Brightpoint Reports Fourth Quarter and Year End 2005 Financial Results.PLAINFIELD, Ind. -- Brightpoint, Inc. (NASDAQ:CELL): For the Fourth Quarter of 2005 --Revenue of $631 million, an increase of 33% from the fourth quarter of 2004 --Income from continuing operations of $11.8 million, or $0.28 per diluted share compared to $10.3 million, or $0.25 per diluted share in the fourth quarter of 2004 --$14.2 million of cash flow provided by operating activities during the fourth quarter of 2005. Balance sheet remained strong: unrestricted cash of $106 million, $186 million in Liquidity --14.2 million wireless devices handled, an increase of approximately 64% from the fourth quarter of 2004, primarily comprised of a 77% increase in fee-based logistic services unit volumes and a 33% increase in distribution unit volumes --Net income of $8.9 million, or $0.21 per diluted share compared to net income of $7.5 million, or $0.18 per diluted share in the fourth quarter of 2004 --Loss of $3.0 million, or $0.07 per diluted share in discontinued operations including approximately $2.2 million of non-cash loss on disposal relating to the sale of the Company's operations in France For the Year Ended December 31, 2005 --Revenue of $2.1 billion, an increase of 21% from 2004 --Income from continuing operations of $31.9 million, or $0.77 per diluted share compared to $23.8 million, or $0.55 per diluted share in 2004 --Net income of $10.4 million, or $0.25 per diluted share compared to net income of $13.8 million, or $0.32 per diluted share for the year. Net income for the year 2005 included a $13.8 million non-cash impairment charge to the value of goodwill and other intangibles related to the Company's former operations in France --42.1 million wireless devices handled, an increase of approximately 57% from 2004, primarily comprised of an 81% increase in fee-based logistic services unit volumes and a 17% increase in distribution unit volumes --$69.0 million of cash flow provided by operating activities for 2005 Brightpoint, Inc. (NASDAQ:CELL) reported its financial results for the fourth quarter and year ended December 31, 2005. Unless otherwise noted, amounts pertain to the fourth quarter of 2005. Additionally, the results of our France operations have been reclassified to "discontinued operations" for all periods presented. In September and December 2005, the Company effected 3-for-2 common stock splits in the form of 50% stock dividends, which the Company's Board of Directors approved. Per share amounts for all periods presented in this report have been adjusted to reflect the 3-for-2 common stock splits.
SUMMARY FINANCIAL RESULTS
(Amounts in thousands, except per share data)
Three Months Ended Twelve Months Ended
--------------------- -----------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2005 2004 2005 2004
---------- ---------- ----------- -----------
(Unaudited) (Unaudited)
Wireless devices handled 14,230 8,694 42,081 26,827
Revenue $630,634 $474,095 $2,140,177 $1,772,424
Gross profit $ 43,615 $ 33,602 $ 132,012 $ 104,764
Gross margin 6.9% 7.1% 6.2% 5.9%
Selling, general and
administrative expenses $ 27,401 $ 18,568 $ 86,726 $ 69,433
Operating income from
continuing operations $ 16,214 $ 15,055 $ 44,353 $ 35,567
Income from continuing
operations $ 11,832 $ 10,262 $ 31,918 $ 23,826
Discontinued operations $ (2,982) $ (2,782) $ (21,478) $ (10,056)
Net income $ 8,850 $ 7,480 $ 10,440 $ 13,770
Diluted per share:
Income from continuing
operations $ 0.28 $ 0.25 $ 0.77 $ 0.55
Discontinued operations $ (0.07) $ (0.07) $ (0.52) $ (0.23)
Net income $ 0.21 $ 0.18 $ 0.25 $ 0.32
Robert Laikin, CEO, said, "I am pleased with our performance in the fourth quarter and 2005 overall. I believe that 2006 has the potential, given all the positive recent market factors, to be a record year for Brightpoint in the number of wireless devices handled. I currently believe that the range of handsets sold in the global wireless industry in 2006 will be approximately 900 million to 1 billion." "We continue to focus our attention on growing earnings while maintaining a strong balance sheet which is evidenced by our increase in cash flow from operations and our improvement in the cash conversion cycle," said Tony Boor, Brightpoint's Chief Financial Officer. Brightpoint experienced a 64% year-over-year