<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 May 31, 2000
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 July 12, 2000 there were 60,142,221 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> <C>
Item 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS (unaudited)
May 31, 2000 and November 30, 1999 3
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Three and six months ended May 31, 2000 and 1999 4
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY AND
COMPREHENSIVE LOSS (unaudited) 5
Six months ended May 31, 2000
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Six months ended May 31, 2000 and 1999 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 13
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 21
PART II - OTHER INFORMATION
------- -----------------
Item 1. LEGAL PROCEEDINGS 22
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 22
</TABLE>
2
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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>
May 31, November 30,
2000 1999
------------ ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 79,684 95,498
Accounts receivable (less allowance for doubtful
accounts of $56,968 and $33,152, respectively) 302,613 306,235
Inventories 275,566 189,866
Deferred income tax assets 27,021 15,127
Prepaid expenses 26,759 32,029
------------ ------------
Total current assets 711,643 638,755
Property and equipment, net 25,320 27,481
Goodwill (less accumulated amortization of $11,385
and $10,483, respectively) 31,222 32,584
Other assets 12,631 7,618
------------ ------------
$ 780,816 706,438
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 285,707 212,999
Notes payable to financial institutions 97,486 50,609
Accrued expenses 25,502 24,864
Income taxes payable 1,781 8,646
Deferred income tax liabilities 1,453 8,796
------------ ------------
Total current liabilities 411,929 305,914
Long-term debt 150,000 150,000
------------ ------------
Total liabilities 561,929 455,914
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares
authorized; none issued - -
Common stock, $.01 par value, 200,000,000 shares
authorized; 60,142,221 and 60,057,096 shares
issued and outstanding, respectively 602 601
Additional paid-in capital 81,298 80,929
Accumulated other comprehensive loss - foreign currency
translation adjustments (10,283) (8,509)
Retained earnings 147,270 177,503
------------ ------------
Total stockholders' equity 218,887 250,524
------------ ------------
$ 780,816 706,438
============ ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
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CellStar Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months Six months
ended May 31, ended May 31,
----------------------------- ----------------------------------
2000 1999 2000 1999
------------- ------------- --------------- ----------------
<S> <C> <C> <C> <C>
Revenues $ 561,370 570,325 1,151,229 1,085,673
Cost of sales 553,944 521,267 1,095,520 992,976
------------- ------------- --------------- ----------------
Gross profit 7,426 49,058 55,709 92,697
Selling, general and
administrative expenses 58,059 28,304 90,298 53,922
Restructuring charge - 2,868 (157) 2,868
------------- ------------- --------------- ----------------
Operating income (loss) (50,633) 17,886 (34,432) 35,907
Other income (expense):
Equity in income (loss) of
affiliated companies (466) 100 (381) 6,123
Gain on sale of assets - 6,047 - 8,247
Interest expense (4,702) (5,396) (8,773) (10,077)
Other, net 182 (716) 396 (2,303)
------------- ------------- --------------- ----------------
Total other income (expense) (4,986) 35 (8,758) 1,990
------------- ------------- --------------- ----------------
Income (loss) before income taxes (55,619) 17,921 (43,190) 37,897
Provision (benefit) for income taxes (15,940) 3,952 (12,957) 8,337
------------- ------------- --------------- ----------------
Net income (loss) $ (39,679) 13,969 (30,233) 29,560
============= ============= =============== ================
Net income (loss) per share:
Basic $ (0.66) 0.23 (0.50) 0.50
============= ============= =============== ================
Diluted $ (0.66) 0.23 (0.50) 0.48
============= ============= =============== ================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
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CellStar Corporation and Subsidiaries
Consolidated Statement of Stockholders' Equity and Comprehensive Loss
Six months ended May 31, 2000
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Accumulated
Additional other
Common Stock paid-in comprehensive Retained
----------------------
Shares Amount capital loss earnings Total
---------- ---------- ------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at November 30, 1999 60,057 $ 601 80,929 (8,509) 177,503 250,524
Comprehensive loss:
Net loss - - - - (30,233) (30,233)
Foreign currency translation
adjustment - - - (1,774) - (1,774)
----------
Total comprehensive
loss (32,007)
Common stock issued under
stock option plans 85 1 369 - - 370
--------- --------- ------------ ----------- ------------ ----------
Balance at May 31, 2000 60,142 $ 602 81,298 (10,283) 147,270 218,887
========= ========= ============ =========== ============ ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
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CellStar Corporation and Subsidiaries
Consolidated Statements of Cash Flows
Six months ended May 31, 2000 and 1999
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
2000 1999
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (30,233) 29,560
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 6,394 5,862
Equity in (income) loss of affiliated companies, net 381 (6,123)
Gain on sale of assets - (8,247)
Deferred income taxes (19,237) (2,770)
Changes in operating assets and liabilities
net of effects from acquisitions of businesses:
Accounts receivable 2,351 72,066
Inventories (85,700) 87,206
Prepaid expenses 5,270 (5,059)
Other assets (5,962) (896)
Accounts payable 72,708 (145,900)
Accrued expenses 638 (21,665)
Income taxes payable (6,865) (1,674)
------------ -----------
Net cash provided by (used in) operating activities (60,255) 2,360
Cash flows from investing activities:
Proceeds from sale of assets - 14,148
Purchases of property and equipment (2,722) (4,402)
Acquisitions of businesses, net of cash acquired (84) -
------------ -----------
Net cash provided by (used in) investing activities (2,806) 9,746
Cash flows from financing activities:
Net borrowings on notes payable to financial institutions 46,877 5,624
Net proceeds from issuance of common stock 370 600
------------ -----------
Net cash provided by financing activities 47,247 6,224
Net increase (decrease) in cash and cash equivalents (15,814) 18,330
Cash and cash equivalents at beginning of period 95,498 47,983
------------ -----------
Cash and cash equivalents at end of period $ 79,684 66,313
============ ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
6
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CellStar Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
Although the interim consolidated financial statements of CellStar
Corporation and subsidiaries (the "Company") are unaudited, Company
management is of the opinion 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 income 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, 1999.
