CARROLLTON, Texas, May 5 /PRNewswire-FirstCall/ -- CellStar Corporation
(Nasdaq: CLSTE), a value-added wireless logistics and distribution services
leader, today announced preliminary results of the management review of its
Asia Pacific operation and preliminary results for the fourth quarter of 2004
and the first quarter of 2005. The Company has been unable to file its Annual
Report on Form 10-K for 2004 and its Form 10-Q for the first quarter of 2005
as a result of accounting issues related to certain accounts receivable and
revenues in its Asia Pacific Region. Corporate management has undertaken an
intense review in the Asia Pacific Region consisting of interviews with
personnel directly involved with the subject matter of the claims, a review of
documentation related to the claims, and discussions with the Company's
distribution network (the "Small Bees"). The Audit Committee of the Board of
Directors engaged independent counsel and the Company's internal auditors to
assist in the oversight of this process.
The Company is nearing completion of its review of the accounts receivable
and revenues and is working with its independent auditor, Grant Thornton LLP,
and its former independent auditor, KPMG LLP, to finalize the accounting
treatment for the issues raised. KPMG LLP was the Company's independent
auditors prior to fiscal 2003. Management currently believes that adjustments
to the Company's previously reported financial results will be required. The
net pre-tax effect to previously issued prior year financial statements is a
decrease of approximately $26.0 million, all of which relates to the Asia
Pacific Region. Accordingly, investors should not rely on the financial
information contained in the Company's Annual Reports on Form 10-K for the
years ended November 30, 2001, 2002, and 2003, and the Company's quarterly
reports on Form 10-Q for the quarters ended in those periods, and for the
quarters ended February 29, May 31 and August 31, 2004. This press release
includes discussion of the Company's findings related to the accounts
receivable and revenue issues, and the estimated financial impact is
summarized in the attached table.
BACKGROUND ON THE ASIA PACIFIC REGION
Historically, the Asia Pacific Region has been very profitable and
contributed significantly to the Company's consolidated results. In prior
years, the region represented approximately 50% of the Company's total
revenues, and approximately 90% of the revenues in the Asia Pacific region
have been generated by the operation in the People's Republic of China
("PRC"). In 2004 the Asia Pacific Region is expected to represent
approximately 37% of the Company's total revenues and, this will be the first
fiscal year in the Company's history to report an operating loss in the
region.
The success of the Asia Pacific operation has been largely due to the
strong relationships that the Asian management team has built with its
distribution channel consisting of 73 local distributors in China, the Small
Bees. Approximately 95% of the total revenues in China have historically been
generated by 26 Small Bees. The Company has cooperative arrangements with the
Small Bees that allow them to establish wholesale and retail operations using
CellStar's trademarks. Under the terms of these arrangements, CellStar
provides services, sales support, training and access to promotional materials
for use in their operations. As a result of these arrangements, approximately
1,700 retail points of sale in the PRC display the CellStar name and
trademarks. In addition to these branded retail outlets, an additional 15,000
outlets in China carry CellStar products.
ACCOUNTS RECEIVABLE AND REVENUE ISSUES IN ASIA PACIFIC
During 2004, the Company experienced a significant increase in accounts
receivable days outstanding ("DSO's") in its operation in the PRC.
Historically, the Company has had no significant collection issues in the PRC.
During 2004, however, the PRC market was undergoing a significant amount of
change that negatively impacted the Company's business. Manufacturers began
to sell directly to carriers, bypassing national distributors, and carriers
began to subsidize phone purchases. Also, due to the growth in the number of
local manufacturers in the market, the major manufacturers, such as Nokia and
Motorola, experienced a significant loss of market share. This resulted in
price reductions across the board, as manufacturers fought to maintain market
share. There was also a tightening of credit by the PRC government to slow
the rate of economic growth.
