Brightpoint Reports First Quarter 2010 Financial Results

INDIANAPOLIS, May 5, 2010 (GLOBE NEWSWIRE) -- Brightpoint, Inc. (Nasdaq:CELL) reported its financial results for the first quarter ended March 31, 2010. Unless otherwise noted, amounts pertain to the first quarter of 2010.

FOR THE FIRST QUARTER OF 2010:

Revenue was $795.3 million for the first quarter of 2010, an increase of 15% compared to the first quarter of 2009 and a decrease of 12% compared to the fourth quarter of 2009. Brightpoint revenue typically declines 13% to 18% in the first quarter from the preceding fourth quarter due to the impact of seasonality on our distribution business.

Units handled were 22.5 million for the first quarter of 2010, an increase of 21% compared to the first quarter of 2009 and a decrease of 7% compared to the fourth quarter of 2009. Brightpoint units handled typically decline 10% to 15% in the first quarter as compared to the preceding fourth quarter due to the impact of seasonality on our distribution business. Industry estimates are that global sell-in for the first quarter of 2010 declined approximately 9% to 12% from the fourth quarter of 2009.

Income from continuing operations was $4.7 million or $0.07 per diluted share for the first quarter of 2010 compared to loss from continuing operations of $2.1 million or $0.03 diluted share for the first quarter of 2009 and income from continuing operations of $21.4 million or $0.27 per diluted share for the fourth quarter of 2009. Income from continuing operations for the fourth quarter of 2009 included a $7.7 million non-cash, non-taxable gain on the settlement of an indemnification claim with NC Telecom Holding A/S.

Adjusted income from continuing operations (non-GAAP) was $11.3 million or $0.15 per diluted share for the first quarter of 2010 compared to adjusted income from continuing operations (non-GAAP) of $5.2 million or $0.06 per diluted share for the first quarter of 2009 and $17.8 million or $0.22 per diluted share for the fourth quarter of 2009.

Please see the disclosure below regarding adjusted income from continuing operations (non-GAAP). Adjusted income from continuing operations (non-GAAP) of $0.15 per diluted share for the first quarter of 2010 excludes the following items:

• $3.8 million (pre-tax) of non-cash amortization expense related to acquired intangible assets.
• $3.2 million (pre-tax) of non-cash stock based compensation expense.
• $1.1 million (pre-tax) restructuring charge.
• $2.4 million tax benefit related to the excluded expenses described above.
• $0.8 million tax expense related to valuation allowances on deferred tax assets that are no longer expected to be utilized.

Total debt was $124.5 million at March 31, 2010, compared to $97.0 million at December 31, 2009 and $138.3 million at March 31, 2009. Total liquidity (unrestricted cash and unused borrowing availability) was $338.9 million at March 31, 2010 compared to $426.2 million at December 31, 2009 and $398.1 million at March 31, 2009. Total debt and liquidity at March 31, 2010 includes the impact of the repurchase of 9.2 million shares of Brightpoint common shares in January 2010 for $57.3 million, or approximately $6.20 per share.

Gross margin was 9.1% for the first quarter of 2010 compared to 8.8% for the first quarter of 2009 and 9.0% for the fourth quarter of 2009.

SG&A expenses were $56.7 million for the first quarter of 2010 compared to $50.3 million for the first quarter of 2009 and $55.1 million for the fourth quarter of 2009. Fluctuations in foreign currency negatively impacted SG&A expenses by approximately $4.4 million for the first quarter of 2010 as compared to the first quarter of 2009 and favorably impacted SG&A expenses by approximately $1.2 million as compared to the fourth quarter of 2009. SG&A expenses for the first quarter of 2010 included an incremental $1.5 million of additional stock based compensation expense as a result of discretionary awards of restricted stock units granted by our Board of Directors in February 2010. Approximately one-third of these awards vested on the grant date.

Interest expense, net, was $1.8 million for the first quarter of 2010 compared to $2.3 million for the first quarter of 2009 and $1.9 million for the fourth quarter of 2009.

Cash used in operating activities was $23.2 million for the three months ended March 31, 2010 compared to cash provided by operating activities of $35.8 million for the three months ended March 31, 2009 and cash provided by operating activities of $51.1 million for the three months ended December 31, 2009.

EBITDA was $17.0 million for the first quarter of 2010 compared to $6.7 million for the first quarter of 2009 and $31.9 million for the fourth quarter of 2009.

