PLAINFIELD, Ind., Nov. 4, 2008 (GLOBE NEWSWIRE) -- Brightpoint, Inc. (Nasdaq:CELL) reported its financial results for the third quarter ended September 30, 2008. Unless otherwise noted, amounts pertain to the third quarter of 2008.
FOR THE THIRD QUARTER OF 2008:
Because of the acquisition of Dangaard Telecom on July 31, 2007, the Company believes that it is meaningful to compare financial results for the third quarter of 2008 to the second quarter of 2008 as well as to the third quarter of 2007.
The consolidated statements of operations for all periods presented reflect the reclassification of the results of operations of the Company's locally branded PC notebook business in Slovakia to discontinued operations in accordance with U.S. generally accepted accounting principles. This is a result of the Company's decision to exit that business. Please see Brightpoint Inc.'s website at www.Brightpoint.com for quarterly statements of operations for all periods that have been reclassified.
Revenue was $1.2 billion for the third quarter of 2008, which was flat compared to the second quarter of 2008 and an increase of 4% from the third quarter of 2007.
Income from continuing operations was $6.0 million or $0.07 per diluted share for the third quarter of 2008 compared to $2.6 million or $0.03 per diluted share for the second quarter of 2008 and $13.0 million or $0.18 per diluted share for the third quarter of 2007. Weighted average common shares outstanding (diluted) were 81.3 million for the third quarter of 2008 compared to 81.4 million for the second quarter of 2008 and 71.1 million for the third quarter of 2007.
Adjusted income from continuing operations (non-GAAP) was $10.9 million or $0.13 per diluted share compared to $9.6 million or $0.12 per diluted share for the second quarter of 2008 and $15.6 million or $0.22 per diluted share for the third quarter of 2007. Please see the disclosure below regarding adjusted income from continuing operations. Adjustments to income from continuing operations for the third quarter of 2008 include:
-- A $0.9 million restructuring charge (pre-tax) consisting
primarily of a $0.2 million charge related to the sale of certain
assets in Colombia as well as $0.7 million of restructuring
charges associated with the previously announced realignment of
our European operations
-- $4.6 million (pre-tax) of non-cash amortization expense related
to acquired intangible assets.
-- $1.6 million (pre-tax) of non-cash stock based compensation
expense.
Total debt was $185.5 million at September 30, 2008, compared to $243.8 million at June 30, 2008 and $460.9 million at December 31, 2007. Total debt as of September 30, 2008 is lower than the previously announced debt target of $200 million set for December 31, 2008. Total liquidity (unrestricted cash and unused borrowing availability) was $455.5 million at September 30, 2008 compared to $456.5 million at June 30, 2008 and $232.0 million at December 31, 2007.
Cash provided by operating activities was $53.0 million and $312.9 million for the three and nine months ended September 30, 2008. Cash provided by operating activities was used to pay down borrowings by approximately $46.0 million since June 30, 2008, bringing the total debt reduction to approximately $281.0 million since December 31, 2007.
EBITDA was $24.4 million for the third quarter of 2008 compared to $9.4 million for the second quarter of 2008 and $29.2 million for the third quarter of 2007.
We handled 20.3 million wireless devices for the third quarter of 2008 compared to 19.9 million for the second quarter of 2008 and 22.0 million for the third quarter of 2007, an increase of approximately 2% from the second quarter of 2008 and a decrease of 8% from the third quarter of 2007. The sale of certain assets in Colombia resulted in approximately 0.9 million fewer units handled in the third quarter of 2008 compared to the third quarter of 2007.
Gross margin was 7.2% for the third quarter of 2008, a decrease of 0.1 percentage points from the second quarter of 2008 and an increase of 0.5 percentage points from the third quarter of 2007.
SG&A expenses were $63.5 million for the third quarter of 2008, a decrease of $7.6 million or 11% compared to the second quarter of 2008 and an increase of $12.2 million or 24% compared to the third quarter of 2007. SG&A expenses increased compared to the third quarter of 2007 primarily because of the acquisition of Dangaard Telecom. SG&A expenses decreased compared to the second quarter of 2008 because of the positive impact of our cost reduction initiatives. SG&A expenses as a percent of revenue were 5.2% for the third quarter of 2008 compared to 5.9% for the second quarter of 2008 and 4.4% for the third quarter of 2007.
Interest expense, net was $4.4 million for the third quarter of 2008 compared to $6.7 million for the second quarter of 2008 and $5.8 million for the third quarter of 2007. Interest expense, net decreased because of the positive impact of our debt reduction initiatives.
The effective tax rate was 48.2% for the third quarter of 2008 compared to 18.5% for the third quarter of 2007. The effective tax rate was higher than the U.S. statutory tax rate for the third quarter of 2008 primarily due to an unfavorable mix of income. The mix of income has shifted toward higher tax jurisdictions for which the negative impact of adjusting for our revised estimated annual tax rate for the year is reflected in the third quarter of 2008. The effective tax rate for the third quarter of 2007 included a $2.1 million tax benefit resulting from a reduction in the statutory tax rate in Germany.
