Section 1.1 of the Agreement.
-----------
2.4 Amendment to Section 2.6. Effective as of the date hereof,
------------------------
Section 2.6 of the Agreement is amended to read as follows:
-----------
Section 2.6. Borrowing Procedure. The Borrower shall give the Agent
-------------------
notice of each requested Advance (other than Swing Line Advances), by means
of an Advance Request Form, before 11:00 A.M. Dallas, Texas time (a) on the
same Business Day as the requested date of each Floating Rate Advance, (b)
at least three Business Days before the requested date of each Eurodollar
Advance, and (c) at least four Business Days before the requested date of
each Alternate Currency Advance, specifying: (i) the requested date of such
Advance (which shall be a Business Day), (ii) the amount of such Advance,
(iii) the Type of the Advance, (iv) in the case of Alternate Currency
Advances, the requested Alternate Currency, it being agreed that Advances
made on any one day shall be made in the same currency, and (v) in the case
of a Eurodollar Advance or an Alternate Currency Advance, the duration of
the Interest Period for such Advance. The Agent at its option may accept
telephonic requests for Advances, provided that such acceptance shall not
constitute a waiver of the Agent's right to delivery of an Advance Request
Form in connection with subsequent Advances. Any telephonic request for an
Advance by the Borrower shall be promptly confirmed by submission of a
properly completed Advance Request Form to the Agent. Each Advance (other
than Swing Line Advances) shall be in a minimum principal amount of
$1,000,000 or the Equivalent Amount thereof or such greater amount which is
an integral multiple of $100,000 or the Equivalent Amount thereof. The
aggregate principal amount of Eurodollar Advances having the same Interest
Period shall be at least equal to $1,000,000. The aggregate principal
amount of Alternate Currency Advances having the same Interest Period
shall be at least equal to the Equivalent Amount of $1,000,000. The Agent
shall notify each Bank of the contents of each such notice on the day such
notice is received by the Agent if received by 11:00 A.M. Dallas, Texas
time on a Business Day and otherwise on the next succeeding Business Day.
Promptly on the date specified for each Advance hereunder, each Bank will
make available to the Agent at the Principal Office or, as to Alternate
Currency Advances, at the office designated by Agent for such Alternate
Currency, in the specified Alternate Currency for Alternate Currency
Advances and in Dollars for all other Advances and in immediately available
funds, for the account of the Borrower, such Bank's pro rata share of each
Advance; provided that in relation to the payment of any amount of Euro
Units or National Currency Units, such amounts shall be made available to
the Agent in immediately available, freely transferable, cleared funds to
such account with such bank in Frankfurt am Main,
-4-
<PAGE>
Germany (or such other principal financial center in such Participating
Member State as the Agent may from time to time nominate for this purpose)
as the Agent shall from time to time nominate for this purpose. After the
Agent's receipt of such funds and subject to the terms and conditions of
this Agreement, the Agent will (a) make each Advance (other than Alternate
Currency Advances) available to the Borrower by depositing the same, in
Dollars in immediately available funds, in an account of the Borrower
maintained with the Agent designated by the Borrower or by wire transfer in
accordance with written instructions from the Borrower, (b) make each
Alternate Currency Advance (other than Advances in Euro Units) available to
the Borrower by depositing the same, in the requested Alternate Currency in
immediately available funds, in an account of the Borrower maintained with
a financial institution in the country where such Alternate Currency is
legal tender, and (c) make each Advance in Euro Units available by
depositing the same in an account of the Borrower maintained with a
financial institution in Frankfurt am Main, Germany; in each case
designated by the Borrower by written notice to the Agent containing the
information specified in Exhibit K hereto for such account, which notice
---------
shall be received by the Agent at least five Business Days before the
requested date of such Advance. All notices by the Borrower to the Agent
under this Section shall be irrevocable and shall be given not later than
the time specified above for such notice on the day which is not less than
the number of Business Days specified above for such notice.
2.5 Amendment to Section 3.1. Effective as of the date hereof, the
------------------------
reference in Section 3.1 of the Agreement to the amount "$10,000,000"
-----------
is amended to read "$15,000,000".
2.6 Amendment to Article IV. Effective as of the date hereof, the
-----------------------
reference to the title "Payments" in Article IV of the Agreement is
--------
amended to read "Payments: EMU Provisions".
------------------------
2.7 Amendment to Section 4.1. Effective as of the date hereof,
------------------------
Section 4.1 of the Agreement is amended to read as follows:
-----------
Section 4.1. Method of Payment. All payments of principal, interest,
-----------------
and other amounts to be made by the Borrower under this Agreement and the
other Loan Documents (other than payments of principal and interest with
respect to Alternate Currency Advances) shall be made to the Agent at the
Principal Office in Dollars and immediately available funds, without
setoff, deduction, or counterclaim, not later than 11:00 A.M., Dallas,
Texas time on the date on which such payment shall become due (each such
payment made after such time on such due date to be deemed to have been
made on the next succeeding Business Day). All payments of principal and
interest to be made by the Borrower under this Agreement and the other Loan
Documents with respect to Alternate Currency Advances shall be made to the
Agent, in such Alternate Currency and immediately available funds, without
setoff, deduction, or counterclaim, to such account at such bank, in the
country where such
-5-
<PAGE>
Alternate Currency is legal tender, as the Agent may designate to the
Borrower, or as otherwise provided in Section 4.9. Such payments of
-----------
principal and interest with respect to Alternate Currency Advances shall be
made no later than 11:00 A.M. local time in the place where such bank is
located on the date on which such payment shall become due (each such
payment made after such time on such due date to be deemed to have been
made on the next succeeding Business Day). The Borrower shall, at the time
of making each payment under this Agreement and the other Loan Documents,
specify to the Agent the sums payable by the Borrower under this Agreement
and the other Loan Documents to which such payment is to be applied (and in
the event the Borrower fails to so specify, or if an Event of Default has
occurred and is continuing, the Agent may apply such payment to the
Obligations in such order and manner as it may elect in its sole
discretion, subject to Section 4.4 hereof). Each payment received by the
-----------
Agent under this Agreement or any other Loan Document for the account of a
Bank shall be paid promptly to such Bank, in immediately available funds,
for the account of such Bank's Applicable Lending Office. Whenever any
payment under this Agreement or any other Loan Document shall be stated to
be due on a day that is not a Business Day, such payment shall be made on
the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of the payment of interest and
commitment fee, as the case may be. Each payment received by Agent
hereunder or under any Note shall be paid promptly to the Banks in
accordance with Section 4.4, in immediately available funds, for the
-----------
account of each Bank's Applicable Lending Office for the Advance in respect
of which such payment is made.