On December 1, 2004, the Company hired a new Director of Accounting for
the Asia-Pacific Region. In early February 2005, the new Director of
Accounting raised certain issues regarding some of the PRC's accounts
receivable and revenue. The issues primarily focused on three areas:
(1) whether or not certain sales to the Small Bees were valid; (2) whether
claims made by the Small Bees for credits related to certain sales by the
Company to the Small Bees should be recorded as an additional reduction in
revenues; and (3) whether certain trade receivables should be more
appropriately classified as investments or loans.
SUMMARY OF COMPANY'S FINDINGS TO DATE
The following summary represents the current results of management's
review and may be adjusted upon completion of management's review and the
Audit Committee's review.
Sales to Small Bees. The PRC operation recorded revenues, principally in
the first half of 2004, for sales of products a significant portion of which
had not been sold by the Small Bees at November 30, 2004. The Company's
shipping documents indicate that the products were shipped to the Small Bees'
locations at the time revenues were originally recorded. However, some of the
products have had significant quality issues and experienced poor consumer
acceptance. The Small Bees have subsequently returned the majority of these
products to the Company. The Company continues to aggressively pursue
negotiations and possible legal action with the manufacturers to reduce its
loss on these defective products.
Due to the quality issues and subsequent returns, management has
preliminarily determined that a return provision should have been recorded for
these models of approximately $20.3 million and $1.4 million for the quarters
ended May 31, 2004 and August 31, 2004, respectively. As a result of the
provision, management expects that accounts receivable as previously reported
is expected to be reduced approximately $23.8 million and $1.6 million at May
31, 2004 and August 31, 2004, respectively, and accrued expenses are expected
to be reduced by $3.5 and $0.2, respectively, for the related value added tax
("VAT") payable. The corresponding increase to inventory is expected to be
approximately $12.9 million and $1.5 million at May 31, 2004 and August 31,
2004 respectively and a reduction of cost of goods sold of approximately
$12.9 million and $1.5 million for the quarters ended May 31, 2004 and August
31, 2004, respectively. The Company also expects to record inventory
obsolescence of approximately $6.4 million for the returned product.
Claims for Credits. The PRC operation has historically received credits
or other forms of compensation from its suppliers. These include credits for
price protection, volume rebates, incentives for market coverage, and
inventory accuracy. The PRC operation has historically passed some of these
credits through to the Small Bees for products purchased from the PRC
operation. The PRC operation has not historically granted credits to the
Small Bees with respect to their claims in excess of the amount of
compensation the PRC operation actually received from its suppliers. In 2004,
the amount of claims received from the Small Bees exceeded the amounts
received by the PRC operation from its suppliers. Although the PRC operation
has no legal obligation to honor the Small Bees' claims, the Small Bees have
not paid the accounts receivable related to these claims. Previously the
Company recorded the credits provided to the Small Bees as a reduction in
revenue in the period the credit was processed rather than at the time of the
initial sale. As a result, the Company's reported revenues in previous
periods did not properly include an estimate of the credits to be provided.
The Company has begun negotiations with the Small Bees to settle certain
claims and other issues resulting from the handset quality issues and
accordingly expects to set up an $18.0 million provision.
Trade Receivables. At various times since 2000, the PRC informally
extended trade terms to the Small Bees. Under these informally extended trade
terms, the Small Bees purchased products from the PRC operation and the
proceeds from the subsequent sales of these products were used by the Small
Bees to develop new or expand existing wholesale and/or retail operations or
to develop new business opportunities. The Company estimates there was
approximately $20.0 million included in accounts receivable at November 30,
2004, with informally extended trade terms. While reviewing the nature of the
credit terms, management questioned the appropriateness of the revenue
recognition. Management has determined that the recognition of revenue for
sales under these terms was not appropriate due to the indefinite nature of
the extended credit and the absence of a formal agreement. Management has
determined that revenues on the original sales transactions should have been
deferred and the revenue recognized upon payment of the accounts receivable
balance.
Based on the results of management's review, management has preliminarily
determined its previously announced provision for bad debt for the quarter
ended November 30, 2004, should be decreased from $20.0 million to $10.0
million. The Company intends to aggressively pursue collection of the
accounts receivable through all reasonable means.
