INDIANAPOLIS, Feb. 9, 2009 (GLOBE NEWSWIRE) -- Brightpoint, Inc. (Nasdaq:CELL) reported its financial results for the fourth quarter and year ended December 31, 2008. Unless otherwise noted, amounts pertain to the fourth quarter of 2008.
FOR THE FOURTH QUARTER OF 2008:
Revenue was $1.0 billion for the fourth quarter of 2008, a decrease of 36% compared to the fourth quarter of 2007, due to a decrease in both wireless devices handled and average selling price brought on by a global economic slowdown. Revenue decreased 15% compared to the third quarter of 2008 due to a shift in mix of business from distribution to logistic services.
Loss from continuing operations was $344.4 million or $4.24 per diluted share for the fourth quarter of 2008 compared to income from continuing operations of $14.1 million or $0.17 per diluted share for the fourth quarter of 2007 and $6.0 million or $0.07 per diluted share for the third quarter of 2008. Loss from continuing operations for the fourth quarter of 2008 includes a $325.9 million non-cash goodwill impairment charge. Management performed its annual goodwill impairment test in the fourth quarter and concluded that the carrying amount of the goodwill allocated to its Europe, Middle East, and Africa (EMEA) reporting unit was impaired. This goodwill primarily related to the acquisition of Dangaard Telecom in 2007. The Board of Directors approved the impairment charge in February 2009.
Adjusted income from continuing operations (non-GAAP) was $7.7 million or $0.09 per diluted share compared to $25.7 million or $0.31 per diluted share for the fourth quarter of 2007 and $10.9 million or $0.13 per diluted share for the third quarter of 2008. Please see the disclosure below regarding adjusted income from continuing operations. Adjustments to income from continuing operations for the fourth quarter of 2008 include:
* A $325.9 million (pre-tax) goodwill impairment charge related to
the goodwill allocated to the EMEA reporting unit. The goodwill
related primarily to the 2007 acquisition of Dangaard Telecom.
* A $6.4 million restructuring charge (pre-tax) consisting
primarily of a $3.3 million charge related to the termination of
the operating lease for our European headquarters, $1.7 million
of restructuring charges associated with the closure of our Reno,
Nevada distribution facility in December, $0.6 million of
severance costs for other employees of our North America
operations, and $0.8 million of restructuring charges related to
the previously announced realignment of our European operations.
* $3.9 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.
* $14.2 million of income tax expense adjustments. Adjustments to
income tax expense include an $18.0 million charge related to
valuation allowances on tax assets that are no longer expected to
be utilized, partially offset by $3.9 million related to the tax
benefit of restructuring charge, amortization expense related to
acquired intangible assets, and non-cash stock based compensation
expense. The adjusted effective tax rate (non-GAAP) for the
fourth quarter of 2008 was 43%.
Total debt was $176.4 million at December 31, 2008, compared to $185.5 million at September 30, 2008 and $460.9 million at December 31, 2007. Total liquidity (unrestricted cash and unused borrowing availability) was $401.3 million at December 31, 2008 compared to $455.5 million at September 30, 2008 and $232.0 million at December 31, 2007.
Cash used in operating activities was $40.1 million for the three months ended December 31, 2008 and cash provided by operating activities was $272.8 million for the year ended December 31, 2008. Cash provided by operating activities as well as cash on hand were used to pay down borrowings by $279.5 million since December 31, 2007.
EBITDA was $13.8 million for the fourth quarter of 2008 compared to $41.9 million for the fourth quarter of 2007 and $24.4 million for the third quarter of 2008.
We handled 22.0 million wireless devices for the fourth quarter of 2008 compared to 27.0 million for the fourth quarter of 2007 and 20.3 million for the third quarter of 2008, a decrease of approximately 18% from the fourth quarter of 2007 and an increase of 8% from the third quarter of 2008.
Gross margin was 7.9% for the fourth quarter of 2008, an increase of 0.6 percentage points from the fourth quarter of 2007 and an increase of 0.7 percentage points from the third quarter of 2008. The increase in gross margin was primarily due to a higher mix of logistic services revenue compared to prior periods.
SG&A expenses were $60.2 million for the fourth quarter of 2008, a decrease of $12.8 million or 18% compared to the fourth quarter of 2007 and a decrease of $3.3 million or 5% compared to the third quarter of 2008. SG&A expenses decreased primarily due to the strengthening of the U.S. Dollar during the fourth quarter. SG&A expenses as a percent of revenue were 5.9% for the fourth quarter of 2008 compared to 4.5% for the fourth quarter of 2007 and 5.2% for the third quarter of 2008.
