Brightpoint Reports 4th Quarter and 2004 Financial Results, Files Form 10-K and is Compliant with Section 404.PLAINFIELD Plainfield, city (1990 pop. 46,567), Union co., NE N.J.; settled 1684 by Friends, inc. as a city 1869. Formerly a residential city in the New York metropolitan area, it has become the urban center of 10 closely allied municipalities, with diversified industries, , Ind IND Investigational new drug Therapeutics A status assigned by the FDA to a drug before allowing its use in humans, exempting it from premarketing approval requirements so that experimental clinical trials may be conducted. See Phase 1.2, 3 studies, Sponsorship. . -- Brightpoint Brightpoint, Inc. (NASDAQ: CELL) is a leading global communications technology firm that specializes in the distribution of wireless devices and in providing customized logistics services to the wireless industry. , Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :CELL) For the fourth quarter of 2004: --Wireless devices handled of 8.7 million, an increase of 42% from the fourth quarter of 2003 --Revenue of $506 million, a decrease of 5% from the fourth quarter of 2003 --Income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the of $8.7 million, or $0.47 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, an increase of 41% from the fourth quarter of 2003 --Successfully complied with Section 404 of the Sarbanes-Oxley Act See SOX. of 2002 For the year ended December December: see month. 31, 2004: --Wireless devices handled of 27 million, an increase of 34% from 2003 --Revenue of $1.9 billion, an increase of 6% from 2003 --Income from continuing operations of $22.5 million, or $1.17 per diluted share, an increase of 48% from 2003 --Net income of $16.3 million, or $0.85 per diluted share, an increase of 39% from 2003 Brightpoint, Inc. (NASDAQ:CELL) reported its financial results for the fourth quarter and year ended December 31, 2004, and filed its Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. with the Securities and Exchange Commission, which incorporates the requirements for full compliance with Section 404 of the Sarbanes-Oxley Act of 2002. Unless otherwise noted, amounts are in thousands (except per share data) and pertain to pertain to verb relate to, concern, refer to, regard, be part of, belong to, apply to, bear on, befit, be relevant to, be appropriate to, appertain to the fourth quarter of 2004.
SUMMARY FINANCIAL RESULTS
Three Months Ended Year Ended
------------------- -----------------------
December December December December
31, 31, 31, 31,
2004 2003 2004 2003
--------- --------- ----------- -----------
(Unaudited)
Wireless devices handled 8,749 6,154 27,007 20,134
Revenue $506,395 $534,385 $1,865,587 $1,766,376
Gross profit $36,515 $31,408 $118,773 $99,280
Gross margin 7.2% 5.9% 6.4% 5.6%
Operating income from
continuing operations $12,925 $9,100 $34,234 $23,695
Income from continuing
operations $8,748 $6,211 $22,473 $15,147
Net income $8,141 $5,416 $16,285 $11,729
Diluted per share:
Income from continuing
operations $0.47 $0.32 $1.17 $0.80
Net income $0.44 $0.28 $0.85 $0.62
"With strong customer commitment and operational execution, we handled over 27 million wireless devices in 2004. This performance reinforced re·in·force also re-en·force or re·en·force tr.v. re·in·forced, re·in·forc·ing, re·in·forc·es 1. To give more force or effectiveness to; strengthen: The news reinforced her hopes. our position as an industry leader in providing distribution and logistics logistics In military science, all the activities of armed-force units in support of combat units, including transport, supply, communications, and medical aid. The term, first used by Henri Jomini, Alfred Thayer Mahan, and others, was adopted by the U.S. services to the global wireless industry. As we move into 2005, we believe we are well positioned both operationally and financially to continue executing our growth strategy and delivering valued services to our distribution and logistics services customers," said Robert Robert, Henry Martyn 1837-1923. American army engineer and parliamentary authority. He designed the defenses for Washington, D.C., during the Civil War and later wrote Robert's Rules of Order (1876). Noun 1. J. Laikin, Brightpoint's Chairman of the Board and Chief Executive Officer. "With our globally diversified diversified (di·verˑ·s business model and our focus on capital efficiency, we have been able to generate a growth earnings stream and an attractive ROIC ROIC Return On Invested Capital ROIC Return On Investment Capital ROIC Readout Integrated Circuit ROIC Resident Officer In Charge ROIC Regional Office Implementation Committee and invest in new markets in 2004," said Frank Terence Terence (Publius Terentius Afer) (tĕr`əns), b. c.185 or c.195 B.C., d. c.159 B.C., Roman writer of comedies, b. Carthage. As a boy he was a slave of Terentius Lucanus, a Roman senator, who brought him to Rome, educated him, and gave him his , Brightpoint's Chief Financial Officer. "We plan on continuing with our focused management model and our growth strategy in 2005." Fourth Quarter 2004 Financial Results Highlights of our financial results for the fourth quarter of 2004 include: --42% increase in wireless devices handled from the fourth quarter of 2003 with a notable sales mix sales mix See product mix. shift towards our fee-based logistics services business --Sales mix shift effect: 5% year-over-year decrease in total revenue and a 1.3 percentage point increase in gross margin --202% increase in operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. in the Americas A·mer·i·cas , the See America. division from the fourth quarter of 2003 --35% decrease in operating income in the Asia Pacific division, which includes a loss in India India, officially Republic of India, republic (2005 est pop. 1,080,264,000), 1,261,810 sq mi (3,268,090 sq km), S Asia. The second most populous country in the world, it is also sometimes called Bharat, its ancient name. India's land frontier (c. --Europe division returns to operating profitability, as compared to the third quarter of 2004 --Strong balance sheet: unrestricted cash of $72 million, zero gross-debt-to-total-capitalization ratio, $149 million of liquidity --Company successfully complied with Section 404 of the Sarbanes-Oxley Act of 2002 We experienced 42% and 31% increases in wireless devices handled from the fourth quarter of 2003 and the third quarter of 2004, respectively. The year-over-year increase was mostly due to significant growth in our logistics services business and was partially offset by a decline in distribution volumes. The increase in logistics services volumes was predominantly pre·dom·i·nant adj. 1. Having greatest ascendancy, importance, influence, authority, or force. See Synonyms at dominant. 