Brightpoint Reports Third Quarter Financial Results
INDIANAPOLIS--(BUSINESS WIRE)--Oct. 28, 1999--Brightpoint, Inc. (NASDAQ:CELL - news)
•Revenue from recurring operations of $460 million for the quarter ended September 30, 1999•Net income per share from recurring operations of $0.07 for the quarter ended September 30, 1999
-- Previously-announced restructuring is substantially complete
Brightpoint, Inc. (NASDAQ:CELL - news) reported its financial results for the quarter ended September 30, 1999. Because of the significance of the restructuring plan announced by the Company on June 30, 1999 (the ''Plan''), results of operations have been delineated between results from recurring operations and results from non-recurring operations. In addition, the impacts of non-recurring charges have also been shown separately in this earnings release. The attached consolidated statements of operations include all operations and the charges discussed herein.
As a result of the Plan, the Company has eliminated, or is in the process of eliminating, certain operations in Argentina, Poland, Taiwan and the United Kingdom and has terminated two joint operations in China (the new operations in China, which were announced on September 29, 1999, have replaced the terminated operations in China). Recurring operations include all operations except those that have been eliminated or terminated. Recurring operations also exclude the impacts of the non-recurring charges recorded in 1999, the cumulative effect of a change in accounting principle recorded in the first quarter of 1999 and a net investment gain recognized in the first quarter of 1998.
RECURRING OPERATIONS
Recurring Operations Quarter Ended Nine Months Ended
(U.S. Dollars, in September 30 September 30
thousands except
per share data)
1998 1999 Change 1998 1999 Change
--------------------------------------------------
Revenue $339,085 $459,600 36% $863,146 $1,144,042 33%
Cost of revenue 308,978 425,163 38% 781,250 1,053,845 35%
------------------ --------------------
Gross profit 30,107 34,437 14% 81,896 90,197 10%
Selling, general and
administrative
expenses 16,183 25,465 57% 40,014 70,076 75%
------------------ --------------------
Operating income 13,924 8,972 (36%) 41,882 20,121 (52%)
Interest 2,169 2,940 36% 7,050 9,315 32%
------------------ --------------------
Income before income
taxes 11,755 6,032 (49%) 34,832 10,806 (69%)
Income taxes 3,526 2,413 (32%) 10,449 4,323 (59%)
------------------ --------------------
Net income $8,229 $3,619 (56%) $24,383 $6,483 (73%)
------------------ --------------------
------------------ --------------------
Net income per share
(diluted) $0.15 $0.07 (53%) $0.46 $0.12 (74%)
------------------ --------------------
------------------ --------------------
Weighted average
shares outstanding
(diluted) 53,268 53,446 53,427 53,681
------------------ --------------------
------------------ --------------------
Revenue. Revenue from recurring operations in the quarter ended September 30, 1999 increased 36%, compared to revenue generated by the same operations in the third quarter of 1998. For the nine months ended September 30, 1999, revenue from recurring operations increased 33% from the same period in the prior year.
-0-
Revenue From Recurring Operations By Division
(U.S. Dollars, in thousands)
Quarter Ended September 30
-------------------------------
Percent of
Total
Third Nine Months
Percent Percent Quarter Ended
of of Year-to-Year September 30
1998 Total 1999 Total Change 1998 1999
---------------------------------------------------------
Asia-Pacific $103,819 31% $109,474 24% 5% 36% 20%
Europe,
Middle
East and
Africa 64,427 19% 92,795 20% 44% 17% 20%
North
America 112,698 33% 191,904 42% 70% 32% 45%
Latin
America 58,141 17% 65,427 14% 13% 15% 15%
---------------------------- --------------
Total $339,085 100% $459,600 100% 36% 100% 100%
---------------------------- --------------
---------------------------- --------------
Revenue From Recurring Operations By Service Line
(U.S. Dollars, in thousands)
Quarter Ended September 30
-------------------------------
Percent of
Total
Third Nine Months
Percent Percent Quarter Ended
of of Year-to-Year September 30
1998 Total 1999 Total Change 1998 1999
---------------------------------------------------------
Sales of
wireless
handsets $267,506 79% $342,897 75% 28% 80% 74%
Sales of
wireless
accessories 30,382 9% 66,068 14% 117% 9% 15%
Integrated
logistics
services 41,197 12% 50,635 11% 23% 11% 11%
---------------------------- --------------
Total $339,085 100% $459,600 100% 36% 100% 100%
---------------------------- --------------
---------------------------- --------------
Gross Margin. The gross margins in recurring operations for the quarters ended September 30, 1999 and 1998 were 7.5% and 8.9%, respectively, and gross margins were 7.9% and 9.5% for the nine months ended September 30, 1999 and 1998, respectively. Gross margins were lower due primarily to increased costs of revenue, generally arising from the addition of infrastructure to serve logistics customers who have recently engaged the Company. While many of the costs associated with these contracts are being incurred, the revenue streams are not yet fully developed.