2.8 Addition of New Sections 4.9 and 4.10. Effective as of the date
-------------------------------------
hereof, Article IV of the Agreement is amended to add the following
Sections 4.9 and 4.10 to the end thereof, which Sections shall read
------------ ----
as follows:
Section 4.9. EMU Provisions.
--------------
(a) Effectiveness of Provisions. The provisions
---------------------------
of Subsections (b) to (h) below (inclusive) shall
--------------- ---
be effective at and from March 5, 1999, provided,
--------
that if and to the extent that any such provision
relates to any state (or the currency of such
state) that is not a Participating Member State on
the Commencement of the Third Stage of EMU, such
provision shall become effective in relation to
such state (and the currency of such state) at and
from the date on which such state becomes a
Participating Member State.
(b) Redenomination and Alternative Currencies.
-----------------------------------------
Each obligation under this Agreement of a party to
this Agreement which has been denominated in the
National Currency Unit of a Participating Member
State shall be redenominated into the Euro Unit in
accordance with EMU Legislation, provided,
--------
-6-
<PAGE>
that if and to the extent that any EMU Legislation
provides that following the Commencement of the
Third Stage of EMU an amount denominated either in
the Euro Unit or in the National Currency Unit of
a Participating Member State and payable within
that Participating Member State by crediting an
account of the creditor can be paid by the debtor
either in the Euro Unit or in that National
Currency Unit, each party to this Agreement shall
be entitled to pay or repay any such amount either
in the Euro Unit or in such National Currency
Unit.
(c) Advances. Any Advance in the currency of a
--------
Participating Member State shall be made in the
Euro Unit.
(d) Payments to the Agent. Sections 2.6, 4.1
--------------------- ------------ ---
and 13.3 shall be construed so that, in relation
----
to the payment of any amount of Euro Units or
National Currency Units, such amount shall be made
available to the Agent in immediately available,
freely transferable, cleared funds to such account
with such bank in Frankfurt am Main, Germany (or
such other principal financial center in such
Participating Member State as the Agent may from
time to time nominate for this purpose) as the
Agent shall from time to time nominate for this
purpose.
(e) Payments by the Agent to the Banks. Any
----------------------------------
amount payable by the Agent to the Banks under
this Agreement in the currency of a Participating
Member State shall be paid in Euro Units.
(f) Payments by the Agent. Generally, with
---------------------
respect to the payment of any amount denominated
in the Euro or in a National Currency Unit, the
Agent shall not be liable to the Borrower or any
of the Banks in any way whatsoever for any delay,
or the consequences of any delay, in the crediting
to any account of any amount required by this
Agreement to be paid by the Agent if the Agent
shall have taken all relevant steps to achieve, on
the date required by this Agreement, the payment
of such amount in immediately available, freely
transferable, cleared funds (in the Euro Unit or,
as the case may be, in a National Currency Unit)
to the account with the bank in the principal
financial center in the Participating Member State
which the Borrower or, as the case may be, any
Bank shall have specified for such purpose. In
this Subsection (f), "all relevant steps" means
--------------
all such steps as
-7-
<PAGE>
may be prescribed from time to time by the regulations
or operating procedures of such clearing or settlement
system as the Agent may from time to time determine for
the purpose of clearing or settling payments of the
Euro.
(g) Basis of Accrual. If the basis of accrual of
----------------
interest or fees expressed in this Agreement with
respect to the currency of any state that is or becomes
a Participating Member State shall be inconsistent with
any convention or practice in the London Interbank
Market or any other applicable interbank market for the
basis of accrual of interest or fees in respect of the
Euro, such convention or practice shall replace such
expressed basis effective as of and from the date on
which such state becomes a Participating Member State;
provided, that if any Advance in the currency of such
--------
state is outstanding immediately prior to such date,
such replacement shall take effect, with respect to
such Advance, at the end of the then current Interest
Period.
(h) Rounding and Other Consequential Changes. Without
----------------------------------------
prejudice and in addition to any method of conversion
or rounding prescribed by any EMU Legislation and
without prejudice to the respective liabilities for
indebtedness of the Borrower to the Banks and the Banks
to the Borrower under or pursuant to this Agreement:
(i) each reference in this Agreement to a
minimum amount (or an integral multiple
thereof) in a National Currency Unit to be
paid to or by the Agent shall be replaced by
a reference to such reasonably comparable and
convenient amount (or an integral multiple
thereof) in the Euro Unit as the Agent may
from time to time specify; and
(ii) except as expressly provided in this
Section 4.9, each provision of this Agreement
-----------
shall be subject to such reasonable changes
of construction as the Agent may from time to
time specify to be necessary or appropriate
to reflect the introduction of or changeover
to the Euro in Participating Member States.