In addition to the accounting issues above, the Company identified
additional weaknesses in internal controls in its PRC operation related to
accounts receivable and revenues. These weaknesses include lack of adequate
supporting written documentation, approval of credit terms, and insufficient
formalized communication between the PRC operation and corporate management to
ensure that all relevant information related to unusual, non-routine or
judgmental transactions were made available to corporate accounting personnel
in a timely manner. Also, design deficiencies in the operation's capturing
and recording of credits granted to customers, cash application process, and
VAT invoicing process were noted.
PRELIMINARY RESULTS FOR THE FOURTH QUARTER OF 2004
As the Company has not finalized its review of the accounts receivable and
revenue issues in the Asia Pacific Region, these are preliminary results based
on the Company's findings to date and the actual results may differ, and the
differences could be material. Also, the Audit Committee of the Board of
Directors has not completed its review of these issues.
For the fourth quarter of 2004, the Company expects to report consolidated
revenues of approximately $296.0 million and a consolidated operating loss of
approximately $34.0 million compared to revenues of approximately $ 470.0
million and an operating loss of $0.7 million in the fourth quarter of 2003.
Gross margins are expected to decrease from $23.0 million in the fourth
quarter of 2003 to negative gross margins of $5.0 million in the fourth
quarter of 2004. The Company anticipates providing obsolescence reserves for
certain inventories in the PRC operation of approximately $15.0 million due to
quality and market acceptance of handsets sourced from manufacturers from
which the Company has not traditionally purchased phones.
Selling, general and administrative expenses are expected to increase to
approximately $29.0 million in the fourth quarter of 2004 compared to $20.0
million in 2003. This increase was primarily due to $10.0 million in bad debt
expense in the operation in the PRC.
Interest expense was $1.7 million in the fourth quarter of 2004 compared
to $1.1 million in 2003.
Consolidated Balance Sheet
Cash, cash equivalents, and restricted cash at the end of the fourth
quarter were $33.2 million compared to $55.6 million at the end of 2003.
Compared to year end 2003, cashed declined $20.0 million in the Asia Pacific
Region due to lack of collections related to the current accounts receivable
issues in the Asia Pacific Region.
Accounts receivable are anticipated to decrease to $191.0 million from
$208.0 million at the end of 2003. At November 30, 2004, net accounts
receivable in the Asia Pacific Region are expected to be approximately $74.0
million compared to $96.0 million at November 30, 2003. Accounts receivable
in Latin America increased $21.0 million, year over year, from $51.7 million
at November 30, 2003 to $72.7 million at November 30, 2004. This increase was
primarily due to the increased revenues in the fourth quarter of 2004.
Accounts receivable in North America decreased $15.1 million from November 30,
2003 primarily due to collections in the last few days of November 2004.
Inventory is anticipated to be approximately $140.0 million at November
30, 2004 compared to $168.0 million at the end of the fourth quarter of 2003.
The Asia Pacific Region and the North America Region are expected to decrease
approximately $42.0 million and $18.0 million, respectively, and were
partially offset by an increase in Latin America of $32.0 million.
Liquidity
As of November 30, 2004, the Company had borrowed $35.8 million against
its $85.0 million domestic revolving credit facility compared to $19.3 million
at the end of the fourth quarter of 2003. Availability under the revolving
credit facility is asset based and measured weekly. The Company has obtained
a waiver from Wells Fargo Foothill extending the date to file its Form 10-K
for fiscal 2004 and its Form 10-Q for the first quarter of 2005 to May 16,
2005. The Company believes it will be successful in getting that date
extended to May 31, 2005.
The Company believes that upon filing its Form 10-K or Form 10-Q, it will
be in violation of certain financial covenants in the revolving credit
facility. The Company believes it will be able to obtain a waiver of the
violations from Wells Fargo Foothill, but there can be no assurance that the
waiver will be granted.