2. driven by overall strength in demand in the U.S. market, which benefited our mobile operator customers such as Nextel (Nextel Communications, Inc., Reston, VA, www.nextel.com) A wireless communications carrier founded in New Jersey in 1987 as Fleet Call, a two-way radio service. Throughout the late 1980s and 1990s, the company acquired a large number of SMR (Specialized Mobile Radio) operators and turned , Virgin Mobile, MetroPCS MetroPCS Communications, Inc., (formerly General Wireless, Inc.) is a provider of CDMA wireless communications services in the greater Miami, Tampa, Sarasota, Fort Myers, Atlanta, San Francisco, Los Angeles, Dallas, Detroit, Orlando, and Sacramento metropolitan areas. and TracFone. Additionally, we acquired a significant new customer in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , Cricket Communications Cricket Communications, Inc. is a subsidiary of Leap Wireless International, Inc. It offers wireless service without credit checks or long-term commitments. Customers can purchase plans giving them access to unlimited local calls; unlimited U.S. , earlier in the year, which contributed to our growth rate. Outside of the United States, our logistics services mobile operator customers in Colombia Colombia (kəlŭm`bēə, Span. kōlōm`byä), officially Republic of Colombia, republic (2005 est. pop. 42,954,000), 439,735 sq mi (1,138,914 sq km), NW South America. Bogotá is the capital and largest city. , the Slovak Slo·vak also Slo·va·ki·an n. 1. a. A native or inhabitant of Slovakia. b. A person of Slovak descent. 2. The Slavic language of the Slovaks. adj. Republic and Australia Australia (ôstrāl`yə), smallest continent, between the Indian and Pacific oceans. With the island state of Tasmania to the south, the continent makes up the Commonwealth of Australia, a federal parliamentary state (2005 est. pop. experienced strong demand for wireless devices, which we fulfilled ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. . The decline in distribution volumes was primarily due to a 95% year-over-year reduction in shipments in our India CDMA (Code Division Multiple Access) A method for transmitting simultaneous signals over a shared portion of the spectrum. The foremost application of CDMA is the digital cellular phone technology from QUALCOMM that operates in the 800 MHz band and 1.9 GHz PCS band. business. The shift in sales mix from units handled through distribution to logistics services resulted in a 5% year-over-year decline in revenue and a 1.3 percentage point year-over-year increase in gross margin. Fee-based logistics services typically generate significantly less revenue per transaction than distribution sales and generally yield a higher gross margin. Consequently, gross profit increased by $5.1 million, or 16%, on a year-over-year basis. On a sequential One after the other in some consecutive order such as by name or number. basis, we experienced a continuation continuation - continuation passing style of the historical growth trend in logistics services and a similar mix shift effect where total wireless devices handled increased by 31%, revenue increased by 12% and gross margin increased by 0.7 percentage points to 7.2%. Gross profit increased by $7.0 million, or 24%. Operating income from continuing operations ("Operating Income") was $12.9 million, a 42% year-over-year increase and a 55% sequential increase. The year-over-year increase in Operating Income was primarily driven by a 202% increase in Operating Income in the Americas division and partially offset by a 35% decline in Operating Income in the Asia-Pacific The term Asia-Pacific generally applies to littoral East Asia, Southeast Asia and Australasia near the Pacific Ocean, plus the states in the ocean itself (Oceania). division. The increase in Operating Income in the Americas division was principally due to a 74% increase in wireless devices handled and operating leverage Operating Leverage A measurement of the degree to which a firm or project relies on fixed rather than variable costs. Notes: The higher the degree of operating leverage, the greater the potential danger from forecasting risk. associated with the increased unit volumes. The Americas division's results were a significant contributor to our 1.3 percentage point year-over-year improvement in gross margin to 7.2%. The decrease in Operating Income in the Asia-Pacific division was chiefly the result of a reduction in shipments to India CDMA customers, which contributed to an $866 thousand operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. in our India CDMA business, and a reduction of incentives received from a key supplier. A strong performance by our Australia operation mitigated mit·i·gate v. mit·i·gat·ed, mit·i·gat·ing, mit·i·gates v.tr. To moderate (a quality or condition) in force or intensity; alleviate. See Synonyms at relieve. v.intr. To become milder. a portion of the decrease. We launched our India business in the third quarter of 2003, in which we fulfilled orders of significant size to Reliance Infocomm who heavily promoted a specific Nokia Nokia (nō`kēä), town (1996 pop. 26,326), Western Finland prov., SW Finland, on Lake Näsijärvi. It is an industrial community where wood and rubber products are manufactured. CDMA handset The part of the telephone that contains the speaker and the microphone. On a desktop phone, the part you hold in your hand is the handset. On a cellphone, the entire phone is the handset. See multihandset cordless and headset. model. Since then, this mobile operator has changed its promotional activities and airtime air·time n. 1. The time during which a radio or television station is broadcasting. Also called airspace. 2. The time at which a radio or television program is broadcast. offerings which has affected its handset buying patterns. We are in the process of transitioning our business model to sell products through channels to reach independent dealers who can now activate handsets on CDMA networks, including Reliance Infocomm's, and we are shifting our marketing efforts towards these channels. Although there can be no assurances, we believe this will result in a more predictable business model. On a sequential basis, the 55% increase in Operating Income reflects positive contributions from all of our divisions, and in particular, our Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). division. During the fourth quarter of 2004, the