FOR THE 2008 FISCAL YEAR, MANAGEMENT CURRENTLY EXPECTS:
-- Units handled to be between 85 million to 90 million units, a
reduction from the previously disclosed range of approximately 90
million to 95 million units, as a result of many macro economic
events and general weakness in the European and U.S. wireless
markets.
-- Adjusted (non-GAAP) SG&A expense for the fourth quarter of 2008
is expected to be relatively flat compared to adjusted (non-GAAP)
SG&A expense for the third quarter of 2008 of $61.9 million.
-- Annual effective tax rate from 32% to 35%.
-- Non-GAAP weighted average common shares outstanding (diluted) of
approximately 82.5 million.
Please see the following Schedules and the Brightpoint website at www.Brightpoint.com for an explanation and reconciled presentation of the results for the third quarter ended September 30, 2008 prepared in accordance with U.S. GAAP and on an as adjusted non-GAAP basis. The explanation includes the reasons why management believes such non-GAAP measures are useful both to management and investors. Any financial measure other than those prepared in accordance with U.S. GAAP should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP. In addition, please see the following Supplemental Information for a reconciliation of EBITDA.
"Despite the challenging macro economic factors affecting all industries, our industry-leading low cost business model, global market position and strong balance sheet are resulting in many new opportunities with the leading companies in the wireless space. While our visibility into the overall wireless handset shipments for the global wireless device industry remains good, we however, in the future, will no longer provide an industry outlook for overall wireless handset shipments. These estimates are widely available from various reliable sources. I believe that based on increasing opportunities in wireless distribution and customized logistics with manufacturers, network operators, MVNOs, and retailers on a global basis, we will grow faster than the wireless handset industry in terms of units handled. We remain focused on growing our earnings per share and achieving an annual ROIC target of approximately 15%," said Robert J. Laikin, Brightpoint's Chairman of the Board and Chief Executive Officer. "We expect to continue to generate positive operating cash flow, execute on our previously announced realignment of our European operations and realize annualized cost savings of $25 million to $30 million, align with the leading manufacturers in the converged Smartphone space, (both hardware and software) and with new entrants in the global wireless market, and continue to look for ways to drive costs out of our already low cost distribution and customized logistics business model. I am proud of our employees' ability to focus and deliver positive results in the third quarter of 2008."
"I am pleased with our cash flows from operations and working capital improvements during the third quarter," said Tony Boor, Brightpoint's Chief Financial Officer. "We generated over $53 million of cash flows from operations, which allowed us to reduce our debt balances by more than $46 million by the end of the quarter. As of the end of the third quarter, virtually all of our remaining debt was term debt that requires no additional principal payments in the fourth quarter. Cash flows from operations came primarily from lowering our inventory levels by $72 million and from improving the overall aging of our inventories. These improvements in inventory in the quarter combined with other improvements in working capital helped us lower our cash conversion cycle to an industry leading ten days."
UPDATE ON PREVIOUSLY ANNOUNCED REALIGNMENT OF EUROPEAN OPERATIONS
On June 30, 2008 the Company announced that as part of the natural progression of the Dangaard integration process, it was realigning its European operations in an effort to streamline its business processes and optimize its business model. The Company believes that these efforts, and the resultant cost reductions and operational efficiencies, will help produce additional synergies for the Company. The Company incurred restructuring costs of $14.6 million in the third quarter of 2008 related to these initiatives. Approximately $13.7 million of the total restructuring costs were directly related to the Dangaard Telecom acquisition and thus resulted in additional goodwill recorded in purchase accounting. The remaining $0.9 million of restructuring costs incurred during the third quarter of 2008 were not directly related to the Dangaard Telecom acquisition and thus are included as "restructuring charge" in the Consolidated Statement of Operations for the three months ended September 30, 2008.
These cost reduction initiatives, which will be fully implemented by the end of 2008, are expected to result in approximately $12 million to $14 million in spending reductions for the second half of 2008 and $25 million to $30 million in annualized spending reductions. Some of these spending reductions will be realized within SG&A and some will be realized within gross profit. As of the end of the third quarter of 2008, we are on-track to realize the previously announced spending reductions of $12 million to $14 million for the second half of 2008. We will also continue to focus on other spending reduction opportunities and operational efficiencies in an effort to achieve desired operating margins.
In October 2008 the Company reached an agreement with the landlord of its European headquarters to terminate the building's lease. The Company will record a charge of approximately $3.0 million to $3.5 million related to the termination of this lease in its results of operations for the fourth quarter of 2008.
