PLAINFIELD, Ind., Feb. 7, 2008 (PRIME NEWSWIRE) -- For the Fourth Quarter of 2007:
* Revenue of $1.6 billion, an increase of 141% from the fourth quarter of 2006.
* Income from continuing operations of $14.2 million or $0.17 per diluted share compared to $10.0 million or $0.20 per diluted share in the fourth quarter of 2006. Weighted average common shares outstanding (diluted) of 81.3 million for the fourth quarter of 2007 compared to 50.4 million for the fourth quarter of 2006. Fourth quarter 2007 results included:
- $8.5 million restructuring charges (pre-tax), consisting of a charge of $7.1 million in connection with terminating Dangaard Telecom's implementation of SAP enterprise resource planning and related software and a $1.4 million charge in connection with consolidating the Brightpoint and Dangaard operations in Germany. - $5.7 million (pre-tax) of non-cash amortization expense related to finite-lived intangible assets acquired in connection with the CellStar and Dangaard Telecom transactions. - $1.6 million (pre-tax) of non-cash stock based compensation expense in the fourth quarter of 2007 compared to $1.9 million in the fourth quarter of 2006 (included within SG&A expenses). - $0.7 million of incremental costs related to integrating the Dangaard Telecom acquisition (included within SG&A expenses). - $4.9 million tax impact of items described above.
* Adjusted income from continuing operations (non-GAAP) of $25.7 million or $0.31 per diluted share. Please see the disclosure below regarding adjusted income from continuing operations.
* Net income of $14.9 million or $0.18 per diluted share compared to $9.7 million or $0.19 per diluted share in the fourth quarter of 2006.
* Gross margin of 7.3%, an increase of 1.1 percentage points from the fourth quarter of 2006.
* A record 27.0 million wireless devices handled, an increase of approximately 78% from the fourth quarter of 2006.
* EBITDA of $41.9 million in the fourth quarter of 2007 compared to $15.6 million for the fourth quarter of 2006.
For the Year Ended December 31, 2007:
(Including the results of operations of the Dangaard Telecom operations beginning August 1, 2007 as the Dangaard Telecom acquisition closed July 31, 2007)
* Revenue of $4.3 billion, an increase of 77% from 2006.
* Income from continuing operations of $46.7 million or $0.73 per diluted share compared to $36.2 million or $0.72 per diluted share in 2006. 2007 results included:
- $10.2 million (pre-tax) of non-cash amortization expense related to finite-lived intangible assets acquired in connection with the CellStar and Dangaard Telecom transactions. - $8.7 million restructuring charges (pre-tax), consisting of a charge of $7.1 million in connection with terminating Dangaard Telecom's implementation of SAP enterprise resource planning and related software and a $1.6 million charge in connection with consolidating the Brightpoint and Dangaard operations in Germany. - $6.1 million (pre-tax) of non-cash stock based compensation expense in 2007 compared to $6.0 million in 2006 (included within SG&A expenses). - $4.2 million (pre-tax) of incremental costs related to integrating the Dangaard Telecom and CellStar acquisitions and initial charges taken in connection with other longer-term cost saving initiatives (included within SG&A expenses). - $25.5 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.
* Net income of $47.4 million or $0.74 per diluted share compared to $35.6 million or $0.70 per diluted share in 2006.
* A record 82.9 million wireless devices handled, an increase of 55% from 2006.
* EBITDA of $90.6 million as compared to $60.7 million in 2006
FOR 2008 MANAGEMENT CURRENTLY EXPECTS:
* Annual as adjusted (non-GAAP) SG&A as a percent of revenue of 4.3% to 4.7%
* Annual effective tax rate from 32% to 35%
* Non-GAAP weighted average common shares outstanding (diluted) of approximately 83.3 million
Please see the attached Schedules and the Brightpoint website at www.Brightpoint.com for an explanation and reconciled presentation of the results for the fourth quarter and year ended December 31 2007 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 attached Supplemental Information for a reconciliation of EBITDA.
Brightpoint, Inc. (Nasdaq:CELL) reported its financial results for the fourth quarter and year ended December 31, 2007. Unless otherwise noted, amounts pertain to the fourth quarter of 2007.