Europe division generated Operating Income of $1.8 million as compared
to an operating loss of $305 thousand in the third quarter of 2004. The
improvement in the Europe division was primarily due to strong demand
for feature-rich devices, a 50% increase in wireless devices handled, a
reduction in bad debt expenses and achieving operating profitability in
our operations in Germany Germany (jûr`mənē), Ger. Deutschland, officially Federal Republic of Germany, republic (2005 est. pop. 82,431,000), 137,699 sq mi (356,733 sq km). and the Slovak Republic.We ended the quarter with cash and cash equivalents (unrestricted) of $72 million, a 10% decrease from $80 million at September September: see month. 30, 2004, and a 27% decrease from $99 million at December 31, 2003. Net cash used in operating activities was $407 thousand and net cash provided by operating activities was $7.6 million for the year ended December 31, 2004. The cash conversion cycle was 7 days, an increase of 2 days from the third quarter of 2004 and 3 days from the fourth quarter of 2003. The sequential increase in the cash conversion cycle during the fourth quarter of 2004 was due to a 4-day increase in days sales outstanding In accountancy, Days Sales Outstanding is a company's average collection period. A low figure indicates that the company collects its outstanding receivables quickly. Typically it is looked at either quarterly or yearly (90 or 365 days). and a 3-day increase in days inventory outstanding, partially offset by a 5-day increase in days payable outstanding. Our December month was stronger than we had experienced in recent years. This is the predominant pre·dom·i·nant adj. 1. Having greatest ascendancy, importance, influence, authority, or force. See Synonyms at dominant. 2. cause for the increase in days sales outstanding. Our days inventory on hand increased from unusually low levels in the third quarter of 2004. At 22 days in inventory, we believe our inventory levels were appropriate for our anticipated demand in the first quarter of 2005. Our net income and related items essentially offset the cash consumption caused by the increase in the cash conversion cycle for the fourth quarter of 2004. Annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. return on invested capital from operations was 25%. During 2004, we purchased a total of $24 million of our common shares pursuant to two separate $20 million share repurchase plans share repurchase plan A corporation's plan for buying back a predetermined number of its own shares in the open market. Institution of a share repurchase plan derives from management's view that the company has limited outside investment opportunities and . The first share repurchase plan was announced and completed in the second quarter. The second plan was announced on November November: see month. 30, 2004, and during December 2004 we purchased 208 thousand of our common shares at an average price of $19.29 per share for a total of $4.0 million. Our liquidity (unrestricted cash and unused borrowing availability) was approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $149 million as of December 31, 2004, compared to approximately $142 million as of September 30, 2004, and approximately $144 million as of December 31, 2003. On June June: see month. 5, 2003, the United States Securities and Exchange Commission issued new rules on internal control over financial reporting that were mandated by Section 404 of the Sarbanes-Oxley Act of 2002 ("Section 404"). These rules require management reporting on internal controls over financial reporting. Compliance with Section 404 is a significant priority for us and our management has assessed our internal controls over financial reporting to be effective as of the end of December 31, 2004. Additionally, our independent registered public accounting firm, Ernst & Young LLP LLP - Lower Layer Protocol , has attested at·test v. at·test·ed, at·test·ing, at·tests v.tr. 1. To affirm to be correct, true, or genuine: The date of the painting was attested by the appraiser. 2. to our evaluation and compliance with Section 404. The external cost of implementation of Section 404 and the evaluation of our internal controls was approximately $1.6 million in 2004. We expect these costs to be approximately $500 thousand in 2005 for existing operations. Full Year 2004 Financial Results Highlights of our financial results for the year ended December 31, 2004, include: --34% growth in wireless devices handled compared to an estimated worldwide growth rate of 29% --76% growth in units handled by logistics services business, representing 62% of our total wireless devices handled, up from 47% in 2003 --Sales mix shift effect: 6% increase in total revenue and a 0.8 percentage point increase in gross margin --44% growth in operating income primarily due to strong performance in Americas division --Income from continuing operations of $22.5 million, or $1.17 per diluted share, an increase of 48% from 2003 --Net income of $16.3 million, or $0.85 per diluted share, an increase of 39% from 2003 --Return on invested capital from operations of 16% During 2004, we experienced a 34% increase in wireless devices handled as compared to an estimated industry growth rate of 29%. Driving the increase was a 6.5 million, or 52%, increase in unit volumes in the Americas division and a 47% increase in our Europe division. The unit growth in our Americas division was due to a 72% increase in logistics services volumes in response to strong market demand in the United States that benefited our mobile operator and mobile virtual network operator A Mobile Virtual Network Operator (MVNO) is a company that provides mobile (sometimes called wireless or cellular) telephone service but does not have its own allocation of the radio frequency spectrum nor all of the infrastructure required to provide mobile telephone service. customers and the addition of Cricket Communications as a new logistics services customer. Our Colombia operation also contributed to the growth in unit volumes as its key logistics services mobile operator customer successfully converted its network from TDMA (Time Division Multiple Access) A satellite and cellular phone technology that interleaves multiple digital signals onto a single