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Industry: Email Alert RSS FeedBrightpoint Reports Second Quarter Financial Results - Company Financial Information
Cambridge Telcom Report, August 9, 1999
-- Revenue from recurring operations of $371 million for the quarter ended June 30, 1999
-- Net income per share from recurring operations of $0.03 for the quarter ended June 30, 1999
-- Previously-announced restructuring plan results in non-recurring charge of $85 million recognized in the quarter ended June 30, 1999
Brightpoint, Inc. (NASDAQ:CELL) reported its financial results for the quarter ended June 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.
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RECURRING OPERATIONS As a result of the Plan, the Company has eliminated, or is in the process of eliminating, operations in Argentina, Poland, Taiwan and the United Kingdom and has terminated its two joint operations in China. Recurring operations include all operations except those that have been eliminated or terminated. Recurring operations also exclude the impacts of non-recurring charges recorded in the second quarter of 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 OperationsQuarter Ended Six Months Ended
(U.S. Dollars, in June 30 June 30
thousands)
1998 1999 Change 1998 1999 Change
--------------------------------------------------
Revenue $262,004 $370,564 41% $524,061 $684,442 31%
Cost of revenue 235,855 341,233 45% 472,272 628,682 33%
------------------ -----------------
Gross profit 26,149 29,331 12% 51,789 55,760 8%
Selling, general and
administrative
expenses 11,238 23,384 108% 23,831 44,611 87%
------------------ -----------------
Operating income 14,911 5,947 (60%) 27,958 11,149 (60%)
Interest and other 2,412 3,412 41% 4,881 6,375 31%
------------------ -----------------
Income before income
taxes 12,499 2,535 (80%) 23,077 4,774 (79%)
Income taxes 3,750 1,149 (69%) 6,923 1,910 (72%)
------------------ -----------------
Net income $ 8,749 $ 1,386 (84%) $ 16,154 $ 2,864 (82%)
------------------ -----------------
------------------ -----------------
Net income per
share (diluted) $ 0.16 $ 0.03 (81%) $ 0.30 $ 0.05 (83%)
------------------ -----------------
------------------ -----------------
Weighted average
shares outstanding
(diluted) 53,725 53,403 53,580 53,928
------------------ -----------------
------------------ -----------------
>TB
Revenue. Revenue from recurring operations in the quarter ended June 30,
1999 increased 41%, compared to revenue generated by the same entities in
the second quarter of 1998. For the six months ended June 30, 1999,
revenue from recurring operations increased 31% from the same period in
the prior year.
>TB
Revenue From Recurring Operations By Division
(U.S. Dollars, in thousands)
Quarter Ended June 30
---------------------------------------
Percent Percent
1998 of Total 1999 of Total
---------------------------------------
Asia-Pacific $84,782 33% $64,871 18%
Europe, Middle East
and Africa 50,416 19% 76,545 21%
North America 92,268 35% 164,212 44%
Latin America 34,538 13% 64,936 17%
---------------------------------------
Total $262,004 100% $370,564 100%
---------------------------------------
---------------------------------------
Second Quarter Percent of Total
Year-to-Year Six Months Ended June 30
Change 1998 1999
---------------------------------------
Asia-Pacific (23%) 39% 18%
Europe, Middle East
and Africa 52% 16% 20%
North America 78% 32% 47%
Latin America 88% 13% 15%
---------------------------------------
Total 41% 100% 100%
---------------------------------------
---------------------------------------
Revenue From Recurring Operations By Service Line
(U.S. Dollars, in thousands)
Quarter Ended June 30
---------------------------------------
Percent Percent
1998 of Total 1999 of Total
---------------------------------------
Sales of wireless
handsets $199,360 76% $271,955 73%
Sales of wireless
accessories 26,902 10% 54,915 15%
Integrated
logistics services 35,742 14% 43,694 12%
---------------------------------------
Total $262,004 100% $370,564 100%
---------------------------------------
---------------------------------------
Second Quarter Percent of Total
Year-to-Year Six Months Ended June 30
Change 1998 1999
---------------------------------------
Sales of wireless
handsets 36% 80% 73%
Sales of wireless
accessories 104% 9% 15%
Integrated
logistics services 22% 11% 12%
---------------------------------------
Total 41% 100% 100%
---------------------------------------
---------------------------------------
>TB
Gross Margin. The gross margins in the recurring operations for the
quarters ended June 30, 1999 and 1998 were 7.9% and 10.0%, respectively,
and gross margins were 8.1% and 9.9% for the six months ended June 30,
1999 and 1998, respectively. Gross margins were lower due primarily to
continued pressure on handset margins in certain markets and increased
costs of revenue.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses incurred in recurring operations during the second
quarter of 1999 were $23,384,000, an increase of 108% from $11,238,000 in
the second quarter of 1998, reflecting the increased cost of serving
current and anticipated integrated logistics services customers.
Increasing personnel costs was the largest contributor to the increase in
selling, general and administrative costs. Personnel costs increased due
to a 40% increase in headcount from approximately 1,000 employees in the
second quarter of 1998 to approximately 1,400 employees in the second
quarter of 1999. For the six months ended June 30, 1999, selling, general
and administrative expenses were $44,611,000, an increase of 87% from the
same period in the prior year due to the same factors impacting the second
quarter.