"I am pleased with our financial performance in the first quarter of 2010," said Robert J. Laikin, Chairman of the Board and Chief Executive officer of Brightpoint, Inc. "Our results reflect the execution of our debt and spending reduction initiatives in 2009 as well as the ramp up of recently announced distribution wins. I believe Brightpoint remains well positioned to take advantage of wireless industry trends and we still anticipate our unit growth rate to exceed the top end of analyst expectations for the wireless industry for 2010."

"I am very pleased we were able to deliver strong financial results for the first quarter of 2010," said Tony Boor, Brightpoint's Chief Financial Officer and Treasurer. "All of our regions exceeded our internal expectations for the first quarter, which resulted in as-adjusted operating margin of 2.3%. I am also pleased with our return on invested capital and return on tangible capital metrics. Return on invested capital was 10% for the trailing twelve months, and return on tangible capital for the trailing twelve months was 37%, which is now within our targeted range of 35% to 40%. Both of these improved ratios reflect our disciplined approach to managing our balance sheet and the success of renegotiating or eliminating programs that did not provide an adequate return to our shareholders."

Please see the attached Schedules and the Brightpoint website at www.Brightpoint.com for an explanation and reconciled presentation of the results for the quarter ended March 31, 2010 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.

In the fourth quarter of 2009 we began reporting the revenue from certain prepaid airtime logistic services agreements on a net basis. The revenue under these agreements was previously reported on a gross basis within logistic services revenue. Had the revenue from these agreements been reported on a net basis for the first quarter 2009, logistic services revenue and cost of revenue would have been approximately $16.7 million lower and gross margin for the first quarter of 2009 would have been approximately 0.2% higher.

The consolidated statements of operations for all periods presented reflect the reclassification of the results of operations of our Italy business to discontinued operations in accordance with U.S. GAAP based on our decision to exit that business in the first quarter of 2010. Please see Brightpoint Inc.'s website at www.Brightpoint.com for quarterly statements of operations for all periods that have been reclassified.

CURRENT FISCAL YEAR 2010 EXPECTATIONS

• Wireless devices handled by the Company of between 101 million and 103 million. This represents an increase of 21% to 22% compared to wireless devices handled by the Company in 2009. Global sell-in for the wireless device industry is currently expected to grow by approximately 10% to 12% compared to 2009.
   
• We currently anticipate our mix of wireless devices handled through logistic services to end the year between 77% and 80% of total wireless devices handled.
   
• Annual combined gross margin of between 8.6% and 8.8% for 2010, which is an increase from the previously announced range of 8.4% to 8.6%. This gross margin range reflects our anticipated shift in mix resulting from an expected rebound in distribution revenues over the next three quarters. Our mix of distribution business will continue to be impacted by product availability and any change in the ramp-up of newer distribution agreements. We also still anticipate some future pricing pressure related to the renegotiation and renewal of contracts with a key logistic services customer in our Asia-Pacific region and two key logistic services customers in our Americas region during the remainder of 2010. Combined gross margin is expected to vary from quarter to quarter as we anticipate for seasonality to have a more pronounced impact on demand than in 2009.

Brightpoint, Inc. (Nasdaq:CELL) is a global leader in providing supply chain solutions to leading stakeholders in the wireless industry. In 2009, Brightpoint handled approximately 84 million wireless devices globally. Brightpoint's innovative services include distribution channel management, procurement, inventory management, software loading, kitting and customized packaging, 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 2,700 employees in more than 25 countries. In 2009, Brightpoint generated revenue of $3.2 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 presentation 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 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; (ii) 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; (iii) our business could be harmed by consolidation of mobile operators; (iv) the current economic downturn could cause a severe disruption in our operations; (v) fluctuations in regional demand patterns and economic factors could harm our operations; (vi) our debt facilities could prevent us from borrowing additional funds, if needed; (vii) collections of our accounts receivable; (viii) our reliance on suppliers to provide trade credit facilities to adequately fund our on-going operations and product purchases; (ix) a significant percentage of our revenues are generated outside of the United States in countries that may have volatile currencies or other risks; (x) the impact that seasonality may have on our business and results; (xi) we make significant investments in the technology used in our business and rely on that technology to function effectively without interruptions; (xii) our future operating results will depend on our ability to maintain volumes and margins; (xiii) our ability to expand and implement our future growth strategy, including acquisitions; (xiv) uncertainty regarding whether wireless equipment manufacturers and wireless network operators will continue to outsource aspects of their business to us; (xv) our reliance upon third parties to manufacture products which we distribute and reliance upon their quality control procedures; our ability to retain existing logistic services customers at acceptable returns upon expiration of existing agreements; (xvi) rapid technological changes in the wireless industry could render our services or the products we handle obsolete or less marketable; (xvii) effect of natural disasters, epidemics, hostilities or terrorist attacks on our operations; (xviii) intense industry competition; (xix) our ability to manage and sustain future growth at our historical or current rates; (xx) our ability to continue to enter into relationships and financing that may provide us with minimal returns or losses on our investments; (xxi) our implementation of European Centers of Excellence may not be successful; (xxii) our ability to attract and retain qualified management and other personnel, the cost of complying with labor agreements and high rate of personnel turnover; (xxiii) protecting our proprietary information; (xxiv) 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) the existence of anti-takeover measures. 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 INCOME FROM CONTINUING OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)