The Company also had $55.4 million in loans to support its PRC operation
compared to $88.5 million in the fourth quarter of last year. The loans are
collateralized by PRC accounts receivable and have no corporate guarantees.
At November 30, 2004, the Company's long-term debt consisted of
$12.4 million of 12% Senior Subordinated Notes that mature in January 2007.
Although the Company is in violation of the indenture governing the Notes due
to its failure to file the Form 10-K and Form 10-Q, the Company has not
received a default notice related to the Notes. If it does receive a default
notice, the Company has 60 days to cure the default. The Company is current
on all interest payments related to the Notes.
Deferred Tax Asset
In assessing the realizability of deferred income tax assets, management
considers whether it is more likely than not that the deferred income tax
assets will be realized. At November 30, 2004 the Company expects to have
deferred income tax assets, net of valuation allowances, of $50.0 million, a
significant portion of which relates to net operating loss carryforwards. The
ultimate realization of deferred income tax assets is dependent on the
generation of future taxable income during the periods in which those
temporary differences are deductible. Management considers the scheduled
reversal of deferred income tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment. Based on the level of
historical taxable income and projections for future taxable income over the
periods in which the deferred income tax assets are deductible, including
taxable income generated by tax planning strategies, management determines if
it is more likely than not that the Company will realize the benefits of these
deductible differences. The amount of the deferred income tax asset
considered realizable, however, could be reduced if estimates of future
taxable income during the carry-forward period are reduced. Upon completion
of the review, the Company will reevaluate the deferred tax asset to determine
whether or not an additional valuation allowance is needed.
Latin America
Latin America was the Company's strongest performing region in 2004.
Demand in the region during the fourth quarter was strong as many carriers
promoted their network upgrades. The Company's Latin America Region is
expected to report revenues of approximately $121.8 million and operating
income of approximately $2.0 million in the fourth quarter of 2004 compared to
revenues of $81.0 million and an operating loss of $1.6 million in the fourth
quarter of 2003. The region represented 42% of the total Company revenues in
the fourth quarter of 2004 compared to 17% in the fourth quarter of 2003.
Over the last three years, the operation in Mexico has recognized
operating losses of $9.8 million, $11.5 million, and $3.0 million in 2001,
2002 and 2003, respectively. Consequently, the Company has restructured the
region, brought in new management teams, revised the business model and
focused on supplier and carrier relationships in order to recapture market
share.
Revenues in Mexico, the region's largest revenue contributor, are
expected to be $72.5 million for the fourth quarter of 2004 compared to
$37.2 million in 2003, a $35.3 million increase. Operating income in Mexico
is anticipated to be $1.5 million in the fourth quarter compared to $0.7 in
the fourth quarter of 2003. The improved results in Mexico in 2004 were due
primarily to the Company's renewed relationships with Telcel, the largest
wireless carrier in the country, and Motorola.
The Company's average monthly Telcel activations in Mexico have increased
significantly to approximately 12,000 per month. In an effort to continue to
grow activations, the Company announced in April of 2005 that it has invested
in a joint venture in Mexico to provide handset distribution and activation
services for Telcel. Currently the joint venture operates 43 kiosks inside
Liverpool national department stores in Mexico in which they sell handsets,
airtime and related accessory products, and provide activation services for
Telcel. The joint venture also provides electronic delivery of airtime for
Telcel to any handset model in all 53 Liverpool department stores nationwide.
The new joint venture will more than double the Company's current monthly
activation rate and provide opportunities to expand.
In March of 2005, the Company also announced that it is currently
distributing Samsung product in Mexico. The Company is supplying the product
to Unefon, one of its carrier customers in Mexico. Historically, Samsung has
typically sold handsets directly to the carriers in Mexico; however, its
customer base did not include Unefon until this time.
Revenues in the Company's Miami operation are expected to be $46.9 million
in the fourth quarter compared to $29.4 million in the fourth quarter of 2003.
Revenues were up 60% compared to the fourth quarter of last year due primarily
to promotions by a carrier customer in Colombia and new business. The
Company's Chile operation anticipates reporting revenues of $2.5 million in
the fourth quarter compared to $5.2 million in 2003.