SUMMARY FINANCIAL RESULTS
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended
------------------------------------
Sept. 30, Sept. 30, June 30,
2008 2007 2008
---------- ---------- ----------
Wireless devices handled 20,348 22,028 19,895
Revenue $1,209,969 $1,160,682 $1,212,730
Gross profit $ 86,948 $ 77,746 $ 88,225
Gross margin 7.2% 6.7% 7.3%
Selling, general and
administrative expenses $ 63,475 $ 51,275 $ 71,071
Operating income from
continuing operations $ 17,925 $ 22,413 $ 9,366
Income from
continuing operations $ 6,027 $ 13,020 $ 2,596
Net income (loss) $ 5,479 $ 12,962 $ (2,331)
Diluted per share:
Income from
continuing operations $ 0.07 $ 0.18 $ 0.03
Net income (loss) $ 0.06 $ 0.18 $ (0.03)
Brightpoint, Inc. (Nasdaq:CELL) is a global leader in the distribution of wireless devices and in providing customized logistic services to the wireless industry. In 2007, Brightpoint handled approximately 83 million wireless devices globally. Brightpoint's innovative services include distribution, channel development, fulfillment, product customization, eBusiness solutions, and other outsourced services that integrate seamlessly with its customers. Brightpoint's effective and efficient platform allows its customers to benefit from quickly deployed, flexible, and cost effective solutions. The company has approximately 3,000 employees in 26 countries. In 2007 Brightpoint generated revenue of $4.2 billion and net income of $47.4 million. Brightpoint provides distribution and customized services to over 25,000 B2B customers worldwide. Additional information about Brightpoint can be found on its website at www.brightpoint.com, or by calling its toll-free Information and Investor Relations line at 877-IIR-CELL (877-447-2355).
Certain information in this press release may contain forward-looking statements regarding future events or the future performance of the Company including, without limitation, its expectations regarding units handled, adjusted (non-GAAP) SG&A, spending reductions, annual effective tax rate, and non-GAAP weighted average common shares outstanding (diluted). These statements are only predictions and actual events or results may differ materially. Please refer to the documents the Company files, from time to time, with the Securities and Exchange Commission; specifically, the Company's most recent Form 10-K and Form 10-Q and the cautionary statements and risk factors contained therein. These documents contain and identify important risk factors that could cause the actual results to differ materially from those contained in or implied by these forward-looking statements. These risk factors include, without limitation, uncertainties relating to customer plans and commitments, including, without limitation, (i) loss of significant customers or a reduction in prices we charge these customers as a result of consolidation of mobile phone operators, including Dobson Communications Corporation, Suncom and Rural Cellular Corporation, which were recently acquired or Alltel, which has announced plans to be acquired; (ii) our obligations under certain debt, lease and other contractual arrangements; (iii) dependence upon principal suppliers and availability and price of wireless products including the risk of consolidation of these suppliers; (iv) our ability to borrow additional funds, including the viability of the banks participating in our credit facilities that might impact their ability to provide additional funds; (v) collection of our accounts receivable; (vi) our ability to expand and implement our future growth strategy, including acquisitions; (vii) uncertainty regarding future volatility in our Common Stock price; (viii) uncertainty regarding whether wireless equipment manufacturers and wireless network operators will continue to outsource aspects of their business to us; (ix) our reliance upon third parties to manufacture products which we distribute and reliance upon their quality control procedures; (x) the potential for our operations to be materially affected by fluctuations in regional demand and economic factors; (xi) rapid technological changes in the wireless communications and data industry; (xii) risks of foreign operations, including currency, trade restrictions and political risks in our foreign markets; (xiii) effect of natural disasters, epidemics, hostilities or terrorist attacks on our operations; (xiv) the impact that seasonality may have on our business and results; (xv) our ability to attract and retain qualified management and other personnel, cost of complying with labor agreements and high rate of personnel turnover; (xvi) protecting our proprietary information; (xvii) existence of anti-takeover measures; (xviii) the fact that a substantial number of shares are eligible for future sale by Dangaard Holding and the sale of those shares could adversely affect our stock price; (xix) integration of Dangaard Telecom's operations in a timely manner; (xx) acquisition related accounting impairment and amortization charges may delay and reduce our post-acquisition profitability; (xxi) exposure to unknown pre-existing liabilities of Dangaard Telecom; (xxii) possible adverse effects of future medical claims regarding the use of wireless devices; (xxiii) intense industry competition. Because of the aforementioned uncertainties affecting our future operating results, past performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate future results or trends. The words "believe," "expect," "anticipate," "estimate," "intend," "likely," "will," "should" and "plan" and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on any of these forward-looking statements, which speak only as of the date that such statement was made. We undertake no obligation to update any forward-looking statement.
BRIGHTPOINT, INC.