increase in wireless devices handled during the fourth quarter of 2005 and year-over-year revenue growth for the quarter of 33%. Fee-based logistic services units handled increased 77% while distribution units handled increased 33%. Fee-based logistic services typically generate significantly less revenue per transaction than distribution sales. The percentage increase in revenue was less than the growth rate in wireless devices handled due to a sales mix-shift from units handled through distribution to fee-based logistic services and a reduction in average fulfillment fee per unit. Handset units handled in logistic services grew at a faster pace than revenue as our Americas division experienced a shift in services provided, which contributed to a decrease in the average fulfillment fee per unit. Our logistic services revenue is derived from a mix of services with different fee structures that range from full pallet pick, pack and ship services to higher value and more complex software loading, kitting, customized packaging and individual handset fulfillment services. While fee structures are higher for more complex services, we generally strive to maintain a consistent profit margin for each service. This is substantiated by the improvement in our logistic services gross margin for the quarter despite the decline in average fulfillment fee per unit. In addition, the average fee per unit for logistic services was diminished by lower fees for services provided to certain customers due to volume discounts earned on their increased activities. The growth in logistic services units handled resulted in the percentage of wireless devices handled related to fee-based logistic service agreements to increase to 76% of total wireless devices handled as compared to 70% of the total wireless devices handled in the fourth quarter of 2004. Our Americas and Asia Pacific divisions were significant contributors to our unit growth with 75% and 31% year-over-year increases in wireless devices handled, respectively. The growth in unit volumes in the Americas division was primarily driven by increased demand due to market growth of fee based logistic services customers (such as, Alltel, COMCEL, Cricket Communications, Metro PCS, Sprint Nextel, Tracfone and Virgin Mobile) and increased demand for, and availability of LG, Nokia and Samsung products to our distribution channels. The unit volume increase in the Asia Pacific division was mainly due to increased handset distribution by our operations in India. Gross margin decreased from 7.1% in the fourth quarter of 2004 to 6.9% in the fourth quarter of 2005. The 0.2 percentage point decrease in gross margin was primarily the result of a decrease in distribution margin in the Asia Pacific region. The decrease in distribution margin in the Asia Pacific region was due to increased costs as a result of estimated non-recoverable value added taxes. In addition, India's revenue was a larger proportion of the region's total revenue and has had lower margins than our other businesses in the region. Gross profit increased by $10.0 million, or 30% in the fourth quarter of 2005 as compared to the fourth quarter of 2004. The increase in gross profit was primarily the result of the increased revenue and an increase in the logistic services margin partially offset by a decrease in distribution margins. Logistic services gross margin increased 2.3 percentage points due to operating efficiencies gained through leveraging existing capacity in our Americas division. Selling, General and Administrative ("SG&A") expenses increased 48% from the fourth quarter of 2004 in comparison with a 33% increase in revenue and a 30% increase in gross profit. As a percentage of revenue, SG&A expense increased from 3.9% in the fourth quarter of 2004 to 4.3% in the fourth quarter of 2005. The increase in SG&A was primarily due to a $3.5 million increase to support overall growth in unit volumes, a $2.7 million increase in executive incentive compensation related to performance, a $1.2 million increase of non cash equity compensation, a $0.5 million increase to support our investment in Advance Wireless Services (AWS) in the Americas and $0.4 million of other non cash compensation. Operating income from continuing operations ("Operating Income") was $16.2 million, an