Certain prior period financial statement amounts have been reclassified to
conform to the current year presentation.
(2) Net Income (Loss) Per Share
Basic net income (loss) per common share is based on the weighted average
number of common shares outstanding for the relevant period. Diluted net
income (loss) 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 and six months ended May 31, 2000
and 1999 follows (in thousands, except per share data):
<TABLE>
<CAPTION>
Three months ended
May 31
--------------------------
2000 1999
----------- -----------
<S> <C> <C>
Basic:
Net income (loss) $ (39,679) 13,969
=========== ===========
Weighted average number of shares outstanding 60,137 59,614
=========== ===========
Net income (loss) per share $ (0.66) 0.23
=========== ===========
Diluted:
Net income (loss) $ (39,679) 13,969
Interest on convertible notes, net of tax effect - 1,125
----------- -----------
Adjusted net income (loss) $ (39,679) 15,094
=========== ===========
Weighted average number of shares outstanding 60,137 59,614
Effect of dilutive securities:
Stock options and warrant - 653
Convertible notes - 5,422
----------- -----------
Weighted average number of shares outstanding and effect
of dilutive securities 60,137 65,689
=========== ===========
Net income (loss) per share $ (0.66) 0.23
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Six months ended
May 31
--------------------------
2000 1999
----------- -----------
<S> <C> <C>
Basic:
Net income (loss) $ (30,233) 29,560
=========== ===========
Weighted average number of shares outstanding 60,121 59,564
=========== ===========
Net income (loss) per share $ (0.50) 0.50
=========== ===========
Diluted:
Net income (loss) $ (30,233) 29,560
Interest on convertible notes, net of tax effect - 2,250
----------- -----------
Adjusted net income (loss) $ (30,233) 31,810
=========== ===========
Weighted average number of shares outstanding 60,121 59,564
Effect of dilutive securities:
Stock options and warrant - 632
Convertible notes - 5,422
----------- -----------
Weighted average number of shares outstanding and effect
of dilutive securities 60,121 65,618
=========== ===========
Net income (loss) per share $ (0.50) 0.48
=========== ===========
</TABLE>
8
<PAGE>
Options to purchase 3.9 million shares of common stock for the three months
ended May 31, 2000, and 3.1 million for the six months ended May 31, 2000,
were not included in the computation of diluted EPS because the options'
exercise price was greater than the average market price of the common
shares. The subordinated convertible notes were not dilutive for the three
and six month periods ended May 31, 2000.
Options to purchase 1.9 million shares of common stock for the three months
ended May 31, 1999, and 2.0 million for the six months ended May 31, 1999,
were not included in the computation of diluted EPS because the options'
exercise price was greater than the average market price of the common
shares.
(3) Segment and Related Information
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: Asia-
Pacific, Latin America, which includes Mexico and the Company's Miami,
Florida operations ("Miami"), Europe, and North America. Revenues and
operating results of Miami are included in Latin America since Miami's
activities are primarily for export customers. The Corporate group
includes headquarter operations and income and expenses not allocated to
reportable segments. Intersegment sales and transfers are not significant.
9
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Segment information for the three and six months ended May 31, 2000 and 1999
follows (in thousands):
<TABLE>
<CAPTION>
Asia- Latin North
Pacific America Europe America Corporate Total
-------------- ------------- ------------ -------------------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Three months ended
May 31, 2000:
Revenues from external customers $ 231,388 160,526 66,503 102,953 - 561,370
Income (loss) before
interest and taxes 1,461 (28,095) (3,654) (15,673) (6,245) (52,206)
Three months ended
May 31, 1999:
Revenues from external customers $ 193,580 186,877 89,063 100,805 - 570,325
Income (loss) before
interest and taxes 9,222 15,655 1,908 1,015 (5,337) 22,463
</TABLE>
<TABLE>
<CAPTION>
2000 1999
-------------- --------------
<S> <C> <C>
Income (loss) before interest and income taxes per segment information...................... $ (52,206) 22,463
Interest expense per the consolidated statements of operations.............................. (4,702) (5,396)
Interest income included in other, net in the consolidated statements of operations......... 1,289 854
-------------- --------------
Income (loss) before income taxes per the consolidated statements of operations............. $ (55,619) 17,921
============== ==============
</TABLE>
<TABLE>
<CAPTION>
Asia- Latin North
Pacific America Europe America Corporate Total
-------------- ------------- ------------ ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Six months ended
May 31, 2000:
Revenues from external customers $ 473,306 315,732 181,781 180,410 - 1,151,229
Income (loss) before
interest and taxes 13,183 (23,072) (960) (14,828) (10,910) (36,587)
Six months ended
May 31, 1999:
Revenues from external customers $ 327,283 357,129 198,318 202,943 - 1,085,673
Income (loss) before
interest and taxes 17,333 20,537 4,807 12,859 (9,365) 46,171
</TABLE>
<TABLE>
<CAPTION>
2000 1999
-------------- --------------
<S> <C> <C>
Income (loss) before interest and income taxes per segment information..................... $ (36,587) 46,171
Interest expense per the consolidated statements of operations............................. (8,773) (10,077)
Interest income included in other, net in the consolidated statements of operations........ 2,170 1,803
-------------- --------------
Income (loss) before income taxes per the consolidated statements of operations............. $ (43,190) 37,897
============== ==============
</TABLE>
10
<PAGE>
(4) United Kingdom International Trading Operations
In April 2000, the Company curtailed a significant portion of its U.K.