"I am very pleased with our results in the Fourth Quarter," stated Robert J. Laikin, Brightpoint's Chief Executive Officer and Chairman of the Board. "The global demand for wireless devices continues to be healthy and I only expect a seasonal decline of approximately 5% to 10% in terms of global handset unit volumes in Q1-08 from Q4-07. I reiterate my previously estimated 2008 global sell-in range of 1.25 billion to 1.35 billion units which will be driven by a high handset replacement cycle. Brightpoint handled about 83 million wireless devices in 2007 and expects to handle over 100 million devices in 2008 representing a growth rate that is faster than the wireless device industry. Looking at 2008 and the future years, converged devices and many related applications will be the main reason for excitement in this great industry. I believe 15%-20% of all devices sold in 2008 will be converged devices and this percentage will increase to 75% in mature markets in the next 5 years. Brightpoint is positioned well within the wireless supply chain to take advantage of these positive trends and align itself with the leading manufacturers, network operators and application developers who will lead the charge in the converged device arena."
"Our successful fourth quarter included significant progress in integrating the Dangaard operations," said Tony Boor, Brightpoint's Chief Financial Officer. "We have developed synergy plans and in many cases we have begun implementing those plans. Our finance team has implemented our policies and procedures to ensure we have a robust control environment in place throughout our global operations. As we turn our attention to 2008, we are focused on reducing our average outstanding debt by $100 to $150 million in the second half of the year by using cash generated from operations, renegotiating payment terms with our vendors and improving inventory management."
SUMMARY FINANCIAL RESULTS
(Amounts in thousands, except per share data)
The Company completed its acquisition of Dangaard Telecom A/S on July
31, 2007. Accordingly, results of operations for Dangaard Telecom are
included in our consolidated results of operations beginning August 1,
2007.
Three Months Ended Twelve Months Ended
---------------------- ----------------------
December 31, December 31,
2007 2006 2007 2006
---------- ---------- ---------- ----------
(Unaudited)(Unaudited) (Unaudited)
Wireless devices
handled 26,957 15,149 82,942 53,539
Revenue $1,629,665 $ 677,221 $4,300,275 $2,425,373
Gross profit $ 118,247 $ 41,848 $ 270,586 $ 150,906
Gross margin 7.3% 6.2% 6.3% 6.2%
Selling, general
and administrative
expenses $ 73,135 $ 29,775 $ 185,484 $ 102,253
Operating income
from continuing
operations $ 30,725 $ 12,002 $ 65,913 $ 48,371
Income from
continuing
operations $ 14,172 $ 10,033 $ 46,719 $ 36,190
Net income $ 14,894 $ 9,737 $ 47,394 $ 35,610
Diluted per share:
Income from
continuing
operations $ 0.17 $ 0.20 $ 0.73 $ 0.72
Net income $ 0.18 $ 0.19 $ 0.74 $ 0.70
Revenue was $1.6 billion for the fourth quarter of 2007, an increase of 141% from the fourth quarter of 2006. Management estimates that when excluding the impact of the Dangaard Telecom and CellStar acquisitions, revenue increased by approximately 28%-30%, which was largely driven by growth in our distribution business in Singapore.
Gross margin was 7.3% for the fourth quarter of 2007, an increase of 1.1 percentage points from the fourth quarter of 2006. The 1.1 percentage point increase in gross margin was largely driven by an 11.6 percentage point increase in gross margin from our logistic services business. The increase in gross margin from logistic services was primarily driven by an increase in logistic services gross profit and gross margin in our Europe division resulting largely from the Dangaard Telecom acquisition. Logistic services gross margin also increased in our Europe division as a result of new fulfillment arrangements with customers located in Russia. Our overall distribution gross margin was favorably impacted by approximately 0.3 percentage points during the fourth quarter of 2007 as a result of higher than historical gross margins in our Singapore business as a result of a strong product line-up from our largest supplier as well as favorable product allocations. There can be no assurances that we will continue to experience this level of gross margins in our Singapore distribution business in the future.