In March of 2005 the Company announced that it had adopted a new strategy
in Latin America that focuses on the distribution of GSM products in the
region. The new strategy was adopted as a result of the rapid carrier
technology migration to GSM in Latin America. According to a report issued by
3G Americas, GSM mobile technology grew by 169% in 2004 in the Caribbean and
Latin America region. The Company expects to strengthen its market position
in the region as a result of the new direction. Since the fourth quarter of
2004, the Company's operation in Miami, which exports product to much of Latin
America, has increased its handset purchases significantly to support the
enormous growth opportunity of GSM technology.
North America
The Company's North America Region is expected to report revenues of
approximately $112.0 million and operating income of approximately
$0.7 million in the fourth quarter of 2004 compared to revenues of
$145.8 million and operating income of $4.9 million in the fourth quarter of
2003. The drop in revenues compared to the fourth quarter of 2003 was
primarily due to the Company's decision to discontinue its business with
Cricket Communications and its indirect sales channel. The drop in operating
income compared to the fourth quarter of 2003 was primarily due to the
discontinuation of the business with Cricket and lower average selling prices
as a result of selling more low-end product during the quarter. The North
America Region generated 38% of the Company's total revenues in the fourth
quarter of 2004 compared to 31% in the fourth quarter of 2003.
In the last several months there have been further consolidations in the
U.S. wireless market with announcements of several high profile mergers and
acquisitions. As the tier one wireless carriers get larger and gain market
share, the smaller regional carriers, many of which are the Company's
customers, are fighting to remain competitive. The Company believes that in
order to combat the volatility of the handset business it will need to become
less dependent on the handset distribution business.
During 2005, the North America Region will continue to market its reverse
logistics capabilities. In an effort to execute the strategy, the Company has
renewed its focus in the areas of new business and product development. The
Company believes the current team has the experience and leadership skills
needed to add high value-added services and products to the portfolio to
complement the handset business in the U.S.
During 2005 the U.S. region is planning several updates to expand its all-
in-one forward and reverse logistics solution, Omnigistics. The updates will
include an advanced exchange program, enhanced asset recovery solutions and
highly sophisticated technical product support. These upgrades will allow the
Company to simplify the unpredictable and cumbersome back-end part of their
customers business, so they can focus on maximizing their core business. The
Company's goal is to differentiate CellStar from the competition by offering a
"full circle", forward and reverse, solution to its customers.
The Company recently announced that it had expanded its relationship with
Dobson Communications with two direct-to-consumer logistics solutions to help
Dobson streamline its business processes, consolidate and minimize inventory
management and provide seamless customer fulfillment. CellStar houses and
manages inventory and fulfills orders for Dobson's multiple call centers and
its online web purchases.
Asia Pacific
The Company's Asia Pacific Region expects to report revenues of
approximately $62.0 million and an operating loss of approximately
$30.0 million in the fourth quarter of 2004 compared to revenues of
approximately $243.0 million and an operating loss of $1.0 million in the
fourth quarter of 2003. The decline in revenues and operating income was
primarily in the PRC. Revenues in the PRC declined significantly compared to
the fourth quarter of 2003 due to the economic and market changes currently
taking place in the region. The operating loss in the fourth quarter of 2004
is expected to include inventory obsolescence of $13.0 million and
$10.0 million of bad debt expense in the PRC operation. The region
represented 21% of the total Company revenues in the fourth quarter of 2004
compared to 52% in the fourth quarter of 2003.
PRELIMINARY RESULTS FOR THE FIRST QUARTER OF 2005
As many of the accounts receivable and revenue issues in the fourth
quarter of 2004 will impact the results in the first quarter of 2005, the
Company currently is unable to provide detailed estimates on the first quarter
of 2005 for the Asia Pacific Region and on a consolidated basis until it has
finalized results for the fourth quarter of 2004.