NON-GAAP RECONCILIATION OF CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended
September 30, 2008 (1)
US GAAP Non-GAAP As
As Reported Adjustments(2) Adjusted
-------------------------------------------
Revenue
Distribution revenue $ 1,098,800 $ 1,098,800
Logistic services 111,169 111,169
-------------------------------------------
Total revenue 1,209,969 1,209,969
Cost of revenue
Cost of distribution
revenue 1,054,383 1,054,383
Cost of logistic
services revenue 68,638 68,638
-------------------------------------------
Total cost of revenue 1,123,021 1,123,021
-------------------------------------------
Gross profit 86,948 86,948
Selling, general and
administrative expenses 63,475 $ (1,574) 61,901
Amortization 4,647 (4,553) 94
Restructuring charge 901 (901) --
-------------------------------------------
Operating income from
continuing operations 17,925 7,028 24,953
Interest, net 4,435 4,435
Other expenses 1,782 1,782
-------------------------------------------
Income from continuing
operations before
income taxes 11,708 7,028 18,736
Income tax expense 5,648 2,156 7,804
-------------------------------------------
Income from continuing
operations before
minority interest 6,060 4,872 10,932
Minority interest 33 33
-------------------------------------------
Income from
continuing operations 6,027 $ 4,872 $ 10,899
==========================
Discontinued operations,
net of income taxes:
Loss from discontinued
operations (538)
Loss on disposal of
discontinued operations (10)
-------------
Total discontinued
operations, net of
income taxes (548)
-------------
Net income $ 5,479
=============
Earnings per share -
basic:
Income from continuing
operations $ 0.08 $ 0.14
=============
Discontinued operations,
net of income taxes (0.01)
-------------
Net income $ 0.07
=============
Earnings per share -
diluted:
Income from continuing
operations $ 0.07 $ 0.13
=============
Discontinued operations,
net of income taxes (0.01)
-------------
Net income $ 0.06
=============
Weighted average common
shares outstanding:
Basic 78,549 78,549
============= =============
Diluted 81,250 1,118 82,368
===========================================
Three Months Ended
September 30, 2007 (1)
US GAAP Non-GAAP As
As Reported Adjustments(3) Adjusted
-------------------------------------------
Revenue
Distribution revenue $ 1,067,791 $ 1,067,791
Logistic services 92,891 92,891
-------------------------------------------
Total revenue 1,160,682 1,160,682
Cost of revenue
Cost of distribution
revenue 1,018,314 1,018,314
Cost of logistic
services revenue 64,622 64,622
-------------------------------------------
Total cost of revenue 1,082,936 1,082,936
-------------------------------------------
Gross profit 77,746 77,746
Selling, general and
administrative expenses 51,275 $ (2,803) 48,472
Amortization 3,892 (3,831) 61
Restructuring charge 166 (166) 0
-------------------------------------------
Operating income from
continuing operations 22,413 6,800 29,213
Interest, net 5,758 5,758
Other expenses 424 (256) 168
-------------------------------------------
Income from continuing
operations before
income taxes 16,231 7,056 23,287
Income tax expense 3,005 4,460 7,465
-------------------------------------------
Income from continuing
operations before
minority interest 13,226 2,596 15,822
Minority interest 206 206
-------------------------------------------
Income from
continuing operations 13,020 $ 2,596 $ 15,616
==========================
Discontinued operations,
net of income taxes:
Loss from discontinued
operations (57)
Loss on disposal of
discontinued operations (1)
-------------
Total discontinued
operations, net of
income taxes (58)
-------------
Net income $ 12,962
=============
Earnings per share -
basic:
Income from continuing
operations $ 0.19 $ 0.22
=============
Discontinued operations,
net of income taxes
-------------
Net income $ 0.19
=============
Earnings per share -
diluted:
Income from continuing
operations $ 0.18 $ 0.22
=============
Discontinued operations,
net of income taxes
-------------
Net income $ 0.18
=============
Weighted average common
shares outstanding:
Basic 70,076 70,076
============= =============
Diluted 71,125 1,032 72,157
===========================================
See accompanying "Notes to Non-GAAP Reconciliation of Consolidated
Statements of Operations."
BRIGHTPOINT, INC.