SG&A expenses increased $43.4 million or 146% for the three months ended December 31, 2007 compared to the same period in the prior year. SG&A expenses associated with the Dangaard Telecom operations represented $29.9 million of the overall increase in SG&A expenses for the three months ended 2007. Excluding the impact of the Dangaard Telecom acquisition, SG&A expenses increased $13.5 million for the fourth quarter of 2007 compared to the fourth quarter of 2006. SG&A expenses as a percent of revenue was 4.5% for the fourth quarter of 2007 compared to 4.4% for the fourth quarter of 2006. The fourth quarter of 2007 represents the first full quarter impact of the Dangaard Telecom operations including the impact of conforming Dangaard Telecom to Brightpoint accounting policies. For the 2008 fiscal year, we expect SG&A expenses as a percent of revenue to be within a range of 4.3% to 4.7% on an as adjusted (non-GAAP) basis. A majority of our SG&A expenses do not vary with seasonal changes in volume. As a result, we would expect SG&A expenses as a percent of revenue to fluctuate on a quarterly basis.
Amortization expense was $5.9 million for the fourth quarter of 2007, which primarily relates to finite-lived intangible assets acquired in connection with the CellStar and Dangaard Telecom transactions. We allocated the purchase price of the Dangaard Telecom acquisition based on preliminary estimates of the fair value of assets acquired and liabilities assumed. The assets acquired included $123.1 million of intangible assets assigned to the customer relationships included in the acquisition. The acquired intangible assets have a useful life of approximately fifteen years and are being amortized over the period that the assets are expected to contribute to our future cash flows. The assets are being amortized on an accelerated method based on the projected cash flows used for valuation purposes. We believe that these cash flows are most reflective of the pattern in which the economic benefit of the intangible assets will be consumed. Based on the preliminary estimates of the fair value of assets acquired we expect to recognize amortization expense during 2008 of approximately $17.0 million to $20.0 million related to the finite lived intangible assets acquired in the Dangaard Telecom and CellStar acquisitions.
Restructuring charges were $8.5 million for the fourth quarter of 2007. In the fourth quarter of 2007, we decided to terminate Dangaard Telecom's implementation of SAP enterprise resource planning and related software, which resulted in an impairment charge of $7.1 million. In addition, we recorded a charge of $1.4 million in connection with consolidating the Brightpoint and Dangaard Telecom operations in Germany. We anticipate taking an additional restructuring charge during the first half of 2008 of approximately $3.2 million to $3.8 million associated with the final exit of our redundant warehouse and office facility in Germany.
Our effective tax rate was 36.3% for the fourth quarter of 2007. For the 2008 fiscal year, we expect our effective tax rate to be within the range of 32.0% to 35.0%.
For the fourth quarter of 2007, our weighted average common shares outstanding (diluted) were 81.3 million, and our non-GAAP weighted average common shares outstanding (diluted) were 82.1 million. By the end of 2008, we expect our non-GAAP weighted average common shares outstanding (diluted) to be approximately 83.3 million.
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 3,300 employees in over 25 countries. In 2007 Brightpoint generated revenue of $4.3 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).