increase of 8% from the fourth quarter of 2004. The year-over-year growth in Operating Income for the quarter was driven by a $10.0 million increase in gross profit partially offset by an $8.8 million increase in SG&A expenses. The effective income tax rate was 23.8% as compared to 30.7% in the fourth quarter of 2004. The decrease in the effective income tax rate is due primarily to recognition of certain deferred tax assets not previously recognized. The loss of $3.0 million from discontinued operations consisted of approximately $2.2 million of non-cash loss on disposal relating to the sale of the Company's operations in France. In the third quarter of 2005, the Company announced its intention to sell its operations in France. On December 16, 2005, the Company sold all of the equity securities of Brightpoint France SARL (Brightpoint France) to an entity formed by the former managing director of Brightpoint France for an aggregate purchase price of $1.6 million, of which, approximately $0.1 million has been received, and with approximately $1.5 million payable in annual installments on each of the first, second, and third anniversaries following the date of closing. Cash and cash equivalents (unrestricted) were $106 million at December 31, 2005, a decrease of $6.7 million from September 30, 2005. The decrease in cash and cash equivalents (unrestricted) from September 30, 2005 was primarily the result of $4.7 million in capital expenditures, $8.7 million of cash used for contract financing, $3.2 million due to the effect of exchange rates and $6.9 million for the repurchase of Common Stock largely offset by $14.2 million in cash flow from operations. Cash flow from operations was reduced by approximately $4.5 million due to the Company's decision to discontinue the sale of trade receivables to third party financial institutions in Sweden and Norway. At December 31, 2005, the balance of trade receivables sold to third parties was approximately $15.7 million. The Company expects the unwinding of these trade receivable sales to result in a negative impact on cash flow from operations in the first quarter of 2006. The cash conversion cycle for the fourth quarter of 2005 was 5 days, an increase of 1 day from the third quarter of 2005 and a decrease of 1 day from the fourth quarter of 2004. Our Liquidity (unrestricted cash and unused borrowing availability) was approximately $186 million as of December 31, 2005, compared to approximately $202 million as of September 30, 2005. Annualized quarterly return on invested capital from operations ("ROIC") was 34% for the quarter, up from 29% in the fourth quarter of 2004 and up from 22% in the third quarter of 2005. On a trailing four-quarter basis, ROIC was 22% as of December 31, 2005. Calculations of ROIC can be found at the end of this earnings release. During the fourth quarter of 2005, the Company repurchased approximately 422 thousand shares of Common Stock at an average price of $16.54 for a total of $6.9 million pursuant to the amended share repurchase plan announced on November 11, 2005 ("Amended Share Repurchase Plan"). As of December 31, 2005, $18.1 million of share repurchases are available to be made under our Amended Share Repurchase Plan which is currently scheduled to expire on December 31, 2007. Brightpoint, Inc. (NASDAQ:CELL) is a global leader in the distribution of wireless devices and in providing customized logistic services to the wireless industry. In 2005, Brightpoint handled 42 million wireless devices globally. Brightpoint's innovative services include distribution, channel development, fulfillment, product customization, eBusiness solutions, and other outsourced services that integrate seamlessly with its customers. Brightpoint's effective and efficient platform allows its customers to benefit from quickly deployed, flexible, and cost effective solutions. Additional information about Brightpoint can be found on its website at www.brightpoint.com, or by calling its toll-free Information and Investor Relations line at 877-IIR-CELL (877-447-2355). Certain information in this press release may contain forward-looking statements regarding future events or the future performance of the Company. These statements are only predictions and actual events or results may differ materially. Please refer to the