Interest expense, net was $4.3 million for the fourth quarter of 2008 compared to $8.5 million for the fourth quarter of 2007 and $4.4 million for the third quarter of 2008. Interest expense, net decreased because of the positive impact of our debt reduction initiatives.
Income tax expense was $20.1 million for the fourth quarter of 2008 compared to $8.1 million for the fourth quarter of 2007. Income tax expense for the three months and year ended December 31, 2008 includes an $18.0 million charge related to valuation allowances on certain tax assets that are no longer expected to be utilized.
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, 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 attached Supplemental Information for a reconciliation of EBITDA.
"2009 will be the year of blocking and tackling at Brightpoint," said Robert J. Laikin, Brightpoint's Chairman of the Board and Chief Executive officer. "Given the turbulent times ahead, we are focused on the following four action items: 1) reducing the debt on our balance sheet, 2) reducing spending on a global basis, 3) generating positive cash flow, and 4) ramping up the recently awarded deals and winning new business globally. I firmly believe that the successful performance in these focus areas will reduce our overall risk profile, enhance our balance sheet and build long term shareholder value."
"I am pleased that we were able to meet our aggressive year-end debt target of less than $200 million and that we achieved our previously announced spending reductions for the second half of 2008," said Tony Boor, Brightpoint's Chief Financial Officer. "Given the uncertainty caused by the turmoil in the global economy, our focus in 2009 will be on the things within our control: managing our balance sheet, reducing our debt, and controlling spending."
2009 SPENDING AND DEBT REDUCTION PLAN
Please refer to our separate press release dated February 9, 2009 announcing that we have initiated an additional 2009 spending and debt reduction plan. This plan is expected to reduce planned spending in 2009 by $40 to $45 million and reduce average daily debt by approximately $100 million to $150 million in 2009. The highlights of this plan are:
* An elimination of senior executive officers' cash incentive
compensation opportunities
* A reduction of staff cash incentive compensation opportunities
* A general pay freeze
* A general hiring freeze
* A global workforce reduction of 220 positions
* Other discretionary spending reductions
* A reduction of average daily debt
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 $4.1 million in the fourth quarter of 2008 related to these initiatives, which are included as "restructuring charge" in the Consolidated Statement of Operations for the three months ended December 31, 2008. As of the end of 2008, we fully realized the previously announced spending reductions of $12 to $14 million during the second half of 2008.
In addition, to the 2009 Spending and Debt Reduction Plan, the Company will close its operations in Poland and Turkey. The Company expects to record charges related to closing these operations of approximately $2.0 to $3.0 million in the first quarter of 2009.
GOODWILL IMPAIRMENT CHARGE
At September 30, 2008, we had $389.0 million of goodwill recorded in conjunction with past business combinations. Goodwill is subject to annual reviews for impairment based on a two-step test in accordance with Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets." We perform our annual goodwill impairment test in the fourth quarter of each year.
During the fourth quarter of 2008, there were severe disruptions in the credit markets and reductions in global economic activity which had significant adverse impacts on stock markets and on the outlook for the wireless industry, both of which contributed to a significant decline in Brightpoint's stock price and corresponding market capitalization. The result of our annual goodwill impairment test was that the carrying amount of the net assets allocated to the Europe, Middle East, and Africa (EMEA) reporting unit exceeded the fair market value. The entire amount of goodwill allocated to that reporting unit was impaired, which resulted in an impairment charge of $325.9 million, which was approved by our Board in February 2009. The goodwill allocated to the EMEA reporting unit is primarily related to the acquisition of Dangaard Telecom in July 2007. The impairment charge resulted from factors impacted by current market conditions including: 1) lower market valuation multiples for similar assets; 2) higher discount rates resulting from turmoil in the credit and equity markets; and 3) cash flow forecasts for the EMEA markets in which we operate. The impairment will not result in any current or future cash expenditures.
The Company completed its impairment analysis for the Americas and Asia-Pacific reporting units in the fourth quarter of 2008 and determined that the goodwill allocated to these reporting units was not impaired. A 10% change in the anticipated cash flow forecasts for the Americas and Asia-Pacific reporting units would not have resulted in any impairment charge.