The Brightpoint, Inc. logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=4533
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 SG&A as a percent of revenue, 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 contained in Exhibit 99.1 thereto. 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: Dobson Communications Corporation was recently acquired. In addition Rural Cellular Corporation (RCC) and Suncom have recently announced plans to be acquired. The completion of any of these acquisitions may negatively impact our operating results. (ii) our significant payment obligations under certain debt, lease and other contractual arrangements and our ability to reduce these obligations; (iii) possible adverse effect on demand for our products resulting from consolidation of mobile operators; (iv) dependence upon principal suppliers and availability and price of wireless products including the risk of consolidation of these suppliers; (v) our ability to borrow additional funds; (vi) possible difficulties collecting our accounts receivable; (vii) our ability to increase volumes and maintain our margins; (viii) investment in and implementation of sophisticated information systems technologies and our reliance upon the proper functioning of such systems; (ix) our ability to expand and implement our future growth strategy, including acquisitions; (x) uncertainty regarding future volatility in our Common Stock price; (xi) uncertainty regarding whether wireless equipment manufacturers and wireless network operators will continue to outsource aspects of their business to us; (xii) our reliance upon third parties to manufacture products which we distribute and reliance upon their quality control procedures; (xiii) the potential for our operations to be materially affected by fluctuations in regional demand and economic factors; (xiv) our ability to respond to rapid technological changes in the wireless communications and data industry; (xv) access to or the cost of increasing amounts of capital, trade credit or other financing; (xvi) risks of foreign operations, including currency, trade restrictions and political risks in our foreign markets; (xvii) effect of natural disasters, epidemics, hostilities or terrorist attacks on our operations; (xviii) our ability to manage and sustain future growth at our historical or current rates; (xix) certain relationships and financings, which may provide us with minimal returns or losses on our investments; (xx) the impact that seasonality may have on our business and results; (xxi) our ability to attract and retain qualified management and other personnel, cost of complying with labor agreements and high rate of personnel turnover; (xxii) our ability to protect our proprietary information; (xxiii) our ability to maintain adequate insurance at a reasonable cost; (xxiv) the potential issuance of additional equity, including our Common Stock, which could result in dilution of existing shareholders and may have an adverse impact on the price of our Common Stock; (xxv) existence of anti-takeover measures; (xxvi) the fact that a substantial number of shares will be eligible for future sale by Dangaard Holding and the sale of those shares could adversely affect our stock price; (xxvii) if we are not able to integrate Dangaard Telecom's operations in a timely manner, we may not realize anticipated benefits of the transaction in a timely fashion, or at all, and our business could be harmed; (xxviii) we incurred significant financial obligations as a result of the acquisition of Dangaard Telecom, and our inability to satisfy these could materially and adversely affect our operating results and financial condition and harm our business; (xxix) acquisition related accounting impairment and amortization charges may delay and reduce our post-acquisition profitability; (xxx) exposure to unknown pre-existing liabilities of Dangaard Telecom could cause us to incur substantial financial obligations and harm our business; (xxxi) possible adverse effects of future medical claims regarding the use of wireless devices; (xxxii) our ability to meet 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," "intend," 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.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
Three Months Ended
December 31, 2007 (1)
(Unaudited)
U.S. GAAP Non-GAAP As
As Reported Adjustments(2) Adjusted
---------------------------------------
Revenue
Distribution revenue $1,522,981 $1,522,981
Logistic services revenue 106,684 106,684
---------------------------------------
Total revenue 1,629,665 1,629,665
Cost of revenue
Cost of distribution
revenue 1,445,475 1,445,475
Cost of logistic
services revenue 65,943 65,943
---------------------------------------
Total cost of revenue 1,511,418 1,511,418
---------------------------------------
Gross profit 118,247 118,247
Selling, general and
administrative
expenses 73,135 $ (2,298) 70,837
Amortization 5,892 (5,714) 178
Restructuring charge 8,495 (8,495) --
