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CellStar Q3 Revenue Off 14%, Profits Rise

Carrollton, Texas – Despite a 14 percent decrease in revenue, wireless communications products distributor CellStar enjoyed a jump in profit during its fiscal third quarter.

The company reported $523 million in revenue for the three months, ended August 31, compared with $610.5 million in the year-ago period. Changes made earlier in the year in the Hong Kong export market accounted for the decrease, said the company, when a certain manufacturer restricted exports to mainland China.

CellStar recorded third-quarter consolidated net income of $6.1 million, compared with a net loss of $5.8 million in the same quarter in 2001.

The company, which said it has exited from its operations in the United Kingdom, Peru and Argentina, realized $7 million in cash in the third quarter in connection with these changes. The cash will be used to retire debt in October.

In the three months, revenue in the North American market dropped to $145.3 million, down from $155.6 million, but this total garnered a 28 percent share of total company revenue, compared with 26 percent in the third quarter of last year.

CellStar handled 4 million handsets in the third quarter, down from the 4.7 million in the third quarter of 2001 and 4.6 million in the second quarter of this year. Average selling price of the handsets in the third quarter was $147, the same year over year, but slightly lower than the $149 recorded in the second quarter of this year.

Gross margin in the third quarter climbed 150 basis points, to 6.6 percent, up from 5.1 percent in the third quarter in 2001. Selling, general and administrative expense for the three months was $27.8 million, an improvement over the $28.7 million of a year ago.

For the nine months, revenue dropped to $1.7 billion, compared with $1.8 billion in the same period in 2001. Year-to-date net income was $11.6 million, up from $1.9 million in the same nine months last year.

Nine-month revenue in North America increased to $428.4 million, up from $407.2 million in the same period last year. As a percent of total, the current nine-month share rose to 25 percent, up from 22 percent year over year.