Selling, General and Administrative Expenses. Selling, general and administrative expenses incurred in recurring operations during the third quarter of 1999 were $25,465,000, an increase of 57% from $16,183,000 in the third quarter of 1998. For the nine months ended September 30, 1999, selling, general and administrative expenses were $70,076,000, an increase of 75% from the same period in the prior year. These increases are due primarily to increased levels of business activity and increased costs of serving current and anticipated integrated logistics services customers. In addition, write-offs of accounts receivable were higher than in prior quarters due in part to the currency devaluation and the general economic climate in Brazil.
Operating Margin. Operating margins (income from operations, as a percent of revenue) from recurring operations for the third quarters ended September 30, 1999 and 1998 were 2.0% and 4.1%, respectively. Operating margins for the nine months ended September 30, 1999 and 1998 were 1.8% and 4.9%, respectively. The decrease in operating margins resulted primarily from the decrease in gross margin and from the increase in selling, general and administrative expenses as a percent of revenue.
Net Income From Recurring Operations. Net income from recurring operations for the third quarter of 1999 was $3,619,000 compared to net income of $8,229,000 in the third quarter of 1998. For the nine months ended September 30, 1999 and 1998, net income from recurring operations was $6,483,000 and $24,383,000, respectively. These changes were due primarily to the factors discussed above in the analyses of revenue, gross margin and selling, general and administrative expenses.
Net income per diluted share from recurring operations was $0.07 for the third quarter of 1999 compared to net income per diluted share of $0.15 for the same period in the prior year, and $0.12 and $0.46 for the nine months ended September 30, 1999 and 1998, respectively.
Balance Sheet. As of September 30, 1999, days sales outstanding in accounts receivable was 40 days, an improvement from days sales outstanding of 44 days at December 31, 1998 and 43 days at June 30, 1999. During the third quarter of 1999, annualized inventory turns were 13 times, an improvement from 11 turns during both the fourth quarter of 1998 and the second quarter of 1999. Average days costs in accounts payable were 33 days for the third quarter of 1999, compared to 27 days for the fourth quarter of 1998 and 28 days for the second quarter of 1999. These improvements combined to create a decrease in cash conversion cycle days to 35 days from 50 days in the fourth quarter of 1998 and from 47 days in the second quarter of 1999.
Operating Cash Flow. Cash flow provided by operating activities in the third quarter of 1999 was in excess of $25 million, bringing the year-to-date total to more than $55 million of cash flow provided by operating activities. Through the first nine months of 1998, the Company had used $38 million of cash in operating activities. The improvements in cash flow were due primarily to the improvements in the Company's cash conversion cycle discussed above.
NON-RECURRING OPERATIONS
The following table and discussion relate to certain operations in Argentina, Poland, Taiwan and the United Kingdom and two joint operations in China, all of which have been, or are in the process of being, terminated or eliminated.
Non-Recurring
Operations Quarter Ended Nine Months Ended
(U.S. Dollars, September 30 September 30
in thousands except
per share data)
1998 1999 Change 1998 1999 Change
--------------------------------------------------
Revenue $106,687 $10,158 (90%) $255,772 $112,424 (56%)
Cost of revenue 98,720 8,710 (91%) 239,012 110,206 (54%)
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Gross profit 7,967 1,448 (82%) 16,760 2,218 (87%)
Selling, general and
administrative
expenses 5,394 1,466 (73%) 10,821 12,565 16%
------------------ ------------------
Operating income
(loss) 2,573 (18)(101%) 5,939 (10,347) (274%)
Interest 941 144 (85%) 2,499 869 (65%)
------------------ ------------------
Income (loss) before
income taxes and
minority interest 1,632 (162)(110%) 3,440 (11,216) (426%)
Income taxes 490 - (100%) 975 (1,404) (244%)
------------------ ------------------
Income (loss) before
minority interest 1,142 (162)(114%) 2,465 (9,812) (498%)
Minority interest (47) (20) (57%) (128) (53) (59%)
------------------ ------------------
Net income (loss) $1,189 $(142)(112%) $2,593 $(9,759) (476%)
------------------ ------------------
------------------ ------------------
Net income (loss)
per share (diluted) $0.02 $0.00 (100%) $0.05 $(0.18) (460%)
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------------------ ------------------
Weighted average
shares outstanding
(diluted) 53,268 53,344 53,427 53,233
------------------ ------------------
------------------ ------------------
Revenues from non-recurring operations for the quarter ended September 30, 1999 decreased 90% to $10,158,000 from $106,687,000 in the same period of 1998. Revenues for the nine months ended September 30, 1999 decreased 56% compared to the same period of 1998. These decreases are primarily due to the substantial completion of the Plan and the 1998 discontinuation of trading activities as previously announced.