(i) Increased Costs. The Borrower shall from time to
---------------
time, at the request of the Agent, pay to the Agent for
the
-8-
<PAGE>
account of each Bank the amount of any cost or
increased cost incurred by, or of any reduction in
any amount payable to or in the effective return
on its capital to, or of interest or other return
foregone by, such Bank or any holding company of
such Bank as a result of the introduction of,
changeover to or operation of the Euro in any
Participating Member State.
Section 4.10. Continuity of Contract. Except as otherwise provided
----------------------
herein, no implementation of the EMU or change in currency nor any economic
consequences resulting therefrom shall (i) give rise to any right to
terminate prematurely, contest, cancel, rescind, alter, modify or
renegotiate the provisions of this Agreement or (ii) discharge, excuse or
otherwise affect the performance of any obligations of the Borrower under
this Agreement or other Loan Documents.
2.9 Amendment to Section 10.5(i)(H). Effective as of the date hereof,
-------------------------------
the reference in Section 10.5(i)(H) of the Agreement to the amount
"$40,000,000" is amended to read "$60,000,000".
ARTICLE VI
----------
Conditions Precedent
--------------------
3.1 Conditions. The effectiveness of this Amendment is subject to the
----------
satisfaction of the following conditions precedent:
(a) Representations and Warranties. The
------------------------------
representations and warranties contained herein and in
all other Loan Documents, as amended hereby, shall be
true and correct as of the date hereof as if made on
the date hereof.
(b) No Default. No Default shall have occurred and be
----------
continuing.
(c) Corporate Matters. All corporate proceedings taken
-----------------
in connection with the transactions contemplated by
this Amendment and all documents, instruments, and
other legal matters incident thereto shall be
satisfactory to the Agent and its legal counsel,
Winstead Sechrest & Minick P.C.
(d) Additional Documentation. The Agent shall have
------------------------
received such additional approvals, opinions, or
documents as the Agent or its legal counsel, Winstead
Sechrest & Minick P.C., may reasonably request.
-9-
<PAGE>
ARTICLE VII
-----------
Ratifications, Representations and Warranties
---------------------------------------------
4.1 Ratifications. The terms and provisions set forth in this
-------------
Amendment shall modify and supersede all inconsistent terms and
provisions set forth in the Agreement and except as expressly modified
and superseded by this Amendment, the terms and provisions of the
Agreement and the other Loan Documents are ratified and confirmed and
shall continue in full force and effect. Borrower agrees that the
Agreement, as amended hereby, and the other Loan Documents shall
continue to be legal, valid, binding and enforceable in accordance
with their respective terms.
4.2 Representations and Warranties. Borrower hereby represents and
------------------------------
warrants to the Agent and the Banks that (1) the execution, delivery,
and performance by the Borrower and the Guarantors of this Amendment
and compliance with the terms and provisions hereof have been duly
authorized by all requisite action on the part of each such Person and
do not and will not (a) violate or conflict with, or result in a
breach of, or require any consent under (i) the articles of
incorporation, certificate of incorporation, bylaws, partnership
agreement or other organizational documents of any such Person, (ii)
any applicable law, rule, or regulation or any order, writ,
injunction, or decree of any Governmental Authority or arbitrator, or
(iii) any material agreement or instrument to which any such Person is
a party or by which any of them or any of their property is bound or
subject, (2) the representations and warranties contained in the
Agreement, as amended hereby, and any other Loan Document are true and
correct on and as of the date hereof as though made on and as of the
date hereof, and (3) no Default has occurred and is continuing.
ARTICLE V
---------
Miscellaneous
-------------
5.1 Survival of Representations and Warranties. All representations
------------------------------------------
and warranties made in this Amendment or any other Loan Document shall
survive the execution and delivery of this Amendment, and no
investigation by the Agent or any Bank or any closing shall affect the
representations and warranties or the right of the Agent or any Bank
to rely upon them.
5.2 Reference to Agreement. Each of the Loan Documents, including the
----------------------
Agreement and any and all other agreements, documents, or instruments
now or hereafter executed and delivered pursuant to the terms hereof
or pursuant to the terms of the Agreement as amended hereby, are
hereby amended so that any reference in such Loan Documents to the
Agreement shall mean a reference to the Agreement as amended hereby.
-10-
<PAGE>
5.3 Expenses of the Agent. Borrower agrees to pay on demand all costs
---------------------
and expenses incurred by the Agent in connection with the preparation,
negotiation, and execution of this Amendment and any and all
amendments, modifications, and supplements thereto, including without
limitation the costs and fees of the Agent's legal counsel, and all
costs and expenses incurred by the Agent in connection with the
enforcement or preservation of any rights under the Agreement, as
amended hereby, or any other Loan Document, including without
limitation the costs and fees of the Agent's legal counsel.
5.4 Severability. Any provision of this Amendment held by a court of
------------
competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Amendment and the effect thereof
shall be confined to the provision so held to be invalid or
unenforceable.