international trading operations following third party theft and fraud
losses. The trading business involves the purchase of products from
suppliers other than manufacturers and the sale of those products to
customers other than network operators or their dealers and other
representatives. As a result, the Company experienced a reduction in
revenues for the Europe Region in the quarter ended May 31, 2000 and
anticipates a reduction in revenues during the balance of the year ending
November 30, 2000.
For the quarter ended May 31, 2000, the Company recorded a $4.4 million
charge consisting of $3.2 million for third party theft and fraud losses
during the purchase, transfer of title and transport of six shipments of
wireless handsets and $1.2 million in inventory obsolescence expense for
inventory price reductions incurred while the international trading
business was curtailed pending investigation. The Company is negotiating
to obtain an insurance settlement and is pursuing legal action where
appropriate. However, the ultimate recovery, if any, in relation to these
losses cannot be determined at this time.
(5) Brazil
Since 1998, the Company's Brazilian operations have been primarily
conducted through a majority-owned joint venture. Following an extensive
review of its operations in Brazil, the Company concluded that its joint
venture structure, together with foreign exchange risk, the high cost of
capital in that country, accumulated losses, and the prospect of ongoing
losses, were not optimal for success in that market. As a result, the
Company has elected to exit the Brazil market and intends to divest its 51%
interest in its joint venture. The Company's operations in Brazil have
incurred a $9.3 million loss in 2000, including the write down of certain
assets to fair value. The Company has also fully reserved certain U.S.
based accounts receivable, the collectibility of which has deteriorated
significantly in the second quarter of 2000 and which were further affected
by the decision to exit Brazil.
(6) Redistributor Business
The Company is phasing out a major portion of its redistributor business in
the Miami and North American operations due to the volatility of the
redistributor business, the relatively lower margins and higher credit
risks. Redistributors are distributors that do not have existing direct
relationships with manufacturers and who do not have long-term carrier or
dealer/agent relationships. These distributors purchase product on a spot
basis to fulfill intermittent customer demand and do not have long-term
predictable product demand. Combined revenues for the six months ended May
31, 2000 and 1999 for the redistributor business were $31.5 million and
$59.6 million, respectively.
(7) Amendment to Multicurrency Revolving Credit Facility
Based on results for the three months ended May 31, 2000, the Company would
not have been in compliance with one of its covenants under its
Multicurrency Revolving Credit Facility (the "Facility"). As of July 12,
2000, the Company had negotiated an amendment to the Facility that assists
the Company in complying with the covenant. The relief provided by the
amendment will be available through the third quarter of 2000. The amount
of the Facility was also reduced from $115.0 million to $100.0 million. As
a result of the July 12, 2000 amendment to the Facility, interest rates
will increase by 25 basis points for the balance of the year. The Company
and its banking syndicate have begun negotiations for a future amendment to
address a longer-term solution to covenant concerns. However, no assurance
can be given that the Company and its banking syndicate will achieve a
longer-term solution.
11
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(8) Inventory Obsolescence Expense and Bad Debt Expense
Inventory obsolescence expense of $21.8 million and $23.5 million for the
three months and six months ended May 31, 2000, respectively, is included
in cost of goods sold in the accompanying consolidated statements of
operations.
Bad debt expense of $25.5 million and $29.9 million for the three months
and six months ended May 31, 2000, respectively, is included in selling,
general and administrative expenses in the accompanying consolidated
statements of operations.
(9) Comprehensive Income (Loss)
Comprehensive income (loss) consists of net income (loss) and foreign
currency translation adjustment and aggregates $(41.1) million and $(32.0)
million for the three and six month periods ended May 31, 2000,
respectively. For the three and six month periods ended May 31, 1999
comprehensive income aggregates $13.1 million and $28.5 million,
respectively.
(10) Contingencies
Refer to Part II, Item 1, "Legal Proceedings."