---------------------------------------
Operating income from
continuing operations 30,725 16,507 47,232
Interest, net 8,700 8,700
Other (income) expenses (448) (448)
---------------------------------------
Income from continuing
operations before
income taxes 22,473 16,507 38,980
Income tax expense 8,161 4,939 13,100
---------------------------------------
Income from continuing
operations before
minority interest 14,312 11,568 25,880
Minority interest 140 140
---------------------------------------
Income from continuing
operations $ 14,172 $ 11,568 $ 25,740
=========== ===========
Discontinued operations,
net of income taxes:
Loss from discontinued
operations (9)
Gain on disposal of
discontinued
operations 731
-----------
Total discontinued
operations, net of
income taxes
722
-----------
Net income $ 14,894
===========
Earnings per share -
basic:
Income from
continuing
operations $ 0.18 $ 0.33
===========
Discontinued
operations, net of
income taxes 0.01
-----------
Net income $ 0.19
===========
Earnings per share -
diluted:
Income from
continuing
operations $ 0.17 $ 0.31
===========
Discontinued
operations, net of
income taxes 0.01
-----------
Net income $ 0.18
===========
Weighted average common
shares outstanding:
Basic 77,102 77,102
=========== ===========
Diluted 81,291 790 82,081
=======================================
Three Months Ended
December 31, 2006 (1)
(Unaudited)
U.S. GAAP Non-GAAP As
As Reported Adjustments(4) Adjusted
---------------------------------------
Revenue
Distribution revenue $ 594,622 $ 594,622
Logistic services revenue 82,599 82,599
---------------------------------------
Total revenue 677,221 677,221
Cost of revenue
Cost of distribution
revenue 574,710 574,710
Cost of logistic
services revenue 60,663 60,663
---------------------------------------
Total cost of revenue 635,373 635,373
---------------------------------------
Gross profit 41,848 41,848
Selling, general and
administrative
expenses 29,775 $ (1,885) 27,890
Amortization 71 71
Restructuring charge -- --
---------------------------------------
Operating income from
continuing operations 12,002 1,885 13,887
Interest, net 130 130
Other (income) expenses (823) (823)
---------------------------------------
Income from continuing
operations before
income taxes 12,695 1,885 14,580
Income tax expense 2,662 593 3,255
---------------------------------------
Income from continuing
operations before
minority interest 10,033 1,292 11,325
Minority interest -- --
---------------------------------------
Income from continuing
operations 10,033 $ 1,292 $ 11,325
========= ===========
Discontinued operations,
net of income taxes:
Loss from discontinued
operations (59)
Gain on disposal of
discontinued
operations (237)
-----------
Total discontinued
operations, net of
income taxes (296)
-----------
Net income $ 9,737
===========
Earnings per share -
basic:
Income from
continuing
operations $ 0.20 $ 0.23
===========
Discontinued
operations, net of
income taxes (0.01)
-----------
Net income 0.19
===========
Earnings per share -
diluted:
Income from
continuing
operations $ 0.20 $ 0.22
===========
Discontinued
operations, net of
income taxes (0.01)
-----------
Net income $ 0.19
===========
Weighted average common
shares outstanding:
Basic 49,336 49,336
=========== ===========
Diluted 50,429 836 51,265
=======================================
See accompanying "Notes to Consolidated Statements of Operations"
BRIGHTPOINT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
Twelve Months Ended
December 31, 2007(1)
(Unaudited)
US GAAP Non-GAAP As
As Reported Adjustments(3) Adjusted
-----------------------------------------
Revenue
Distribution revenue $ 3,942,095 $ 3,942,095
Logistic services revenue 358,180 358,180
-----------------------------------------
Total revenue 4,300,275 4,300,275
Cost of revenue
Cost of distribution
revenue 3,775,165 3,775,165
Cost of logistic services
revenue 254,524 254,524
-----------------------------------------
Total cost of revenue 4,029,689 4,029,689
-----------------------------------------
Gross profit 270,586 270,586
Selling, general and
administrative expenses 185,484 $ (10,009) 175,475
Amortization 10,528 (10,165) 363
Restructuring charge
(benefit) 8,661 (8,661) --
-----------------------------------------
Operating income from
continuing operations 65,913 28,835 94,748
Interest, net 18,017 18,017
Other (income) expenses 390 (256) 134
-----------------------------------------
Income from continuing
operations before income
taxes 47,506 29,091 76,597
Income tax expense 440 25,514 25,954
-----------------------------------------
Income from continuing
operations before minority
interest 47,066 3,577 50,643
Minority interest 347 347
-----------------------------------------
Income from continuing
operations 46,719 $ 3,577 $ 50,296
=========== ===========
Discontinued operations, net
of income taxes:
Loss from discontinued
operations (68)
Gain on disposal of
discontinued operations 743
-----------
Total discontinued
operations, net of income
taxes 675