documents the Company files, from time to time, with the Securities and Exchange Commission; specifically, the Company's most recent Form 10-K/A and Form 10-Q and the cautionary statements contained in Exhibit 99.1 thereto. These documents contain and identify important risk factors that could cause the actual results to differ materially from those contained in or implied by these forward-looking statements. These risk factors include, without limitation, (i) dependence upon principal suppliers and availability and price of wireless products; (ii) loss of significant customers or a reduction in prices we charge these customers; (iii) possible difficulties collecting our accounts receivable; (iv) lack of demand for our products and services in certain markets and our inability to maintain margins; (v) our ability to absorb, through revenue growth, the increasing operating costs that we have incurred and continue to incur in connection with our activities and the execution of our strategy for growth; (vi) risks of foreign operations, including currency, trade restrictions and political risks in our foreign markets; (vii) factors that could affect forward-looking statements relating to the resolution of the material weakness with respect to internal controls discussed in Item 9A of the Company's Annual Report on Form 10-K/A, as amended, including, among other things, the Company's ability to design and maintain policies and procedures which enable the Company to avoid any recurrence of the matters which gave rise to the material weakness; (viii) uncertainty whether wireless equipment manufacturers and network operators will continue to outsource aspects of their business to us; (ix) possible adverse effect on demand for our products or services resulting from consolidation of wireless network operator customers; (x) our ability to comply with Section 404 of the Sarbanes-Oxley Act of 2002; (xi) ability to respond to rapid technological changes in the wireless communications and data industry; (xii) access to or the cost of increasing amounts of capital, trade credit or other financing and; (xiii) effect of hostilities or terrorist attacks on our operations. Because of the aforementioned uncertainties affecting our future operating results, past performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate future results or trends. The words "believe," "expect," "anticipate," "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 OPERATIONS
(Amounts in thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
(Unaudited) (Unaudited)
--------------------- -----------------------
2005 2004 2005 2004
---------- ---------- ----------- -----------
Revenue
Distribution revenue $542,083 $402,793 $1,845,983 $1,523,717
Logistic services
revenue 88,551 71,302 294,194 248,707
---------- ---------- ----------- -----------
Total revenue 630,634 474,095 2,140,177 1,772,424
Cost of revenue
Cost of distribution
revenue 518,869 383,935 1,774,612 1,464,119
Cost of logistic
services revenue 68,150 56,558 233,553 203,541
---------- ---------- ----------- -----------
Total cost of revenue 587,019 440,493 2,008,165 1,667,660
Gross profit 43,615 33,602 132,012 104,764
Selling, general and
administrative expenses 27,401 18,568 86,726 69,433
Facility consolidation
charge (benefit) - (21) 933 (236)
---------- ---------- ----------- -----------
Operating income from
continuing operations 16,214 15,055 44,353 35,567
Interest, net (302) (174) (146) (37)
Net other expenses 992 424 1,523 1,526
---------- ---------- ----------- -----------
Income from continuing
operations before income
taxes 15,524 14,805 42,976 34,078
Income tax expense 3,692 4,543 11,058 10,252
---------- ---------- ----------- -----------
Income from continuing
operations 11,832 10,262 31,918 23,826
Discontinued operations,
net of tax:
Loss from discontinued
operations (773) (1,928) (20,600) (4,343)
Loss on disposal of
discontinued
operations (2,209) (854) (878) (5,713)
---------- ---------- ----------- -----------
Total discontinued
operations (2,982) (2,782) (21,478) (10,056)
---------- ---------- ----------- -----------
Net income $8,850 $7,480 $10,440 $13,770
========== ========== =========== ===========
Basic per share:
Income from
continuing
operations $0.29 $0.25 $0.80 $0.57
Discontinued
operations (0.07) (0.07) (0.54) (0.24)