12
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The Company reported a net loss of $39.7 million, or $0.66 per diluted
share, for the second quarter of 2000 compared with net income of $14.0 million
or $0.23 per diluted share, for the same quarter last year. In the second
quarter of 2000, the Company decided to divest its majority interest in its
Brazil joint venture, phase out a major portion of its North America and Miami
redistributor business, and substantially reduced international trading
operations conducted by its U.K. subsidiary due to third party theft and fraud
losses. Also during the second quarter of 2000, the Company recorded inventory
obsolescence expense of $21.8 million, bad debt expense of $25.5 million, and
$3.2 million in theft and fraud losses related to the U.K. international trading
operations. In addition, the Company experienced a decline in gross margins due
to a shift in geographic revenue mix and competitive margin pressures. The
second quarter of 1999 was impacted by several non-operating items, including
(i) a pre-tax charge of $2.9 million related to the reorganization and
consolidation of the management for the Company's Latin American and North
American Regions and the centralization of its Asia-Pacific Region's management,
and (ii) pre-tax gains totaling $6.0 million from the sale of its prepaid
operation in Venezuela and the sale of the Company's retail stores in the Kansas
City area. Without the effects of these items, net income for the second quarter
of 1999 would have been $11.4 million, or $0.19 per diluted share.
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 "should", "may,"
"intends", "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,
revaluation, devaluation and fluctuations in relative exchange rates, political
instability, changes in foreign laws, regulations and tariffs, new technologies,
competition, customer and vendor relationships, unstable channels of
distribution, seasonality, inventory obsolescence and availability, "gray
market" resales, and inflation 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.
13
<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 and six months ended May 31, 2000 and 1999:
<TABLE>
<CAPTION>
Three months Six months
ended May 31 ended May 31
---------------------- -----------------------
2000 1999 2000 1999
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0 100.0 100.0
Cost of sales 98.7 91.4 95.2 91.5
--------- --------- ---------- ---------
Gross profit 1.3 8.6 4.8 8.5
Selling, general and administrative expenses 10.3 5.0 7.8 5.0
Restructuring charge - 0.5 - 0.2
--------- --------- ---------- ---------
Operating income (loss) (9.0) 3.1 (3.0) 3.3
Other income (expense):
Equity in income (loss) of
affiliated companies (0.1) - - 0.6
Gain on sale of assets - 1.1 - 0.7
Interest expense (0.8) (1.0) (0.8) (0.9)
Other, net - (0.1) - (0.2)
--------- --------- ---------- ---------
Total other income (expense) (0.9) - (0.8) 0.2
--------- --------- ---------- ---------
Income (loss) before income taxes (9.9) 3.1 (3.8) 3.5
Provision (benefit) for income taxes (2.8) 0.7 (1.1) 0.8
--------- --------- ---------- ---------
Net income (loss) (7.1)% 2.4 (2.7) 2.7
========= ========= ========== =========
</TABLE>
14
<PAGE>
Three Months Ended May 31, 2000 Compared to Three Months Ended May 31, 1999
Revenues. The Company's revenues decreased $8.9 million, or 1.6%, from
$570.3 million to $561.4 million.
Revenues in the Asia-Pacific Region increased $37.8 million, or 19.5%, from
$193.6 million to $231.4 million. The Company's operations in the People's
Republic of China, including Hong Kong ("PRC"), provided $153.2 million in
revenue, an increase of $26.2 million or 20.6%, from $127.0 million. This
increase was due to continued strong demand in the PRC and the build-up of
extensive sales channels. The Company's operations in Taiwan provided $48.8
million of revenue, a decrease of $4.0 million, from $52.8 million. Demand
decreased in Taiwan due to the political uncertainty surrounding the
presidential election in March and Taiwan's relationship with the PRC. In the
Philippines, revenues for the quarter increased $14.7 million to $19.0 million
due to carrier promotions and receipt by the Company in the fourth quarter of
1999 of certain distribution rights to Nokia products in the Philippines.
Latin America Region revenues were $160.5 million for the second quarter
ended May 31, 2000, a 14.1% decrease from the prior year revenues of $186.9
million. Revenues in Brazil declined $45.9 million. In 2000, sales to the
Company's major customer in Brazil were greatly reduced due to the increased
availability of in-country manufactured product. The Company has elected to exit
the Brazil market (see "International Operations"). Revenues in Venezuela
declined $11.1 million, reflecting continuing market softness caused by
political and economic instability due to upcoming local elections. Revenues
from the Miami export operations were down $12.7 million, reflecting the
Company's decision to phase out a major portion of its redistributor channel,
and the declining export market due to increasing availability of in-country
manufactured product. The Company is phasing out a major portion of its
redistributor business in the Miami and North American operations due to the
volatility of the redistributor business, the relatively lower margins and
higher credit risks. Also, supply shortages in the third and fourth quarters of
1999 significantly weakened the redistributor channel, reducing the number of
financially viable redistributors and creating operating and financial
difficulties for others. Combined revenues for the quarter for the redistributor
business were $13.3 million in 2000 and $33.9 million in 1999. Revenues in
Mexico increased $36.7 million, or 58.1%, due primarily to an aggressive new
subscriber promotion by PEGASO during the quarter. Combined revenues from
CellStar's Argentina, Colombia and Peru operations more than doubled to $15.3
million.
North America Region revenues were $103.0 million, up 2.1% from $100.8
million for the prior year. This was the region's first revenue increase since
the fourth quarter of 1998. The region's revenues have been impacted by a major
customer that began coordinating its distribution directly with manufacturers.
Excluding revenues from that customer, second quarter 2000 revenues for the
region increased $35.2 million, or 51.9%.
Revenues for the Europe Region decreased to $66.5 million in the second
quarter from $89.1 million in the prior comparable quarter, due to the Company's
decision to curtail its U.K. international trading operations (see
"International Operations"). Quarterly results included a $3.6 million increase
in revenues from Sweden, as well as revenues of $6.8 million from the Company's
operations in The Netherlands, which was acquired in the third quarter of 1999.