high-speed channel. For cellular, TDMA triples the capacity of the original analog method (FDMA). to GSM (Global System for Mobile Communications) A digital cellular phone technology based on TDMA that is the predominant system in Europe, but also used worldwide. Developed in the 1980s, GSM was first deployed in seven European countries in 1992. and experienced a general increase in market demand. The increase in wireless devices handled by our Europe division was principally due to our entry into the Slovak Republic (logistics services) and our acquisitions in Finland Finland, Finnish Suomi (swô`mē), officially Republic of Finland, republic (2005 est. pop. 5,223,000), 130,119 sq mi (337,009 sq km), N Europe. (distribution). Overall, in 2004 our logistics services business saw unit growth of 76% and represented 62% of our total wireless devices handled, up from 47% in 2003. As fee-based logistics services typically generate significantly less revenue per transaction than distribution, the sales mix shift to logistics services caused our revenue growth of 6% to be less than the 34% overall increase in wireless devices handled. However, due to generally higher gross margins in our logistics services business, our gross margin increased by 0.8 percentage points from 2003 and our gross profit increased by $19.5 million, or 20%. For 2004, our Operating Income was $34 million, an increase of 44% from 2003. This improvement was due to the increase in gross profit and a $5.5 million facility consolidation charge in 2003 that did not recur in 2004, partially offset by a 21% increase in SG&A expenses. The increase in SG&A expenses is primarily related to the strengthening of foreign currencies relative to the U.S. Dollar, our entry into the Slovak Republic and Finland, continued development of our business in India and $1.6 million in expenses associated with becoming compliant
tr.v. pre·paid, pre·pay·ing, pre·pays To pay or pay for beforehand. pre·pay  ment n. wireless airtime.
Conversely con·verse 1 intr.v. con·versed, con·vers·ing, con·vers·es 1. To engage in a spoken exchange of thoughts, ideas, or feelings; talk. See Synonyms at speak. 2. , these items were partially offset by our Germany business that generated a positive operating result following the initiation initiation, the transition and attendant ceremonies, such as ordeals and rites, involved in passing from one state or status to another, often from childhood to adulthood. It was among the most important social institutions of early humans. of high-end high-end adj. Informal 1. Appealing to sophisticated and discerning customers: a high-end department store; high-end video equipment. 2. wireless device sales. New Facility in Australia As a result of higher than planned growth rates Growth Rates The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures. Notes: Remember, historically high growth rates don't always mean a high rate of growth looking into the future. and anticipated growth opportunities, our Australian Australian pertaining to or originating in Australia. Australian bat lyssavirus disease see Australian bat lyssavirus disease. Australian cattle dog a medium-sized, compact working dog used for control of cattle. operation has moved to a larger facility. We expect to completely vacate To annul, set aside, or render void; to surrender possession or occupancy. The term vacate has two common usages in the law. With respect to real property, to vacate the premises means to give up possession of the property and leave the area totally devoid of contents. our previous location in the first quarter of 2005 and to sublease sublease n. the lease of all or a portion of premises by a tenant who has leased the premises from the owner. A sublease may be prohibited by the original lease, or require written permission from the owner. the facility in the future. The anticipated lease costs, net of sublease income, for the remaining term of the current location and other items are approximately $900 thousand to $1.2 million and we expect to incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. a charge in the first quarter of 2005 within this range. If we are unsuccessful in terminating the lease, finding a sub-lessee or if the terms of any sublease are less than this estimate, we may incur additional expenses. Industry Update Our preliminary estimates indicate that the wireless device industry experienced a growth rate of approximately 29% in 2004. Globally, the availability of feature-rich devices, mobile operator promotional activities and the deployment Installing, setting up, testing and running. This military term, which means the placement of troops and equipment in the field, is widely used with computers as an alternate to the word "implementation. of wireless data services caused subscribers to upgrade their wireless devices. Our preliminary estimates for 2004 also indicate that average selling prices The average sales price of goods or commodities. Especially used in the retail sector and technology distribution. of wireless devices in the global market declined by approximately 2% from 2003. We estimate that the wireless device industry sold approximately 665 million wireless devices in 2004 and 194 million wireless devices in the fourth quarter of 2004. With consumer demand for feature-rich devices, rollouts of advanced 2.5G and 3G networks and continued mobile operator promotional activities, we currently estimate that worldwide sales of wireless devices will increase approximately 10% in 2005. Brightpoint is one of the world's largest distributors of mobile phones. Brightpoint supports the global wireless telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. and data industry, providing quickly deployed, flexible and cost effective solutions. Brightpoint's innovative services include distribution, channel management, fulfillment ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. , eBusiness See e-business. solutions and other outsourced Outsourced is a modern day comedy of cross-cultural conflict and romance, directed by John Jeffcoat, released in 2007. Synopsis Todd Anderson (Josh Hamilton) spends his days managing a customer call center for American Novelty Products in Seattle, until his job, services that integrate seamlessly with its customers. Additional information about Brightpoint can be found on its website at www.brightpoint.com or by calling its toll-free Information and Investor Relations Investor relations The process by which the