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" requires that long-lived assets be tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The Company tested the long-lived assets that are part of the EMEA reporting unit for recoverability in accordance with SFAS No. 144 and determined that the carrying amount of the these assets are recoverable. The implementation of the 2009 Spending and Debt Reduction Plan might include the exit of lower profitability programs that do not meet our requirements for returns on invested capital. Exiting these programs might result in impairment charges for the related long-lived assets.
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 during the third quarter of 2008. Please see Brightpoint Inc.'s website at www.Brightpoint.com for quarterly statements of operations for all periods that have been reclassified.
SUMMARY FINANCIAL RESULTS
(Amounts in thousands, except per share data)
Three Months Ended Year Ended
---------------------- ----------------------
December 31, December 31,
2008 2007 2008 2007
---------- ---------- ---------- ----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Wireless devices
handled 21,984 26,958 84,010 82,942
Revenue $1,026,081 $1,606,847 $4,640,478 $4,236,283
Gross profit $ 80,807 $ 118,000 $ 346,723 $ 269,374
Gross margin 7.9% 7.3% 7.5% 6.4%
Selling, general and
administrative
expenses $ 60,157 $ 72,935 $ 266,201 $ 184,979
Operating income
(loss) from
continuing
operations $(315,775) $ 30,678 $(277,575) $ 65,206
Income (loss) from
continuing
operations $(344,372) $ 14,081 $(333,431) $ 46,416
Net income (loss) $(346,037) $ 14,893 $(342,114) $ 47,394
Diluted per share:
Income (loss) from
continuing
operations $ (4.24) $ 0.17 $ (4.09) $ 0.73
Net income (loss) $ (4.26) $ 0.18 $ (4.20) $ 0.75
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 2008, Brightpoint handled approximately 84 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 2008 Brightpoint generated revenue of $4.6 billion. 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. 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) the current economic downturn could cause a severe disruption in our operations; (ii) fluctuations in regional demand patterns and economic factors could harm our operations; (iii) our debt facilities could prevent us from borrowing additional funds, if needed; (iv) collections of our accounts receivable; (v) our reliance on suppliers to provide trade credit facilities to adequately fund our on-going operations and product purchases; (vi) a significant percentage of our revenues are generated outside of the United States in countries that may have volatile currencies or other risks; (vii) the loss or reduction in orders from principal customers or a reduction in the prices we are able to charge these customers could cause our revenues to decline and impair our cash flows; (viii) the impact that seasonality may have on our business and results; (ix) we buy a significant amount of our products from a limited number of suppliers, and they may not provide us with competitive products at reasonable prices when we need them in the future; (x) our business could be harmed by consolidation of mobile operators; (xi) we make significant investments in the technology used in our business and rely on that technology to function effectively without interruptions; (xii) 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; (xiii) our future operating results will depend on our ability to continue to increase volumes and maintain margins; (xiv) our ability to expand and implement our future growth strategy, including acquisitions; (xv) uncertainty regarding whether wireless equipment manufacturers and wireless network operators will continue to outsource aspects of their business to us; (xvi) our reliance upon third parties to manufacture products which we distribute and reliance upon their quality control procedures; (xvii) rapid technological changes in the wireless communications and data industry; (xviii) effect of natural disasters, epidemics, hostilities or terrorist attacks on our operations; (xix) intense industry competition; (xx) our ability to manage and sustain future growth at our historical or current rates; (xxi) our ability to continue to enter into relationships and financing that may provide us with minimal returns or losses on our investments; (xxii) our ability to attract and retain qualified management and other personnel, cost of complying with labor agreements and high rate of personnel turnover; (xxiii) protecting our proprietary information; (xxiv) our obligations under certain debt, lease and other contractual arrangements; (xxv) our dependence on our computer and communications systems; (xxvi) uncertainty regarding future volatility in our Common Stock price; (xxvii) potential dilution to existing shareholders from the issuance of securities under our long-term incentive plans; (xxviii) existence of anti-takeover measures; (xxix) acquisition related accounting impairment and amortization. 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