In the third quarter of 1999, the non-recurring operations realized a gross margin of 14.3% compared to a gross margin of 7.5% in the prior year third quarter. Gross margins in the third quarter of 1999 were abnormally high due to the disposal of inventory at prices well above estimated net realizable values. Gross margins for the nine months ended September 30, 1999 and 1998 were 2.0% and 6.6%, respectively.
The non-recurring operations generated a net loss in the third quarter of 1999 of $142,000 (less than $0.01 per diluted share) compared to net income in the third quarter of 1998 of $1,189,000 ($0.02 per diluted share). For the first nine months of 1999, the net loss was $9,759,000 ($0.18 per diluted share) compared to net income of $2,593,000 ($0.05 per diluted share) for the same period of 1998. These results are due to the declining revenues and gross margins within these operations and were exacerbated by increased selling, general and administrative costs.
NON-RECURRING CHARGES AND OTHER ITEMS
Investment Gain. In the first quarter of 1998, the Company realized a net gain on the sale of marketable equity securities, representing income of a non-recurring nature of $572,000 ($343,000 after applicable taxes).
Accounting Change. The Company recorded in the first quarter of 1999 a cumulative effect adjustment for a change in accounting principle of $14.1 million ($0.26 per diluted share) net of applicable taxes. The change in accounting principle resulted from the required adoption of American Institute of Certified Public Accountants Statement of Position 98-5, Reporting the Costs of Start-up Activities, which requires the write-off of the unamortized portion of certain capitalized costs. These costs were previously capitalized in accordance with generally accepted accounting principles then in effect.
Non-recurring Charges. In the second quarter of 1999, the Company recorded non-recurring charges of approximately $85 million resulting from actions taken in accordance with the Plan. The charges included the write-off of goodwill and investments related to the eliminated or terminated operations, as well as losses on the disposals of fixed and other assets and cash expenses related to lease and employee termination costs and legal fees (approximately $5 million). These amounts are recorded in the ''Restructuring and other charges'' line. The non-recurring charges also include the write-down of inventory (included in the ''Cost of revenue'' line) and accounts receivable (included in the ''Selling, general and administrative expenses'' line) to their estimated net realizable value.
In the third quarter of 1999, adjustments totaling $659,000 were made to the non-recurring charges to adjust previous estimates to their current value and to record additional amounts incurred in the quarter.
-0-
Non-recurring Charges
and Other Items
(U.S. Dollars, in thousands Quarter Ended Nine Months Ended
except per share data) September 30 September 30
1998 1999 1998 1999
---------------------------------------
Revenue $ - $ - $ - $ -
Cost of revenue - 1,223 - 8,621
---------------------------------------
Gross profit (loss) - (1,223) - (8,621)
Selling, general and
administrative expenses - (756) - 6,805
Restructuring and other
charges - 192 - 65,709
---------------------------------------
Operating income (loss) - (659) - (81,135)
Interest and other - - 572 -
---------------------------------------
Income (loss) before
income taxes - (659) 572 (81,135)
Income taxes - - 229 4,497
---------------------------------------
Income (loss) before
accounting change (659) 343 (85,632)
Cumulative effect of
accounting change,
net of tax - - - (14,065)
---------------------------------------
Net income (loss) $ - $ (659) $ 343 $(99,697)
---------------------------------------
---------------------------------------
Net income (loss) per share
(diluted) $ - $ (0.01) $ 0.01 $ (1.87)
---------------------------------------
---------------------------------------
Weighted average shares
outstanding (diluted) 53,268 53,344 53,427 53,233
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---------------------------------------
UPDATE ON RESTRUCTURING
The Plan has been implemented by the Company and executed in a timely manner. Among the major accomplishments are the closure of operations in the United Kingdom and Argentina, entering into an agreement for the sale of the operation in Poland (subject to regulatory approval), the termination of two joint operations in China and the elimination of certain operations in Taiwan. The Company continues to monitor its progress toward the completion of the Plan, and performance to date has been consistent with that which was anticipated.