Latin America
The Company's Latin America Region is expected to report revenues of
approximately $127.0 million and operating income of approximately
$2.2 million in the first quarter of 2005 compared to revenues of
$90.0 million and operating income of $2.0 million in the first quarter of
2004. Revenues in Mexico are anticipated to be up $21.0 million and revenues
in the Company's Miami operation are anticipated to be up $24.5 million
compared to the first quarter of 2004
North America
The Company's North America Region is expected to report revenues of
approximately $100.0 million and an operating loss of approximately
$0.2 million in the first quarter of 2005 compared to revenues of
$111.2 million and operating income of $0.1 million in the first quarter of
2004
Asia Pacific
The Company's Asia Pacific Region expects to report revenues in the range
of approximately $90.0 million to $100.0 million in the first quarter of 2005
compared to revenues of $247.0 million in the first quarter of 2004. The drop
in revenues was due primarily to lower revenues in the PRC. Operating income
in the first quarter of 2004 is expected to be approximately $11.0 million and
is expected to be significantly lower or a loss in the first quarter of 2005.
SEC FILINGS
Management does not expect to file its Form 10-K for 2004 in definitive
form with the SEC until May 31, 2005. Management expects to file its
Form 10-Q for the first quarter of 2005 and required amended Form 10-Q's for
the first three quarters of 2004 as soon as possible after filing its
Form 10-K.
Due to the Company's inability to timely file its Form 10-K for fiscal
2004 and Form 10-Q for the first quarter of 2005, the Company received a
Nasdaq Staff Determination notice for each of the periods indicating that the
Company had violated The Nasdaq Stock Market's continued listing requirement
set forth in Marketplace Rule 4310(c)(14), and as a result, the Company's
common stock is subject to delisting from the Nasdaq National Market. The
Company has requested that The Nasdaq Stock Market stay its delisting
proceedings and grant the Company until May 31, 2005, to file its Form 10-K
and as soon as possible thereafter, its Form 10-Q. The Company can provide no
assurance that the Nasdaq Stock Market will grant its request for continued
listing.
About CellStar Corporation
CellStar Corporation is a leading global provider of value added logistics
and distribution services to the wireless communications industry, with
operations in the Latin American, North American and Asia-Pacific Regions.
CellStar facilitates the effective and efficient distribution of handsets,
related accessories and other wireless products from leading manufacturers to
network operators, agents, resellers, dealers and retailers. CellStar also
provides activation services in some of its markets that generate new
subscribers for its wireless carriers. Additional information about CellStar
may be found on its website at http://www.cellstar.com.
This news release contains forward-looking statements, as defined in the
Private Securities Litigation Reform Act of 1995. A variety of risk factors,
including the Company's ability to implement its business strategies, to
maintain its channels of distribution, continue to secure an adequate supply
of competitive products on a timely basis and on commercially reasonable
terms, improve its operating margins, secure adequate financial resources,
maintain an adequate system of internal control, comply with debt covenants,
and continually turn its inventories and accounts receivable, as well as
changes in foreign laws, regulations and tariffs, new technologies, system
implementation difficulties, competition, handset shortages or overages,
terrorist acts, a decline in consumer confidence and continued economic
weakness in the U.S. and other countries in which the Company does business
and other risk factors, are discussed in the Company's Annual Report on Form
10-K and most recent Quarterly Report on Form 10-Q. Any one, or a combination
of these risk factors could cause CellStar's actual results to vary materially
from anticipated results or other expectations expressed in the Company's
forward-looking statements.