December 31, 2008 (1)
US GAAP Non-GAAP
As Adjustments As
Reported (2) Adjusted
-------------------------------------
Revenue
Distribution revenue $ 919,108 $ 919,108
Logistic services revenue 106,973 106,973
-------------------------------------
Total revenue 1,026,081 1,026,081
Cost of revenue
Cost of distribution
revenue 881,614 881,614
Cost of logistic
services revenue 63,660 63,660
-------------------------------------
Total cost of revenue 945,274 945,274
-------------------------------------
Gross profit 80,807 80,807
Selling, general and
administrative expenses 60,157 $ (1,566) 58,591
Amortization 4,057 (3,936) 121
Goodwill impairment charge 325,947 (325,947) --
Restructuring charge 6,421 (6,421) --
-------------------------------------
Operating income (loss)
from continuing operations (315,775) 337,870 22,095
Interest, net 4,260 4,260
Other (income) expense 4,237 4,237
-------------------------------------
Income (loss) from
continuing operations
before income taxes (324,272) 337,870 13,598
Income tax expense 20,104 (14,206) 5,898
-------------------------------------
Income (loss) from
continuing operations
before minority interest (344,376) 352,076 7,700
Minority interest (4) (4)
-------------------------------------
Income (loss)from
continuing operations (344,372) $ 352,076 $ 7,704
=======================
Discontinued operations,
net of income taxes:
Gain (loss) from
discontinued
operations (2,254)
Gain on disposal of
discontinued
operations 589
----------
Total discontinued
operations, net of
income taxes (1,665)
----------
Net income (loss) $(346,037)
==========
Earnings per share - basic:
Income (loss) from
continuing operations $ (4.36) $ 0.10
==========
Discontinued
operations, net of
income taxes (0.02)
----------
Net income (loss) $ (4.38)
==========
Earnings per share - diluted:
Income (loss) from
continuing operations $ (4.24) $ 0.09
==========
Discontinued operations,
net of income taxes (0.02)
----------
Net income (loss) $ (4.26)
==========
Weighted average common
shares outstanding:
Basic 78,905 78,905
========== ==========
Diluted 81,222 672 81,894
=====================================
Three Months Ended
December 31, 2007 (1)
US GAAP Non-GAAP
As Adjustments As
Reported (3) Adjusted
-------------------------------------
Revenue
Distribution revenue $1,500,163 $1,500,163
Logistic services revenue 106,684 106,684
-------------------------------------
Total revenue 1,606,847 1,606,847
Cost of revenue
Cost of distribution
revenue 1,422,869 1,422,869
Cost of logistic
services revenue 65,978 65,978
-------------------------------------
Total cost of revenue 1,488,847 1,488,847
-------------------------------------
Gross profit 118,000 118,000
Selling, general and
administrative expenses 72,935 $ (2,298) 70,637
Amortization 5,892 (5,714) 178
Goodwill impairment charge -- --
Restructuring charge 8,495 (8,495) --
-------------------------------------
Operating income (loss)
from continuing operations 30,678 16,507 47,185
Interest, net 8,471 8,471
Other (income) expense (154) (154)
-------------------------------------
Income (loss) from
continuing operations
before income taxes 22,361 16,507 38,868
Income tax expense 8,139 4,938 13,077
-------------------------------------
Income (loss) from
continuing operations
before minority interest 14,222 11,569 25,791
Minority interest 141 141
-------------------------------------
Income (loss)from
continuing operations 14,081 $ 11,569 $ 25,650
=======================
Discontinued operations,
net of income taxes:
Gain (loss) from
discontinued
operations 81
Gain on disposal of
discontinued
operations 731
----------
Total discontinued
operations, net of
income taxes 812
----------
Net income (loss) $ 14,893
==========
Earnings per share - basic:
Income (loss) from
continuing operations $ 0.18 $ 0.33
==========
Discontinued
operations, net of
income taxes 0.01
----------
Net income (loss) $ 0.19
==========
Earnings per share - diluted:
Income (loss) from
continuing operations $ 0.17 $ 0.31
==========
Discontinued operations,
net of income taxes 0.01
----------
Net income (loss) $ 0.18
==========
Weighted average common
shares outstanding:
Basic 77,103 77,103
========== ==========
Diluted 81,291 790 82,081
=====================================
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)
Twelve Months Ended
December 31, 2008 (1)
US GAAP Non-GAAP
As Adjustments As
Reported (4) Adjusted
-------------------------------------
Revenue
Distribution revenue $4,211,811 $4,211,811