Gross Profit. Gross profit decreased $41.7 million, or 84.9%, from $49.1
million to $7.4 million. The decrease in gross profit was primarily due to $21.8
million in inventory obsolescence as a result of price declines during the
quarter and $3.2 million in third party theft and fraud losses related to the
U.K. international trading operations. Excluding these provisions, the decrease
in gross profit as a percentage of revenues was primarily due to a shift in
geographic revenue mix, lack of digital handsets in North America, competitive
margin pressures including an oversupply of analog handsets in North America and
an oversupply of handsets in Asia Pacific, and a delay in the introduction of
new models by manufacturers, including WAP enabled phones.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $29.8 million, or 105.3% from $28.3 million to
$58.1 million. This increase was principally due to bad debt
15
<PAGE>
expense of $25.5 million, up from $4.0 million for the second quarter last year.
The increase was primarily from certain U.S. based accounts receivable, the
collectibility of which has deteriorated significantly in the second quarter of
2000 and which were further affected by the Company's decision to sell its
majority interest in its joint venture in Brazil and the phase out of a major
portion of the redistributor business in its Miami and North America operations.
The increase in selling, general and administrative expenses was also
attributable to costs associated with business expansion activities and
professional expenses. Overall selling, general and administrative expenses as a
percentage of revenues increased to 10.3% from 5.0%.
Restructuring Charge. The Company's results of operations for the second
quarter of 1999 include a pre-tax restructuring charge of $2.9 million
associated with the reorganization and consolidation of the management for the
Company's Latin American and North American Regions as well as the
centralization of the management in the Asia-Pacific Region.
Gain on Sale of Assets. In the second quarter of 1999, the Company
recorded a pre-tax gain of $6.0 million associated with the sale of its prepaid
operations in Venezuela and the sale of the Company's retail stores in the
Kansas City area.
Interest Expense. Interest expense decreased to $4.7 million from $5.4
million primarily as a result of lower interest expense in Brazil.
Other, Net. Other, net increased from expense of $0.7 million in the
second quarter of 1999 to income of $0.2 million in 2000. This increase was
primarily due to lower foreign currency losses related to Brazil.
Income Taxes. Income tax expense decreased from a provision of $4.0
million in 1999 to a benefit of $15.9 million in 2000. The annual effective tax
rate increased to 30.0% from 22.0%. The higher effective tax rate was
attributable to changes in the expected geographical mix of income (loss) before
income taxes.
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Six Months Ended May 31, 2000 Compared to Six Months Ended May 31, 1999
Revenues. The Company's revenues increased $65.5 million, or 6.0%, from
$1,085.7 million to $1,151.2 million.
Revenues in the Asia-Pacific Region increased $146.0 million, or 44.6%,
from $327.3 million to $473.3 million. The Company's operations in the PRC
provided $321.2 million in revenue, an increase of $98.5 million, or 44.2%, from
$222.7 million. This increase was due to continued strong demand in the PRC and
the build-up of extensive sales channels. The Company's operations in Taiwan
provided $102.4 million of revenue, an increase of $22.6 million, or 28.3%, from
$79.8 million. Demand in Taiwan increased due to the introduction of new high-
end handsets in the first quarter of 2000, but was slowed in the second quarter
of 2000 due to the political uncertainty surrounding the presidential election
in March and Taiwan's relationship with the PRC. In the Philippines, revenues
increased $22.6 million to $31.0 million due to carrier promotions and receipt
by the Company in the fourth quarter of 1999 of certain distribution rights to
Nokia products in the Philippines.
The Latin American Region provided $315.7 million of revenues, compared to
$357.1 million, or an 11.6% decrease. Revenues in Mexico increased $91.2 million
due primarily to increased carrier business. Revenues for Brazil were down
$105.0 million from last year. In 1999, the recently completed privatization of
the telecommunications industry was driving rapid growth in carrier sales. In
2000, sales to the Company's major customer in Brazil were greatly reduced due
to the increased availability of in-country manufactured product. The Company
has elected to exit the Brazil market (see "International Operations"). Revenues
from the Venezuela operations declined $23.8 million. The decline was a result
of the effects of the torrential floods in late 1999, the positive impact on
last year's first quarter of a special carrier promotion, and continuing market
softness caused by political and economic instability due to upcoming local
elections. Revenues from the Company's operations in Miami decreased $19.2
million from 1999 as increased product availability from in-country
manufacturers in Latin America continued to reduce export sales from Miami. The
Company is phasing out a major portion of its redistributor business in its
Miami and North American operations due to the volatility of the redistributor
business, the relatively lower margins, and higher credit risks. Also, supply
shortages in the third and fourth quarters of 1999 significantly weakened the
redistributor channel, reducing the number of financially viable redistributors
and creating operating and financial difficulties for others. Combined revenues
from the redistributor business were $31.5 million and $59.6 million in 2000 and
1999, respectively. Combined revenues from the operations in Argentina, Chile,
Colombia and Peru increased $15.6 million.
North American Region revenues were $180.4 million, a decrease of $22.5
million, or 11.1% when compared to $202.9 million. The decrease was primarily a
result of a decline in product sales to a major customer that began coordinating
its distribution directly with manufacturers. Excluding revenues from that
customer, revenues increased $41.0 million or 30.6% from 1999.