corporation communicates with its investors. line at 877-IIR-CELL (877-447-2355). Certain information in this press release may contain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. regarding future events or our future performance. These statements are only predictions and actual events or results may differ materially. Please refer to the documents we file, from time to time, with the Securities and Exchange Commission; specifically, our most recent Form 10-K and Form 10-Q Form 10-Q See 10-Q. and the cautionary statements contained in Exhibit 99.1 thereto there·to adv. 1. To that, this, or it. 2. Archaic In addition to that; furthermore. thereto Adverb Formal 1. to that or it 2. . These documents contain and identify important risk factors that could cause the actual results to differ materially from those contained in or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by these forward-looking statements. These risk factors include, without limitation, uncertainties relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc customer plans and commitments, including, without limitation, (i) loss of significant customers or a reduction in prices we charge these customers; (ii) possible adverse effect on demand for our products resulting from consolidation of mobile operator customers; (iii) dependence upon principal suppliers and availability and price of wireless products; (iv) possible adverse effects of future medical claims regarding the use of wireless handsets; (v) possible difficulties collecting our accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying ; (vi) our ability to absorb absorb To offset sell orders or a new security offering with buy orders. , through revenue growth, the increasing operating costs operating costs npl → gastos mpl operacionales that we have incurred and continue to incur in connection with our activities; (vii) lack of demand for our products and services in certain markets and our inability to maintain margins; (viii) our ability to expand geographically ge·o·graph·ic also ge·o·graph·i·cal adj. 1. Of or relating to geography. 2. Concerning the topography of a specific region. ge on a satisfactory basis, through acquisition or otherwise; (ix) potential future losses and capital required in connection with our India business; (x) uncertainty whether wireless equipment manufacturers and wireless network operators will continue to outsource outsource verb To assign specific work to a 3rd party for a specific length of time at an set price and service level Managed care To use outside labor to perform functions–billing and collections, accounting, janitorial services, ER aspects of their business to us; (xi) our reliance upon third parties to manufacture products which we distribute and reliance upon their quality control procedures; (xii) our operations may be materially affected by fluctuations in regional demand and economic factors; (xiii) ability to respond to rapid technological changes in the wireless communications wireless communications System using radio-frequency, infrared, microwave, or other types of electromagnetic or acoustic waves in place of wires, cables, or fibre optics to transmit signals or data. and data industry; (xiv) access to or the cost of increasing amounts of capital, trade credit or other financing; (xv) reliance on a third party to manage significant operations in our Asia-Pacific division; (xvi) investment in sophisticated information systems technologies and our reliance upon the proper functioning of such systems; (xvii) ability to manage and sustain future growth at our historical or industry rates and our ability to meet intense industry competition; (xviii) effect of hostilities hos·til·i·ty n. pl. hos·til·i·ties 1. The state of being hostile; antagonism or enmity. See Synonyms at enmity. 2. a. A hostile act. b. hostilities Acts of war; overt warfare. or terrorist attacks on our operations; (xix) our history of significant losses in previous; (xx) the impact that seasonality may have on our business and results; (xxi) risks of foreign operations, including currency, trade restrictions A trade restriction is an artificial restriction on the trade of goods between two countries. It is the result of protectionism. However, the term is not uncontroversial since what one part may see as a trade restriction another may see as a way to protect consumers from inferior, and political risks in our foreign markets; (xxii) ability to attract and retain qualified management and other personnel and cost of complying with labor agreements; (xxiii) ability to protect our proprietary information; (xxiv) high rate of personnel turnover; (xxv) our significant payment obligations under certain lease and other contractual arrangements; (xxvi) the potential issuance of additional equity, including our common shares, which could result in dilution Dilution A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities. Notes: Adding to the number of shares outstanding reduces the value of holdings of existing shareholders. of existing shareholders and may have an adverse impact on the price of our common shares; (xxvii) uncertainties regarding the outcome of pending litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. ; (xxviii) ability to maintain adequate insurance at a reasonable cost; and (xxix) existence of anti-takeover measures Anti-Takeover Measure Measures taken on a continual or sporadic basis by a firm's management in order to prevent or deter unwanted takeovers. Notes: Companies have many different options for preventing takeovers. . Because of the aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. uncertainties affecting our future operating results, past performance should not be considered to be a reliable indicator Indicator Anything used to predict future financial or economic trends. Notes: In the context of technical analysis, an indicator is a mathematical calculation based on a securities price and/or volume. The result is used to predict future prices. of future performance, and investors should not use historical trends to anticipate future results or trends. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date these statements were made. The words "believe," "expect," "anticipate," "intend," and "plan" and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on any of these forward-looking statements, which speak only as of the date that such statement was made. We undertake no obligation to update any forward-looking statement.