Logistic services revenue 428,667 428,667
-------------------------------------
Total revenue 4,640,478 4,640,478
Cost of revenue
Cost of distribution
revenue 4,027,475 4,027,475
Cost of logistic
services revenue 266,280 266,280
-------------------------------------
Total cost of revenue 4,293,755 4,293,755
-------------------------------------
Gross profit 346,723 346,723
Selling, general and
administrative expenses 266,201 $ (6,557) 259,644
Amortization 18,246 (17,708) 538
Goodwill impairment charge 325,947 (325,947) --
Restructuring charge 13,904 (13,904) --
-------------------------------------
Operating income (loss)
from continuing operations (277,575) 364,116 86,541
Interest, net 22,876 22,876
Other expense 7,045 7,045
-------------------------------------
Income (loss) from
continuing operations
before income taxes (307,496) 364,116 56,620
Income tax expense 25,573 (6,312) 19,261
-------------------------------------
Income (loss) from
continuing operations
before minority interest (333,069) 370,428 37,359
Minority interest 362 362
-------------------------------------
Income (loss) from
continuing operations (333,431) $ 370,428 $ 36,997
=======================
Discontinued operations,
net of income taxes:
Gain (loss) from
discontinued operations (9,267)
Gain on disposal of
discontinued operations 584
----------
Total discontinued
operations, net of
income taxes (8,683)
----------
Net income (loss) $(342,114)
==========
Earnings per share - basic:
Income (loss) from
continuing operations $ (4.26) $ 0.47
==========
Discontinued operations,
net of income taxes (0.11)
----------
Net income (loss) $ (4.37)
==========
Earnings per share - diluted:
Income (loss) from
continuing operations $ (4.09) $ 0.45
==========
Discontinued operations,
net of income taxes (0.11)
----------
Net income (loss) $ (4.20)
==========
Weighted average common
shares outstanding:
Basic 78,202 78,202
========== ==========
Diluted 81,509 876 82,385
=====================================
Twelve Months Ended
December 31, 2007 (1)
US GAAP Non-GAAP
As Adjustments As
Reported (5) Adjusted
-------------------------------------
Revenue
Distribution revenue $3,878,103 $3,878,103
Logistic services revenue 358,180 358,180
-------------------------------------
Total revenue 4,236,283 4,236,283
Cost of revenue
Cost of distribution
revenue 3,712,067 3,712,067
Cost of logistic
services revenue 254,842 254,842
-------------------------------------
Total cost of revenue 3,966,909 3,966,909
-------------------------------------
Gross profit 269,374 269,374
Selling, general and
administrative expenses 184,979 $ (10,009) 174,970
Amortization 10,528 (10,165) 363
Goodwill impairment charge -- -- --
Restructuring charge 8,661 (8,661) --
-------------------------------------
Operating income (loss)
from continuing operations 65,206 28,835 94,041
Interest, net 17,442 17,442
Other expense 632 (256) 376
-------------------------------------
Income (loss) from
continuing operations
before income taxes 47,132 29,091 76,223
Income tax expense 369 25,514 25,883
-------------------------------------
Income (loss) from
continuing operations
before minority interest 46,763 3,577 50,340
Minority interest 347 347
-------------------------------------
Income (loss) from
continuing operations 46,416 $ 3,577 $ 49,993
=======================
Discontinued operations,
net of income taxes:
Gain (loss) from
discontinued operations 234
Gain on disposal of
discontinued operations 744
----------
Total discontinued
operations, net of
income taxes 978
----------
Net income (loss) $ 47,394
==========
Earnings per share - basic:
Income (loss) from
continuing operations $ 0.76 $ 0.82
==========
Discontinued operations,
net of income taxes 0.02
----------
Net income (loss) $ 0.78
==========
Earnings per share - diluted:
Income (loss) from
continuing operations $ 0.73 $ 0.77
==========
Discontinued operations,
net of income taxes 0.02
----------
Net income (loss) $ 0.75
==========
Weighted average common
shares outstanding:
Basic 61,174 61,174
========== ==========
Diluted 63,571 987 64,558
=====================================
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 goodwill
impairment charges and 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 December 31, 2008 include:
* The $325.9 million goodwill impairment charge discussed
above.
* A $6.4 million restructuring charge consisting of a $3.3
million charge related to the termination of the operating
lease for our European headquarters, $1.7 million of
restructuring charges associated with the closure of our
Reno, Nevada distribution facility in December, $0.6 million
of severance costs for other employees of our North America
operations, and $0.8 million of restructuring charges
related to the previously announced realignment of our
European operations.