---------- ---------- ----------- -----------
Net income $0.22 $0.18 $0.26 $0.33
========== ========== =========== ===========
Diluted per share:
Income from
continuing
operations $0.28 $0.25 $0.77 $0.55
Discontinued
operations (0.07) (0.07) (0.52) (0.23)
---------- ---------- ----------- -----------
Net income $0.21 $0.18 $0.25 $0.32
========== ========== =========== ===========
Weighted average common
shares outstanding:
Basic 40,390 40,406 39,962 41,742
========== ========== =========== ===========
Diluted 41,984 41,781 41,381 43,131
========== ========== =========== ===========
BRIGHTPOINT, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share data)
December 31, December 31,
2005 2004
------------- ------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $106,053 $72,120
Pledged cash 168 13,830
Accounts receivable (less allowance for
doubtful accounts of $3,621 and $6,215,
respectively) 168,004 148,321
Inventories 124,864 110,089
Contract financing receivable 28,749 14,022
Other current assets 22,623 23,132
------------- ------------
Total current assets 450,461 381,514
Property and equipment, net 27,989 27,503
Goodwill and other intangibles, net 6,707 21,981
Other assets 2,667 6,586
------------- ------------
Total assets $487,824 $437,584
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $232,258 $201,621
Accrued expenses 64,494 52,995
Unfunded portion of contract financing
receivable 32,373 23,373
------------- ------------
Total current liabilities 329,125 277,989
Total long-term liabilities 9,657 8,858
------------- ------------
Total liabilities 338,782 286,847
------------- ------------
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; 46,563 and 43,873
issued in 2005 and 2004, respectively; 466 439
Additional paid-in capital 258,536 233,524
Unearned compensation (12,125) -
Treasury stock, at cost, 5,094 and 3,613
shares in 2005 and 2004, respectively (39,928) (24,010)
Retained deficit (53,528) (63,968)
Accumulated other comprehensive income
(loss) (4,379) 4,752
------------- ------------
Total shareholders' equity 149,042 150,737
------------- ------------
Total liabilities and shareholders' equity $487,824 $437,584
============= ============
BRIGHTPOINT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Three Months Ended Twelve Months Ended
December 31, December 31,
(Unaudited) (Unaudited)
------------------- -------------------
2005 2004 2005 2004
--------- ------------------- ---------
Operating activities
Net income $8,850 $7,480 $10,440 $13,770
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
amortization 3,166 2,597 11,101 10,070
Facility consolidation
charge (benefit) - (21) 933 (236)
Restricted cash
requirements (2) 2,828 13,662 3,212
Non-cash compensation 1,229 - 2,837 -
Discontinued operations 2,982 2,782 21,478 10,056
Other non cash 401 - 401 -
Net cash used by
discontinued operations (601) (2,671) (2,085) (1,674)
Tax benefit of incentive
stock option exercises 3,141 3,983 5,377 5,418
Change in deferred income
taxes 473 1,698 (390) 1,792
Changes in operating
assets and liabilities,
net of effects from
acquisitions and
divestitures:
Accounts receivable,
net (37,367) (23,905) (47,778) (16,265)
Inventories (27,302) (21,779) (23,656) 1,476
Other operating
assets 7,160 4,937 (6,183) (590)
Accounts payable and
accrued expenses 52,052 21,764 82,823 (19,287)
--------- --------- --------- ---------
Net cash provided by (used in)
operating activities 14,182 (307) 68,960 7,742
Investing activities
Capital expenditures (4,717) (2,970) (12,649) (8,029)
Cash effect of divestitures - - - 576
Purchase acquisitions, net of
cash acquired (56) (203) (413) (1,447)
Net investing cash used in
discontinued operation (61) (487) (1,097) (543)
Decrease in funded contract
financing receivables (8,730) (4,607) (5,285) 4,398
Decrease (increase) in other
assets 1,225 (1,011) 3,945 (878)
--------- --------- --------- ---------
Net cash used in investing
activities (12,339) (9,278) (15,499) (5,923)
Financing activities
Purchases of treasury stock (6,914) (4,013) (15,918) (24,010)
Net payments on credit
facilities - (179) - (16,462)
Pledged cash requirements - - - 5,000
Net financing cash used in
discontinued operations - (373) - (38)
Proceeds from common stock
issuances under employee stock
option and purchase plans 1,497 453 4,750 1,013