BRIGHTPOINT, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
Three Months Ended Year Ended
December 31 December 31
--------------------- -----------------------
2004 2003 2004 2003
---------- ---------- ----------- -----------
(Unaudited)
Revenue:
Distribution revenue $413,695 $471,719 $1,559,109 $1,540,471
Logistics services
revenue 92,700 62,666 306,478 225,905
---------- ---------- ----------- -----------
Total revenue 506,395 534,385 1,865,587 1,766,376
Cost of revenue:
Cost of distribution
revenue 396,218 453,586 1,500,105 1,486,166
Cost of logistics
services revenue 73,662 49,391 246,709 180,930
---------- ---------- ----------- -----------
Total cost of revenue 469,880 502,977 1,746,814 1,667,096
---------- ---------- ----------- -----------
Gross profit 36,515 31,408 118,773 99,280
Selling, general and
administrative
expenses 23,611 21,308 84,775 70,124
Facility consolidation
charge (benefit) (21) 1,000 (236) 5,461
---------- ---------- ----------- -----------
Operating income from
continuing operations 12,925 9,100 34,234 23,695
Interest expense 389 419 1,870 1,815
Interest income (310) (219) (986) (652)
Loss on debt
extinguishment - - - 365
Net other expenses 576 339 1,860 2,251
---------- ---------- ----------- -----------
Income from continuing
operations before
income taxes and
minority interest 12,270 8,561 31,490 19,916
Income tax expense 3,522 2,374 9,017 4,793
---------- ---------- ----------- -----------
Income from continuing
operations before
minority interest 8,748 6,187 22,473 15,123
Minority interest - (24) - (24)
---------- ---------- ----------- -----------
Income from continuing
operations 8,748 6,211 22,473 15,147
Discontinued
operations:
Gain (loss) from
discontinued
operations 247 (116) (475) (2,890)
Loss on disposal of
discontinued
operations (854) (679) (5,713) (528)
---------- ---------- ----------- -----------
Total discontinued
operations (607) (795) (6,188) (3,418)
---------- ---------- ----------- -----------
Net income $8,141 $5,416 $16,285 $11,729
========== ========== =========== ===========
Basic per share:
Income from
continuing
operations $0.49 $0.34 $1.21 $0.83
Discontinued
operations (0.04) (0.05) (0.33) (0.19)
---------- ---------- ----------- -----------
Net income $0.45 $0.29 $0.88 $0.64
========== ========== =========== ===========
Diluted per share:
Income from
continuing
operations $0.47 $0.32 $1.17 $0.80
Discontinued
operations (0.03) (0.04) (0.32) (0.18)
---------- ---------- ----------- -----------
Net income $0.44 $0.28 $0.85 $0.62
========== ========== =========== ===========
Weighted average
common shares
outstanding:
Basic 17,958 18,498 18,552 18,170
========== ========== =========== ===========
Diluted 18,569 19,488 19,169 19,002
========== ========== =========== ===========
BRIGHTPOINT, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share data)
December 31, December 31,
2004 2003
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $72,120 $98,879
Pledged cash 13,830 22,042
Accounts receivable (less allowance for
doubtful accounts of $6,215 and $7,683,
respectively) 144,106 132,944
Inventories 109,559 108,665
Contract financing receivable 14,022 10,838
Other current assets 20,641 13,083
--------- ---------
Total current assets 374,278 386,451
Property and equipment, net 27,503 29,566
Goodwill and other intangibles, net 21,981 19,340
Other assets 6,586 9,333
--------- ---------
Total assets $430,348 $444,690
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $191,820 $204,242
Accrued expenses 61,660 60,960
Unfunded portion of contract financing
receivable 23,375 15,697
Lines of credit - 16,207
--------- ---------
Total current liabilities 276,855 297,106
Lines of credit - -
COMMITMENTS AND CONTINGENCIES
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; 19,499 issued in 2004
and 19,262 issued and outstanding in 2003 195 193
Additional paid-in capital 233,768 227,338
Treasury stock, at cost, 1,606 shares (24,010) -
Retained earnings (deficit) (61,453) (77,738)
Accumulated other comprehensive income
(loss) 4,993 (2,209)
--------- ---------
Total shareholders' equity 153,493 147,584
--------- ---------
Total liabilities and shareholders' equity $430,348 $444,690
========= =========
BRIGHTPOINT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Three Months Ended Year Ended
December 31, December 31,
----------------- -----------------
2004 2003 2004 2003
-------- -------- -------- --------
(Unaudited)
Operating activities
Net income $8,141 $5,416 $16,285 $11,729
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and
amortization 2,839 3,041 10,815 12,733
Amortization of debt
discount - - - 33
Facility consolidation
charge (21) 1,000 (236) 5,461
Pledged cash requirements 2,828 (118) 3,212 (2,308)
Change in deferred taxes 609 2,010 609 2,010
Discontinued operations 607 796 6,188 3,418