* $3.9 million of non-cash amortization expense related to
acquired intangible assets.
* $1.6 million of non-cash stock based compensation expense.
* $14.2 million of income tax adjustments, which include the
tax impact of the items described above, a $10.9 million tax
charge related to valuation allowances on certain foreign
tax credit carryforwards that are no longer expected to be
utilized and a $7.2 million tax charge related to valuation
allowances on certain net operating loss carryforwards that
are no longer expected to be utilized. The adjusted
effective tax rate (non-GAAP) for the fourth quarter of 2008
was 43%.
(3) Adjustments for the three months ended December 31, 2007
include:
* An $8.5 million restructuring charge, consisting 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 Telecom
operations in Germany.
* $5.7 million of non-cash amortization expense related to
acquired intangible assets.
* $1.6 million of non-cash stock based compensation expense.
* $0.7 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.
* $4.9 million tax impact of items described above.
(4) Adjustments for the year ended December 31, 2008 include:
* The $325.9 million goodwill impairment charge discussed
above.
* A $13.9 million restructuring charge 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, a
$3.3 million charge related to the termination of the
operating lease for our European headquarters in the fourth
quarter, $1.7 million of restructuring charges associated
with the closure of our Reno, Nevada distribution facility
in the fourth quarter, $0.6 million of severance costs for
other employees of our North America operations in the
fourth quarter, and $1.8 million of other charges in
connection with the previously announced realignment of our
European operations.
* $17.7 million of non-cash amortization expense related to
acquired intangible assets.
* $6.6 million of non-cash stock based compensation expense.
* $6.3 million of income tax adjustments, which include the
tax impact of the items described above, a $10.9 million tax
charge related to valuation allowances on certain foreign
tax credit carryforwards that are no longer expected to be
utilized, and a $7.2 million tax charge related to valuation
allowances on certain net operating loss carryforwards that
are no longer expected to be utilized. The adjusted
effective tax rate (non-GAAP) for the year ended December
31, 2008 was 34%.
(5) Adjustments for the year ended December 31, 2007 include:
* An $8.7 million restructuring charge, consisting 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 Telecom
operations in Germany.
* $10.2 million of non-cash amortization expense related to
acquired intangible assets.
* $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 longer-term other 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.
BRIGHTPOINT, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share data)
December 31,
2008 2007
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 57,226 $ 102,160
Accounts receivable (less allowance
for doubtful accounts of $11,217 in
2008 and $17,157 in 2007) 499,541 754,238
Inventories 290,243 474,951
Other current assets 61,392 69,261
----------- -----------
Total current assets 908,402 1,400,610
Property and equipment, net 56,463 55,732
Goodwill 51,439 349,646
Other intangibles, net 107,286 135,431
Other assets 22,770 30,942
----------- -----------
Total assets $ 1,146,360 $ 1,972,361
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 534,906 $ 666,085
Accrued expenses 137,957 189,415
Current portion of long-term debt -- 19,332
Lines of credit and other short-term
borrowings 798 --
----------- -----------
Total current liabilities 673,661 874,832
Long-term liabilities:
Lines of credit, long-term 1,501 208,399
Long-term debt 174,106 233,122
Other long-term liabilities 46,528 54,425
----------- -----------
Total long-term liabilities 222,135 495,946
----------- -----------
Total liabilities 895,796 1,370,778
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; 88,730
issued in 2008 and 88,418 issued
in 2007 887 884
Additional paid-in-capital 625,415 584,806
Treasury stock, at cost, 7,063 shares
in 2008 and 6,930 shares in 2007 (59,983) (58,695)
Retained earnings (deficit) (312,648) 29,467
Accumulated other comprehensive income
(loss) (3,107) 44,303
----------- -----------
Total shareholders' equity 250,564 600,765
----------- -----------
Total liabilities and shareholders'
equity $ 1,146,360 $ 1,972,361
=========== ===========
BRIGHTPOINT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Year Ended
December 31,
---------------------
2008 2007
---------------------
Operating activities
Net (loss) income $(342,114) $ 47,394
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 36,734 24,747
Non-cash compensation 6,557 6,104
Restructuring charge 13,904 8,661