NON-GAAP RECONCILIATION OF CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
Nine Months Ended
September 30, 2008(1)
US GAAP Non-GAAP As
As Reported Adjustments(4) Adjusted
------------------------------------
Revenue
Distribution revenue $3,292,703 $3,292,703
Logistic services revenue 321,694 321,694
------------------------------------
Total revenue 3,614,397 3,614,397
Cost of revenue
Cost of distribution revenue 3,145,861 3,145,861
Cost of logistic services
revenue 202,620 202,620
------------------------------------
Total cost of revenue 3,348,481 3,348,481
------------------------------------
Gross profit 265,916 265,916
Selling, general and
administrative expenses 206,043 $ (4,991) 201,052
Amortization 14,189 (13,772) 417
Restructuring charge 7,483 (7,483) --
------------------------------------
Operating income from
continuing operations 38,201 26,246 64,447
Interest, net 18,616 18,616
Other expenses 2,809 2,809
------------------------------------
Income from continuing
operations before income taxes 16,776 26,246 43,022
Income tax expense (benefit) 5,469 7,894 13,363
------------------------------------
Income from continuing
operations before minority
interest 11,307 18,352 29,659
Minority interest 366 366
------------------------------------
Income from continuing
operations 10,941 $ 18,352 $ 29,293
======================
Discontinued operations, net of
income taxes:
Gain (loss) from
discontinued operations (7,013)
Gain (loss) on disposal of
discontinued operations (5)
----------
Total discontinued operations,
net of income taxes (7,018)
----------
Net income $ 3,923
==========
Earnings per share - basic:
Income from continuing
operations $ 0.14 $ 0.38
==========
Discontinued operations,
net of income taxes (0.09)
----------
Net income $ 0.05
==========
Earnings per share - diluted:
Income from continuing
operations $ 0.13 $ 0.36
==========
Discontinued operations,
net of income taxes (0.09)
----------
Net income $ 0.04
==========
Weighted average common shares
outstanding:
Basic 77,968 77,968
========== ==========
Diluted 81,545 926 82,471
====================================
Nine Months Ended
September 30, 2007(1)
US GAAP Non-GAAP As
As Reported Adjustments(5) Adjusted
-----------------------------------
Revenue
Distribution revenue $2,377,940 $2,377,940
Logistic services revenue 251,496 251,496
-----------------------------------
Total revenue 2,629,436 2,629,436
Cost of revenue
Cost of distribution revenue 2,289,198 2,289,198
Cost of logistic services
revenue 188,864 188,864
-----------------------------------
Total cost of revenue 2,478,062 2,478,062
-----------------------------------
Gross profit 151,374 151,374
Selling, general and
administrative expenses 112,044 $(7,711) 104,333
Amortization 4,636 (4,451) 185
Restructuring charge 166 (166) --
-----------------------------------
Operating income from
continuing operations 34,528 12,328 46,856
Interest, net 8,971 8,971
Other expenses 786 (256) 530
-----------------------------------
Income from continuing
operations before income taxes 24,771 12,584 37,355
Income tax expense (benefit) (7,771) 20,576 12,805
-----------------------------------
Income from continuing
operations before minority
interest 32,542 (7,992) 24,550
Minority interest 206 206
-----------------------------------
Income from continuing
operations 32,336 $(7,992) $ 24,344
=====================
Discontinued operations, net of
income taxes:
Gain (loss) from
discontinued operations 153
Gain (loss) on disposal of
discontinued operations 11
----------
Total discontinued operations,
net of income taxes 164
----------
Net income $ 32,500
==========
Earnings per share - basic:
Income from continuing
operations $ 0.57 $ 0.43
==========
Discontinued operations,
net of income taxes --
----------
Net income $ 0.57
==========
Earnings per share - diluted:
Income from continuing
operations $ 0.56 $ 0.42
==========
Discontinued operations,
net of income taxes --
----------
Net income $ 0.56
==========
Weighted average common shares
outstanding:
Basic 56,488 56,488
========== ==========
Diluted 57,551 1,080 58,631
===================================
See accompanying "Notes to Non-GAAP Reconciliation of
Consolidated Statements of Operations."
Notes to Non-GAAP Reconciliation of Consolidated
Statements of Operations:
(1) We have provided income from continuing operations and earnings
per share on both a U.S. GAAP basis and on an as adjusted non-GAAP
basis because the Company's management believes it provides
meaningful information to investors. Among other things, it may
assist investors in evaluating the Company's on-going operations.
Adjustments to earnings per share from continuing operations
generally include certain non-cash charges such as stock based
compensation and amortization of acquired finite lived intangible
assets as well as other items that are considered to be unusual or
infrequent in nature such as restructuring charges. Non-GAAP
earnings per share is calculated by dividing non-GAAP income from
continuing operations by non-GAAP weighted average common shares
outstanding (diluted). For purposes of calculating non-GAAP
earnings per share, we add back certain shares presumed to be
repurchased under the U.S. GAAP treasury stock method related to
stock based compensation expense. We believe these non-GAAP
disclosures provide important supplemental information to
management and investors regarding financial and business trends
relating to the Company's financial condition and results of
operations. Management uses these non-GAAP measures internally to
evaluate the performance of the business and to evaluate results
relative to incentive compensation targets for certain employees.
Investors should consider non-GAAP measures in addition to, not as
a substitute for, or as superior to measures of financial
performance prepared in accordance with U.S. GAAP.