The Company's Europe Region recorded revenues of $181.8 million, a decrease
of $16.5 million, or 8.3%, from $198.3 million, primarily due to the Company's
decision to curtail its U.K. international trading operations in April 2000 (see
"International Operations"). Revenues from Sweden declined $4.6 million
primarily due to product shortages in the first quarter of 2000. Revenues from
The Netherlands, which was acquired in the third quarter of 1999, were $15.6
million.
Gross Profit. Gross profit decreased $37.0 million, or 39.9% from $92.7
million to $55.7 million. The decrease in gross profit is primarily due to $23.5
million in inventory obsolescence primarily as a result of price declines during
the second quarter and $3.2 million in third party theft and fraud losses
related to the U.K. international trading operations. Excluding these
provisions, the decrease in gross profit as a percentage of revenues was
primarily due to a shift in geographic revenue mix, lack of digital handsets in
North America, competitive margin pressures including an oversupply of analog
handsets in North America and an oversupply of handsets in Asia Pacific, and a
delay in the introduction of new models by manufacturers, including WAP enabled
phones.
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Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $36.4 million, or 67.5% from $53.9 million to
$90.3 million. This increase was primarily due to bad debt expense of $29.9
million, up from $6.5 million for the same period last year. The increase was
primarily from certain U.S. based accounts receivable, the collectibility of
which has deteriorated significantly in the second quarter of 2000 and which
were further affected by the Company's decision to sell its majority interest in
its joint venture in Brazil and the phase out of a major portion of the
redistributor business in its Miami and North America operations. The increase
in selling, general and administrative expenses was also attributable to costs
associated with business expansion activities and professional expenses. Overall
selling, general and administrative expenses as a percentage of revenues
increased to 7.8% from 5.0%.
Restructuring Charge. The Company's results of operations include a pre-tax
restructuring charge of $2.9 million in 1999 associated with the reorganization
and consolidation of the management for the Company's Latin American and North
American Regions as well as the centralization of management in the Asia-Pacific
Region.
Equity in Income (Loss) of Affiliated Companies. Equity in income (loss) of
affiliated companies decreased from income of $6.1 million in 1999 to a loss of
$0.4 million in 2000. In February 1999, the Company sold part is its equity
investment in Topp Telecom, Inc. ("Topp") to a wholly owned subsidiary of
Telefonos de Mexico S.A. de C.V. ("TelMex"). 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 recorded a pre-tax gain of $5.8
million. In September 1999, the Company sold its remaining debt and equity
interest in Topp to the TelMex subsidiary for a pre-tax gain of $26.1 million.
Gain on Sale of Assets. In 1999, the Company recorded a pre-tax gain of
$8.2 million associated with the sale of its prepaid operations in Venezuela and
the sale of the Company's retail stores in the Dallas-Fort Worth and Kansas City
areas.
Interest Expense. Interest expense decreased to $8.8 million from $10.1
million primarily as a result of cash received from the sale of the Company's
remaining debt and equity interest in Topp in September 1999 and lower interest
rates in Brazil compared to 1999.
Other, Net. Other, net changed from an expense of $2.3 million to income of
$0.4 million. This change was primarily due to a $2.6 million foreign currency
transaction loss realized in 1999 from the conversion of U.S. dollar denominated
debt in Brazil into a Brazilian real denominated credit facility.
Income Taxes. Income tax expense decreased from $8.3 million in 1999 to a
benefit of $13.0 million in 2000. The Company's effective tax rate increased to
30.0% from 22.0%. The higher effective tax rate was attributable to changes in
the expected geographical mix of income (loss) before income taxes.
International Operations
The Company's foreign operations are subject to various political and
economic risks including, but not limited to, the following: political
instability, currency controls, currency devaluations, exchange rate
fluctuations, potentially unstable channels of distribution, increased credit
risks, export control laws that might limit markets the Company can enter,
inflation, changes in laws related to foreign ownership of business abroad,
foreign tax laws, changes in import/export regulations, including enforcement
policies, "gray market" resales, and tariff and freight rates. Political and
other factors beyond the control of the Company, including trade disputes among
nations, currency fluctuations or internal political or economic instability in
any nation where the Company conducts business, could have a materially adverse
effect on the Company.
During the second half of 1998, the Company's sales from Miami to customers
exporting into South American countries began to decline as a result of
increased in-country manufactured product availability in South America,
primarily Brazil. The Company expects to focus its efforts on servicing large,
financially sound carrier partners from the Company's Latin American
subsidiaries.
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<PAGE>
Since 1998, the Company's Brazilian operations have been primarily
conducted through a majority-owned joint venture. Following an extensive review
of its operations in Brazil, the Company concluded that its joint venture
structure, together with foreign exchange risk, the high cost of capital in that
country, alternative uses of capital, accumulated losses, and the prospect of
ongoing losses, were not optimal for success in that market. As a result, the
Company has elected to exit the Brazil market and intends to divest its 51%
interest in its joint venture. The Company's operations in Brazil have incurred
a $9.3 million loss in 2000 including the write down of certain assets to fair
value. The Company has also fully reserved certain U.S. based accounts
receivable, the collectibility of which has deteriorated significantly in the
second quarter, and which were further affected by the decision to exit Brazil.