--------- --------- --------- ---------
Net cash used in financing
activities (5,417) (4,112) (11,168) (34,497)
Effect of exchange rate changes
on cash and cash equivalents (3,192) 5,897 (8,360) 5,919
--------- --------- --------- ---------
Net increase (decrease) in cash
and cash equivalents (6,766) (7,800) 33,933 (26,759)
Cash and cash equivalents at
beginning of period 112,819 79,920 72,120 98,879
--------- --------- --------- ---------
Cash and cash equivalents at
end of period $106,053 $72,120 $106,053 $72,120
========= ========= ========= =========
Supplemental Information
(Amounts in thousands)
Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA")
Three Months Ended
---------------------------------------
December 31, December 31, September 30,
2005 2004 2005
------------ ------------ -------------
Net income (loss) (1) $8,850 $7,480 $(6,182)
Net interest expense (1) (83) 79 492
Income taxes (1) 3,692 3,407 4,574
Depreciation and amortization
(1) 3,230 2,839 2,724
------------ ------------ -------------
EBITDA $15,689 $13,805 $1,608
============ ============ =============
(1) Includes discontinued operations
EBITDA is a non-GAAP financial measure. Management
believes EBITDA provides it with an indicator of how much cash the
Company generates, excluding non-cash charges and any changes in
working capital. Management also reviews and utilizes the entire
statement of cash flows to evaluate cash flow performance.
Cash Conversion Cycle Days
Management utilizes the cash conversion cycle days metric
and its components to evaluate the Company's ability to manage its
working capital and its cash flow performance. Cash conversion
cycle days and its components for the quarters ending
December 31, 2005 and 2004, and September 30, 2005 were as follows:
Three Months Ended
---------------------------------------
December 31, December 31, September 30,
2005 2004 2005
------------ ------------ -------------
Days sales outstanding in
accounts receivable 23 22 21
Days inventory on-hand 20 23 18
Days payable outstanding (38) (39) (35)
------------ ------------ -------------
Cash Conversion Cycle
Days 5 6 4
============ ============ =============
Supplemental Information (continued)
(Amounts in thousands)
Return on Invested Capital ("ROIC")
The Company uses ROIC to measure the effectiveness of its use of
invested capital to generate profits. ROIC for the quarters and
trailing four quarters ending December 31, 2005 and 2004, and
September 30, 2005, was as follows:
Three Months Ended
---------------------------------------
December 31, December 31, September 30,
2005 2004 2005
------------ ------------ -------------
Operating income after taxes:
Operating income from
continuing operations $16,214 $15,055 $11,291
Plus: Facility consolidation
charge (benefit) -- (21) (270)
Less: Estimated income taxes
(1) (3,856) (4,615) (2,748)
------------ ------------ -------------
Operating income after taxes $12,358 $10,419 $8,273
============ ============ =============
Invested capital:
Debt $-- $-- $--
Shareholders' equity 149,042 150,737 142,792
------------ ------------ -------------
Invested capital $149,042 $150,737 $142,792
============ ============ =============
Average invested capital (2) $145,917 $144,363 $147,790
============ ============ =============
ROIC (3) 34% 29% 22%
============ ============ =============
Trailing Four Quarters Ended
---------------------------------------
December 31, December 31, September 30,
2005 2004 2005
------------ ------------ -------------
Operating income after taxes:
Operating income from
continuing operations $44,353 $35,567 $43,193
Plus: Facility consolidation
charge (benefit) 933 (236) 911
Less: Estimated income taxes
(1) (11,728) (10,633) (12,487)
------------ ------------ -------------
Operating income after taxes $33,556 $24,698 $31,617
============ ============ =============
Invested capital:
Debt $-- $-- $--
Shareholders' equity 149,042 150,737 142,792
------------ ------------ -------------
Invested capital $149,042 $150,737 $142,792
============ ============ =============
Average invested capital (2) $149,567 $145,977 $147,356
============ ============ =============
ROIC (3) 22% 17% 22%
============ ============ =============
(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.
|
|
||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion