e10vq
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
|
|
|
þ |
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2008
0-23494
(Commission File no.)
Brightpoint, Inc.
(Exact name of registrant as specified in its charter)
|
|
|
Indiana |
|
35-1778566 |
State or other jurisdiction of
|
|
(I.R.S. Employer Identification No.) |
incorporation or organization |
|
|
|
|
|
2601 Metropolis Parkway, Suite 210, Plainfield, Indiana |
|
46168 |
(Address of principal executive offices)
|
|
(Zip Code) |
|
|
|
|
(317) 707-2355 |
|
|
(Registrants telephone number, including area code) |
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
þ Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or
a non-accelerated filer, or a smaller reporting company. See definition of accelerated filer,
large accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer
o Accelerated filer
þ
Non-accelerated filer o
Smaller reporting company o
(Do not check if a smaller reporting company)
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act)
Yes o No þ
The number of shares of Common Stock outstanding as of May 1, 2008: 81,593,200
PART
1 FINANCIAL INFORMATION
Item 1. Financial Statements
Brightpoint, Inc.
Consolidated Statements of Operations
(Amounts in thousands, except per share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
|
2008 |
|
2007 |
|
|
|
Revenue |
|
|
|
|
|
|
|
|
Distribution revenue |
|
$ |
1,089,010 |
|
|
$ |
567,040 |
|
Logistic services revenue |
|
|
105,771 |
|
|
|
74,589 |
|
|
|
|
Total revenue |
|
|
1,194,781 |
|
|
|
641,629 |
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
|
|
|
|
|
|
|
Cost of distribution revenue |
|
|
1,039,145 |
|
|
|
550,414 |
|
Cost of logistic services revenue |
|
|
68,367 |
|
|
|
58,500 |
|
|
|
|
Total cost of revenue |
|
|
1,107,512 |
|
|
|
608,914 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
87,269 |
|
|
|
32,715 |
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
|
71,751 |
|
|
|
28,253 |
|
Amortization expense |
|
|
4,722 |
|
|
|
80 |
|
Restructuring charge |
|
|
3,614 |
|
|
|
|
|
|
|
|
Operating income from continuing operations |
|
|
7,182 |
|
|
|
4,382 |
|
|
|
|
|
|
|
|
|
|
Interest, net |
|
|
7,544 |
|
|
|
1,150 |
|
Other (income) expenses |
|
|
(1,965 |
) |
|
|
44 |
|
|
|
|
Income from continuing operations before income taxes |
|
|
1,603 |
|
|
|
3,188 |
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
705 |
|
|
|
1,346 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before minority interest |
|
|
898 |
|
|
|
1,842 |
|
|
|
|
|
|
|
|
|
|
Minority interest, net of taxes |
|
|
139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
759 |
|
|
|
1,842 |
|
|
|
|
|
|
|
|
|
|
Discontinued operations, net of income taxes: |
|
|
|
|
|
|
|
|
Gain from discontinued operations |
|
|
16 |
|
|
|
4 |
|
Gain on disposal of discontinued operations |
|
|
|
|
|
|
4 |
|
|
|
|
Total discontinued operations, net of income taxes |
|
|
16 |
|
|
|
8 |
|
|
|
|
|
Net income |
|
$ |
775 |
|
|
$ |
1,850 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share basic: |
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
0.01 |
|
|
$ |
0.04 |
|
Discontinued operations, net of income taxes |
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
0.01 |
|
|
$ |
0.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share diluted: |
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
0.01 |
|
|
$ |
0.04 |
|
Discontinued operations, net of income taxes |
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
0.01 |
|
|
$ |
0.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
77,523 |
|
|
|
49,488 |
|
|
|
|
Diluted |
|
|
81,519 |
|
|
|
50,424 |
|
|
|
|
See
accompanying notes
2
Brightpoint, Inc.
Consolidated Balance Sheets
(Amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2008 |
|
|
2007 |
|
|
|
(Unaudited) |
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
90,753 |
|
|
$ |
102,160 |
|
Accounts receivable (less allowance for doubtful
accounts of $18,034 in 2008 and $17,157 in 2007) |
|
|
578,811 |
|
|
|
754,238 |
|
Inventories |
|
|
471,107 |
|
|
|
474,951 |
|
Other current assets |
|
|
70,505 |
|
|
|
69,261 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
1,211,176 |
|
|
|
1,400,610 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
58,663 |
|
|
|
55,732 |
|
Goodwill |
|
|
371,166 |
|
|
|
349,646 |
|
Other intangibles, net |
|
|
139,198 |
|
|
|
135,431 |
|
Other assets |
|
|
34,510 |
|
|
|
30,942 |
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,814,713 |
|
|
$ |
1,972,361 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
571,560 |
|
|
$ |
666,085 |
|
Accrued expenses |
|
|
165,875 |
|
|
|
189,415 |
|
Current portion of long-term debt |
|
|
12,382 |
|
|
|
19,332 |
|
Lines of credit and other short-term borrowings |
|
|
9,703 |
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
759,520 |
|
|
|
874,832 |
|
|
|
|
|
|
|
|
|
|
Long-term liabilities: |
|
|
|
|
|
|
|
|
Lines of credit, long-term |
|
|
126,989 |
|
|
|
208,399 |
|
Long-term debt |
|
|
229,333 |
|
|
|
233,122 |
|
Other long-term liabilities |
|
|
59,513 |
|
|
|
54,425 |
|
|
|
|
|
|
|
|
Total long-term liabilities |
|
|
415,835 |
|
|
|
495,946 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
1,175,355 |
|
|
|
1,370,778 |
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest |
|
|
1,014 |
|
|
|
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; 88,647 issued in 2008
and 88,418 issued in 2007 |
|
|
886 |
|
|
|
884 |
|
Additional paid-in-capital |
|
|
586,389 |
|
|
|
584,806 |
|
Treasury stock, at cost, 6,951 shares in 2008 and
6,930 shares in 2007 |
|
|
(58,952 |
) |
|
|
(58,695 |
) |
Retained earnings |
|
|
30,242 |
|
|
|
29,467 |
|
Accumulated other comprehensive income |
|
|
79,779 |
|
|
|
44,303 |
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
638,344 |
|
|
|
600,765 |
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
1,814,713 |
|
|
$ |
1,972,361 |
|
|
|
|
|
|
|
|
See
accompanying notes
3
Brightpoint, Inc.
Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
|
2008 |
|
2007 |
|
|
|
Operating activities |
|
|
|
|
|
|
|
|
Net income |
|
$ |
775 |
|
|
$ |
1,850 |
|
Adjustments to reconcile net income to net cash
provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
9,507 |
|
|
|
3,059 |
|
Discontinued operations |
|
|
16 |
|
|
|
(8 |
) |
Pledged cash requirements |
|
|
|
|
|
|
(1,342 |
) |
Non-cash compensation |
|
|
1,645 |
|
|
|
1,552 |
|
Restructuring charge |
|
|
3,614 |
|
|
|
|
|
Change in deferred taxes |
|
|
(4,262 |
) |
|
|
1,348 |
|
Minority interest |
|
|
139 |
|
|
|
|
|
Other non-cash |
|
|
3,330 |
|
|
|
1,091 |
|
|
|
|
|
|
|
14,764 |
|
|
|
7,550 |
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities,
net of effects from acquisitions and divestitures: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
211,058 |
|
|
|
35,764 |
|
Inventories |
|
|
29,298 |
|
|
|
71,593 |
|
Other operating assets |
|
|
(3,154 |
) |
|
|
(3,224 |
) |
Accounts payable and accrued expenses |
|
|
(153,557 |
) |
|
|
(121,512 |
) |
|
|
|
Net cash provided by (used in) operating activities |
|
|
98,409 |
|
|
|
(9,829 |
) |
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(6,377 |
) |
|
|
(4,847 |
) |
Acquisitions, net of cash acquired |
|
|
(1,252 |
) |
|
|
(67,018 |
) |
Decrease (increase) in other assets |
|
|
1,002 |
|
|
|
(1,472 |
) |
|
|
|
Net cash used in investing activities |
|
|
(6,627 |
) |
|
|
(73,337 |
) |
|
|
|
|
|
|
|
|
|
Financing Activities |
|
|
|
|
|
|
|
|
Net proceeds from (repayments) on lines of credit |
|
|
(79,134 |
) |
|
|
76,434 |
|
Repayments on Global Term Loans |
|
|
(23,130 |
) |
|
|
|
|
Deferred financing costs paid |
|
|
|
|
|
|
(1,627 |
) |
Purchase of treasury stock |
|
|
(257 |
) |
|
|
(353 |
) |
Excess tax (deficit) benefit from equity based compensation |
|
|
(82 |
) |
|
|
104 |
|
Proceeds from common stock issuances under employee stock
option plans |
|
|
22 |
|
|
|
255 |
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
(102,581 |
) |
|
|
74,813 |
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
(608 |
) |
|
|
943 |
|
|
|
|
Net decrease in cash and cash equivalents |
|
|
(11,407 |
) |
|
|
(7,410 |
) |
Cash and cash equivalents at beginning of period |
|
|
102,160 |
|
|
|
54,130 |
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
90,753 |
|
|
$ |
46,720 |
|
|
|
|
See
accompanying notes
4
Brightpoint, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
General
The accompanying unaudited Consolidated Financial Statements have been prepared in conformity with
U.S. generally accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934.
Accordingly, they do not include all of the information and footnotes necessary for fair
presentation of financial position, results of operations and cash flows in conformity with U.S.
generally accepted accounting principles. Operating results from interim periods are not
necessarily indicative of results that may be expected for the fiscal year as a whole. The Company
is subject to seasonal patterns that generally affect the wireless device industry. The preparation
of financial statements in conformity with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect amounts reported in the financial
statements and accompanying notes. Actual results could differ from those estimates, but management
does not believe such differences will materially affect Brightpoint, Inc.s financial position or
results of operations. The Consolidated Financial Statements reflect all adjustments considered, in
the opinion of management, necessary to fairly present the results for the periods. Such
adjustments are of a normal recurring nature.
For further information, including the Companys significant accounting policies, refer to the
audited Consolidated Financial Statements and the notes thereto included in the Companys Annual
Report on Form 10-K for the year ended December 31, 2007. As used herein, the terms Brightpoint,
Company, we, our and us mean Brightpoint, Inc. and its consolidated subsidiaries.
Earnings Per Share
Basic earnings per share is based on the weighted average number of common shares outstanding
during each period, and diluted earnings per share is based on the weighted average number of
common shares and dilutive common share equivalents outstanding during each period. The following
is a reconciliation of the numerators and denominators of the basic and diluted earnings per share
computations (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2008 |
|
|
2007 |
|
|
|
|
Income from continuing operations |
|
$ |
759 |
|
|
$ |
1,842 |
|
Discontinued operations, net of income taxes |
|
|
16 |
|
|
|
8 |
|
|
|
|
|
|
|
|
Net Income |
|
$ |
775 |
|
|
$ |
1,850 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share basic: |
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
0.01 |
|
|
$ |
0.04 |
|
Discontinued operations, net of income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
0.01 |
|
|
$ |
0.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share diluted: |
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
0.01 |
|
|
$ |
0.04 |
|
Discontinued operations, net of income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
0.01 |
|
|
$ |
0.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding for basic earnings per share |
|
|
77,523 |
|
|
|
49,488 |
|
Net effect of dilutive stock options, restricted stock units, shares held in escrow and
restricted stock based on the treasury stock method using average market price |
|
|
3,996 |
|
|
|
936 |
|
|
|
|
|
|
|
|
Weighted
average shares outstanding for diluted earnings per share |
|
|
81,519 |
|
|
|
50,424 |
|
|
|
|
|
|
|
|
5
Brightpoint, Inc.
Notes to Consolidated Financial Statements
Recently Issued Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) 157, Fair Value Measurements. The provisions of SFAS 157 were effective
for the Company on January 1, 2008 for financial assets and liabilities and are effective for the
Company on January 1, 2009 for non-financial assets and liabilities. The adoption of SFAS 157 did
not have a material impact on the Companys financial statements. SFAS 157 defines fair value,
provides guidance for measuring fair value and requires certain disclosures. SFAS No. 157
discusses valuation techniques, such as the market approach (comparable market prices), the income
approach (present value of future income or cash flow), and the cost approach (cost to replace the
service capacity of an asset or replacement cost). The statement utilizes a fair value hierarchy
that prioritizes the inputs to valuation techniques used to measure fair value into three broad
levels. The following is a brief description of those three levels:
|
|
|
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for
identical assets or liabilities. |
|
|
|
|
Level 2: Inputs, other than quoted prices, that are observable for the asset or
liability, either directly or indirectly. These include quoted prices for similar assets
or liabilities in active markets and quoted prices for identical or similar assets or
liabilities in markets that are not active. |
|
|
|
|
Level 3: Unobservable inputs that reflect the reporting entitys own assumptions. |
The following table summarizes the bases used to measure certain financial assets and financial
liabilities at fair value on a recurring basis in the balance sheet (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted prices |
|
Significant |
|
|
Balance at |
|
in active |
|
other |
|
|
March 31, |
|
markets |
|
observable |
|
|
2008 |
|
(Level 1) |
|
inputs (Level 2) |
Financial instruments classified
as assets |
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities |
|
$ |
7,050 |
|
|
$ |
7,050 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial instruments classified
as liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
$ |
3,833 |
|
|
$ |
|
|
|
$ |
3,833 |
|
Forward foreign currency contracts |
|
|
1,692 |
|
|
|
|
|
|
|
1,692 |
|
In December 2007, FASB issued SFAS 141 (R). This statement amends SFAS 141, Business Combinations,
and provides revised guidance for recognizing and measuring identifiable assets and goodwill
acquired, liabilities assumed, and any noncontrolling interest in the acquiree. It also provides
disclosure requirements to enable users of the financial statements to evaluate the nature and
financial effects of the business combination. The provisions of SFAS 141(R) are effective for the
Company on January 1, 2009. The Company does not currently expect the adoption of SFAS 141(R) to
have a material impact on its financial statements since the provisions of SFAS 141 (R) are applied
prospectively.
In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial
Statements an amendment of ARB 51. SFAS 160 amends ARB 51 to establish accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It also amends certain of ARB 51s consolidation procedures for consistency with the
requirements of SFAS 141(R). The provisions of SFAS 160 are effective for the Company on January 1,
2009. The Company does not expect the adoption of SFAS 160 to have a material impact on its
financial statements.
In March 2008, the FASB issued SFAS 161, Disclosures about Derivative Instruments and Hedging
Activities. This Statement enhances disclosures about derivative and hedging activities. The
provisions of SFAS 161 are effective
6
Brightpoint, Inc.
Notes to Consolidated Financial Statements
for the Company on January 1, 2009. The Company does not
expect the adoption of SFAS 161 to have a material impact on its financial statements.
Other Comprehensive Income
Comprehensive income is comprised of net income, unrealized losses on marketable securities,
unrealized losses on derivative instruments, and gains or losses resulting from currency
translations of foreign investments. The details of comprehensive income for the three months ended
March 31, 2008 and 2007 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2008 |
|
|
2007 |
|
|
|
|
Net income |
|
$ |
775 |
|
|
$ |
1,850 |
|
Unrealized loss on derivative instruments |
|
|
(721 |
) |
|
|
|
|
Unrealized loss on marketable securities |
|
|
(1,334 |
) |
|
|
|
|
Foreign currency translation |
|
|
37,531 |
|
|
|
1,835 |
|
|
|
|
|
|
|
|
Comprehensive income |
|
$ |
36,251 |
|
|
$ |
3,685 |
|
|
|
|
|
|
|
|
2. Acquisitions
On March 30, 2007, the Company completed its acquisition of certain assets and the assumption of
certain liabilities related to the U.S. operations and the Miami-based Latin America business of
CellStar Corporation for $67.5 million (including direct acquisition costs). Results of operations
related to this acquisition have been included in the Companys Consolidated Statements of
Operations beginning in the second quarter of 2007.
On July 31, 2007 the Company completed its acquisition of Dangaard Telecom A/S (Dangaard Telecom).
The purchase price for the Dangaard Telecom acquisition was $311.1 million (including direct
acquisition costs). The fair value of the Companys common stock was measured in accordance with
EITF 99-12, Determination of the Measurement Date for the Market Price of Acquirer Securities
Issued in a Purchase Business Combination. Total equity consideration was estimated using a stock
price of $11.25 per share, which represents the average closing stock price beginning two trading
days before and ending two trading days after February 20, 2007, the date of the public
announcement of the definitive purchase agreement. The allocation of the purchase price is based
upon preliminary estimates of the fair value of assets acquired and liabilities assumed. Results of
operations related to this acquisition are included in the Companys Consolidated Statements of
Operations beginning on August 1, 2007.
The following sets forth unaudited pro forma financial information in accordance with accounting
principles generally accepted in the United States assuming the Dangaard Telecom acquisition took
place at the beginning of the period presented. The unaudited pro forma results include certain
adjustments as described in the notes below (in thousands, except per share data):
Three months ended:
(amounts in 000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dangaard |
|
|
|
|
|
|
|
|
March 31, 2007 |
|
Telecom |
|
Brightpoint |
|
Adjustments |
|
Note |
|
Consolidated |
|
|
|
Revenue |
|
$ |
507,719 |
|
|
$ |
641,629 |
|
|
$ |
(49,911 |
) |
|
|
(1 |
) |
|
$ |
1,099,437 |
|
Income from continuing operations |
|
|
2,675 |
|
|
|
1,842 |
|
|
|
(3,101 |
) |
|
|
(2 |
) |
|
|
1,416 |
|
Net income |
|
|
2,675 |
|
|
|
1,850 |
|
|
|
(3,101 |
) |
|
|
|
|
|
|
1,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding diluted |
|
|
|
|
|
|
50,424 |
|
|
|
30,000 |
|
|
|
(3 |
) |
|
|
80,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations per share diluted |
|
|
|
|
|
$ |
0.04 |
|
|
|
|
|
|
|
|
|
|
$ |
0.02 |
|
7
Brightpoint, Inc.
Notes to Consolidated Financial Statements
Pro forma adjustments:
|
(1) |
|
To reclassify the cost of revenue that was historically presented on a gross basis to a
net basis to conform with EITF 99-19, Reporting Revenue Gross as a Principal versus Net as
an Agent and Brightpoint accounting policy. |
|
|
(2) |
|
To record the following: |
|
|
|
amortization of the intangible assets recorded as a result of the acquisition
Dangaard Telecom, and |
|
|
|
|
income tax provision for the effect of the pro forma adjustments above based on
statutory tax rates. |
|
(3) |
|
To adjust the weighted average number of shares outstanding used to determine diluted
pro forma earnings per share assuming the 30,000,000 shares of the Companys unregistered
Common Stock used to acquire Dangaard Telecom were issued at the beginning of the period
presented. |
Prior to the completion of the acquisition of Dangaard Telecom, Company management began
formulating a plan to exit certain activities of the combined company. Components of this plan
included terminating Dangaard Telecoms implementation of SAP enterprise resource planning (ERP)
and related software and consolidating certain facilities. These additional liabilities were
recognized as liabilities assumed in the business combination and included in the allocation of the
acquisition costs in accordance with EITF 95-3, Recognition of Liabilities in Connection with a
Purchased Business Combination. Adjustments to the purchase price allocation under the preliminary
plan resulted in reductions of assets acquired of $16.7 million and additional liabilities assumed
of $2.7 million in 2007.
3. Borrowings
At March 31, 2008, the Company and its subsidiaries were in compliance with the covenants in each
of its credit agreements. Interest expense includes interest on outstanding debt, fees paid for
unused capacity on credit lines and amortization of deferred financing fees. Average daily debt
outstanding was approximately $513.0 million in the first quarter of 2008.
The table below summarizes the borrowings that were available to the Company as of March 31, 2008
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Letters of Credit & |
|
Net |
|
|
Gross Availability |
|
Outstanding |
|
Guarantees |
|
Availability |
|
|
|
Global Term Loans |
|
$ |
241,715 |
|
|
$ |
241,715 |
|
|
$ |
|
|
|
$ |
|
|
Global Credit Facility |
|
|
300,000 |
|
|
|
126,989 |
|
|
|
1,027 |
|
|
|
171,984 |
|
Other |
|
|
60,624 |
|
|
|
9,703 |
|
|
|
|
|
|
|
50,921 |
|
|
|
|
Total |
|
$ |
602,339 |
|
|
$ |
378,407 |
|
|
$ |
1,027 |
|
|
$ |
222,905 |
|
|
|
|
Additional details on the above borrowings are discussed in the Companys Annual Report on Form
10-K for the year ended December 31, 2007.
4. Guarantees
In accordance with FIN 45, Guarantors Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others, guarantees are recorded at fair value and
disclosed, even when the likelihood of making any payments under such guarantees is remote.
The Company has issued certain guarantees on behalf of its subsidiaries with regard to lines of
credit. Although the guarantees relating to lines of credit are excluded from the scope of FIN 45,
the nature of these guarantees and the
amounts outstanding are described in the Companys Annual Report on Form 10-K for the year ended
December 31, 2007.
8
Brightpoint, Inc.
Notes to Consolidated Financial Statements
The Company has entered into indemnification agreements with its officers and directors, to the
extent permitted by law, pursuant to which the Company has agreed to reimburse its officers and
directors for legal expenses in the event of litigation and regulatory matters. The terms of these
indemnification agreements provide for no limitation to the maximum potential future payments. The
Company has a directors and officers insurance policy that may, in certain instances, mitigate the
potential liability and payments.
Late in 2004, the Company entered into a non-exclusive agreement to distribute wireless devices in
Europe for a certain supplier. Subject to this agreement, the Company provides warranty repair
services on certain devices it distributes for this supplier. The warranty period for these devices
ranges from 12 to 24 months, and the Company is liable for providing warranty repair services
unless failure rates exceed a certain threshold. The Company records estimated expenses related to
future warranty repair at the time the devices are sold. Estimates for warranty costs are
calculated primarily based on managements assumptions related to cost of repairs and anticipated
failure rates. During 2006, this supplier re-branded its devices and provides aftermarket support
services including warranty repairs. The Company does not provide warranty repair services on the
re-branded devices on behalf of the supplier; however, the Company does provide aftermarket support
services including warranty repairs for wireless devices sold by one of the Companys European
operations to one customer. Sales of devices for which the Company provides warranty repair
services have decreased significantly since this supplier re-branded its devices. The Company
assumed an obligation through the acquisition of Dangaard Telecom that is related to a similar
program. Warranty accruals are adjusted from time to time when the Companys actual warranty claim
experience differs from its estimates. A summary of the changes in the product warranty accrual is
as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
|
2008 |
|
2007 |
|
|
|
January 1 |
|
$ |
3,944 |
|
|
$ |
3,063 |
|
Provision for product warranties |
|
|
478 |
|
|
|
1,227 |
|
Settlements during the period |
|
|
(1,760 |
) |
|
|
(1,893 |
) |
|
|
|
March 31 |
|
$ |
2,662 |
|
|
$ |
2,397 |
|
|
|
|
5. Restructuring
Prior to the completion of the acquisition of Dangaard Telecom, Company management began
formulating a plan to exit certain activities of the combined company. As Company management
finalizes the plan, additional liabilities may result primarily related to involuntary employee
termination costs and costs to exit certain facilities in our Europe operations. These additional
liabilities will be recognized as liabilities assumed in the business combination and included in
the allocation of the acquisition costs in accordance with EITF 95-3, Recognition of Liabilities in
Connection with a Purchased Business Combination.
Reserve activity for the restructuring for the three months ended March 31, 2008 is as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease |
|
|
|
|
|
|
Employee |
|
|
Termination |
|
|
|
|
|
|
Terminations |
|
|
Costs |
|
|
Total |
|
Balance at December 31, 2007 |
|
$ |
3,336 |
|
|
$ |
728 |
|
|
$ |
4,064 |
|
Restructuring charge |
|
|
426 |
|
|
|
3,188 |
|
|
|
3,614 |
|
Foreign currency translation |
|
|
138 |
|
|
|
123 |
|
|
|
261 |
|
|
|
|
|
|
|
|
|
|
|
Total activity: |
|
|
3,900 |
|
|
|
4,039 |
|
|
|
7,939 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash usage |
|
|
(886 |
) |
|
|
|
|
|
|
(886 |
) |
Non-cash usage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2008 |
|
$ |
3,014 |
|
|
$ |
4,039 |
|
|
$ |
7,053 |
|
|
|
|
|
|
|
|
|
|
|
9
Brightpoint, Inc.
Notes to Consolidated Financial Statements
Restructuring charge was $3.6 million for the three months ended March 31, 2008. The restructuring
charge consists of $3.2 million associated with the exit of our redundant warehouse and office
facility in Germany as well as $0.4 million of severance costs to terminate employees of the
Companys redundant operations in Germany and Norway.
6. Operating Segments
The Company has operations centers and/or sales offices in various countries including Australia,
Austria, Belgium, Colombia, Denmark, Finland, France, Germany, India, Italy, the Netherlands, New
Zealand, Norway, Poland, Portugal, Russia, Singapore, Slovakia, South Africa, Spain, Sweden,
Switzerland, Turkey, the United Arab Emirates, the United Kingdom and the United States. All of the
Companys operating entities generate revenue from the distribution of wireless devices and
accessories and/or the provision of logistic services. The Company identifies its reportable
segments based on management responsibility of its three geographic divisions: the Americas,
Asia-Pacific and Europe. The Companys operating segments have been aggregated into these three
geographic reporting segments.
The Company evaluates the performance of and allocates resources to these segments based on
operating income from continuing operations (excluding corporate selling, general and
administrative expenses and other unallocated expenses). In the first quarter of 2008, the Company
reclassified the financial information related to the global IT support cost center from the
Asia-Pacific region to the Corporate and Reconciling section of the segment information presented
below. Segment information as of and for the three months ended March 31, 2007 has been
reclassified to conform to the 2008 presentation. A summary of the Companys operations by segment
is presented below (in thousands) for the three months ended March 31, 2008 and 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and |
|
|
|
|
Americas |
|
Asia-Pacific |
|
Europe |
|
Reconciling Items |
|
Total |
|
|
|
Three
Months Ended March 31, 2008: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution revenue |
|
$ |
200,853 |
|
|
$ |
330,448 |
|
|
$ |
557,709 |
|
|
$ |
|
|
|
$ |
1,089,010 |
|
Logistic services revenue |
|
|
46,750 |
|
|
|
10,640 |
|
|
|
48,381 |
|
|
|
|
|
|
|
105,771 |
|
|
|
|
Total revenue from external customers |
|
$ |
247,603 |
|
|
$ |
341,088 |
|
|
$ |
606,090 |
|
|
$ |
|
|
|
$ |
1,194,781 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income from continuing operations |
|
$ |
8,256 |
|
|
$ |
6,085 |
|
|
$ |
945 |
|
|
$ |
(8,104 |
) |
|
$ |
7,182 |
|
Depreciation and amortization |
|
|
2,683 |
|
|
|
744 |
|
|
|
5,816 |
|
|
|
264 |
|
|
|
9,507 |
|
Capital expenditures |
|
|
1,077 |
|
|
|
93 |
|
|
|
4,952 |
|
|
|
255 |
|
|
|
6,377 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2007: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution revenue |
|
$ |
139,951 |
|
|
$ |
318,277 |
|
|
$ |
108,812 |
|
|
$ |
|
|
|
$ |
567,040 |
|
Logistic services revenue |
|
|
42,226 |
|
|
|
7,235 |
|
|
|
25,104 |
|
|
|
24 |
|
|
|
74,589 |
|
|
|
|
Total revenue from external customers |
|
$ |
182,177 |
|
|
$ |
325,512 |
|
|
$ |
133,916 |
|
|
$ |
24 |
|
|
$ |
641,629 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income from continuing operations |
|
$ |
5,482 |
|
|
$ |
4,313 |
|
|
$ |
725 |
|
|
$ |
(6,138 |
) |
|
$ |
4,382 |
|
Depreciation and amortization |
|
|
2,059 |
|
|
|
512 |
|
|
|
262 |
|
|
|
226 |
|
|
|
3,059 |
|
Capital expenditures |
|
|
3,526 |
|
|
|
841 |
|
|
|
194 |
|
|
|
286 |
|
|
|
4,847 |
|
Additional segment information is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
|
2008 |
|
2007 |
|
|
|
Total segment assets: |
|
|
|
|
|
|
|
|
Americas |
|
$ |
289,092 |
|
|
$ |
354,910 |
|
Asia-Pacific |
|
|
202,142 |
|
|
|
243,084 |
|
Europe |
|
|
1,294,611 |
|
|
|
1,343,621 |
|
Corporate |
|
|
28,868 |
|
|
|
30,746 |
|
|
|
|
|
|
$ |
1,814,713 |
|
|
$ |
1,972,361 |
|
|
|
|
7. Legal Proceedings and Contingencies
On July 31, 2007, we acquired Dangaard Telecom which had the following material claims and/or
disputes:
10
Brightpoint, Inc.
Notes to Consolidated Financial Statements
German value-added tax authorities
There are two disputes pending with Finanzamt Flensburg, the German value-added tax, or VAT,
authorities (the Finanzamt):
|
1. |
|
Dangaard Telecoms subsidiary, Dangaard Telecom Denmark A/S, received an assessment
from the Finanzamt claiming that local German VAT should be applied on sales made by
Dangaard Telecom Denmark A/S to two specific German customers in 1997 and 1998. Finanzamt
claimed approximately $2.9 million. The case is currently in abeyance waiting for a
principal decision or settlement involving similar cases pending in Germany. Dangaard
Telecom Denmark A/S continues to dispute this claim and intends to defend this matter
vigorously. The former shareholders of Dangaard Telecom agreed to indemnify Dangaard
Holding with respect to this dispute when Dangaard Holding acquired Dangaard Telecom, and
Dangaard Holding has agreed in the purchase agreement to transfer and assign these
indemnification rights to us (or enforce them on our behalf if such transfer or assignment
is not permitted). |
|
|
2. |
|
Dangaard Telecoms subsidiary, Dangaard Telecom Denmark A/S, received a notice from the
Finanzamt claiming that local German VAT should be applied on all sales made by Dangaard
Telecom Denmark A/S to German customers during the years 1999 to 2004. Finanzamt claimed
approximately $8.1 million. The case is currently in abeyance waiting for a principal
decision or settlement involving similar cases pending
in Germany. Dangaard Telecom Denmark A/S continues to dispute this claim and intends to
defend this matter vigorously. The former shareholders of Dangaard Telecom agreed to
indemnify Dangaard Holding with respect to 80% of this claim when Dangaard Holding acquired
Dangaard Telecom, and Dangaard Holding has agreed in the purchase agreement to transfer and
assign these indemnification rights to us (or enforce them on our behalf if such transfer or
assignment is not permitted). |
Fleggaard group of companies
The former headquarters of Dangaard Telecom was in premises rented from a member of the Fleggaard
group of companies, which was a former shareholder of Dangaard Telecom. A fire in March 2006 caused
by another tenant in the building destroyed the headquarters and Dangaard Telecom had to leave the
building while awaiting renovation of its space. Because of Fleggaards failure to renovate the
space, Dangaard Telecom terminated the lease. Fleggaard has disputed the lease termination and has
claimed $1.4 million in damages. Dangaard Telecom continues to dispute this claim and intends to
defend this matter vigorously.
Norwegian tax authorities
Dangaard Telecoms subsidiary, Dangaard Telecom Norway AS Group, received notice from the Norwegian
tax authorities regarding tax claims in connection with certain capital gains. The Norwegian tax
authorities have claimed $2.7 million. Dangaard Telecom Norway AS Group has disputed this claim;
however, The Norwegian Tax Authorities ruled against Dangaard Telecom Norway AS in April 2008, and
a law firm has been asked to give an assessment of whether or not to appeal the case. The former
shareholders of Dangaard Telecom agreed to indemnify Dangaard Holding with respect to 80% of this
claim when Dangaard Holding acquired Dangaard Telecom, and Dangaard Holding agreed in the purchase
agreement with the Company to transfer and assign these indemnification rights to the Company (or
enforce them on our behalf if such transfer or assignment is not permitted). The Company is
currently evaluating the actions to be taken towards former shareholders of the Dangaard group of
companies in relation to the indemnification agreement.
German
tax authorities
Dangaard Telecoms subsidiary, Dangaard Telecom Germany Holding GmbH, received notice from the
German tax authorities regarding tax claims in connection with the deductibility of certain stock
adjustments and various fees during the period 1998 to 2002. Dangaard Telecom Germany Holding GmbH
agreed to pay part of the claim, and the current amount in dispute is $1.8 million. Dangaard
Telecom Germany Holding GmbH continues to dispute this claim and intends to defend this matter
vigorously. The former shareholders of Dangaard Telecom are obliged to indemnify Dangaard Holding
with respect to any such tax claims. Due to the claims limited size, however, it will be below an
agreed upon threshold, therefore the indemnification would not be activated by this claim if no
other claims for indemnification have been or are asserted.
11
Brightpoint, Inc.
Notes to Consolidated Financial Statements
8. Subsequent events
On April 28, 2008, the Company acquired the assets of Hugh Symons Group Ltd.s wireless
distribution business for $0.6 million (0.3 million pounds sterling) and the value of inventory at
date of closing. In addition, the Company agreed to contingent cash earn out payments based upon
certain operating performance measures which may be payable on the first, second and third
anniversary of closing. The total earn out payments shall in no event exceed $7.2 million (3.6
million pounds sterling).
In April 2008, the Company reached an agreement with the former managing director of the Companys
Colombia operations to sell certain assets used primarily in connection with fulfillment services
performed in that market. The agreement will result in a pre-tax loss in connection with this sale
of approximately $1.7 million to $2.0 million in the second quarter of 2008 of which approximately
$1.1 million to $1.4 million will be non-cash.
12
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
OVERVIEW AND RECENT DEVELOPMENTS
This discussion and analysis should be read in conjunction with the accompanying Consolidated
Financial Statements and related notes. Our discussion and analysis of the financial condition and
results of operations is based upon our consolidated financial statements, which have been prepared
in conformity with U.S. generally accepted accounting principles. The preparation of financial
statements in conformity with U.S. generally accepted accounting principles requires us to make
estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of
any contingent assets and liabilities at the financial statement date and reported amounts of
revenue and expenses during the reporting period. On an on-going basis we review our estimates and
assumptions. Our estimates were based on our historical experience and various other assumptions
that we believe to be reasonable under the circumstances. Actual results could differ from those
estimates but we do not believe such differences will materially affect our financial position or
results of operations. Our critical accounting policies and estimates, the policies we believe are
most important to the presentation of our financial statements and require the most difficult,
subjective and complex judgments are outlined in our Annual Report on Form 10-K for the year ended
December 31, 2007, and have not changed significantly. Certain statements made in this report may
contain forward-looking statements. For a description of risks and uncertainties relating to such
forward-looking statements, see the cautionary statements contained in Exhibit 99.1 to this report
and our Annual Report on Form 10-K for the year ended December 31, 2007.
Brightpoint, Inc. is a global leader in the distribution of wireless devices and accessories and
provision of customized logistic services to the wireless industry. We have operations centers
and/or sales offices in various countries including Australia, Austria, Belgium, Colombia, Denmark,
Finland, France, Germany, India, Italy, the Netherlands, New Zealand, Norway, Poland, Portugal,
Russia, Singapore, Slovakia, South Africa, Spain, Sweden, Switzerland, Turkey, the United Arab
Emirates, the United Kingdom and the United States. We provide customized integrated logistic
services including procurement, inventory management, software loading, kitting and customized
packaging, fulfillment, credit services and receivables management, call center and activation
services, website hosting, e-fulfillment solutions and other services within the global wireless
industry. Our customers include mobile network operators, mobile virtual network operators (MVNOs),
resellers, retailers and wireless equipment manufacturers. We distribute wireless communication
devices and we provide value-added distribution and logistic services for wireless products
manufactured by companies such as High Tech Computer Corp., Kyocera, LG Electronics, Motorola,
Nokia, Samsung, Siemens, Sony Ericsson and UTStarcom.
On July 31, 2007 we completed our acquisition of Dangaard Telecom A/S (Dangaard Telecom). Results
of operations related to this acquisition are included in our Consolidated Statements of Operations
beginning on August 1, 2007.
On March 30, 2007, we completed our acquisition of certain assets and the assumption of certain
liabilities related to the U.S. operations and the Miami-based Latin America business of CellStar
Corporation. Results of operations related to this acquisition have been included in our
Consolidated Statements of Operations beginning in the second quarter of 2007.
13
RESULTS OF OPERATIONS
Revenue and wireless devices handled by division and service line
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|
|
% of |
|
|
|
|
|
% of |
|
|
|
|
2008 |
|
Total |
|
2007 |
|
Total |
|
Change |
|
|
(Amounts in 000s) |
|
|
|
|
Distribution
revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
$ |
200,853 |
|
|
|
19 |
% |
|
$ |
139,951 |
|
|
|
25 |
% |
|
|
44 |
% |
Asia-Pacific |
|
|
330,448 |
|
|
|
30 |
% |
|
|
318,277 |
|
|
|
56 |
% |
|
|
4 |
% |
Europe |
|
|
557,709 |
|
|
|
51 |
% |
|
|
108,812 |
|
|
|
19 |
% |
|
|
413 |
% |
|
|
|
|
|
|
|
Total |
|
$ |
1,089,010 |
|
|
|
100 |
% |
|
$ |
567,040 |
|
|
|
100 |
% |
|
|
92 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Logistic services revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
$ |
46,750 |
|
|
|
44 |
% |
|
$ |
42,226 |
|
|
|
56 |
% |
|
|
11 |
% |
Asia-Pacific |
|
|
10,640 |
|
|
|
10 |
% |
|
|
7,235 |
|
|
|
10 |
% |
|
|
47 |
% |
Europe |
|
|
48,381 |
|
|
|
46 |
% |
|
|
25,104 |
|
|
|
34 |
% |
|
|
93 |
% |
|
|
|
|
|
|
|
Total |
|
$ |
105,771 |
|
|
|
100 |
% |
|
$ |
74,565 |
|
|
|
100 |
% |
|
|
42 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
$ |
247,603 |
|
|
|
21 |
% |
|
$ |
182,177 |
|
|
|
28 |
% |
|
|
36 |
% |
Asia-Pacific |
|
|
341,088 |
|
|
|
28 |
% |
|
|
325,512 |
|
|
|
51 |
% |
|
|
5 |
% |
Europe |
|
|
606,090 |
|
|
|
51 |
% |
|
|
133,916 |
|
|
|
21 |
% |
|
|
353 |
% |
|
|
|
|
|
|
|
Total |
|
$ |
1,194,781 |
|
|
|
100 |
% |
|
$ |
641,605 |
|
|
|
100 |
% |
|
|
86 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
March 31, |
|
|
|
|
|
|
|
|
% of |
|
|
|
|
|
% of |
|
|
|
|
2008 |
|
Total |
|
2007 |
|
Total |
|
Change |
|
|
(Amounts in 000s) |
|
|
|
|
|
|
|
Wireless devices sold through distribution |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
|
1,593 |
|
|
|
25 |
% |
|
|
987 |
|
|
|
25 |
% |
|
|
61 |
% |
Asia-Pacific |
|
|
2,740 |
|
|
|
43 |
% |
|
|
2,564 |
|
|
|
66 |
% |
|
|
7 |
% |
Europe |
|
|
2,025 |
|
|
|
32 |
% |
|
|
347 |
|
|
|
9 |
% |
|
|
484 |
% |
|
|
|
|
|
|
|
Total |
|
|
6,358 |
|
|
|
100 |
% |
|
|
3,898 |
|
|
|
100 |
% |
|
|
63 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wireless devices handled through logistic services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
|
14,030 |
|
|
|
91 |
% |
|
|
10,121 |
|
|
|
96 |
% |
|
|
39 |
% |
Asia-Pacific |
|
|
376 |
|
|
|
2 |
% |
|
|
364 |
|
|
|
3 |
% |
|
|
3 |
% |
Europe |
|
|
1,020 |
|
|
|
7 |
% |
|
|
147 |
|
|
|
1 |
% |
|
|
594 |
% |
|
|
|
|
|
|
|
Total |
|
|
15,426 |
|
|
|
100 |
% |
|
|
10,632 |
|
|
|
100 |
% |
|
|
45 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total wireless devices handled |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
|
15,623 |
|
|
|
72 |
% |
|
|
11,108 |
|
|
|
77 |
% |
|
|
41 |
% |
Asia-Pacific |
|
|
3,116 |
|
|
|
14 |
% |
|
|
2,928 |
|
|
|
20 |
% |
|
|
6 |
% |
Europe |
|
|
3,045 |
|
|
|
14 |
% |
|
|
494 |
|
|
|
3 |
% |
|
|
516 |
% |
|
|
|
|
|
|
|
Total |
|
|
21,784 |
|
|
|
100 |
% |
|
|
14,530 |
|
|
|
100 |
% |
|
|
50 |
% |
|
|
|
|
|
|
|
The following table presents the percentage changes in revenue for the first quarter of 2008 by
service line compared to the same period in the prior year, including the effect of handset volume,
average selling price, foreign currency, and acquisitions on these percentage changes.
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 Percentage Change in Revenue vs. 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Handset- |
|
Average |
|
handset |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
based |
|
Selling |
|
based |
|
Foreign |
|
|
|
|
|
|
|
|
|
|
|
|
volume (1) |
|
Price |
|
revenue (2) |
|
Currency |
|
Subtotal (3) |
|
Acquisitions |
|
Total |
|
|
|
|
|
|
|
Distribution |
|
|
(3 |
%) |
|
|
(1 |
%) |
|
|
1 |
% |
|
|
2 |
% |
|
|
(1 |
%) |
|
|
93 |
% |
|
|
92 |
% |
|
|
|
|
Logistic services |
|
|
9 |
% |
|
|
(5 |
%) |
|
|
8 |
% |
|
|
2 |
% |
|
|
14 |
% |
|
|
28 |
% |
|
|
42 |
% |
|
|
|
|
Total |
|
|
(2 |
%) |
|
|
(1 |
%) |
|
|
2 |
% |
|
|
2 |
% |
|
|
1 |
% |
|
|
85 |
% |
|
|
86 |
% |
|
|
|
|
|
|
|
(1) |
|
Handset-based volume includes percentage change in revenue from
wireless devices sold through our distribution business and revenue
from wireless devices handled through our logistic services business. |
|
(2) |
|
Non-handset distribution revenue includes revenue from accessories
sold, freight, non-voice navigation devices and PCs and PC accessories
sold through our distribution business. Non-handset based logistic
services revenue includes revenue from the sale of prepaid airtime,
freight billed, and fee based services other than fees earned from
wireless devices handled. |
|
(3) |
|
The subtotal represents the percent change in distribution revenue and
logistic services revenue excluding the impact the acquisitions of the
North America and Latin America operations of CellStar on March 31,
2007 and the acquisition of Dangaard Telecom on July 31, 2007. |
Revenue and wireless devices handled by division:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
March 31, |
|
|
Americas |
|
|
|
|
|
% of |
|
|
|
|
|
% of |
|
|
(Amounts in 000s) |
|
2008 |
|
Total |
|
2007 |
|
Total |
|
Change |
|
|
|
REVENUE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution |
|
$ |
200,853 |
|
|
|
81 |
% |
|
$ |
139,951 |
|
|
|
77 |
% |
|
|
44 |
% |
Logistic services |
|
|
46,750 |
|
|
|
19 |
% |
|
|
42,226 |
|
|
|
23 |
% |
|
|
11 |
% |
|
|
|
|
|
|
|
Total |
|
$ |
247,603 |
|
|
|
100 |
% |
|
$ |
182,177 |
|
|
|
100 |
% |
|
|
36 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WIRELESS DEVICES HANDLED : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution |
|
|
1,593 |
|
|
|
10 |
% |
|
|
987 |
|
|
|
9 |
% |
|
|
61 |
% |
Logistic services |
|
|
14,030 |
|
|
|
90 |
% |
|
|
10,121 |
|
|
|
91 |
% |
|
|
39 |
% |
|
|
|
|
|
|
|
Total |
|
|
15,623 |
|
|
|
100 |
% |
|
|
11,108 |
|
|
|
100 |
% |
|
|
41 |
% |
|
|
|
|
|
|
|
The following table presents the percentage changes in revenue for our Americas division by service
line for the first quarter of 2008 compared to the same period in the prior year, including the
effect of handset volume, average selling price, foreign currency, and the CellStar acquisition on
these percentage changes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 Percentage Change in Revenue vs. 2007 |
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
|
|
|
Handset- |
|
Average |
|
handset |
|
|
|
|
|
|
|
|
|
|
|
|
based |
|
Selling |
|
based |
|
Foreign |
|
|
|
|
|
CellStar |
|
|
|
|
volume |
|
Price |
|
revenue |
|
Currency |
|
Subtotal |
|
Acquisition |
|
Total |
|
|
|
Distribution |
|
|
(19 |
%) |
|
|
14 |
% |
|
|
0 |
% |
|
|
1 |
% |
|
|
(4 |
%) |
|
|
48 |
% |
|
|
44 |
% |
Logistic services |
|
|
17 |
% |
|
|
(9 |
%) |
|
|
2 |
% |
|
|
1 |
% |
|
|
11 |
% |
|
|
0 |
% |
|
|
11 |
% |
Total |
|
|
(11 |
%) |
|
|
9 |
% |
|
|
0 |
% |
|
|
1 |
% |
|
|
(1 |
%) |
|
|
37 |
% |
|
|
36 |
% |
The decrease in handset based volume was primarily due to higher sales of lower priced handsets in
2007 that did not recur in the first quarter of 2008. The increase in average selling price was
primarily due to a higher mix of converged devices sold compared to the same period in the prior
year. Converged devices are feature-rich and typically carry a higher average selling price. While
we believe the market for converged devices will continue to expand, there can be no assurances
that our average selling price will continue to remain at current levels and the mix of devices
sold will continue to yield favorable variances in average selling price.
15
The increase in devices handled through logistic services and decrease in average fulfillment fee
per unit in our Americas division was primarily driven by the successful launch of the T-Mobile
logistic services business during the second quarter of 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
March 31, |
|
|
Asia-Pacific |
|
|
|
|
|
% of |
|
|
|
|
|
% of |
|
|
(Amounts in 000s) |
|
2008 |
|
Total |
|
2007 |
|
Total |
|
Change |
|
|
|
REVENUE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution |
|
$ |
330,448 |
|
|
|
97 |
% |
|
$ |
318,277 |
|
|
|
98 |
% |
|
|
4 |
% |
Logistic services |
|
|
10,640 |
|
|
|
3 |
% |
|
|
7,235 |
|
|
|
2 |
% |
|
|
47 |
% |
|
|
|
|
|
|
|
Total |
|
$ |
341,088 |
|
|
|
100 |
% |
|
$ |
325,512 |
|
|
|
100 |
% |
|
|
5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WIRELESS DEVICES HANDLED : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution |
|
|
2,740 |
|
|
|
88 |
% |
|
|
2,564 |
|
|
|
88 |
% |
|
|
7 |
% |
Logistic services |
|
|
376 |
|
|
|
12 |
% |
|
|
364 |
|
|
|
12 |
% |
|
|
3 |
% |
|
|
|
|
|
|
|
Total |
|
|
3,116 |
|
|
|
100 |
% |
|
|
2,928 |
|
|
|
100 |
% |
|
|
6 |
% |
|
|
|
|
|
|
|
The following table presents the percentage changes in revenue for our Asia-Pacific division by
service line for the first quarter of 2008 compared to the same period in the prior year, including
the effect of handset volume, average selling price, and foreign currency on these percentage
changes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 Percentage Change in Revenue vs. 2007 |
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
Handset- |
|
Average |
|
handset |
|
|
|
|
|
|
based |
|
Selling |
|
based |
|
Foreign |
|
|
|
|
volume |
|
Price |
|
revenue |
|
Currency |
|
Total |
|
|
|
Distribution |
|
|
6 |
% |
|
|
(7 |
%) |
|
|
2 |
% |
|
|
3 |
% |
|
|
4 |
% |
Logistic services |
|
|
1 |
% |
|
|
2 |
% |
|
|
39 |
% |
|
|
5 |
% |
|
|
47 |
% |
Total |
|
|
6 |
% |
|
|
(6 |
%) |
|
|
2 |
% |
|
|
3 |
% |
|
|
5 |
% |
The increase in wireless devices sold in our Asia-Pacific division was driven by increased volume
of devices sold to customers served by our Singapore business. However, supply constraints caused
by snow storms in China slowed the growth in devices sold by our Singapore business. The decrease
in average selling price in our Asia-Pacific division was also driven by our Singapore business as
a result of an increase in sales of lower priced handsets due to market demand as well as lower
availability of higher priced devices. This decrease in average selling price in Singapore was
partially offset by an increase in average selling price in our Australia business due to a higher
mix of converged devices sold compared to the same period in the prior year.
The increase in non-handset based logistic services revenue was primarily due to an increase in
repair services in India compared to the same period in the prior year as well as an increase in
revenue from non-handset based logistic services contracts in New Zealand.
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
March 31, |
|
|
Europe |
|
|
|
|
|
% of |
|
|
|
|
|
% of |
|
|
(Amounts in 000s) |
|
2008 |
|
Total |
|
2007 |
|
Total |
|
Change |
|
|
|
REVENUE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution |
|
$ |
557,709 |
|
|
|
92 |
% |
|
$ |
108,812 |
|
|
|
81 |
% |
|
|
413 |
% |
Logistic services |
|
|
48,381 |
|
|
|
8 |
% |
|
|
25,104 |
|
|
|
19 |
% |
|
|
93 |
% |
|
|
|
|
|
|
|
Total |
|
$ |
606,090 |
|
|
|
100 |
% |
|
$ |
133,916 |
|
|
|
100 |
% |
|
|
353 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WIRELESS DEVICES HANDLED : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution |
|
|
2,025 |
|
|
|
67 |
% |
|
|
347 |
|
|
|
70 |
% |
|
|
484 |
% |
Logistic services |
|
|
1,020 |
|
|
|
33 |
% |
|
|
147 |
|
|
|
30 |
% |
|
|
594 |
% |
|
|
|
|
|
|
|
Total |
|
|
3,045 |
|
|
|
100 |
% |
|
|
494 |
|
|
|
100 |
% |
|
|
516 |
% |
|
|
|
|
|
|
|
The following table presents the percentage changes in revenue for the first quarter of 2008 by
service line for our Europe division compared to the same period in the prior year, including the
effect of handset volume, average selling price, foreign currency, and the Dangaard Telecom
acquisition on these percentage changes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 Percentage Change in Revenue vs. 2007 |
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
|
|
|
Handset- |
|
Average |
|
handset |
|
|
|
|
|
|
|
|
|
|
|
|
based |
|
Selling |
|
based |
|
Foreign |
|
|
|
|
|
Dangaard |
|
|
|
|
volume |
|
Price |
|
revenue |
|
Currency |
|
Subtotal |
|
Acquisition |
|
Total |
|
|
|
Distribution |
|
|
(12 |
%) |
|
|
1 |
% |
|
|
(1 |
%) |
|
|
3 |
% |
|
|
(9 |
%) |
|
|
422 |
% |
|
|
413 |
% |
Logistic services |
|
|
0 |
% |
|
|
(1 |
%) |
|
|
8 |
% |
|
|
2 |
% |
|
|
9 |
% |
|
|
84 |
% |
|
|
93 |
% |
Total |
|
|
(10 |
%) |
|
|
1 |
% |
|
|
1 |
% |
|
|
2 |
% |
|
|
(6 |
%) |
|
|
359 |
% |
|
|
353 |
% |
The increase in distribution revenue was primarily due to the acquisition of Dangaard Telecom. The
acquisition of Dangaard Telecom expanded our Europe division to include nine countries in which we
historically did not have a significant operating presence. In countries in which both companies
had a significant operating presence, the acquisition of Dangaard Telecom allowed us to increase
our market share. Excluding the Dangaard Telecom operations, distribution revenue in our Europe
division was estimated to have decreased 9% when assuming that revenue from legacy Brightpoint
operations in overlapping countries (Germany, Norway, and Sweden) remained constant from the first
quarter of 2007. The decrease in handset-based volume excluding the Dangaard Telecom operations was
primarily due to a decrease in wireless devices sold by our Finland operations as a result of lower
sales to a wireless device retailer. The decrease in non-handset based revenue was primarily due to
a decrease in revenue from the sale of locally branded PC notebooks in Europe. This business is
currently under evaluation, and revenue from the sale of locally branded PC notebooks is not
expected to return to historical levels.
The increase in logistic services revenue was primarily due to the acquisition of Dangaard Telecom,
which was included in our results of operations beginning on August 1, 2007. In order to conform to
Brightpoint accounting policies and US GAAP, Dangaard Telecom changed its revenue recognition for
arrangements where Dangaard Telecom serves as the agent in the transaction. The revenue from
these arrangements is included in logistic services revenue. Excluding the Dangaard Telecom
operations, logistic services revenue in our Europe division increased 9% due to an increase in
revenue from the sale of prepaid airtime in Sweden.
17
Gross Profit and Gross Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
March 31, |
|
|
|
|
|
|
|
|
% of |
|
|
|
|
|
% of |
|
|
|
|
2008 |
|
Total |
|
2007 |
|
Total |
|
Change |
|
|
(Amounts in 000s) |
|
|
|
|
Distribution |
|
$ |
49,865 |
|
|
|
57 |
% |
|
$ |
16,626 |
|
|
|
51 |
% |
|
|
200 |
% |
Logistic services |
|
|
37,404 |
|
|
|
43 |
% |
|
|
16,089 |
|
|
|
49 |
% |
|
|
132 |
% |
|
|
|
|
|
|
|
Gross profit |
|
$ |
87,269 |
|
|
|
100 |
% |
|
$ |
32,715 |
|
|
|
100 |
% |
|
|
167 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution |
|
|
4.6 |
% |
|
|
|
|
|
|
2.9 |
% |
|
|
|
|
|
1.7 |
points |
Logistic services |
|
|
35.4 |
% |
|
|
|
|
|
|
21.6 |
% |
|
|
|
|
|
13.8 |
points |
Gross margin |
|
|
7.3 |
% |
|
|
|
|
|
|
5.1 |
% |
|
|
|
|
|
2.2 |
points |
The 2.2 percentage point increase in gross margin was driven by both a 1.7 percentage point
increase in gross margin from our distribution business and a 13.8 percentage point increase in
gross margin from our logistic services business. The increases in gross profit and gross margin
from logistic services were driven by incremental logistic services gross profit and gross margin
from the Dangaard Telecom operations as well the impact of conforming Dangaard Telecom to
Brightpoint accounting policies. The increases in distribution gross profit and gross margin were
primarily driven by a shift in mix toward higher margin distribution business in Europe resulting
from the acquisition of Dangaard Telecom. Distribution gross margin was negatively impacted by
approximately 0.3 percentage points due to a loss from the sale of locally branded PC notebooks in
Europe. This business is currently under evaluation, and revenue and profit from the sale of
locally branded PC notebooks is not expected to return to historical levels.