In April 2000, the Company curtailed a significant portion of its U.K.
international trading operations following third party theft and fraud losses.
The trading business involves the purchase of products from suppliers other than
manufacturers and the sale of those products to customers other than network
operators or their dealers and other representatives. The Company experienced a
reduction in revenues for the Europe Region in the quarter ended May 31, 2000
and anticipates a reduction in revenues during the balance of the year ending
November 30, 2000.
For the quarter ended May 31, 2000, the Company recorded a $4.4 million
charge consisting of $3.2 million from third party theft and fraud losses during
the purchase, transfer of title and transport of six shipments of wireless
handsets, and $1.2 million in inventory obsolescence expense for inventory price
reductions incurred while the international trading business was curtailed
pending investigation. The Company is negotiating to obtain an insurance
settlement and is pursuing legal action where appropriate. However, the ultimate
recovery in relation to these losses, if any, cannot be determined at this time.
Liquidity and Capital Resources
During the six months ended May 31, 2000, the Company relied on cash
available at November 30, 1999, cash generated from operations, and borrowings
under its Multicurrency Revolving Credit Facility (the "Facility") to fund
working capital, capital expenditures and expansions. At July 12, 2000 the
Company had available $46.5 million of unused borrowing capacity under the
Facility.
Compared to November 30, 1999, accounts receivable decreased $3.6 million,
while inventories and accounts payable increased $85.7 million and $72.7
million, respectively. This increase in inventory and accounts payable was
primarily in North America and Miami and primarily relates to a series of
purchases from a major supplier that granted extended payment terms in
conjunction with these purchases.
As of May 31, 2000 and June 30, 2000, the Company's Brazilian operations
had borrowed $13.0 million and $20.8 million, respectively, using credit
facilities denominated in Brazilian reals with Brazilian banks. The Company has
$9.2 million of letters of credit outstanding against its Facility to guarantee
the repayment of the principal and accrued interest and all other contractual
obligations of its Brazilian operations to several Brazilian banks.
At May 31, 2000, the Company's operations in the PRC had two lines of
credit available to them, one for USD $12.5 million and the second for RMB $180
million ($21.9 million equivalent), bearing interest at 5.52% and 5.85%,
respectively. The loans mature through March 2001 and are fully collateralized
by a U.S. dollar cash deposit. The cash deposit was made via an intercompany
loan from the operating entity in Hong Kong as a mechanism to secure the
repatriation of these funds. At May 31, 2000 and June 30, 2000, $34.2 million
and $40.2 million, respectively, had been borrowed against the lines of credit
in the PRC. As a result of this method of funding operations in the PRC, the
consolidated balance sheet at May 31, 2000 reflects $35.4 million in cash that
is restricted as collateral on these advances and a corresponding $34.2 million
in notes payable. Subsequent to the end of the quarter, the Hong Kong operating
entity increased its intercompany advance to the PRC by $11.0 million for a
total funding of $46.4 million to support the PRC's growth.
Based on results for the three months ended May 31, 2000, the Company would
not have been in compliance with one of its covenants under its Facility. As of
July 12, 2000, the Company had negotiated an amendment to the Facility that
assists the Company in complying with the covenant. The relief provided by the
amendment will be available through the third quarter of 2000. The amount of the
Facility was also reduced from $115.0 million to $100.0 million. As a result of
the July 12, 2000 amendment to the Facility, interest rates will increase by 25
basis points for the
19
<PAGE>
balance of the year. The Company and its banking syndicate have begun
negotiations for a future amendment to address a longer-term solution to
covenant concerns. However, no assurance can be given that the Company and its
banking syndicate will achieve a longer- term solution.
The Company anticipates that it should have sufficient cash available to
meet its current capital requirements and expansion plans. Capital is expected
to be provided by available cash on hand, cash generated from operations,
amounts available under the Facility, amounts available from new debt sources,
and various other funded debt sources. The Company believes that it should have
the ability to expand its borrowing sources to accommodate expected capital
needs in the future.
Accounting Pronouncements Not Yet Adopted
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement No. 133 "Accounting for Derivative Instruments and Hedging Activities"
("Statement 133"), which was amended by Statement 137 issued in July 1999 and
Statement 138 issued in June 2000. Statement 137 delayed the effective date of
Statement 133. Statement 133 is now effective for all interim and annual periods
of the Company commencing December 1, 2000. Given the Company's current and
anticipated derivative activities, management does not believe the adoption of
Statement 133 should have a material effect on the Company's consolidated
financial position and results of operations.
FASB issued Interpretation No. 44, "Accounting for Certain Transactions
Involving Stock Compensation - an Interpretation of APB Opinion No. 25" ("FIN
44") in March 2000. Among other issues, this interpretation clarifies the
definition of employee for purposes of applying APB Opinion No. 25, "Accounting
for Stock Issued to Employees" ("APB 25"), the criteria for determining whether
a plan qualifies as a non-compensatory plan, the accounting consequence of
various modifications to the terms of previously fixed stock options or awards
and the accounting for an exchange of stock compensation awards in a business
combination. The Interpretation is effective July 1, 2000, but certain
conclusions in the Interpretation cover specific events that occurred after
either December 15, 1998 or January 12, 2000. Management believes that FIN 44
will not have a material effect on the Company's financial position and
consolidated results of operations upon adoption.