(2) Adjustments for the three months ended September 30, 2008
include:
* A $0.9 million restructuring charge (pre-tax) consisting
primarily of a $0.2 million charge related to the sale of
certain assets in Colombia as well as $0.7 million of
restructuring charges associated with the previously announced
realignment of our European operations.
* $4.6 million of non-cash amortization expense related to
acquired intangible assets.
* $1.6 million of non-cash stock based compensation expense.
* $2.2 million tax impact of items described above.
(3) Adjustments for the three months ended September 30, 2007
include:
* $3.8 million of non-cash amortization expense related to
acquired intangible assets.
* $1.6 million of non-cash stock based compensation expense.
* $1.6 million of incremental costs related to integrating the
Dangaard Telecom and CellStar acquisitions and other initial
charges taken in connection with longer-term cost saving
initiatives.
* $4.5 million tax impact of items described above, including
$2.1 million tax benefit resulting from a reduction in the
statutory tax rate in Germany.
(4) Adjustments for the nine months ended September 30, 2008 include:
* A $7.5 million restructuring charge (pre-tax) consisting
primarily of $1.8 million in charges in connection with the
previously announced sale of certain assets in Colombia, a $1.1
million charge to write-off IT projects that were abandoned
after the acquisition of Dangaard Telecom, a $3.6 million
charge in connection with consolidating the Brightpoint and
Dangaard operations in Germany during the first quarter of
2008, and $1.0 million of other charges in connection with the
previously announced realignment of our European operations.
* $13.8 million of non-cash amortization expense related to
acquired intangible assets.
* $5.0 million of non-cash stock based compensation expense.
* $7.9 million tax impact of items described above.
(5) Adjustments for the nine months ended September 30, 2007 include:
* $4.5 million of non-cash amortization expense related to
acquired intangible assets.
* $4.9 million of non-cash stock based compensation expense.
* $3.6 million of incremental costs related to integrating the
Dangaard Telecom and CellStar acquisitions and initial charges
taken in connection with longer-term other cost saving
initiatives.
* $20.6 million tax impact of items described above, including
$14.1 million tax benefit related to the reversal of valuation
allowances on certain foreign tax credit carryforwards and $2.1
million tax benefit resulting from a reduction in the statutory
tax rate in Germany
BRIGHTPOINT, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share data)
Sept. 30, Dec. 31,
----------- -----------
2008 2007
----------- -----------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 101,200 $ 102,160
Accounts receivable (less allowance
for doubtful
accounts of $12,875 in 2008 and
$17,157 in 2007) 544,491 754,238
Inventories 312,869 474,951
Other current assets 66,236 69,261
----------- -----------
Total current assets 1,024,796 1,400,610
Property and equipment, net 56,652 55,732
Goodwill 389,005 349,646
Other intangibles, net 118,619 135,431
Other assets 36,749 30,942
----------- -----------
Total assets $ 1,625,821 $ 1,972,361
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 615,264 $ 666,085
Accrued expenses 147,226 189,415
Current portion of long-term debt 1,190 19,332
Lines of credit and other
short-term borrowings 13 --
----------- -----------
Total current liabilities 763,693 874,832
Long-term liabilities:
Lines of credit, long-term 1,502 208,399
Long-term debt 182,778 233,122
Other long-term liabilities 53,882 54,425
----------- -----------
Total long-term liabilities 238,162 495,946
----------- -----------
Total liabilities 1,001,855 1,370,778
COMMITMENTS AND CONTINGENCIES
Minority interest 326 818
Shareholders' equity:
Preferred stock, $0.01 par value:
1,000 shares authorized; no shares
issued or outstanding -- --
Common stock, $0.01 par value:
100,000 shares authorized; 88,702
issued in 2008 and 88,418 issued
in 2007 887 884
Additional paid-in-capital 623,721 584,806
Treasury stock, at cost, 7,063
shares in 2008 and 6,930 shares
in 2007 (59,983) (58,695)
Retained earnings 33,389 29,467
Accumulated other comprehensive income 25,626 44,303
----------- -----------
Total shareholders' equity 623,640 600,765
----------- -----------
Total liabilities and
shareholders' equity $ 1,625,821 $ 1,972,361
=========== ===========
BRIGHTPOINT INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Nine months ended
September 30,
--------------------
2008 2007
--------- ---------
Operating activities
Net income $ 3,923 $ 32,500
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 28,249 14,658
Non-cash compensation 4,991 4,485
Restructuring charge 7,483 166
Change in deferred taxes (13,910) (18,132)
Minority interest 366 --
Other non-cash (910) 2,354
--------- ---------
30,192 36,031
Changes in operating assets and liabilities,
net of effects from acquisitions and
divestitures:
Accounts receivable 197,999 (10,841)
Inventories 160,193 203,537
Other operating assets (7,935) (4,312)
Accounts payable and accrued expenses (67,563) (124,864)
--------- ---------
Net cash provided by operating activities 312,886 99,551
Investing activities
Capital expenditures (16,064) (16,172)