Selling General and Administrative (SG&A) Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
March 31, |
|
|
|
|
2008 |
|
2007 |
|
Change |
|
|
(Amounts in 000s) |
|
|
|
|
SG&A expenses |
|
$ |
71,751 |
|
|
$ |
28,253 |
|
|
|
154 |
% |
Percent of revenue |
|
|
6.0 |
% |
|
|
4.4 |
% |
|
1.6 |
points |
The increase in SG&A expenses for the first quarter of 2008 compared to the same period in the
prior year was primarily driven by the impact of the Dangaard Telecom and CellStar acquisitions.
As a percent of revenue, SG&A expenses increased 1.6 percentage points. The increase in SG&A as a
percent of revenue was largely driven by the impact of the Dangaard Telecom operations including
the impact of conforming Dangaard Telecom to Brightpoint accounting policies. In addition, SG&A as
a percent of revenue was negatively impacted by the lower than expected revenue resulting from
overall weakness in Europe during mid to late March as well as the supply constraints caused by
snow storms in China. SG&A expenses included $1.6 million of non-cash stock based compensation
expense for the three months ended March 31, 2008 and 2007.
Compared to the fourth quarter of 2007, which was the first full quarter including the Dangaard
Telecom operations, SG&A expenses decreased $1.4 million from $73.1 million for the three months
ended December 31, 2007.
Amortization expense
Amortization expense was $4.7 million for the three months ended March 31, 2008 compared to $0.1
million for the same period in the prior year. The increase in amortization expense 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 and CellStar acquisitions
based on the fair value of assets acquired and liabilities assumed. The assets acquired in
connection with the Dangaard Telecom transaction included $123.1 million of finite-lived intangible
assets assigned to the customer relationships as of July 31, 2007. The acquired finite-lived
intangible
18
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
finite-lived intangible assets will be consumed.
Restructuring charge
Restructuring charge was $3.6 million for the three months ended March 31, 2008. The restructuring
charge consists of $3.2 million associated with the exit of our redundant warehouse and office
facility in Germany as well as $0.4 million of severance costs to terminate employees of our
redundant operations in Germany and Norway.
In the second quarter of 2008, we will record a pre-tax restructuring charge of approximately $1.7
million to $2.0 million in connection with the sale of certain assets in Colombia to the former
managing director. Approximately $1.1 million to $1.4 million of this charge will be non-cash.
Operating Income from Continuing Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
March 31, |
|
|
|
|
|
|
|
|
% of |
|
|
|
|
|
% of |
|
|
|
|
2008 |
|
Total |
|
2007 |
|
Total |
|
Change |
|
|
(Amounts in 000s) |
|
|
|
|
Americas |
|
$ |
8,256 |
|
|
|
115 |
% |
|
$ |
5,482 |
|
|
|
125 |
% |
|
|
51 |
% |
Asia-Pacific |
|
|
6,085 |
|
|
|
85 |
% |
|
|
4,313 |
|
|
|
98 |
% |
|
|
41 |
% |
Europe |
|
|
945 |
|
|
|
13 |
% |
|
|
725 |
|
|
|
17 |
% |
|
|
30 |
% |
Corporate |
|
|
(8,104 |
) |
|
|
(113 |
%) |
|
|
(6,138 |
) |
|
|
(140 |
%) |
|
|
32 |
% |
|
|
|
|
|
|
|
Total |
|
$ |
7,182 |
|
|
|
100 |
% |
|
$ |
4,382 |
|
|
|
100 |
% |
|
|
64 |
% |
|
|
|
|
|
|
|
Operating Income as a Percent of Revenue by Division:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
March 31, |
|
|
|
|
2008 |
|
2007 |
|
Change |
|
|
|
Americas |
|
|
3.3 |
% |
|
|
3.0 |
% |
|
0.3 points |
Asia-Pacific |
|
|
1.8 |
% |
|
|
1.3 |
% |
|
0.5 points |
Europe |
|
|
0.2 |
% |
|
|
0.5 |
% |
|
(0.3) points |
Total |
|
|
0.6 |
% |
|
|
0.7 |
% |
|
(0.1) points |
The increase in operating income in our Americas division was primarily as a result of the
acquisition of CellStar and the launch of logistic services for T-Mobile in the second quarter of
2007.
The increase in operating income in our Asia-Pacific division was primarily as a result of an
increase in volume of devices sold to customers served by our Singapore business as well as a
better allocation of products compared to the first quarter of 2007. However, supply constraints
caused by snow storms in China slowed the growth in devices sold by our Singapore business.
Operating income in our Europe division increased $0.2 million despite the acquisition of Dangaard
Telecom primarily due to overall weakness in Western Europe during mid to late March as well as a
loss in connection with locally branded PC notebook distribution business in Europe. This business
is currently under evaluation, and profit from the sale of locally branded PC notebooks is not
expected to return to historical levels.
The increase in operating loss from our corporate function was due to an increase in personnel
costs primarily due to an increase in headcount in support of managing our expanded global
operations.
19
Interest, net
The components of interest, net are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
March 31, |
|
|
|
|
2008 |
|
2007 |
|
Change |
|
|
(Amounts in 000s) |
|
|
|
|
Interest expense |
|
$ |
8,770 |
|
|
$ |
1,478 |
|
|
|
493 |
% |
Interest income |
|
|
(1,226 |
) |
|
|
(328 |
) |
|
|
274 |
% |
|
|
|
|
|
|
|
Interest, net |
|
$ |
7,544 |
|
|
$ |
1,150 |
|
|
|
556 |
% |
|
|
|
|
|
|
|
Interest expense includes interest on outstanding debt, charges for accounts receivable factoring
programs, fees paid for unused capacity on credit lines and amortization of deferred financing
fees. The increase in interest expense for the three months ended March 31, 2008 compared to the
same period in the prior year was primarily due to the debt assumed in the Dangaard Telecom
acquisition as well as borrowings for the CellStar acquisition. We have made $102.3 million of
repayments of borrowings during the first quarter of 2008, primarily near the end of the quarter.
Average daily debt outstanding was approximately $513.0 million in the first quarter of 2008.
Other income
Other income was $2.0 million for the three months ended March 31, 2008. The increase in other
income was primarily due to foreign currency transaction gains.
Income Tax Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
March 31, |
|
|
|
|
2008 |
|
2007 |
|
Change |
|
|
(Amounts in 000s) |
|
|
|
|
Income tax expense |
|
$ |
705 |
|
|
$ |
1,346 |
|
|
|
(48 |
)% |
Effective tax rate |
|
|
44.0 |
% |
|
|
42.2 |
% |
|
1.8 |
points |
Income tax expense for the first quarter of 2008 was $0.7 million resulting in an effective tax
rate of 44.0% compared to an effective tax rate of 42.2% for the first quarter of 2007. The
effective income tax rate is higher than the U.S. statutory rate due to certain non-deductible
items during the quarter. We still expect our effective tax rate to be within a range of 32.0% to
35.0% for the 2008 fiscal year.
Return on Invested Capital from Operations (ROIC)
We believe that it is important for a business to manage its balance sheet as well as it manages
its statement of operations. A measurement that ties the statement of operations performance to the
balance sheet performance is Return on Invested Capital from Operations, or ROIC. We believe that
if we are able to grow our earnings while minimizing the use of invested capital, we will be
optimizing shareholder value while preserving resources in preparation for further potential growth
opportunities. We take a simple approach in calculating ROIC: we apply an estimated average tax
rate to the operating income of our continuing operations with adjustments for unusual items, such
as facility consolidation charges, and apply this tax-adjusted operating income to our average
capital base, which, in our case, is our shareholders equity and debt. The details of this
measurement are outlined below.
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Trailing Four Quarters Ended |
|
|
|
March 31, |
|
|
March 31, |
|
(Amounts in 000s) |
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
Operating income after taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income from continuing operations |
|
$ |
7,182 |
|
|
$ |
4,382 |
|
|
$ |
68,714 |
|
|
$ |
40,184 |
|
Plus: restructuring charge |
|
|
3,614 |
|
|
|
|
|
|
|
12,275 |
|
|
|
|
|
Less: estimated income taxes (1) |
|
|
(4,746 |
) |
|
|
(1,850 |
) |
|
|
(5,741 |
) |
|
|
(10,587 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income after taxes |
|
$ |
6,050 |
|
|
$ |
2,532 |
|
|
$ |
75,248 |
|
|
$ |
29,597 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Invested Capital: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt |
|
$ |
378,407 |
|
|
$ |
94,405 |
|
|
$ |
378,407 |
|
|
$ |
94,405 |
|
Shareholders equity |
|
|
638,344 |
|
|
|
200,063 |
|
|
|
638,344 |
|
|
|
200,063 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Invested capital |
|
$ |
1,016,751 |
|
|
$ |
294,468 |
|
|
$ |
1,016,751 |
|
|
$ |
294,468 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average invested capital (2) |
|
$ |
1,039,184 |
|
|
$ |
253,460 |
|
|
$ |
734,773 |
|
|
$ |
199,565 |
|
ROIC (3) |
|
|
2 |
% |
|
|
4 |
% |
|
|
10 |
% |
|
|
15 |
% |
|
|
|
(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. |
|
(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 ended March 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.
