February 25, 2004 20:19
CellStar Reports Fourth Quarter and Fiscal 2003 Results; China Revenues Up 61%; EPS Improves to $0.18 Per Share
- Consolidated net income of $3.7 million or $0.18 per diluted share in the fourth quarter; more than doubled the third quarter - Consolidated net loss of $19.7 million or $0.97 per diluted share in fiscal 2003; includes $17.2 million non-cash goodwill write off - Revenues in China up 61% compared to fourth quarter 2002 and 58% compared to third quarter 2003 - Final Sweden results of $3.8 million offset $3.7 million net impairment charges in Colombia
CARROLLTON, Texas, Feb 25, 2004 /PRNewswire-FirstCall via COMTEX/ -- CellStar Corporation (Nasdaq: CLST) today announced results for the fourth quarter and fiscal year ended November 30, 2003. Revenues for the fourth quarter ended November 30, 2003, were $498.1 million, compared to $414.9 million in the third quarter, and $430.4 million in the fourth quarter of 2002. The increase in revenues was primarily attributed to the rebound of the Company's operations in China, which were materially impacted by the spread of severe acute respiratory syndrome ("SARS") during the second and third quarters of 2003.
For the fourth quarter of fiscal 2003, the Company reported consolidated net income of $3.7 million, or $0.18 per diluted share compared to a net loss of $41.6 million in the fourth quarter of fiscal 2002. Results for the current quarter include two offsetting transactions related to the Company's strategy to reposition its operations. In Sweden, the Company completed the sale of the operation, and reported $3.8 million of net income during the quarter as a result of the gain on the sale, the fourth quarter operating results, and tax effects related to the sale. This income was offset by a $3.7 million net impairment charge related to the Company's operation in Colombia.
For the fiscal year ended November 30, 2003, the Company reported revenues of $1.8 billion compared to $2.1 billion for fiscal 2002. Revenues in Asia declined $218.0 million year over year primarily due to the impact of SARS. Operations that were exited in the U.K., Peru and Argentina accounted for $63.9 million of the decline.
The Company reported a consolidated net loss of $19.7 million, or $0.97 per diluted share, for fiscal 2003 compared to a $29.9 million net loss, or $2.44 per diluted share, in fiscal 2002. The Company's results in fiscal 2003 include a $17.2 million, net of tax, non-cash impairment charge resulting from the Company's adoption of FASB Statement No. 142, "Goodwill and Other Intangible Assets," during the first quarter. Excluding the adoption of Statement No. 142, the Company reported a net loss of $2.6 million, or $0.13 per diluted share, for the year ended November 30, 2003. Although the exact impact cannot be determined, the spread of SARS had a devastating impact on the Company's financial results in Asia for the year, particularly in the Peoples Republic of China (the "PRC"). In the fourth quarter of 2002, the Company recorded a $44.2 million non-cash tax provision related to the Company's operations in Asia Pacific, Sweden, The Netherlands and Colombia.
"We are delighted to report positive results for the quarter. We were particularly pleased to see the China markets recover from SARS. Shipments during the fourth quarter were the strongest that we have seen in the region for several quarters," said Chief Executive Officer, Terry Parker. "Even though profits improved in Asia from the third quarter, we were still impacted by some lingering effects of SARS. Although our overall inventory levels were down, we still have excess inventory on certain product lines, and as a result took a $4.3 million inventory reserve in the fourth quarter."
Gross profit declined from $123.9 million in fiscal 2002 to $89.6 million in 2003. Gross margin in fiscal 2003 was 5.0% compared to 6.0% in fiscal 2002. The decline in profits and margins was primarily in China as a result of the impact of SARS, market conditions in the region and inventory reserves. Gross profit for the fourth quarter increased to $25.1 million compared to $24.3 million in the fourth quarter of last year, and gross margin was 5.0% compared to 5.6% in 2002. Excluding the inventory provision, gross margin would have been 5.9%.
Selling, general and administrative (SG&A) expenses declined by 15.2% to $92.1 million, compared to $108.6 million in fiscal 2002. Exited operations accounted for $7.0 million of the decline and the remaining $9.5 million was due to reductions in payroll and benefits, advertising and marketing and insurance premiums, partially offset by IPO expenses related to the operations in China, and increases in accounting and other professional fees. SG&A as a percent of revenues declined to 5.1% in 2003 compared to 5.3% in 2002. For the quarter ended November 30, 2003 SG&A was $21.2 million compared to $20.8 million in the fourth quarter of 2002. Reductions in advertising, marketing and promotions were offset by increases in accounting and other professional fees. SG&A as a percent of revenues declined to 4.3% compared to 4.8% in the fourth quarter of 2002.
Interest expense for fiscal 2003 was $5.6 million compared to $7.6 million in 2002. The reduction in interest expense was primarily due to the completion of the Company's exchange offer on February 20, 2002. Interest expense was $1.1 million for both the fourth quarter of 2003 and the fourth quarter of 2002.
In the third quarter of 2003, the Company's largest customer in Colombia, which had historically purchased Motorola product from the Company, began to purchase product directly from a Korean manufacturer. As a result of the decline in business in Colombia, the Company's intent is to reduce its exposure in-country, and is actively exploring a sale of a significant portion of its interest in the operation to local partners. Therefore, during the fourth quarter, the Company recorded a pre-tax impairment charge in Colombia of $4.0 million ($3.7 million after tax) consisting of a $3.8 million charge for accumulated foreign currency translation adjustments and a $0.2 million charge to write the property and equipment down to the estimated market value.
"For the second quarter in a row, each of our regions had positive operating results, after adjusting for the accumulated foreign translation charge in Colombia, which offset the gains on the sale of our operation in Sweden in October," said Robert Kaiser, President and Chief Operating Officer. "The U.S. has now been profitable for 12 consecutive quarters. Our Miami export operation has been profitable since the fourth quarter of 2002, and we continue to see improvement in Mexico, where we reported operating income of $0.7 million this quarter."