Net cash provided by (used
in) discontinued
operations 252 (619) (1,290) (2,985)
Loss on debt extinguishment - - - 365
Income tax benefits from
exercise of stock options 3,983 334 5,418 445
Minority interest - 24 - 24
Changes in operating assets
and liabilities, net of
effects from acquisitions and
divestitures:
Accounts receivable (28,457) 37,341 (15,678) (4,306)
Inventories (21,621) 1,710 2,100 (27,575)
Other operating assets 2,124 5,149 (1,412) 806
Accounts payable and
accrued expenses 28,309 (29,750) (18,370) 55,677
-------- -------- -------- --------
Net cash provided by (used in)
operating activities (407) 26,334 7,641 55,527
Investing activities
Capital expenditures (3,228) (2,774) (8,343) (6,057)
Purchase acquisitions, net of
cash acquired (390) (908) (1,634) (2,880)
Cash effect of divestitures - - 576 1,328
Decrease (increase) in funded
contract financing receivables (4,607) (681) 4,398 5,887
Decrease (increase) in other
assets (1,053) (408) (920) 154
-------- -------- -------- --------
Net cash used in investing
activities (9,278) (4,771) (5,923) (1,568)
Financing activities
Purchases of treasury stock (4,013) - (24,010) -
Net proceeds (payments) on credit
facilities (552) 9,235 (16,500) 2,761
Pledged cash requirements - (5,000) 5,000 (5,000)
Repurchase of convertible notes - - - (11,980)
Proceeds from common stock
issuances under employee stock
option and purchase plans 453 11,179 1,013 12,383
-------- -------- -------- --------
Net cash provided by (used in)
financing activities (4,112) 15,414 (34,497) (1,836)
Effect of exchange rate changes
on cash and cash equivalents 5,997 281 6,020 2,958
-------- -------- -------- --------
Net increase (decrease) in cash
and cash equivalents (7,800) 37,258 (26,759) 55,081
Cash and cash equivalents at
beginning of period 79,920 61,621 98,879 43,798
-------- -------- -------- --------
Cash and cash equivalents at end
of period $72,120 $98,879 $72,120 $98,879
======== ======== ======== ========
Supplemental Information
(Amounts in thousands)
Revenue and Wireless Devices Handled
Three Months Ended
---------------------------------------------------
December Percent December Percent September Percent
31, of 31, of 30, of
2004 Total 2003 Total 2004 Total
-------- ------- -------- ------- --------- -------
Wireless Devices
Handled by Division:
The Americas 6,521 75% 3,746 61% 4,688 70%
Asia-Pacific 1,776 20% 2,169 35% 1,669 25%
Europe 452 5% 239 4% 301 5%
------- ------- ------- ------- ------- -------
Total 8,749 100% 6,154 100% 6,658 100%
======= ======= ======= ======= ======= =======
Wireless Devices Handled:
Distribution 2,663 30% 3,240 53% 2,469 37%
Logistics
services 6,086 70% 2,914 47% 4,189 63%
------- ------- ------- ------- ------- -------
Total 8,749 100% 6,154 100% 6,658 100%
======= ======= ======= ======= ======= =======
Revenue by Division:
The Americas $138,373 27% $141,319 26% $126,492 28%
Asia-Pacific 243,347 48% 301,779 57% 231,172 51%
Europe 124,675 25% 91,287 17% 96,454 21%
------- ------- ------- ------- ------- -------
Total $506,395 100% $534,385 100% $454,118 100%
======== ======= ======== ======= ======== =======
Revenue by Service Line:
Product
distribution $413,696 82% $471,719 88% $369,962 81%
Logistics
services 92,699 18% 62,666 12% 84,156 19%
------- ------- ------- ------- ------- -------
Total $506,395 100% $534,385 100% $454,118 100%
======== ======= ======== ======= ======== =======
Y-o-Y Sequential
change change
Q4 2003 to Q3 2004 to
Q4 2004 Q4 2004
----------- ----------
Wireless Devices
Handled by Division:
The Americas 74% 39%
Asia-Pacific (18%) 6%
Europe 89% 50%
----------- ----------
Total 42% 31%
=========== ==========
Wireless Devices Handled:
Distribution (18%) 8%
Logistics services 109% 45%
----------- ----------
Total 42% 31%
=========== ==========
Revenue by Division:
The Americas (2%) 9%
Asia-Pacific (19%) 5%
Europe 37% 29%
----------- ----------
Total (5%) 12%
=========== ==========
Revenue by Service Line:
Product
distribution (12%) 12%
Logistics
services 48% 10%
----------- ----------
Total (5%) 12%
=========== ==========
Year Ended Y-o-Y
--------------------------------- change
December Percent December Percent 2003
31, of 31, of to
2004 Total 2003 Total 2004
-------- ------- -------- ------- ------
Wireless Devices
Handled by Division:
The Americas 18,885 70% 12,403 62% 52%
Asia-Pacific 6,956 26% 6,940 34% 0%
Europe 1,166 4% 791 4% 47%
---------- ---- ---------- ---- ----
Total 27,007 100% 20,134 100% 34%
========== ==== ========== ==== ====
Wireless Devices Handled:
Distribution 10,255 38% 10,632 53% (4%)
Logistics services 16,752 62% 9,502 47% 76%
---------- ---- ---------- ---- ----
Total 27,007 100% 20,134 100% 34%
========== ==== ========== ==== ====
Revenue by Division:
The Americas $505,135 27% $469,618 27% 8%
Asia-Pacific 968,150 52% 995,798 56% (3%)