Operating Margin. Operating margins (income from operations, as a percent
of revenue) from recurring operations for the second quarters ended June
30, 1999 and 1998 were 1.6% and 5.7%, respectively. Operating margins for
the six months ended June 30, 1999 and 1998 were 1.6% and 5.3%,
respectively. The decrease in operating margin 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 second quarter of 1999 was $1,386,000 compared to net income of
$8,749,000 in the second quarter of 1998. For the six months ended June
30, 1999 and 1998, net income from recurring operations was $2,864,000 and
$16,154,000, 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 $0.03 for the
second quarter of 1999 compared to net income per diluted share $0.16 for
the same period in the prior year, and $0.05 for the six months ended
June 30, 1999 and $0.30 for the same period in 1998.
Balance Sheet. As of June 30, 1999, days sales outstanding in accounts
receivable was approximately 43 days, a slight improvement from days sales
outstanding at December 31, 1998 of approximately 44 days. During the
second quarter of 1999, annualized inventory turns were approximately 11
times, consistent with the 11 turns during the fourth quarter of 1998.
Average days costs in accounts payable were 28 days for the second
quarter of 1999 and 27 days for the fourth quarter of 1998. Cash
conversion cycle days improved to 47 days from 50 days in the fourth
quarter of 1998 and 55 days in the first quarter of 1999.
The Company has recently closed on the Second Amended and Restated
Multicurrency Credit Agreement with its senior lenders. This credit
facility provides the Company, based upon a newly-instituted borrowing
base calculation, with a maximum borrowing capacity of up to $175 million,
a reduction from the prior maximum of $230 million. Interest rates under
the new facility, excluding fees, range from 175 basis points to 300
basis points above LIBOR, depending on certain leverage ratios.
NON-RECURRING OPERATIONS
The following table and discussion relate to the operations in Argentina,
Poland, Taiwan and the United Kingdom and the joint operations in China,
all of which have been, or are in the process of being, terminated or
eliminated.
>TB
Non-Recurring Operations Quarter Ended June 30
(U.S. Dollars, in thousands)
1998 1999 Change
----------------------------------
Revenue $ 67,809 $ 43,425 (36%)
Cost of revenue 63,453 44,614 (30%)
---------------------------------
Gross profit 4,356 (1,189) (127%)
Selling, general and
administrative expenses 3,363 5,339 59%
---------------------------------
Operating income 993 (6,528) (757%)
Interest and other 615 400 (35%)
---------------------------------
Income before income taxes and
minority interest 378 (6,928) (1933%)
Income taxes 113 -- (100%)
---------------------------------
Income before minority interest 265 (6,928) (2714%)
Minority interest (44) -- (100%)
---------------------------------
Net income $ 309 $ (6,928) (2342%)
---------------------------------
Net income per share (diluted) $ .01 $ (.13) (1400%)
---------------------------------
Weighted average shares
outstanding (diluted) 53,725 53,304
---------------------------------
---------------------------------
Non-Recurring Operations Six Months Ended June 30
(U.S. Dollars, in thousands)
1998 1999 Change
---------------------------------
Revenue $ 149,085 $ 102,266 (31%)
Cost of revenue 140,292 101,497 (28%)
---------------------------------
Gross profit 8,793 769 (91%)
Selling, general and
administrative expenses 5,427 11,099 105%
---------------------------------
Operating income 3,366 (10,330) (407%)
Interest and other 1,558 725 (53%)
---------------------------------
Income before income taxes and
minority interest 1,808 (11,055) (712%)
Income taxes 485 (1,404) (389%)
---------------------------------
Income before minority interest 1,323 (9,651) (829%)
Minority interest (81) (33) (59%)
---------------------------------
Net income $ 1,404 $ (9,618) (785%)
---------------------------------
---------------------------------
Net income per share (diluted) $ .03 $ (.18) (800%)
---------------------------------
---------------------------------
Weighted average shares
outstanding (diluted) 53,580 53,176
---------------------------------
---------------------------------
>TB
Revenues for non-recurring operations for the quarter ended June 30, 1999
decreased 36% to $43,425,000 from $67,809,000 in the same period of 1998.
Revenues for the six months ended June 30, 1999 decreased 31% compared to
the first half of 1998. This decrease is primarily due to the
discontinuation of the Company's trading activities.
The competitive pressures also impacted gross margins realized by the
non-recurring operations. In the second quarter of 1999, the company
realized a negative gross margin of 2.7% compared to a gross margin of
6.4% in the prior year second quarter. Gross margins for the six months
ended June 30, 1999 and 1998 were 0.1% and 5.9%, respectively.