5.5 APPLICABLE LAW. NOTWITHSTANDING ANYTHING TO THE CONTRARY
--------------
CONTAINED IN THE OTHER LOAN DOCUMENTS, THIS AMENDMENT AND ALL OTHER
LOAN DOCUMENTS SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE
IN DALLAS, DALLAS COUNTY, TEXAS AND SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
5.6 Successors and Assigns. This Amendment is binding upon and
----------------------
shall inure to the benefit of the Borrower, the Banks, the Co-Agents
and the Agent and their respective successors and assigns, except the
Borrower shall not assign or transfer any of its rights or obligations
hereunder without the prior written consent of the Agent.
5.7 Counterparts. This Amendment may be executed in one or more
------------
counterparts, each of which when so executed shall be deemed to be an
original, but all of which when taken together shall constitute one
and the same instrument.
5.8 Headings. The headings, captions, and arrangements used in this
--------
Amendment are for convenience only and shall not affect the
interpretation of this Amendment.
5.9 Release of Claims. The Borrower and the Guarantors each hereby
-----------------
acknowledge and agree that none of them has any and there are no
claims or offsets against or defenses or counterclaims to the terms
and provisions of or the obligations of the Borrower, any Guarantor or
any Subsidiary created or evidenced by the Agreement or any of the
other Loan Documents, and to the extent any such claims, offsets,
defenses or counterclaims exist, Borrower and the Guarantors each
hereby waives, and hereby release the Agent and each of the Banks
from, any and all claims, offsets, defenses and counterclaims, whether
known or unknown, such waiver and release being with full knowledge
and understanding of the circumstances and effects of such waiver and
release and after having consulted legal counsel with respect thereto.
-11-
<PAGE>
5.10 ENTIRE AGREEMENT. THIS AMENDMENT AND ALL OTHER INSTRUMENTS,
----------------
DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH
THIS AMENDMENT EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES
HERETO REGARDING THIS AMENDMENT AND SUPERSEDE ANY AND ALL PRIOR
COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER
WRITTEN OR ORAL, RELATING TO THIS AMENDMENT, AND MAY NOT BE
CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE
ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.
Executed as of the date first written above.
BORROWER:
--------
CELLSTAR CORPORATION
By:__________________________________________
Name:___________________________________
Title:__________________________________
AGENTS AND BANKS:
----------------
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION (formerly known as
Texas Commerce Bank National Association), as
Agent and as a Bank
By:__________________________________________
Name:___________________________________
Title:__________________________________
-12-
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO,
as a Co-Agent and a Bank
By:__________________________________________
Name:___________________________________
Title:__________________________________
NATIONAL CITY BANK,
as a Co-Agent and a Bank
By:__________________________________________
Name:___________________________________
Title:__________________________________
CREDIT LYONNAIS NEW YORK BRANCH
By:__________________________________________
Name:___________________________________
Title:__________________________________
THE FUJI BANK, LIMITED,
HOUSTON AGENCY
By:__________________________________________
Name:___________________________________
Title:__________________________________
WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION
By:__________________________________________
Name:___________________________________
Title:__________________________________
-13-
<PAGE>
Each of the undersigned Guarantors hereby (a) consents and agrees to this
Amendment, and (b) agrees that its Guaranty shall continue to be the legal,
valid and binding obligation of such Guarantor enforceable against such
Guarantor in accordance with its terms.
NATIONAL AUTO CENTER, INC.
By:__________________________________________
Name:___________________________________
Title:__________________________________
CELLSTAR, LTD.
By: National Auto Center, Inc.,
General Partner
By:__________________________________________
Name:___________________________________
Title:__________________________________
CELLSTAR FULFILLMENT, LTD.
By: CellStar Fulfillment, Inc.,
General Partner
By:__________________________________________
Name:___________________________________
Title:__________________________________
CELLSTAR WEST, INC.
By:__________________________________________
Name:___________________________________
Title:__________________________________
-14-
<PAGE>
ACC-CELLSTAR, INC.
By:__________________________________________
Name:___________________________________
Title:__________________________________
CELLSTAR FINANCO, INC.
By:__________________________________________
Name:___________________________________
Title:__________________________________
CELLSTAR FULFILLMENT, INC.
By:__________________________________________
Name:___________________________________
Title:__________________________________
NAC HOLDINGS, INC.
By:__________________________________________
Name:___________________________________
Title:__________________________________
CELLSTAR INTERNATIONAL CORPORATION/
ASIA
By:__________________________________________
Name:___________________________________
Title:__________________________________
-15-
<PAGE>
AUDIOMEX EXPORT CORP.
By:__________________________________________
Name:___________________________________
Title:__________________________________
CELLSTAR INTERNATIONAL
CORPORATION/SA
By:__________________________________________
Name:___________________________________
Title:__________________________________
CELLSTAR AIR SERVICES, INC.
By:__________________________________________
Name:___________________________________
Title:__________________________________
A & S AIR SERVICE, INC.
By:__________________________________________
Name:___________________________________
Title:__________________________________
CELLSTAR TELECOM, INC.
By:__________________________________________
Name:___________________________________
Title:__________________________________
-16-
<PAGE>
FLORIDA PROPERTIES, INC.
By:__________________________________________
Name:___________________________________
Title:__________________________________
CELLSTAR GLOBAL SATELLITE
SERVICE, LTD.
By: National Auto Center, Inc.,
General Partner
By:__________________________________________
Name:___________________________________
Title:__________________________________
-17-
<PAGE>
EXHIBIT 10.2
FIFTH AMENDMENT TO
CREDIT AGREEMENT
----------------
This FIFTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of
---------
April 8, 1999, is among CELLSTAR CORPORATION, a Delaware corporation (the
"Borrower"), each of the banks or other lending institutions which is or may
- ---------
from time to time become a signatory to the Agreement (hereinafter defined) or
any successor or permitted assignee thereof (each a "Bank" and collectively, the
----
"Banks"), THE FIRST NATIONAL BANK OF CHICAGO and NATIONAL CITY BANK, as co-
-----
agents ("Co-Agents"), and CHASE BANK OF TEXAS, NATIONAL ASSOCIATION (formerly
---------
known as Texas Commerce Bank National Association), a national banking
association ("Chase"), as agent for itself and the other Banks, as issuer of
-----
Letters of Credit under the Agreement, and as the swing line lender (in such
capacity, together with its successors in such capacity, the "Agent").
-----
RECITALS:
A. The Borrower, the Banks, the Co-Agents and the Agent have
entered into that certain Credit Agreement dated as of October
15, 1997, as amended by (i) that certain First Amendment to
Credit Agreement dated as of February 20, 1998, (ii) that certain
Second Amendment to Credit Agreement dated as of July 24, 1998,
(iii) that certain Third Amendment to Credit Agreement dated as
of September 11, 1998, and (iv) that certain Fourth Amendment to
Credit Agreement dated as of March 5, 1999 (as amended, the
"Agreement").
---------
B. The Borrower, the Banks, the Co-Agents and the Agent now
desire to amend the Agreement as provided herein.
NOW, THEREFORE, in consideration of the premises herein contained and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
---------
Definitions
-----------
1.1 Definitions. Capitalized terms used in this Amendment, to the
-----------
extent not otherwise defined herein, shall have the same meanings as
in the Agreement, as amended hereby.
ARTICLE II
----------
Amendments
----------
2.1 Removal of Fuji Bank. Effective as of and from the date hereof,
--------------------
(a) The Fuji Bank, Limited, Houston Agency ("Fuji Bank") is hereby
---------
removed as a Bank and shall no longer be party to the Agreement and
any other Loan Document; (b) the
<PAGE>
Commitment of Fuji Bank under the Agreement is hereby terminated; and
(c) Fuji Bank shall be released from any further duty, liability and
obligation of any nature whatsoever under the Agreement and any other
Loan Document. Notwithstanding the foregoing, the indemnity
obligations under Section 14.2 of the Agreement and all other
obligations which survive the termination of the Agreement and any
other Loan Document shall survive the removal of Fuji Bank and the
termination of its Commitment thereunder.
2.2 Remaining Banks. The Commitments of the Banks other than Fuji
---------------
Bank shall remain unchanged, and the respective Commitment Percentages
and pro rata shares of such Banks shall be adjusted accordingly
effective as of the date hereof. As of the date hereof, Fuji Bank
shall be deemed to have sold and transferred to each of the other
Banks and each of such other Banks shall be deemed irrevocable and
unconditionally to have purchased and received from Fuji Bank (to the
extent of such other Bank's Commitment Percentage, as adjusted in
accordance with this Section), without recourse or warranty, Fuji
Bank's participation share under Section 3.3 of the Agreement in all
-----------
Letters of Credit outstanding on the date hereof and related rights.
2.3 Waiver of Notice. The Agent and the Banks hereby waive any
----------------
notice required under Section 2.10 of the Agreement for a reduction
------------
of the Commitments pursuant to this Amendment.
2.4 Definition of "Commitment". Effective as of the date hereof, the
--------------------------
definition of "Commitment" set forth in Section 1.1 of the Agreement
---------- -----------
is hereby amended to read in its entirety as follows:
"Commitment" means, as to each Bank, the obligation of such Bank to
----------
make Advances pursuant to Sections 2.1 and 2.2 and issue or participate in
------------ ---
Letters of Credit pursuant to Sections 3.1 and 3.3 in an aggregate
------------ ---
principal amount at any time outstanding up to but not exceeding the amount
set forth below opposite the name of such Bank under the heading
"Commitment":
Bank Commitment
---- -----------
Chase Bank of Texas, National $25,000,000 (including a $5,000,000
Association Swing Line Commitment)
The First National Bank of Chicago $25,000,000
National City Bank $25,000,000
Credit Lyonnais New York Branch $20,000,000
Wells Fargo Bank (Texas), National $20,000,000
Association
-2-
<PAGE>
, or the Commitment amount assigned or retained pursuant to an Assignment
and Acceptance, or the Commitment amount for such Bank specified in
documentation executed pursuant to Section 2.12; in each case, as such
------------
amount may be reduced pursuant to Section 2.10 or terminated pursuant to
------------
Section 2.10 or Section 12.2.
------------ ------------
2.5 Definition of "Companies Cash Flow". Effective as of February
-----------------------------------
28, 1999, the proviso at the end of subparagraph (b) of the definition
of "Companies Cash Flow" set forth in Section 1.1 of the Agreement is
-----------
hereby amended to read as follows:
provided, however, that in calculating Companies Cash Flow (i) changes in
-------- -------
the allowance for doubtful accounts shall not be treated as a non-cash item
for purposes of such calculation, and (ii) special charges in the aggregate
amount of $20,382,000 recorded in the quarter ending November 30, 1998, for
the settlement of the shareholder lawsuit and a charge taken as part of
Borrower's strategic repositioning, shall be excluded from the calculation
of Companies Cash Flow.
2.6 Reduction or Termination of Commitment. Effective as of the date
--------------------------------------
hereof, the last sentence of Section 2.10 of the Agreement is hereby
------------
amended to read as follows:
The Commitments may not be reinstated after they have been terminated
or reduced, except for the Commitment Increase pursuant to Section
2.12.
2.7 Commitment Increase. Effective as of the date hereof, Article
-------------------
II of the Agreement is hereby amended to add the following Section
-------
2.12 to the end thereof, which Section 2.12 shall read in its entirety
---- ------------
as follows:
Section 2.12. Commitment Increase. The parties hereto understand
-------------------
that the Borrower may seek one or more financial institutions to take a
Commitment or Commitments in the aggregate amount of $20,000,000 (the
"Commitment Increase"). The Commitment Increase may be taken by any
existing Bank hereunder by increasing the Commitment of such existing Bank
(each an "Increasing Bank") or by a new Bank added as a party hereto (each
---------------
an "Additional Bank"), subject to the conditions hereinafter specified.
For purposes of the foregoing, Agent may, from time to time, (i) admit
Additional Banks hereunder, or (ii) at the request of any Increasing Bank,
increase the Commitment of such Increasing Bank, subject to the following
conditions:
(a) each Additional Bank shall be an Eligible Assignee;
(b) Borrower shall execute (i) a new Note payable to the
order of each Additional Bank, or (ii) a replacement
Note payable to the order of each Increasing Bank;
-3-
<PAGE>
(c) Borrower and Agent shall execute appropriate
documentation to add each Additional Bank as a party to
this Agreement, whereupon such Additional Bank shall
have all of the rights and obligations of a Bank
hereunder and under the other Loan Documents;
(d) Each Additional Bank and each Increasing Bank shall
pay to the Agent for the account of the other Banks an
amount equal to its Percentage Commitment of
outstanding Advances, and such amount so paid shall
constitute an Advance by such Additional Bank or
Increasing Bank under its Note and a payment of
principal to the other Banks under their respective
Notes, and the outstanding principal balances of the
respective Notes shall be increased or reduced
accordingly;
(e) After giving effect to the admission of any
Additional Bank or the increase in the Commitment of
any Increasing Bank, the aggregate amount of the
Commitments shall not exceed $135,000,000; and
(f) No admission of any Additional Bank shall increase
the Commitment of any existing Bank.
Upon and as of the date of the addition of any Additional Bank to the
Agreement or the increase of the Commitment of any Increasing Bank, (i) the
Commitments of the other Banks shall remain unchanged, and the respective
Commitment Percentages and pro rata shares of such Banks shall be adjusted
accordingly, and (ii) each of the other Banks shall be deemed to have sold
and transferred to such Additional Bank or such Increasing Bank, as the
case may be, and such Additional Bank or Increasing Bank shall be deemed
irrevocably and unconditionally to have purchased and received from each
such other Banks (on a pro rata basis, based on such other Banks'
respective Commitment Percentages, as adjusted in accordance with this
Section) a portion of such other Banks' participation shares under Section
-------
3.3 in all Letters of Credit outstanding on such date and related rights,
---
in an aggregate amount equal to such Additional Bank's or such Increasing
Bank's Commitment Percentage of such outstanding Letters of Credit. The
addition of any Additional Bank or the increase of the Commitment of an
Increasing Bank and the effects thereof as described in this Section shall
occur automatically upon satisfaction of the conditions specified above,
without the necessity for further documentation to be executed by the other
Banks. Neither Agent nor any Co-Agent nor any Bank shall have any
obligation to find or arrange for any Additional Bank, and no Bank shall
have any obligation to increase its Commitment.
-4-
<PAGE>
ARTICLE III
-----------
Conditions Precedent
--------------------
3.1 Conditions. The effectiveness of this Amendment is subject to the
----------
satisfaction of the following conditions precedent:
(a) Interest and Fees. The Borrower shall pay to the
-----------------
Agent for the account of Fuji Bank all accrued interest
owing to Fuji Bank hereunder, all accrued fees on the
amount of Fuji Bank's Commitment which is terminated by
this Amendment, and all other amounts owing to Fuji
Bank under the Agreement other than the principal
amount of outstanding Advances.
(b) Outstanding Advances. The Banks shall pay to the
--------------------
Agent for the account of Fuji Bank their respective
Commitment Percentages (as adjusted pursuant to Section
-------
2.2 hereof) of outstanding Advances made by Fuji Bank.
---
All amounts so paid shall constitute Advances by the
Banks and shall increase the outstanding principal
balances of their respective Notes accordingly.
(c) Note. Fuji Bank shall return to the Agent, for
----
delivery to the Borrower, the original Note payable to
Fuji Bank, which Note shall be marked "cancelled."
(d) Representations and Warranties. The representations
------------------------------
and warranties contained herein and in all other Loan
Documents, as amended hereby, shall be true and correct
as of the date hereof as if made on the date hereof.
(e) No Default. No Default shall have occurred and be
----------
continuing.
(f) Corporate Matters. All corporate proceedings taken
-----------------
in connection with the transactions contemplated by
this Amendment and all documents, instruments, and
other legal matters incident thereto shall be
satisfactory to the Agent and its legal counsel,
Winstead Sechrest & Minick P.C.
(g) Additional Documentation. The Agent shall have
------------------------
received such additional approvals, opinions, or
documents as
-5-
<PAGE>
the Agent or its legal counsel, Winstead Sechrest &
Minick P.C., may reasonably request.
ARTICLE IV
----------
Ratifications, Representations and Warranties
---------------------------------------------
4.1 Ratifications. The terms and provisions set forth in this
-------------
Amendment shall modify and supersede all inconsistent terms and
provisions set forth in the Agreement and except as expressly modified
and superseded by this Amendment, the terms and provisions of the
Agreement and the other Loan Documents are ratified and confirmed and
shall continue in full force and effect. Borrower agrees that the
Agreement, as amended hereby, and the other Loan Documents shall
continue to be legal, valid, binding and enforceable in accordance
with their respective terms.
4.2 Representations and Warranties. Borrower hereby represents and
------------------------------
warrants to the Agent and the Banks that (1) the execution, delivery,
and performance by the Borrower and the Guarantors of this Amendment
and compliance with the terms and provisions hereof have been duly
authorized by all requisite action on the part of each such Person and
do not and will not (a) violate or conflict with, or result in a
breach of, or require any consent under (i) the articles of
incorporation, certificate of incorporation, bylaws, partnership
agreement or other organizational documents of any such Person, (ii)
any applicable law, rule, or regulation or any order, writ,
injunction, or decree of any Governmental Authority or arbitrator, or
(iii) any material agreement or instrument to which any such Person is
a party or by which any of them or any of their property is bound or
subject, (2) the representations and warranties contained in the
Agreement, as amended hereby, and any other Loan Document are true and
correct on and as of the date hereof as though made on and as of the
date hereof, and (3) no Default has occurred and is continuing.
ARTICLE V
---------
Miscellaneous
-------------
5.1 Survival of Representations and Warranties. All representations
------------------------------------------
and warranties made in this Amendment or any other Loan Document shall
survive the execution and delivery of this Amendment, and no
investigation by the Agent or any Bank or any closing shall affect the
representations and warranties or the right of the Agent or any Bank
to rely upon them.
5.2 Reference to Agreement. Each of the Loan Documents, including
----------------------
the Agreement and any and all other agreements, documents, or
instruments now or hereafter executed and delivered pursuant to the
terms hereof or pursuant to the terms of the Agreement as amended
hereby, are hereby amended so that any reference in
-6-
<PAGE>
such Loan Documents to the Agreement shall mean a reference to the
Agreement as amended hereby.
5.3 Expenses of the Agent. Borrower agrees to pay on demand all costs
---------------------
and expenses incurred by the Agent in connection with the preparation,
negotiation, and execution of this Amendment and any and all
amendments, modifications, and supplements thereto, including without
limitation the costs and fees of the Agent's legal counsel, and all
costs and expenses incurred by the Agent in connection with the
enforcement or preservation of any rights under the Agreement, as
amended hereby, or any other Loan Document, including without
limitation the costs and fees of the Agent's legal counsel.
5.4 Severability. Any provision of this Amendment held by a court of
------------
competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Amendment and the effect thereof
shall be confined to the provision so held to be invalid or
unenforceable.
5.5 APPLICABLE LAW. NOTWITHSTANDING ANYTHING TO THE CONTRARY
--------------
CONTAINED IN THE OTHER LOAN DOCUMENTS, THIS AMENDMENT AND ALL OTHER
LOAN DOCUMENTS SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE
IN DALLAS, DALLAS COUNTY, TEXAS AND SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
5.6 Successors and Assigns. This Amendment is binding upon and shall
----------------------
inure to the benefit of the Borrower, the Banks, the Co-Agents and the
Agent and their respective successors and assigns, except the Borrower
shall not assign or transfer any of its rights or obligations
hereunder without the prior written consent of the Agent.
5.7 Counterparts. This Amendment may be executed in one or more
------------
counterparts, each of which when so executed shall be deemed to be an
original, but all of which when taken together shall constitute one
and the same instrument .
5.8 Headings. The headings, captions, and arrangements used in this
--------
Amendment are for convenience only and shall not affect the
interpretation of this Amendment.
5.9 Release of Claims. The Borrower and the Guarantors each hereby
-----------------
acknowledge and agree that none of them has any and there are no
claims or offsets against or defenses or counterclaims to the terms
and provisions of or the obligations of the Borrower, any Guarantor or
any Subsidiary created or evidenced by the Agreement or any of the
other Loan Documents, and to the extent any such claims, offsets,
defenses or counterclaims exist, Borrower and the Guarantors each
hereby waives, and hereby release the Agent and each of the Banks
from, any and all claims,
-7-
<PAGE>
offsets, defenses and counterclaims, whether known or unknown, such
waiver and release being with full knowledge and understanding of the
circumstances and effects of such waiver and release and after having
consulted legal counsel with respect thereto.
5.10 ENTIRE AGREEMENT. THIS AMENDMENT AND ALL OTHER INSTRUMENTS,
----------------
DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH
THIS AMENDMENT EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES
HERETO REGARDING THIS AMENDMENT AND SUPERSEDE ANY AND ALL PRIOR
COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER
WRITTEN OR ORAL, RELATING TO THIS AMENDMENT, AND MAY NOT BE
CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE
ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.
[REMAINDER OF PAGE INTENTIONALLY BLANK
SIGNATURE PAGES FOLLOW.]
Executed as of the date first written above.