Brightpoint, Inc. is a leading provider of innovative services to network operators and equipment manufacturers in the global wireless telecommunications industry. Brightpoint strives to enhance the success of its customers through the specialized and focused provision of efficient and effective solutions for their mission critical business requirements. The Company's innovative services include inventory management, prepaid solutions, custom packaging and other outsourced services. Additional information about the Company can be found on its website at www.brightpoint.com or by calling its toll-free Investor Relations Information line at 877-IIR-CELL (877-447-2355).
''Forward-looking statements'' as defined in the Private Securities Litigation Reform Act of 1995 may be included in this news release. A variety of factors could cause the Company's actual results to differ from the reported results expressed in such forward-looking statements. Investors are referred to the Company's Cautionary Statements (Exhibit 99 to the Company's most recent Form 10-Q), which statements are incorporated into this news release by reference.
BRIGHTPOINT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
1998 1999 1998 1999
--------- --------- ----------- -----------
Revenue $ 445,772 $ 469,758 $ 1,118,918 $ 1,256,466
Cost of revenue 407,698 435,096 1,020,262 1,172,672
--------- --------- ----------- -----------
Gross profit 38,074 34,662 98,656 83,794
Selling, general and
administrative
expenses 21,577 26,175 50,835 89,446
Restructuring and
other charges - 192 - 65,709
--------- --------- ----------- -----------
Income (loss) from
operations 16,497 8,295 47,821 (71,361)
Net investment gain - - 572 -
Interest expense 3,110 3,084 9,549 10,184
--------- --------- ----------- -----------
Income (loss) before
income taxes,
minority interest
and accounting change 13,387 5,211 38,844 (81,545)
Income taxes 4,016 2,413 11,653 7,416
--------- --------- ----------- -----------
Income (loss) before
minority interest and
accounting change 9,371 2,798 27,191 (88,961)
Minority interest (47) (20) (128) (53)
--------- --------- ----------- -----------
Income (loss) before
accounting change 9,418 2,818 27,319 (88,908)
Cumulative effect of
accounting change,
net of tax - - - (14,065)
--------- --------- ----------- -----------
Net income (loss) $ 9,418 $ 2,818 $ 27,319 $ (102,973)
--------- --------- ----------- -----------
--------- --------- ----------- -----------
Basic per share:
Income (loss)
before accounting
change $ 0.18 $ 0.05 $ 0.53 $ (1.67)
Cumulative effect
of accounting
change, net of tax - - - (0.26)
--------- --------- ----------- -----------
Net income (loss) $ 0.18 $ 0.05 $ 0.53 $ (1.93)
--------- --------- ----------- -----------
--------- --------- ----------- -----------
Diluted per share:
Income (loss)
before accounting
change $ 0.18 $ 0.05 $ 0.51 $ (1.67)
Cumulative effect
of accounting
change, net of tax - - - (0.26)
--------- --------- ----------- -----------
Net income (loss) $ 0.18 $ 0.05 $ 0.51 $ (1.93)
--------- --------- ----------- -----------
--------- --------- ----------- -----------
Weighted average
common shares
outstanding:
Basic 52,232 53,344 51,811 53,233
--------- --------- ----------- -----------
--------- --------- ----------- -----------
Diluted 53,268 53,446 53,427 53,233
--------- --------- ----------- -----------
--------- --------- ----------- -----------
BRIGHTPOINT, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
December 31 September 30
1998 1999
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 49,528 $ 47,333
Accounts receivable (less allowance
for doubtful accounts of $6,045 in
1998 and $6,385 in 1999) 278,947 222,445
Inventories 156,333 136,459
Other current assets 64,417 43,781
---------- ----------
Total current assets 549,225 450,018
Property and equipment 48,270 36,733
Goodwill and other intangibles 83,467 58,977
Other assets 33,488 9,935
---------- ----------
Total assets $714,450 $555,663
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $188,176 $196,654
---------- ----------
Total current liabilities 188,176 196,654
Long-term debt:
Line of credit 109,020 42,667
Subordinated notes 177,686 183,038
---------- ----------
Total long-term debt 286,706 225,705
Stockholders' equity 239,568 133,304
---------- ----------
Total liabilities and stockholders' equity $714,450 $555,663
---------- ----------
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Contact:
Brightpoint, Inc., Indianapolis, Indiana
Phillip A. Bounsall, 317/297-6100 |