The non-recurring operations generated a net loss in the second quarter of
1999 of $6,928,000 ($0.13 per diluted share) compared to net income in the
second quarter of 1998 of $309,000 ($0.01 per diluted share). For the
first half of 1999, the net loss was $9,618,000 ($0.18 per share) compared
to $1,404,000 ($0.03 per diluted share) for the first half of 1998. These
results are due to the declining revenues and gross margins 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. 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 previously-capitalized
organization, start-up, pre-operating and integrated logistics services
contract implementation costs incurred primarily as a part of the
Company's in-country expansion and long-term contract activity from 1996
through 1998. These costs were previously capitalized in accordance with
generally accepted accounting principles then in effect. The adjustment
for the write-off of these amounts of $14.1 million ($0.26 per diluted
share) is shown net of applicable taxes.
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 charge includes 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 lease and employee termination costs and legal
fees. The cash portion of the non-recurring charge is 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 "Selling, general and administrative expenses" line) to their
estimated net realizable value.
>TB
Quarter Ended June 30 Six Months Ended June 30
1998 1999 1998 1999
--------------------------------------------
Revenue $ - $ - $ - $ -
Cost of revenue - 7,397 - 7,397
--------------------------------------------
Gross profit - (7,397) - (7,397)
Selling, general and
Administrative expenses - 7,561 - 7,561
Restructuring and other
charges - 65,517 - 65,517
--------------------------------------------
Operating income - (80,475) - (80,475)
Interest and other - - 572 -
--------------------------------------------
Income before income taxes - (80,475) 572 (80,475)
Income taxes - 4,497 229 4,497
--------------------------------------------
Income (loss) before
accounting change (84,972) 343 (84,972)
Cumulative effect of
accounting change,
net of tax - - - (14,065)
--------------------------------------------
Net income (loss) $ - $ (84,972) $ 343 $ (99,037)
--------------------------------------------
--------------------------------------------
Net income per share
(diluted) $ - $ (1.59) $ .01 $ (1.86)
--------------------------------------------
--------------------------------------------
Weighted average shares
outstanding (diluted) - 53,304 53,580 53,176
--------------------------------------------
--------------------------------------------
>TB
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.
>TB
BRIGHTPOINT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
1998 1999 1998 1999
--------- --------- --------- ---------
Revenue $ 329,813 $ 413,989 $ 673,146 $ 786,708
Cost of revenue 299,308 393,244 612,564 737,576
--------- --------- --------- ---------
Gross profit 30,505 20,745 60,582 49,132
Selling, general and
administrative expenses 14,601 36,284 29,258 63,271
Restructuring and Other
Charges - 65,517 - 65,517
--------- --------- --------- ---------
Income from operations 15,904 (81,056) 31,324 (79,656)
Net investment gain - - 572 -
Interest expense 3,027 3,812 6,439 7,100
--------- --------- --------- ---------
Income (loss) before income
taxes, minority interest
and accounting change 12,877 (84,868) 25,457 (86,756)
Income taxes 3,863 5,646 7,637 5,003
--------- --------- --------- ---------
Income (loss) before minority
interest and accounting
change 9,014 (90,514) 17,820 (91,759)
Minority interest (44) - (81) (33)
--------- --------- --------- ---------
Income (loss) before
accounting change 9,058 (90,514) 17,901 (91,726)
Cumulative effect of
accounting change,
net of tax - - - (14,065)
--------- --------- --------- ---------
Net income (loss) $ 9,058 $ (90,514) $ 17,901 $(105,791)
--------- --------- --------- ---------
--------- --------- --------- ---------
Basic per share:
Income (loss) before
accounting change $ 0.17 $ (1.70) $ 0.35 $ (1.73)
Cumulative effect of
accounting change,
net of tax - - - $ (0.26)
--------- --------- --------- ---------
Net income (loss) $ 0.17 $ (1.70) $ 0.35 $ (1.99)
--------- --------- --------- ---------
--------- --------- --------- ---------
Diluted per share:
Income (loss) before
accounting change $ 0.17 $ (1.70) $ 0.33 $ (1.73)
Cumulative effect of
accounting change,
net of tax - - - $ (0.26)
--------- --------- --------- ---------
Net income (loss) $ 0.17 $ (1.70) $ 0.33 $ (1.99)
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average common
shares outstanding:
Basic 51,979 53,304 51,597 53,176
--------- --------- --------- ---------
--------- --------- --------- ---------
Diluted 53,725 53,304 53,580 53,176
--------- --------- --------- ---------
--------- --------- --------- ---------
BRIGHTPOINT, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
December 31 June 30
1998 1999
------------ -----------
ASSETS
Current assets:
Cash and cash equivalents $ 49,528 $ 39,015
Accounts receivable (less allowance for
doubtful accounts of $6,045 in 1998
and $4,681 in 1999) 278,947 210,277
Inventories 156,333 135,464
Other current assets 64,417 45,520
------------ -----------
Total current assets 549,225 430,276
Property and equipment 48,270 36,509
Goodwill and other intangibles 83,467 57,159
Other assets 33,488 13,577
------------ -----------
Total assets $714,450 $537,521
------------ -----------
------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $188,176 $161,559
------------ -----------
Total current liabilities 188,176 161,559
Long-term debt 286,706 243,260
Stockholders' equity 239,568 132,702
------------ -----------
Total liabilities and stockholders' equity $714,450 $537,521
------------ -----------
------------ -----------
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