Goodwill impairment charge 325,947 --
Change in deferred taxes 1,874 (25,624)
Minority interest 362 347
Other non-cash (54) 6,460
Changes in operating assets and liabilities,
net of effects from acquisitions and
divestitures:
Accounts receivable 200,042 (123,195)
Inventories 161,573 160,596
Other operating assets (9,929) (7,156)
Accounts payable and accrued expenses (122,090) (24,656)
---------------------
Net cash provided by operating activities 272,806 73,678
Investing activities
Capital expenditures (21,642) (20,247)
Acquisitions, net of cash acquired (5,877) (68,902)
Decrease (increase) in other assets 2,008 (9,885)
---------------------
Net cash used in investing activities (25,511) (99,034)
Financing activities
Net proceeds from (repayments on) credit
facilities (205,894) 168,493
Repayments on debt assumed from Dangaard
Telecom -- (348,736)
Proceeds from Global Term Loans -- 250,000
Repayments on Global Term Loans (73,616) (4,726)
Deferred financing costs paid (330) (4,597)
Purchase of treasury stock (1,288) (400)
Excess tax benefit from equity based
compensation 76 1,602
Proceeds from common stock issuances under
employee stock option plans 39 4,129
---------------------
Net cash provided by (used in) financing
activities (281,013) 65,765
Effect of exchange rate changes on cash and
cash equivalents (11,216) 7,420
---------------------
Net increase (decrease) in cash and cash
equivalents (44,934) 47,829
Cash and cash equivalents at beginning of year 102,160 54,331
---------------------
Cash and cash equivalents at end of year $ 57,226 $ 102,160
=====================
Supplemental Information (Amounts in thousands)
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")
Three Months Ended Year Ended
December 31, December 31,
--------------------- ---------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Net income (loss)(1) $(346,037) $ 14,893 $(342,114) $ 47,394
Net interest (income)
expense(1) 4,256 8,694 23,171 18,010
Income taxes(1) 21,114 8,188 24,457 467
Depreciation and
amortization(1) 334,432 10,089 362,680 24,747
--------- --------- --------- ---------
EBITDA $ 13,765 $ 41,864 $ 68,194 $ 90,618
========= ========= ========= =========
(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, 2008 and 2007, and September 30, 2008 were as follows:
Three Months Ended
----------------------------------
Dec. 31, Dec. 31, Sept. 30,
2008 2007 2008
--------- --------- ---------
Days sales outstanding in
accounts receivable 32 33 28
Days inventory on-hand 26 28 24
Days payable outstanding (41) (33) (42)
--------- --------- ---------
Cash Conversion Cycle Days 17 28 10
========= ========= =========
Please see the Brightpoint website at www.Brightpoint.com for a
detailed calculation of cash conversion cycle days for the three
months ended December 31, 2008.
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 December 31, 2008 and 2007, and
September 30, 2008, was as follows:
Three Months Ended
----------------------------------
Dec. 31, Dec. 31, Sept. 30,
2008 2007 2008
--------- ---------- ---------
Operating income after taxes
(non-GAAP):
Operating income (loss) from
continuing operations $(315,775) $ 30,678 $ 17,925
Restructuring charge 6,421 8,495 901
Goodwill impairment charge 325,947 -- --
Less: estimated income taxes(1) (5,808) (13,711) (6,589)
--------- ---------- ---------
Operating income after taxes
(non-GAAP) $ 10,785 $ 25,462 $ 12,237
========= ========== =========
Invested Capital:
Debt $ 176,405 $ 460,852 $ 185,483
Shareholders' equity 250,564 600,764 623,640
--------- ---------- ---------
Invested capital $ 426,969 $1,061,616 $ 809,123
========= ========== =========
Average invested capital(2) $ 618,047 $1,019,392 $ 863,922
ROIC(3) 7% 10% 6%
Trailing Four Quarters Ended
----------------------------------
Dec. 31, Dec, 31, Sept. 30,
2008 2007 2008
--------- ---------- ---------
Operating income after taxes
(non-GAAP):
Operating income (loss) from
continuing operations $(277,575) $ 65,206 $ 68,880
Restructuring charge 13,904 8,661 15,979
Goodwill impairment charge 325,947 -- --
Less: estimated income taxes(1) (21,797) (25,853) (29,701)
--------- ---------- ---------
Operating income after taxes
(non-GAAP) $ 40,479 $ 48,013 $ 55,158
========= ========== =========
Invested Capital:
Debt $ 176,405 $ 460,852 $ 185,483
Shareholders' equity 250,564 600,764 623,640
--------- ---------- ---------
Invested capital $ 426,969 $1,061,616 $ 809,123
========= ========== =========
Average invested capital(2) $ 846,636 $ 573,913 $ 956,676
ROIC(3) 5% 8% 6%
(1) Estimated income taxes were calculated by multiplying the sum of
operating income from continuing operations, the restructuring
charge and the goodwill impairment charge by an effective tax
rate of 35%, which represents an estimated, blended statutory tax
rate for the markets in which we operate.