BORROWER:
--------
CELLSTAR CORPORATION
By:________________________________
Name:___________________________
Title:__________________________
-8-
<PAGE>
AGENTS AND BANKS:
----------------
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION (formerly known as
Texas Commerce Bank National Association), as
Agent and as a Bank
By:___________________________________________
Name:______________________________________
Title:_____________________________________
THE FIRST NATIONAL BANK OF CHICAGO,
as a Co-Agent and a Bank
By:___________________________________________
Name:______________________________________
Title:_____________________________________
NATIONAL CITY BANK,
as a Co-Agent and a Bank
By:___________________________________________
Name:______________________________________
Title:_____________________________________
CREDIT LYONNAIS NEW YORK BRANCH
By:___________________________________________
Name:______________________________________
Title:_____________________________________
-9-
<PAGE>
THE FUJI BANK, LIMITED,
HOUSTON AGENCY
By:___________________________________
Name:______________________________
Title:_____________________________
WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION
By:___________________________________
Name:______________________________
Title:_____________________________
Each of the undersigned Guarantors hereby (a) consents and agrees to this
Amendment, and (b) agrees that its Guaranty shall continue to be the legal,
valid and binding obligation of such Guarantor enforceable against such
Guarantor in accordance with its terms.
NATIONAL AUTO CENTER, INC.
By:___________________________________
Name:______________________________
Title:_____________________________
CELLSTAR, LTD.
BY: National Auto Center, Inc.,
General Partner
By:___________________________________
Name:______________________________
Title:_____________________________
-10-
<PAGE>
CELLSTAR FULFILLMENT, LTD.
By: Cellstar Fulfillment, Inc.,
General Partner
By:______________________________
Name:_________________________
Title:________________________
CELLSTAR WEST, INC.
By:___________________________________
Name:______________________________
Title:_____________________________
ACC-CELLSTAR, INC.
By:___________________________________
Name:______________________________
Title:_____________________________
CELLSTAR FINANCO, INC.
By:___________________________________
Name:______________________________
Title:_____________________________
-11-
<PAGE>
CELLSTAR FULFILLMENT, INC.
By:_____________________________
Name:________________________
Title:_______________________
NAC HOLDINGS, INC.
By:_____________________________
Elaine Flud Rodriguez
President
CELLSTAR INTERNATIONAL CORPORATION/
ASIA
By:_____________________________
Name:________________________
Title:_______________________
AUDIOMEX EXPORT CORP.
By:_____________________________
Name:_________________________
Title:________________________
-12-
<PAGE>
CELLSTAR INTERNATIONAL
CORPORATION/SA
By:_____________________________
Name:_________________________
Title:________________________
CELLSTAR AIR SERVICES, INC.
By:_____________________________
Name:_________________________
Title:________________________
A & S AIR SERVICE, INC.
By:_____________________________
Name:_________________________
Title:________________________
CELLSTAR TELECOM, INC.
By:_____________________________
Name:_________________________
Title:________________________
-13-
<PAGE>
FLORIDA PROPERTIES, INC.
By:_______________________________
Name:___________________________
Title:__________________________
CELLSTAR GLOBAL SATELLITE
SERVICE, LTD.
By: National Auto Center, Inc.,
General Partner
By:__________________________
Name:______________________
Title:_____________________
-14-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-START> DEC-01-1998
<PERIOD-END> FEB-28-1999
<CASH> 55,261
<SECURITIES> 0
<RECEIVABLES> 283,915
<ALLOWANCES> 35,259
<INVENTORY> 250,902
<CURRENT-ASSETS> 606,828
<PP&E> 41,856
<DEPRECIATION> 14,589
<TOTAL-ASSETS> 673,926
<CURRENT-LIABILITIES> 329,329
<BONDS> 150,000
0
0
<COMMON> 596
<OTHER-SE> 194,001
<TOTAL-LIABILITY-AND-EQUITY> 673,926
<SALES> 515,348
<TOTAL-REVENUES> 515,348
<CGS> 471,709
<TOTAL-COSTS> 471,709
<OTHER-EXPENSES> 16,808
<LOSS-PROVISION> 2,174
<INTEREST-EXPENSE> 4,681
<INCOME-PRETAX> 19,976
<INCOME-TAX> 4,385
<INCOME-CONTINUING> 15,591
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,591
<EPS-PRIMARY> 0.26<F1>
<EPS-DILUTED> 0.26<F2>
<FN>
<F1>Basic net income per share under SFAS 128.
<F2>Diluted net income per share under SFAS 128.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> FEB-28-1998
<CASH> 80,956
<SECURITIES> 0
<RECEIVABLES> 243,201<F1>
<ALLOWANCES> 24,716
<INVENTORY> 181,269
<CURRENT-ASSETS> 493,833
<PP&E> 35,476
<DEPRECIATION> 12,056
<TOTAL-ASSETS> 551,078
<CURRENT-LIABILITIES> 223,257
<BONDS> 150,000
0
0
<COMMON> 294
<OTHER-SE> 177,527
<TOTAL-LIABILITY-AND-EQUITY> 551,078
<SALES> 406,745
<TOTAL-REVENUES> 406,745
<CGS> 365,335
<TOTAL-COSTS> 365,335
<OTHER-EXPENSES> 20,437
<LOSS-PROVISION> 1,691
<INTEREST-EXPENSE> 2,520
<INCOME-PRETAX> 16,762
<INCOME-TAX> 2,514
<INCOME-CONTINUING> 14,248
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,248
<EPS-PRIMARY> 0.24<F2><F4>
<EPS-DILUTED> 0.23<F3><F4>
<FN>
<F1>Certain financial statement amounts have been reclassified to conform to
the current year presentation.
<F2>Basic net income per share under SFAS No.128.
<F3>Diluted net income per share under SFAS No.128.
<F4>Restated to account for a 2 for 1 common stock split that was distributed
on June 23, 1998.
</FN>
</TABLE>
