INDIANAPOLIS, May 7, 2009 (GLOBE NEWSWIRE) -- Brightpoint, Inc. (Nasdaq:CELL) announced today the following update on its 2009 Spending and Debt Reduction Plan previously announced on February 9, 2009:
2009 SPENDING AND DEBT REDUCTION PLAN UPDATE
On February 9, 2009, the Company announced a plan to reduce forecasted spending for the year by approximately $40 to $45 million. This plan is comprised of $12 to $14 million of cost avoidance and $28 to $31 million of spending reductions. Simultaneously, the Company announced a plan to reduce average daily debt by approximately $100 to $150 million in 2009. The spending reduction measures included, among other things, a substantial workforce reduction of at least 220 positions, or approximately 7% of the Company's workforce. The majority of the foregoing reductions in spending are reflected in the Company's 2009 first quarter results of operations as a reduction of selling, general, and administrative expenses.
Based on our progress through the first quarter of 2009, we believe that we are on track to realize the previously stated spending and cost avoidance targets as well as our debt reduction targets for 2009. For the first quarter of 2009 selling general and administrative (SG&A) expenses were $52.5 million, which represents a decrease of $6.8 million (12%) from the fourth quarter of 2008. This sequential decrease in SG&A is substantially all related to the previously announced spending reduction and cost avoidance initiatives. Average daily debt outstanding for the first quarter of 2009 was $216.0 million as compared to $333.0 million for the fourth quarter of 2008 and $513.0 million for the first quarter of 2008. At the end of April 2009, our total outstanding term debt was approximately $100 million.
Consistent with our previous communication, we continue to focus on optimizing our European operating and financial structure which will result in additional opportunities to improve our financial performance in the European region. Our primary objective is to leverage Brightpoint's core customized logistics capabilities that have been developed and implemented in the Americas and APAC divisions over the past 10 years and to transition these state of the art capabilities, IT systems and logistics processes to our operations in Europe. A main strategic component of this plan will revolve around consolidating our current warehouse facilities and creating strategically located hubs or "Centers of Excellence." By creating "Centers of Excellence" in the European region, we will streamline our operations with the goal to become the low cost service provider of these industry leading logistics services in the European region. This streamlined structure will allow our vendors and customers to take costs out of their supply chain. We are interacting with our vendors and customers as we implement these plans to ensure that we achieve this goal. Through these "Centers of Excellence," we will be able to service the entire continent of Europe more effectively and efficiently. We are also making good progress on our Shared Services model where we will centralize certain business support (or back office) functions to be shared across all of our properties in the region. Our Shared Services Center along with standardization across the European region will result in the efficiencies, enhancements and best practices necessary to meet our cost and effectiveness objectives.
In addition, we expect to exit certain programs, channels and/or countries that do not meet our ROIC target of at least 15%. As a result of exiting underperforming programs, channels and/or countries in our European region, we would expect to incur some additional restructuring charges. We will provide updates on these activities and related estimated charges, which could be material, as appropriate throughout the year. The ultimate motivation for implementing all of the initiatives discussed above is to achieve our as adjusted operating margin goal of at least 2.5% and ROIC goal of at least 15% for the European region.
* COST AVOIDANCE -- $12 million to $14 million in 2009.
We are on track to realize our cost avoidance target of $12 to $14 million for 2009, of which substantially all of these savings will be realized during the first half of the year. The $6.8 million reduction in SG&A expenses during the first quarter of 2009 was comprised of approximately 50% temporarily avoided costs (bonuses, marketing expense, travel & entertainment expenses) and 50% permanent cost reductions (workforce reductions, contract re-negotiations, etc.).
* SPENDING REDUCTION -- $28 million to $31 million in 2009.
Based on our progress through the first quarter of 2009, we believe we are on track to realize the previously stated spending reduction target of $28 million to $31 million in 2009. For the three months ended March 31, 2009, the Company incurred $5.1 million of severance charges in connection with the global workforce reduction announced as part of our 2009 Spending and Debt Reduction Plan. The Company reduced its global workforce by approximately 150 positions during the first quarter of 2009. Most of this reduction came during the latter half of the first quarter. Therefore, we expect to realize incremental cost savings related to this workforce reduction beginning in the second quarter of 2009. We will continue to reduce our workforce to achieve our previously stated target of at least 220 positions. Most of the remaining reduction in workforce will occur throughout the second quarter. Therefore, we expect to realize the full impact of this spending reduction initiative beginning in the second half of 2009. A significant portion of these savings will be realized as a reduction in SG&A expenses, while some portion of this reduction will be realized as a reduction of cost of sales. We expect SG&A to lower to approximately $50 million for the second quarter of 2009. However, SG&A on a dollar basis is expected to increase slightly in the second half of the year due to expected seasonality and the expiration of certain cost avoidance initiatives.
* DEBT REDUCTION
Average daily debt outstanding for the first quarter of 2009 was $216.0 million as compared to $333.0 million for the fourth quarter of 2008 and $513.0 million for the first quarter of 2008. This reduction of approximately $117 million in average daily debt from the fourth quarter of 2008 puts us well on track to meeting or exceeding the high end of our previously announced target range of $100 million to $150 million. Therefore, we are revising our estimated debt reduction and now anticipate having less than $100 million of average daily debt outstanding during the fourth quarter of 2009. This represents an additional $116 million reduction in average daily debt as compared to the first quarter of this year.
During April 2009, we made additional prepayments of approximately $35 million on our term debt reducing the total outstanding term debt to approximately $100 million. As a result, we will not be required to make a principal payment on our US term debt until September 2011 and will not have a principal payment due on our European term debt until December 2011. Average daily debt for the month of April 2009 was $170 million, a decrease of $46 million compared to the $216 million average for the first quarter of 2009.
About Brightpoint, Inc.
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, e-Business 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 2,800 employees in more than 25 countries. In 2008 Brightpoint generated revenue of $4.6 billion. Brightpoint provides distribution and customized services to more than 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 Brightpoint, including, but not limited to, statements regarding potential spending reductions resulting from the elimination and proposed elimination of positions and the streamlining of operations and its ability to achieve cost savings and debt reduction as part of its 2009 Spending and Debt Reduction Plan. These statements are only predictions and actual events or results may differ materially. Please refer to the documents Brightpoint files, from time to time, with the Securities and Exchange Commission, including Brightpoint's most recent Form 10-K and Form 10-Q and 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. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date these statements were made. Brightpoint undertakes no obligation to update any forward-looking statements contained in this press release.