(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 trailing four quarters ended December 31,2008 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. Our average invested capital will be favorably impacted in future quarters due to the goodwill impairment charge recorded in the fourth quarter of 2008.
Return on Tangible Capital ("ROTC")
Management uses 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, goodwill impairment charge 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, and intangible assets, net of current liabilities excluding short term borrowings. The details of this measurement are outlined below.
Three Months Ended
----------------------------------
Dec. 31, Dec. 31, Sept. 30,
2008 2007 2008
---------- ---------- ----------
Operating income before
amortization, goodwill
impairment charge, and
restructuring charges
(non-GAAP):
Operating income (loss) from
continuing operations $(315,775) $ 30,678 $ 17,925
Plus: amortization expense 4,057 5,892 4,647
Plus: goodwill impairment charge 325,947 -- --
Plus: restructuring charge 6,421 8,495 901
---------- ---------- ----------
Operating income before
amortization, goodwill
impairment charge, and
restructuring charges
(non-GAAP): $ 20,650 $ 45,065 $ 23,473
========== ========== ==========
Tangible capital:
Total assets $1,146,360 $1,972,361 $1,625,821
Less: cash and cash equivalents 56,632 101,582 100,670
Less: short term investments -- 8,498 --
Less: goodwill 51,439 349,646 389,005
Less: other intangibles, net 107,286 135,431 118,619
---------- ---------- ----------
Net tangible assets $ 931,003 $1,377,204 $1,017,527
Total current liabilities 672,863 855,500 762,490
Less: current portion of
long-term debt -- 19,332 1,190
Less: lines of credit and
other short term borrowings 798 -- 13
---------- ---------- ----------
Net current liabilities $ 672,065 $ 836,168 $ 761,287
---------- ---------- ----------
Net tangible capital $ 258,938 $ 541,036 $ 256,240
========== ========== ==========
Average tangible capital (1) $ 257,589 $ 553,532 $ 294,146
ROTC (2) 32% 33% 32%
Trailing Four Quarters
----------------------------------
Dec. 31, Dec. 31, Sept. 30,
2008 2007 2008
---------- ---------- ----------
Operating income before
amortization, goodwill
impairment charge, and
restructuring charges
(non-GAAP):
Operating income (loss) from
continuing operations $(277,575) $ 65,206 $ 68,880
Plus: amortization expense 18,246 10,528 20,081
Plus: goodwill impairment charge 325,947 -- --
Plus: restructuring charge 13,904 8,661 15,979
---------- ---------- ----------
Operating income before
amortization, goodwill
impairment charge, and
restructuring charges
(non-GAAP): $ 80,522 $ 84,395 $ 104,940
========== ========== ==========
Tangible capital:
Total assets $1,146,360 $1,972,361 $1,625,821
Less: cash and cash equivalents 56,632 101,582 100,670
Less: short term investments -- 8,498 --
Less: goodwill 51,439 349,646 389,005
Less: other intangibles, net 107,286 135,431 118,619
---------- ---------- ----------
Net tangible assets $ 931,003 $1,377,204 $1,017,527
Total current liabilities 672,863 855,500 762,490
Less: current portion of
long-term debt -- 19,332 1,190
Less: lines of credit and
other short term borrowings 798 -- 13
---------- ---------- ----------
Net current liabilities $ 672,065 $ 836,168 $ 761,287
---------- ---------- ----------
Net tangible capital $ 258,938 $ 541,036 $ 256,240
========== ========== ==========
Average tangible capital (1) $ 376,010 $ 343,651 $ 437,428
ROTC (2) 21% 25% 24%
(1) Average tangible 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 decreased for the three months and trailing four quarters ended December 31, 2008 compared to the same period in the prior year primarily as a result of lower operating income before amortization, goodwill impairment charge and restructuring charges.
We anticipate improving our trailing four quarter ROTC to a range of 35%-40% as we increase operating income and better employ tangible capital.