In December 1999, the SEC staff issued Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 summarizes
certain of the staff's views in applying general accepted accounting principles
to revenue recognition and accounting for deferred costs in the financial
statements. Based on the Company's current revenue recognition policies, SAB 101
is not expected to materially impact the Company's consolidated financial
position and results of operations.
20
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Foreign Exchange Risk
For the quarter ended May 31, 2000, the Company recorded in other income
(expense), net foreign currency losses of $1.2 million primarily due to the
revaluations of foreign currency related to the Company's Europe operations.
Regarding the intercompany advances from the Hong Kong entity to the PRC
entity, the Company has foreign exchange exposure on the funds as they have been
effectively converted into RMB.
As of May 31, 2000 and June 30, 2000, the Company's Brazilian operations
had borrowed $13.0 million and $20.8 million, respectively, using credit
facilities denominated in Brazilian reals with Brazilian banks.
The Company continues to evaluate foreign currency exposures and related
protection measures.
Derivative Financial Instruments
The Company uses various derivative financial instruments as part of an
overall strategy to manage the Company's exposure to market risk associated with
interest rate and foreign currency exchange rate fluctuations. The Company uses
foreign currency forward contracts to manage the foreign currency exchange rate
risks associated with international operations. The Company evaluates the use of
interest rate swaps and cap agreements to manage its interest risk on debt
instruments, including the reset of interest rates on variable rate debt. The
Company does not hold or issue derivative financial instruments for trading
purposes.
The major currency exposures hedged by the Company are the British pound,
Dutch guilder, Euro and Swedish Krona. The carrying amount and fair value of
these contracts are not significant.
Contractual amounts of the Company's forward exchange contracts at May 31,
2000 and June 30, 2000, respectively are $11.7 million and $13.9 million.
Interest Rate Risk
The interest rate of the Company's Facility is an index rate at the time of
borrowing plus an applicable margin on certain borrowings. The interest rate is
based on either the agent bank's prime lending rate or the London Interbank
Offered Rate. Additionally, the applicable margin is subject to increases as the
Company's ratio of consolidated funded debt to consolidated cash flow increases.
During the six months ended May 31, 2000, the interest rates of borrowings under
the Facility ranged from 7.74% to 9.75%. As a result of the July 12, 2000
amendment to the Facility, interest rates will increase by 25 basis points for
the balance of the year. 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 May 31, 2000, annual rates on
borrowings by the Brazilian joint venture operations ranged from approximately
30% to 36%. The Brazilian operations' borrowings at May 31, 2000, were $13.0
million.
The Company has short-term borrowings in the PRC as discussed in Liquidity
and Capital Resources.
The Company's $150.0 million in long-term debt has a fixed coupon interest
rate of 5.0% and is due in October 2002.
21
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
During the period from May 1999 through July 1999, seven purported class
action lawsuits were filed in the United States District Court for the Southern
District of Florida, Miami Division. Each lawsuit sought certification as a
class action to represent those persons who purchased the publicly traded
securities of the Company during the period from March 19, 1998 to September 21,
1998. Each lawsuit alleges that the Company issued a series of materially false
and misleading statements concerning the Company's results of operations and
investment in Topp, resulting in violations of Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated
thereunder. The Court entered an order on September 26, 1999 consolidating the
lawsuits and appointing lead plaintiffs and lead plaintiffs' counsel. On
November 8, 1999, the lead plaintiffs filed a consolidated complaint. The
Company has filed a Motion to Dismiss the consolidated complaint, but the court
has not yet rendered a decision. The Company believes that it has fully complied
with all applicable securities laws and regulations and that it has meritorious
defenses to the allegations made in the consolidated complaint. The Company
intends to vigorously defend the consolidated action if its Motion to Dismiss is
denied.
On August 3, 1998, the Company announced that the Securities and Exchange
Commission is conducting an investigation of the Company relating to its
compliance with federal securities laws. The Company believes that it has fully
complied with all securities laws and regulations and is cooperating with the
commission staff in its investigation.
The Company's 51% joint venture in Brazil has received an assessment of
approximately $4.9 million from the Brazil state tax authorities related to
disallowed ICMS tax credits on purchased products. The Company believes the
joint venture has complied with all applicable tax rules and regulations and has
valid defenses. The joint venture is vigorously contesting the assessment.
Accordingly, an accrual for this assessment is not reflected in the accompanying
financial statements. If the joint venture is unsuccessful in defending against
such assessment, the joint venture would be subject to penalties and interest.
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.
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
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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)
10.1 Second Amendment to Amended and Restated Credit Agreement, dated July
12, 2000, among CellStar Corporation and each of the banks and lending
institutions signatory thereto. (8)
27.1 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.
23
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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
/s/ AUSTIN P. YOUNG
--------------------------------------------------
By: Austin P. Young
Senior Vice President, Chief Financial Officer
and Treasurer
(Principal Financial Officer)
/s/ RAYMOND L. DURHAM
--------------------------------------------------
By: Raymond L. Durham
Corporate Controller
(Principal Accounting Officer)
Date: July 17, 2000
24
<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)
10.1 Second Amendment to Amended and Restated Credit Agreement, dated July 12,
2000, among CellStar Corporation and each of the banks and lending
institutions signatory thereto. (8)
27.1 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.
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<PAGE>
(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.
26