Average invested capital was negatively impacted by an increase in invested capital to fund the
acquisition of Dangaard Telecom.
Operating income after taxes was negatively impacted for the three months ended March 31, 2008 by
$4.7 million (after-tax) of non-cash amortization expense related to finite-lived intangible assets
in connection with the acquisitions of Dangaard Telecom and certain assets of CellStar.
Our overall trailing four quarter ROIC may continue to decrease, and we currently estimate that it
could go as low as 7% to 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.
LIQUIDITY AND CAPITAL RESOURCES
Consolidated Statement of Cash Flows
We use the indirect method of preparing and presenting our statements of cash flows. In our
opinion, it is more practical than the direct method and provides the reader with a good
perspective and analysis of the Companys cash flows.
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
March 31, |
|
|
|
|
2008 |
|
2007 |
|
Change |
|
|
(Amounts in 000s) |
|
|
|
|
Net cash provided by (used in): |
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
98,409 |
|
|
$ |
(9,829 |
) |
|
$ |
108,238 |
|
Investing activities |
|
|
(6,627 |
) |
|
|
(73,337 |
) |
|
|
66,710 |
|
Financing activities |
|
|
(102,581 |
) |
|
|
74,813 |
|
|
|
(177,394 |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
|
(608 |
) |
|
|
943 |
|
|
|
(1,551 |
) |
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
$ |
(11,407 |
) |
|
$ |
(7,410 |
) |
|
$ |
(3,997 |
) |
|
|
|
Net cash provided by operating activities was $98.4 million for the first quarter of 2008 compared
net cash used in used in operating activities of $9.8 million for the first quarter of 2007, a
change of $108.2 million due to:
|
|
|
$101.0 million less cash used for working capital primarily due to higher
collections of receivables in the first three months of 2008. |
|
|
|
|
$7.2 million more cash provided by operating activities before changes in
operating assets and liabilities for the first three months of 2008 compared to the same
period in the prior year. |
A large customer within our Europe division experienced IT difficulties at the end of December
2007, resulting in $62.2 million of anticipated payments in the fourth quarter being delayed into
the first quarter. This payment was received on January 2, 2008. We do not expect similar payment
delays due to IT difficulties from this customer in the future. Had this payment been received in
2007, net cash provided by operating activities would have been $36.2 million for the three months
ended March 31, 2008.
Net cash used for investing activities was $6.6 million for the first quarter of 2008 compared to
$73.3 million for the first quarter of 2007. This decrease is primarily due to the $67.5 million of
cash used in connection with the acquisition of certain assets and assumption of certain
liabilities related to the U.S. operations and the Miami -based Latin America business of CellStar
Corporation during the first quarter of 2007.
Net cash used in financing activities was $102.6 million for the first quarter of 2008 compared to
net cash provided by financing activities of $74.8 million for the first quarter of 2007, a change
of $177.4 million. This change is primarily due to $102.3 million of repayments of borrowings
during the first quarter of 2008 compared to $76.4 million of proceeds from credit facilities in
same period in the prior year. These repayments were made primarily at the end of the first quarter
of 2008.
22
Cash Conversion Cycle
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
|
2008 |
|
2007 |
|
|
|
Days sales outstanding in accounts receivable |
|
|
32 |
|
|
|
22 |
|
Days inventory on-hand |
|
|
37 |
|
|
|
50 |
|
Days payable outstanding |
|
|
(41 |
) |
|
|
(48 |
) |
|
|
|
|
|
|
|
|
|
Cash Conversion Cycle Days |
|
|
28 |
|
|
|
24 |
|
|
|
|
|
|
|
|
|
|
A key source of our liquidity is our ability to invest in inventory, sell the inventory to our
customers, collect cash from our customers and pay our suppliers. We refer to this as the cash
conversion cycle. For additional information regarding this measurement and the detailed
calculation of the components of the cash conversion cycle, please refer to our Annual Report on
Form 10-K for the year ended December 31, 2007. The cash conversion cycle for the three months
ended March 31, 2007 was calculated excluding the assets acquired and liabilities assumed related
to the U.S. operations and the Miami -based Latin America business of CellStar Corporation as such
amounts were acquired on the last day of the quarter and no activity was recorded in our
Consolidated Statement of Operations during the first quarter of 2007 related to the assets
acquired and the liabilities assumed.
For the three months ended March 31, 2008, the cash conversion cycle increased to 28 days from 24
days for the same period in the prior year. The increase in the cash conversion cycle was primarily
due to the Dangaard Telecom acquisition.
Compared to the fourth quarter of 2007, which was the first full quarter including the Dangaard
Telecom operations, the cash conversion cycle increased one day from 27 days.
Lines of Credit
The table below summarizes the borrowings that were available to the Company as of March 31, 2008
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Letters of Credit & |
|
Net |
|
|
Gross Availability |
|
Outstanding |
|
Guarantees |
|
Availability |
|
|
|
Global Term Loans |
|
$ |
241,715 |
|
|
$ |
241,715 |
|
|
$ |
|
|
|
$ |
|
|
Global Credit Facility |
|
|
300,000 |
|
|
|
126,989 |
|
|
|
1,027 |
|
|
|
171,984 |
|
Other |
|
|
60,624 |
|
|
|
9,703 |
|
|
|
|
|
|
|
50,921 |
|
|
|
|
Total |
|
$ |
602,339 |
|
|
$ |
378,407 |
|
|
$ |
1,027 |
|
|
$ |
222,905 |
|
|
|
|
Liquidity Analysis
We measure liquidity as the sum of total unrestricted cash and unused borrowing availability, and
we use this measurement as an indicator of how much access to cash we have to either grow the
business through investment in new markets, acquisitions, or through expansion of existing service
or product lines or to contend with adversity such as unforeseen operating losses potentially
caused by reduced demand for our products and services, material uncollectible accounts receivable,
or material inventory write-downs, as examples. The table below shows our liquidity calculation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
|
(Amounts in 000s) |
|
2008 |
|
2007 |
|
% Change |
|
|
|
Unrestricted cash |
|
$ |
90,166 |
|
|
$ |
101,582 |
|
|
|
(11 |
)% |
Unused borrowing availability |
|
|
222,905 |
|
|
|
130,435 |
|
|
|
71 |
% |
|
|
|
Liquidity |
|
$ |
313,071 |
|
|
$ |
232,017 |
|
|
|
35 |
% |
|
|
|
23
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in our exposure to market risk since the disclosure in our Form
10-K for the year ended December 31, 2007.
Item 4. Controls and Procedures.
The Company, under the supervision and with the participation of its management, including its
Principal Executive Officer and Principal Financial Officer has evaluated the effectiveness of its
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
Act) as of the end of the period covered by this report. Based on that evaluation, the Principal
Executive Officer and Principal Financial Officer have concluded that the Companys disclosure
controls and procedures are effective.
There has been no change in the Companys internal control over financial reporting during the most
recently completed fiscal quarter that has materially affected, or is reasonably likely to
materially affect, internal control over financial reporting except we have integrated the CellStar
operations and incorporated these operations as part of our internal controls. For purposes of this
evaluation, the impact of the acquisition of Dangaard Telecom A/S, which closed on July 31, 2007,
on our internal controls over financial reporting has been excluded.
24
PART
II OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is from time to time involved in certain legal proceedings in the ordinary course of
conducting its business. While the ultimate liability pursuant to these actions cannot currently
be determined, the Company believes these legal proceedings will not have a material adverse effect
on its financial position or results of operations. For more information on legal proceedings, see
Note 7 Legal Proceedings and Contingencies, in the Notes to Consolidated Financial Statements.
Item 1A. Risk Factors.
In addition to the other information set forth in this report, you should carefully consider the
factors discussed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year
ended December 31, 2007, which could materially affect our business, financial condition or future
results. Additional risks and uncertainties not currently known to us or that we currently deem to
be immaterial also may materially adversely affect our business, financial condition and/or
operating results.
25
Item 6. Exhibits.
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934, implementing
Section
302 of the Sarbanes-Oxley Act of 2002(1) |
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934 implementing
Section
302 of the Sarbanes-Oxley Act of 2002(1) |
|
|
|
32.1
|
|
Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-
Oxley Act of 2002(1) |
|
|
|
32.2
|
|
Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-
Oxley Act of 2002(1) |
|
|
|
99.1
|
|
Cautionary Statements(1) |
26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
Brightpoint, Inc.
(Registrant)
|
|
Date: May 6, 2008 |
/s/ Robert J. Laikin
|
|
|
Robert J. Laikin |
|
|
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer) |
|
|
|
|
|
Date: May 6, 2008 |
/s/ Anthony W. Boor
|
|
|
Anthony W. Boor |
|
|
Executive Vice President, Chief Financial Officer
and Treasurer
(Principal Financial Officer) |
|
|
|
|
|
Date: May 6, 2008 |
/s/ Vincent Donargo
|
|
|
Vincent Donargo |
|
|
Vice President, Corporate Controller, Chief
Accounting Officer
(Principal Accounting Officer) |
|
27