CellStar Corporation
Summary of Asia Pacific Adjustments
Amounts in thousands
Unaudited
REVENUES
Consolidated (1) (2) (3) Adjusted
Period revenues Return Provision Deferred consolidated
as reported provision for rebates revenue revenues
Year ended
November 30,
2001 $ 2,224,207 1,447 11,538 2,211,222
Year ended
November 30,
2002 1,923,583 1,007 (4,858) 1,927,434
Three months
ended
February 28,
2003 431,762 741 6,299 424,722
Three months
ended
May 31, 2003 378,530 964 6,762 370,804
Three months
ended August 31,
2003 386,336 1,449 (29) 384,916
Three months
ended
November 30,
2003 470,708 758 29 469,921
Year ended
November 30,
2003 1,667,336 3,912 13,061 1,650,363
Three months
ended
February 29,
2004 445,013 (4,257) 362 448,908
Three months
ended
May 31, 2004 329,714 20,302 10,536 2,216 296,660
Three months
ended
August 31,
2004 266,477 1,393 4,912 362 259,810
(a) Three months
ended
November 30,
2004 290,544 (4,009) 471 (2,155) 296,237
Year ended
November 30,
2004 1,331,748 17,686 11,662 785 1,301,615
Total 17,686 18,028 20,526
COST OF SALES
Consolidated (1) (1)
cost of sales Return Inventory Adjusted
as reported provision obsolescence cost of sales
Year ended
November 30,
2001 2,099,486 2,099,486
Year ended
November 30,
2002 1,802,599 1,802,599
Three months
ended
February 28,
2003 406,668 406,668
Three months
ended
May 31, 2003 362,100 362,100
Three months
ended August 31,
2003 365,417 365,417
Three months
ended
November 30,
2003 446,477 446,477
Year ended
November 30,
2003 1,580,662 1,580,662
Three months
ended
February 29,
2004 419,103 419,103
Three months
ended
May 31, 2004 306,676 12,900 (4,786) 298,562
Three months
ended
August 31, 2004 256,052 1,494 2,695 251,863
(a) Three months
ended
November 30,
2004 292,582 (2,494) (4,345) 299,421
Year ended
November 30,
2004 1,274,413 11,900 (6,436) 1,268,949
Total 11,900 (6,436)
ACCOUNTS RECEIVABLE
(1) (2)
Accounts Cumulative Cumulative Adjusted
receivable return provision accounts
as reported provision for rebates receivable
November 30, 2001 $ 216,002 (1,447) 214,555
November 30, 2002 175,102 (2,454) 172,648
February 28, 2003 181,704 (3,195) 178,509
May 31, 2003 210,353 (4,159) 206,194
August 31, 2003 186,813 (5,608) 181,205
November 30, 2003 214,835 (6,366) 208,469
February 29, 2004 274,528 (2,109) 272,419
May 31, 2004 270,619 (23,753) (12,645) 234,221
August 31, 2004 244,180 (25,383) (17,557) 201,240
(a) November 30, 2004 230,246 (20,692) (18,028) 191,526
INVENTORY
(1) (1)
Cumulative Cumulative
Inventory return inventory Adjusted
as reported provision obsolescence inventory
November 30, 2001 218,927 218,927
November 30, 2002 163,226 163,226
February 28, 2003 185,061 185,061
May 31, 2003 177,945 177,945
August 31, 2003 172,779 172,779
November 30, 2003 167,807 167,807
February 29, 2004 144,934 144,934
May 31, 2004 136,333 12,900 (4,786) 144,447
August 31, 2004 134,673 14,394 (2,091) 146,976
(a) November 30,
2004 134,315 11,900 (6,436) 139,779
ACCRUED EXPENSES
(1) (3)
Accrued Cumulative Cumulative Adjusted
expenses return of deferred accrued
as reported inventory (VAT) revenue expenses
November 30, 2001 21,804 11,538 33,342
November 30, 2002 31,934 6,680 38,614
February 28, 2003 28,002 12,979 40,981
May 31, 2003 29,577 19,741 49,318
August 31, 2003 24,377 19,712 44,089
November 30, 2003 24,470 19,741 44,211
February 29, 2004 30,682 20,103 50,785
May 31, 2004 31,445 (3,451) 22,319 50,313
August 31, 2004 26,963 (3,688) 22,681 45,956
(a) November 30,
2004 24,165 (3,006) 20,526 41,685
(a) - Periods ended November 30, 2004 have not been reported, however are
included to assist in understanding the full impact of adjustments.
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