Acquisitions, net of cash acquired (5,878) (69,141)
Decrease (increase) in other assets 768 (5,391)
--------- ---------
Net cash used in investing activities (21,174) (90,704)
Financing Activities
Net (repayments on) proceeds from lines of
credit (213,843) 37,832
Repayments on debt assumed from Dangaard
Telecom -- (284,557)
Borrowings (repayments) on Global Term Loans (67,076) 248,585
Deferred financing costs paid (212) (4,433)
Purchase of treasury stock (1,288) (400)
Excess tax benefit from equity based
compensation 118 774
Proceeds from common stock issuances under
employee stock option plans 39 1,903
--------- ---------
Net cash used in financing activities (282,262) (296)
Effect of exchange rate changes on cash and
cash equivalents (10,410) 2,869
--------- ---------
Net (decrease) increase in cash and
cash equivalents (960) 11,420
Cash and cash equivalents at beginning of
period 102,160 54,331
--------- ---------
Cash and cash equivalents at end of period $ 101,200 $ 65,751
========= =========
Supplemental Information
(Amounts in thousands)
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")
Three Months Ended
------------------------------------
Sept. 30, Sept. 30, June 30,
2008 2007 2008
---------- ---------- ----------
Net income (1) $ 5,479 $ 12,962 $ (2,331)
Net interest expense (1) 4,470 5,877 6,901
Income taxes (1) 5,528 2,996 (4,955)
Depreciation and
amortization (1) 8,914 7,412 9,828
---------- ---------- ----------
EBITDA $ 24,391 $ 29,247 $ 9,443
========== ========== ==========
(1) Includes discontinued operations
EBITDA is a non-GAAP financial measure. Management believes EBITDA
provides it with an indicator of how much cash the Company generates,
excluding non-cash charges and any changes in working capital.
Management also reviews and utilizes the entire statement of cash flows
to evaluate cash flow performance.
Cash Conversion Cycle Days
Management utilizes the cash conversion cycle days metric and its
components to evaluate the Company's ability to manage its working
capital and its cash flow performance. Cash conversion cycle days and
its components for the quarters ending September 30, 2008 and 2007, and
June 30, 2008 were as follows:
Three Months Ended
------------------------------------
Sept. 30, Sept. 30, June 30,
2008 2007 2008
---------- ---------- ----------
Days sales outstanding in
accounts receivable 28 40 31
Days inventory on-hand 24 34 29
Days payable outstanding (42) (42) (45)
---------- ---------- ----------
Cash Conversion Cycle Days 10 32 15
========== ========== ==========
There can be no assurances that our cash conversion cycle will remain
as low in the future as in the third quarter of 2008. Increases in the
cash conversion cycle would have the effect of consuming our cash,
potentially causing us to borrow from lenders to fund the related
increase in working capital.
Supplemental Information (continued)
(Amounts in thousands)
Return on Invested Capital ("ROIC")
Management uses ROIC to measure the effectiveness of its use of
invested capital to generate profits. ROIC for the quarters and
trailing four quarters ended September 30, 2008 and 2007, and June 30,
2008, was as follows:
Three Months Ended
------------------------------------
Sept. 30, Sept.30, June 30,
2008 2007 2008
---------- ---------- ----------
Operating income after taxes:
Operating income from
continuing operations $ 17,925 $ 22,413 $ 9,366
Plus: restructuring charge 901 166 2,969
Less: estimated income taxes (1) (9,082) (4,180) 20,712
---------- ---------- ----------
Operating income after
taxes $ 9,744 $ 18,399 $ 33,047
========== ========== ==========
Invested Capital:
Debt $ 185,483 $ 377,290 $ 243,787
Shareholders' equity 623,640 599,878 674,933
---------- ---------- ----------
Invested capital $ 809,123 $ 977,168 $ 918,720
========== ========== ==========
Average invested capital (2) $ 863,922 $ 650,514 $ 967,736
ROIC (3) 5% 11% 14%
Trailing Four Quarters Ended
------------------------------------
Sept. 30, Sept. 30, June 30
2008 2007 2008
---------- ---------- ----------
Operating income after taxes:
Operating income from
continuing operations $ 68,880 $ 46,747 $ 73,368
Plus: restructuring charge 15,979 166 15,244
Less: estimated income
taxes (1) (8,287) 9,075 (3,385)
---------- ---------- ----------
Operating income after
taxes $ 76,572 $ 55,988 $ 85,227
========== ========== ==========
Invested Capital:
Debt $ 185,483 $ 377,290 $ 243,787
Shareholders' equity 623,640 599,878 674,933
---------- ---------- ----------
Invested capital $ 809,123 $ 977,168 $ 918,720
========== ========== ==========
Average invested capital (2) $ 956,676 $ 396,954 $ 859,623
ROIC (3) 8% 14% 10%
(1) Estimated income taxes were calculated by multiplying the sum of
operating income from continuing operations and the restructuring
charge by the respective periods' effective tax rate. Income tax
benefit for the three months ended June 30, 2008 includes a $3.0
million benefit from the reversal of a valuation allowance on
deferred tax assets resulting from previous net operating losses
in Germany. The income tax benefit as well as low income before
taxes results in a negative effective tax rate of 167.9% for the
period, This negative effective tax rate causes estimated income
taxes in our ROIC calculation to be a benefit for the three
months ended June 30, 2008.