We have provided income from continuing operations and income from continuing operations 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. The specific items excluded with respect to our first quarter non-GAAP income from continuing operations per share are stock-based compensation expense, amortization expense, restructuring charge and certain discrete tax items. The Company considers these items unrelated to its core operating performance, and believes that use of this non-GAAP measure allows comparison of operating results that are consistent over time. Non-GAAP income from continuing operations 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 income from continuing operations 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.

(1)  Adjusted income from continuing operations (non-GAAP) for the first quarter of 2010 excludes the following items:

• $3.8 million (pre-tax) of non-cash amortization expense related to acquired intangible assets.
• $3.2 million (pre-tax) of non-cash stock based compensation expense.
• $1.1 million (pre-tax) of restructuring charges which primarily consists of severance charges in connection with continued global workforce reductions as part of our previously announced 2009 Spending and Debt Reduction Plan.
• $2.4 million tax benefit of the excluded expenses described above.
• $0.8 million of tax expense related to valuation allowances on deferred tax assets resulting from previous net operating losses in Colombia and Denmark that are no longer expected to be utilized.

(2)  Adjusted income from continuing operations (non-GAAP) for the first quarter of 2009 excludes the following items:

• $3.6 million (pre-tax) of non-cash amortization expense related to acquired intangible assets.
• $1.7 million (pre-tax) of non-cash stock based compensation expense.
• $5.1 million restructuring charges (pre-tax) in connection with our previously announced 2009 spending and debt reduction plan.
• $3.1 million tax benefit of the excluded expenses described above.

(3)  Weighted average common shares outstanding – diluted for the three months ended March 31, 2010 and 2009 includes the effect of 1.9 million (2010) and 0.5 million (2009) common shares outstanding that are presumed to be repurchased under the U.S. GAAP treasury stock method related to stock based compensation expense. Weighted average common shares outstanding – diluted for the three months March 31, 2009 includes the effect of 2.3 million common shares outstanding that are excluded from the earnings per share calculation under ASC 260 (formerly SFAS No. 128 Earnings Per Share) as they are anti-dilutive to earnings per share.

Supplemental Information
(Amounts in thousands)

Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")

Supplemental Information (continued)
(Amounts in thousands)

Return on Invested Capital ("ROIC")

Management uses ROIC to measure the effectiveness of its use of invested capital to generate profits. ROIC for the quarters and trailing four quarters ended March 31, 2010 and 2009, and December 31, 2009, was as follows:

We exclude unusual items such as restructuring charges from our calculation of "Operating income after taxes (non-GAAP)" because we do not believe such items are representative of expected future returns. Therefore, we believe decisions to allocate resources should not be influenced by such items. 

Supplemental Information (continued)
(Amounts in thousands)

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 use of tangible capital. ROTC eliminates the influence of intangible assets balances (and related amortization expense), cash transfer capabilities and income tax rates which vary amongst Brightpoint operating entities and are not controllable by operating entity management. We exclude unusual items such as restructuring charge from our calculation of "Operating income before amortization and restructuring charges (non-GAAP)" because we do not believe such items are controllable by operating entity management or representative of expected future returns. Therefore, we believe decisions to allocate resources should not be influenced by such items. 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 non-GAAP 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.