-----------
Net income $ 47,394
===========
Earnings per share - basic:
Income from continuing
operations $ 0.76 $ 0.82
===========
Discontinued operations,
net of income taxes 0.01
------------
Net income $ 0.77
============
Earnings per share - diluted:
Income from continuing
operations $ 0.73 $ 0.78
===========
Discontinued operations,
net of income taxes 0.01
------------
Net income $ 0.74
============
Weighted average common
shares outstanding:
Basic 61,174 61,174
=========== ===========
Diluted 63,571 987 64,558
=========================================
Twelve Months Ended
December 31, 2006(1)
US GAAP Non-GAAP As
As Reported Adjustments(4) Adjusted
-----------------------------------------
Revenue
Distribution revenue $ 2,097,510 $ 2,097,510
Logistic services revenue 327,863 327,863
-----------------------------------------
Total revenue 2,425,373 2,425,373
Cost of revenue
Cost of distribution
revenue 2,015,736 2,015,736
Cost of logistic services
revenue 258,731 258,731
-----------------------------------------
Total cost of revenue 2,274,467 2,274,467
-----------------------------------------
Gross profit 150,906 150,906
Selling, general and
administrative expenses 102,253 $ (6,005) 96,248
Amortization 291 291
Restructuring charge
(benefit) (9) (9)
-----------------------------------------
Operating income from
continuing operations 48,371 6,005 54,376
Interest, net 553 553
Other (income) expenses (610) (610)
-----------------------------------------
Income from continuing
operations before income
taxes 48,428 6,005 54,433
Income tax expense 12,238 1,870 14,108
-----------------------------------------
Income from continuing
operations before minority
interest 36,190 4,135 40,325
Minority interest -- --
-----------------------------------------
Income from continuing
operations 36,190 $ 4,135 $ 40,325
=========== ===========
Discontinued operations, net
of income taxes:
Loss from discontinued
operations (417)
Gain on disposal of
discontinued operations (163)
-----------
Total discontinued
operations, net of income
taxes (580)
-----------
Net income $ 35,610
===========
Earnings per share - basic:
Income from continuing
operations $ 0.74 $ 0.82
===========
Discontinued operations,
net of income taxes (0.01)
-----------
Net income $ 0.73
===========
Earnings per share - diluted:
Income from continuing
operations $ 0.72 $ 0.79
===========
Discontinued operations,
net of income taxes (0.02)
-----------
Net income $ 0.70
===========
Weighted average common
shares outstanding:
Basic 49,104 49,104
=========== ===========
Diluted 50,554 746 51,300
=========== =========== ===========
See accompanying "Notes to Consolidated Statements of Operations"
Notes to Consolidated Statements of Operations:
(1) We have provided income from continuing operations and earnings
per share on both a U.S. GAAP basis and 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, the calculation of weighted average common
shares outstanding (diluted) is adjusted to exclude the benefits
of compensation costs attributable to future services and not yet
recognized in the financial statements that are treated as
proceeds assumed to be used to repurchase shares under the U.S.
GAAP treasury stock method. 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 December 31, 2007
primarily include:
* $8.5 million restructuring charges, consisting of a charge of
$7.1 million in connection with terminating Dangaard Telecom's
implementation of SAP enterprise resource planning and related
software and a $1.4 million charge in connection with
consolidating the Brightpoint and Dangaard operations in Germany.
* $5.7 million of non-cash amortization expense related to
intangible assets acquired in connection with the CellStar and
Dangaard Telecom transactions.
* $1.6 million of non-cash stock based compensation expense.
* $0.7 million of incremental costs related to integrating the
Dangaard Telecom acquisition.
* $4.9 million tax impact of items described above.
(3) Adjustments for the twelve months ended December 31, 2007
primarily include:
* $8.7 million restructuring charges, consisting of a charge of
$7.1 million in connection with terminating Dangaard Telecom's
implementation of SAP enterprise resource planning and related
software and a $1.6 million charge in connection with
consolidating the Brightpoint and Dangaard operations in Germany.
* $10.2 million of non-cash amortization expense related to
intangible assets acquired in connection with the CellStar and
Dangaard Telecom transactions.
* $6.1 million of non-cash stock based compensation expense.
* $4.2 million of incremental costs related to integrating the
Dangaard Telecom and CellStar acquisitions and initial charges
taken in connection with other longer-term cost saving
initiatives.
* $25.5 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.
(4) Adjustments for the three and twelve months ended December 31,
2006 consist of pre-tax non-cash stock based compensation expense
of $1.9 million and $6.0 million, respectively.