Europe 392,302 21% 300,960 17% 30%
---------- ---- ---------- ---- ----
Total $1,865,587 100% $1,766,376 100% 6%
========== ==== ========== ==== ====
Revenue by Service Line:
Product distribution $1,559,109 84% $1,540,471 87% 1%
Logistics services 306,478 16% 225,905 13% 36%
---------- ---- ---------- ---- ----
Total $1,865,587 100% $1,766,376 100% 6%
========== ==== ========== ==== ====
Supplemental Information (continued)
(Amounts in thousands)
Revenue Change Analysis
Q4 2003 to
Q4 2004 2003 to 2004
-------------- --------------
Units Revenue Units Revenue
----- ------- ----- -------
Effect of change in wireless devices
handled on revenue (volume) 42% 36% 34% 29%
Mix shift from product distribution to
fee-based logistics services (49%) (30%)
Effect of foreign currency 3% 4%
Other 5% 3%
------- --------
Overall percentage change in revenue
from prior periods (5%) 6%
======= ========
Operating Income by Division:
Three Months Ended
------------------------------------------------
December December September
31, OI 31, OI 30, OI
2004 Margin 2003 Margin 2004 Margin
-------- ------ -------- ------ --------- ------
The Americas $8,116 5.9% $2,683 1.9% $6,850 5.4%
Asia-Pacific 3,034 1.2% 4,654 1.5% 1,814 0.8%
Europe 1,775 1.4% 1,763 1.9% (305) (0.3%)
-------- ------ -------- ------ --------- ------
Total $12,925 2.6% $9,100 1.7% $8,359 1.8%
======== ====== ======== ====== ========= ======
Y-o-Y Sequential
change change
Q4 2003 to Q3 2004 to
Q4 2004 Q4 2004
------------- ----------
The Americas 202% 18%
Asia-Pacific (35%) 67%
Europe 1% N/A
------------- ----------
Total 42% 55%
============= ==========
Year Ended Y-o-Y
---------------------------------------- change
2003
December 31, OI December 31, OI to
2004 Margin 2003 Margin 2004
------------ ------- ------------ ------ ------
The Americas $21,469 4.3% $3,620 0.8% 493%
Asia-Pacific 9,410 1.0% 14,088 1.4% (33%)
Europe 3,355 0.9% 5,987 2.0% (44%)
------------ ------- ------------ ------ ------
Total $34,234 1.8% $23,695 1.3% 44%
============ ======= ============ ====== ======
Cash Conversion Cycle Days
Management utilizes the cash conversion cycle days metric and its
components to evaluate our ability to manage our working capital and
its cash flow performance. Cash conversion cycle days and its
components for the quarters ending December 31, 2004 and 2003, and
September 30, 2004 were as follows:
Three Months Ended
---------------------------
December December September
31, 31, 30,
2004 2003 2004
-------- -------- ---------
Days sales outstanding in accounts
receivable 24 19 20
Days inventory on-hand 22 21 19
Days payable outstanding (39) (36) (34)
-------- -------- ---------
Cash Conversion Cycle Days 7 4 5
======== ======== =========
Supplemental Information (continued)
(Amounts in thousands)
Return on Invested Capital ("ROIC")
We use ROIC to measure the effectiveness of our use of invested
capital to generate profits. ROIC for the quarters and trailing four
quarters ending December 31, 2004 and 2003, and September 30, 2004,
was as follows:
Three Months Ended Trailing Four Quarters Ended
----------------------------- ---------------------------
Dec. 31, Dec. 31, Sept. 30, Dec. 31, Dec. 31, Sept. 30,
2004 2003 2004 2004 2003 2004
-------- -------- -------- -------- -------- --------
Operating
income after taxes:
Operating
income from
continuing
operations $12,925 $9,100 $8,359 $34,234 $23,695 $30,408
Plus:
Facility
consolidation
charge (21) 1,000 - (236) 5,461 785
Less:
Estimated
income taxes (1) (3,704) (2,800) (2,586) (9,723) (7,027) (8,824)
-------- -------- -------- -------- -------- --------
Operating
income after
taxes $9,200 $7,300 $5,773 $24,275 $22,129 $22,369
======== ======== ======== ======== ======== ========
Invested capital:
Debt $- $16,207 $362 $- $16,207 $362
Shareholders'
equity 153,493 147,584 139,517 153,493 147,584 139,517
-------- -------- -------- -------- -------- --------
Invested
capital $153,493 $163,791 $139,879 $153,493 $163,791 $139,879
======== ======== ======== ======== ======== ========
Average
invested
capital (2) $146,686 $148,324 $135,450 $147,329 $137,463 $143,202
======== ======== ======== ======== ======== ========
ROIC (3) 25% 20% 17% 16% 16% 16%
======== ======== ======== ======== ======== ========
(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. Average invested capital for
the trailing four quarter periods represents the average of the
ending invested capital amounts for the current and four prior
quarter period ends.
(3) ROIC is calculated by dividing operating income after taxes by
average invested capital. ROIC for quarterly periods is stated on
an annualized basis and is calculated by dividing operating income
after taxes by average invested capital and multiplying the result
by four (4) to state ROIC on an annualized basis.
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