(2) Average invested capital for quarterly periods represents the
simple average of the beginning and ending invested capital
amounts for the respective quarter. Average invested capital for
the trailing four quarters represents the simple average of the
invested capital amounts for the current and four prior quarter
period ends.
(3) ROIC is calculated by dividing operating income after taxes by
average invested capital. ROIC for quarterly periods is stated on
an annualized basis and is calculated by dividing operating
income after taxes by average invested capital and multiplying
the results by four.
The decline in ROIC for the three months and trailing four
quarters ended September 30, 2008 compared to the same period in
the prior year was primarily due to the increase in average
invested capital compared the prior year and the decrease in
operating income after taxes. Average invested capital was
negatively impacted by an increase in invested capital to fund
the acquisition of Dangaard Telecom.
Supplemental Information (continued)
(Amounts in thousands)
Return on Tangible Capital ("ROTC")
Beginning in the third quarter of 2008, Management began using
Return on Tangible Capital, or ROTC, to provide a measurement
which can be consistently and fairly applied internally to all
operating entities to determine the effectiveness of each
entity's usage of tangible capital. ROTC eliminates the influence
of intangible assets balances, cash transfer capabilities and
income tax rates which vary amongst Brightpoint operating
entities and are not controllable by operating entity management.
ROTC indicates the return which can be expected on the tangible
capital consumed and replaced through the normal business cycle.
To calculate ROTC, operating income from continuing operations is
adjusted for restructuring charges and amortization of intangible
assets, and this adjusted operating income is applied to average
tangible capital. Average tangible capital is calculated as total
assets less cash, investments, goodwill, intangible assets, net
of current liabilities excluding short term borrowings. The
details of this measurement are outlined below.
Three Months Ended
------------------------------------
Sept. 30, Sept. 30, June 30,
2008 2007 2008
---------- ---------- ----------
Operating income before
amortization and
restructuring charges:
Operating income from
continuing operations $ 17,925 $ 22,413 $ 9,366
Plus: amortization expense 4,647 3,892 4,819
Plus: restructuring charge 901 166 2,969
---------- ---------- ----------
Operating income before
amortization and
restructuring charges: $ 23,473 $ 26,471 $ 17,154
========== ========== ==========
Tangible capital:
Net tangible assets $1,016,997 $1,193,386 $1,162,676
Net current liabilities $ 764,896 $ 972,357 $ 879,313
---------- ---------- ----------
Net tangible capital $ 252,101 $ 221,029 $ 283,363
========== ========== ==========
Average tangible capital (1) $ 294,146 $ 399,462 $ 411,919
ROTC (2) 32% 27% 17%
Trailing Four Quarters
------------------------------------
Sept. 30, Sept. 30, June 30,
2008 2007 2008
---------- ---------- ----------
Operating income before
amortization and
restructuring charges:
Operating income from
continuing operations $ 68,880 $ 46,747 $ 73,368
Plus: amortization expense 20,081 4,707 19,326
Plus: restructuring charge 15,979 166 15,244
---------- ---------- ----------
Operating income before
amortization and
restructuring charges: $ 104,940 $ 51,620 $ 107,938
========== ========== ==========
Tangible capital:
Net tangible assets $1,016,997 $1,193,386 $1,162,676
Net current liabilities $ 764,896 $ 972,357 $ 879,313
---------- ---------- ----------
Net tangible capital $ 252,101 $ 221,029 $ 283,363
========== ========== ==========
Average tangible capital (1) $ 437,428 $ 250,904 $ 432,760
ROTC (2) 24% 21% 25%
(1) Average invested capital for quarterly periods represents the
simple average of the beginning and ending tangible capital
amounts for the respective quarter.
(2) ROTC is calculated by dividing operating income before
amortization and restructuring charges by average tangible
capital. ROTC for quarterly periods is stated on an annualized
basis and is calculated by dividing operating income before
amortization and restructuring charges by average tangible
capital and multiplying the results by four.
ROTC increased for the three months and trailing four quarters
ended September 30, 2008 compared to the same period in the prior
year primarily as a result of decreases in tangible capital
employed.
We anticipate improving our trailing four quarter ROTC to a range
of 35%-40% as we increase operating income through better
employment of tangible capital.