BRIGHTPOINT, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share data)
December 31,
2007 2006
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 101,582 $ 54,130
Pledged cash 578 201
Accounts receivable (less
allowance for doubtful accounts
of $17,157 in 2007 and $4,926
in 2006) 751,146 228,186
Inventories 474,951 391,657
Contract financing receivable 3,092 20,161
Contract financing inventory -- 7,293
Other current assets 69,261 25,870
----------- -----------
Total current assets 1,400,610 727,498
Property and equipment, net 55,732 37,904
Goodwill 349,646 6,976
Other intangibles, net 135,431 1,243
Other assets 30,942 4,732
----------- -----------
Total assets $ 1,972,361 $ 778,353
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 664,484 $ 454,552
Accrued expenses 189,415 68,320
Contract financing payable 1,601 30,991
Current portion of long-term debt 19,332 --
Lines of credit and other
short-term borrowings 308 13,875
----------- -----------
Total current liabilities 875,140 567,738
Long-term liabilities:
Lines of credit, long-term 208,091 3,750
Long-term debt 233,122 --
Other long-term liabilities 54,425 12,037
----------- -----------
Total long-term liabilities 495,638 15,787
----------- -----------
Total liabilities 1,370,778 583,525
COMMITMENTS AND CONTINGENCIES
Minority interest 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;
88,418 issued in 2007 and
57,536 issued in 2006 884 575
Additional paid-in-capital 584,806 266,756
Treasury stock, at cost, 6,928
shares in 2007 and 6,891
shares in 2006 (58,695) (58,295)
Retained earnings (deficit) 29,467 (17,918)
Accumulated other
comprehensive income 44,303 3,710
----------- -----------
Total shareholders' equity 600,765 194,828
----------- -----------
Total liabilities and
shareholders' equity $ 1,972,361 $ 778,353
=========== ===========
BRIGHTPOINT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Twelve Months Ended
December 31,
--------------------------
2007 2006
--------------------------
(Unaudited)
Operating activities
Net income $ 47,394 $ 35,610
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation and amortization 24,747 12,234
Discontinued operations (675) 580
Pledged cash requirements (371) (15)
Non-cash compensation 6,104 6,005
Facility consolidation charge
(benefit) 8,661 (9)
Change in deferred taxes (25,625) (3,020)
Minority interest 347 --
Other non-cash 6,459 2,126
--------------------------
67,041 53,511
Changes in operating assets and
liabilities, net of effects from
acquisitions and divestitures:
Accounts receivable (123,195) (41,135)
Inventories 160,596 (258,070)
Other operating assets (7,156) (1,542)
Accounts payable and
accrued expenses (23,985) 197,319
--------------------------
Net cash provided by (used in)
operating activities 73,301 (49,917)
Investing activities
Capital expenditures (20,247) (20,779)
Acquisitions, net of cash acquired (68,902) (1,413)
Net cash provided by (used in)
contract financing arrangements (4,838) 6,960
Increase in other assets (5,047) (1,853)
--------------------------
Net cash used in investing
activities (99,034) (17,085)
Financing activities
Net proceeds from credit facilities 104,479 15,825
Repayments on debt assumed from
Dangaard Telecom (284,722) --
Borrowings of long-term debt 250,000 --
Repayments of long-term debt (4,726) --
Deferred financing costs paid (4,597) --
Purchase of treasury stock (400) (18,367)
Excess tax benefit from equity
based compensation 1,602 8,690
Proceeds from common stock
issuances under employee stock
option plans 4,129 5,760
--------------------------
Net cash provided by financing
activities 65,765 11,908
Effect of exchange rate changes on
cash and cash equivalents 7,420 3,171
--------------------------
Net increase (decrease) in cash and
cash equivalents 47,452 (51,923)
Cash and cash equivalents at
beginning of year 54,130 106,053
--------------------------
Cash and cash equivalents at end
of year $ 101,582 $ 54,130
==========================
Supplemental Information
(Amounts in thousands)
Earnings Before Interest, Taxes,
Depreciation and Amortization
("EBITDA")
Three Months Ended Twelve Months Ended
December 31, December 31,
----------------- -----------------
2007 2006 2007 2006
------- ------- ------- -------
Net income (1) $14,894 $ 9,737 $47,394 $35,610
Net interest expense (1) 8,694 130 18,010 545
Income taxes (1) 8,188 2,681 467 12,314
Depreciation and
amortization (1) 10,088 3,095 24,747 12,234
------- ------- ------- -------
EBITDA $41,864 $15,643 $90,618 $60,703
======= ======= ======= =======
(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 December 31, 2007 and 2006, and
September 30, 2007 were as follows:
Three Months Ended
-------------------------------------
December 31, December 31, September 30,
2007 2006 2007
----------- ----------- -----------
Days sales outstanding in
accounts receivable 33 25 40
Days inventory on-hand 27 59 34
Days payable outstanding (33) (62) (42)
----------- ----------- -----------
Cash Conversion Cycle Days 27 22 32
=========== =========== ===========
Our cash conversion cycle improved by approximately 3 days during the fourth quarter of 2007 as a result of changing to off-balance sheet presentation for sales of certain accounts receivable in accordance with U.S. GAAP. This improvement was almost completely offset by a late receipt from a large customer that experienced certain IT difficulties at the end of the quarter resulting in $62.2 million of anticipated payments being delayed into the first quarter. This $62.2 million payment was received on January 2, 2008.
Supplemental Information (continued)
(Amounts in thousands)
Return on Invested Capital ("ROIC")
The Company uses ROIC to measure the effectiveness of its use of
invested capital to generate profits. ROIC for the quarters and
trailing four quarters ended December 31, 2007 and 2006, and
September 30, 2007, was as follows:
Three Months Ended
-------------------------------------
December 31, December 31,September 30,
2007 2006 2007
----------- ----------- -----------
Operating income after taxes:
Operating income from
continuing operations $ 30,725 $ 12,002 $ 22,615
Plus: Restructuring 8,495 -- 166
Less: estimated income
taxes (1) (14,242) (2,516) (4,216)
----------- ----------- -----------
Operating income after
taxes $ 24,978 $ 9,486 $ 18,565
=========== =========== ===========
Invested Capital:
Debt $ 460,853 $ 17,625 $ 377,289
Shareholders' equity 600,765 194,828 599,880
----------- ----------- -----------
Invested capital $ 1,061,618 $ 212,453 $ 977,169
=========== =========== ===========
Average invested
capital (2) $ 1,019,392 $ 194,636 $ 650,515
ROIC (3) 10% 19% 11%
Trailing Four Quarters Ended
-------------------------------------
December 31, December 31,September 30,
2007 2006 2007
----------- ----------- -----------
Operating income after taxes:
Operating income from
continuing operations $ 65,913 $ 48,371 $ 47,190
Plus: Restructuring 8,661 (9) 166
Less: estimated income
taxes (1) (2,844) (12,254) 8,882
----------- ----------- -----------
Operating income after
taxes $ 71,730 $ 36,108 $ 56,238
=========== =========== ===========
Invested Capital:
Debt $ 460,853 $ 17,625 $ 377,289
Shareholders' equity 600,765 194,828 599,880
----------- ----------- -----------
Invested capital $ 1,061,618 $ 212,453 $ 977,169
=========== =========== ===========
Average invested
capital (2) $ 573,913 $ 170,480 $ 396,954
ROIC (3) 12% 21% 14%
(1) Estimated income taxes were calculated by multiplying the sum of
operating income from continuing operations and the facility
consolidation charge by the respective periods' effective tax
rate.
(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 was primarily due to the increase in average invested capital compared to the same periods in the prior year. Average invested capital was negatively impacted for the three months and trailing four quarters ended December 31, 2007 and September 30, 2007 by an increase in invested capital to fund the acquisitions of Dangaard Telecom and CellStar including $318.5 million of acquired goodwill. In addition, operating income after taxes was negatively impacted for the three months ended December 31, 2007 by $5.7 million (pre-tax) of non-cash amortization expense related to intangible assets acquired in connection the Dangaard Telecom and CellStar transactions.
ROIC was positively impacted for the trailing four quarters ended December 31, 2007 compared to the same periods in the prior year by the $2.1 million tax benefit resulting from a reduction in the statutory tax rate in Germany discussed above and the $14.1 million tax benefit related to the reversal of valuation allowances on certain foreign tax credits during the second quarter of 2007.
Our overall ROIC may continue to decrease, and we currently estimate that it could go as low as 7-9%. We anticipate that our ROIC will trend upwards from this low point as we complete the integration of Dangaard Telecom, obtain anticipated synergies, obtain combined balance sheet improvements and reduce our debt.