Accounting & Tax

SEC Investigation of Cellstar Concluded

No enforcement action recommended.
CFO.com StaffJune 28, 2001

CellStar Corp. said the Securities and Exchange Commission ended its investigation of the company “with no enforcement action recommended,” according to Dow Jones Newswires.

Separately, CellStar said it plans to restate results for fiscal 2000, mostly because of understated accounts payable and cost of sales in the second quarter.

On August 3, 1998, the company disclosed the SEC was conducting an investigation of CellStar relating to its compliance with federal securities laws.

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In a press release Thursday, CellStar said the SEC investigation primarily related to events from 1995 and 1996.

In a separate release Thursday, the company said it restated its fiscal 2000 loss to $62.9 million, or $1.05 a share, from $59.4 million, or 99 cents a share.

The company said it normally returns certain inventory to its vendors in exchange for vendor credits, and uses accounts payable clearing accounts to record the returned inventory until credit is received from the vendor, says Dow Jones.

CellStar said it incorrectly recorded credits received from vendors for returned inventory to different clearing accounts, and subsequently cleared those amounts to cost of sales, thereby understating accounts payable and cost of sales, which resulted in the restatement, according to the news service.

The company expects to file amended 10-K and 10-Q reports with the SEC for the affected periods by July 6.

CellStar said it plans to delay filing its fiscal 2001 first quarter results due to the restatement.

The company also said it expects first quarter results “that meet or exceed analyst expectations.”

CellStar, which provides distribution and value-added logistics services, plans to report second quarter results July 9, says Dow Jones.