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For the Fourth Quarter of 2006:
For the Year Ended December 31, 2006:
PLAINFIELD, Ind.--Feb. 6, 2007--Brightpoint, Inc. (NASDAQ:CELL) reported its financial results for the fourth quarter and year ended December 31, 2006. Unless otherwise noted, amounts pertain to the fourth quarter of 2006. In May 2006, the Company's Board of Directors approved and the Company effected a 6-for-5 common stock split in the form of a 20% stock dividend. Per share amounts for all periods presented in this report have been adjusted to reflect the 6-for-5 common stock split.
SUMMARY FINANCIAL RESULTS
(Amounts in thousands, except per share data)
Three Months Ended Twelve Months Ended
----------------------- -----------------------
December 31, December 31,
2006 2005 2006 2005
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited)
Wireless devices
handled 15,149 14,230 53,539 42,081
Revenue $677,221 $630,634 $2,425,373 $2,140,177
Gross profit $41,848 $43,615 $150,906 $132,012
Gross margin 6.2% 6.9% 6.2% 6.2%
Selling, general and
administrative
expenses $29,846 $27,401 $102,544 $86,726
Operating income from
continuing operations $12,002 $16,214 $48,371 $44,353
Income from continuing
operations $10,033 $11,832 $36,190 $31,918
Net income $9,737 $8,850 $35,610 $10,440
Diluted per share:
Income from continuing
operations $0.20 $0.23 $0.72 $0.64
Net income $0.19 $0.18 $0.70 $0.21
"Our fourth quarter revenue of $677 million and over 15 million wireless devices handled were all time quarterly records," stated Robert J. Laikin, Brightpoint's Chairman of the Board and Chief Executive Officer. "The global demand for wireless devices continued to be healthy as reflected in Q4 with a sell-in estimate of over 280 million units. In the first quarter of 2007, I expect to see a normal seasonal sequential decline in the range of 10% to 15% for the industry. In 2006, I believe approximately 975 million devices were shipped on a global basis. I remain bullish on the global wireless device industry and believe the wireless devices sell-in range for 2007 to be 1.1 billion to 1.2 billion units, representing solid double digit growth year-over-year. We remain optimistic on Brightpoint's growth prospects in 2007. Last year Brightpoint was awarded several major contracts, and 2007 will be a year of implementation and integration. Our business development efforts remain strong in 2007 and we believe that we are well positioned in the value chain to take advantage of the many global opportunities within the wireless industry."
"I am very pleased with our record levels of revenue and units handled as well as with our strong earnings performance in the fourth quarter of 2006," said Tony Boor, Brightpoint's Chief Financial Officer. "In 2007 we will focus on executing upon the multiple new opportunities we were awarded in 2006. We will also pursue additional strategic initiatives in an effort to continue our growth trends and to build upon our global brand equity."
Brightpoint experienced a year-over-year increase in wireless devices handled of 6% during the fourth quarter of 2006 and year-over-year growth in revenue of 7%. Wireless devices handled through logistic services were 76% of total wireless devices handled for both the fourth quarter of 2006 and the fourth quarter of 2005.
For the fourth quarter of 2006, our Americas, Asia-Pacific and Europe divisions experienced year-over year growth in devices handled of 4%, 15% and 25%, respectively. The growth in wireless devices handled in our Americas division was primarily driven by increased demand as a result of market growth experienced by current logistic services customers, which was partially offset by lower volume with our primary network operator customer in Colombia. The increase in wireless devices handled in our Asia-Pacific division was primarily due to increased handset distribution units sold through our Brightpoint Asia Limited business as a result of improved product availability at competitive prices. The increase in wireless devices handled in our Europe division was due to increased demand for and availability of branded converged wireless devices as well as sales of devices resulting from our entry into Russia during the second quarter of 2006. In addition, we believe our Europe division benefited from market share gains in Sweden.
Gross margin for the fourth quarter of 2006 decreased to 6.2% from 6.9% in the fourth quarter of 2005. A 3.6 percentage point increase in gross margin from logistic services was more than offset by a 1.0 percentage point decrease in gross margin from our distribution business. The 3.6 percentage point increase in logistic services gross margin was due primarily to improved profitability of our repair business in India. The 1.0 percentage point decrease in distribution gross margin was primarily due to a decrease in several markets as a result of a shift in product mix to lower margin end-of-life products and refurbished products during the fourth quarter of 2006 compared to the fourth quarter of 2005. Sequentially, gross margin improved 0.4 percentage points from 5.8% in the third quarter of 2006. This increase in gross margin was driven by an 8.9 percentage point sequential increase in logistic services gross margin resulting from increased volume in our Americas division and improved profitability of our repair business in India.
Selling, general and administrative (SG&A) expenses increased $2.4 million or 9% from the fourth quarter of 2005. As a percent of revenue, SG&A expenses increased to 4.4% in the fourth quarter of 2006 from 4.3% in the fourth quarter of 2005. The increase in SG&A expenses was primarily due to a $1.4 million increase in personnel costs largely in support of overall growth in volumes, a $0.7 million increase in non-cash stock based compensation including the effects of adopting SFAS 123(R), a $0.7 million increase to support our investment in Advanced Wireless Services (AWS) in the Americas and a $0.8 million increase related to the acquisition of Persequor Limited during the first quarter of 2006, partially offset by a $1.3 million decrease in incentive compensation. Sequentially, SG&A expenses increased $5.3 million or 22% from the third quarter of 2006 due to a $1.8 million increase in incentive compensation and a $0.7 million increase in non-cash stock based compensation as a result of achieving certain strategic targets as well as a $1.1 million increase in personnel costs primarily in support of overall growth in volumes.
Operating income from continuing operations (Operating Income) was $12.0 million, a decrease of 26% from the fourth quarter of 2005. The year-over-year decrease in Operating Income for the quarter was driven by a $1.8 million decrease in gross profit combined with a $2.4 million increase in SG&A expenses.
The effective income tax rate in the fourth quarter of 2006 was 21.0% compared to 23.8% in the fourth quarter of 2005. The decrease in the effective income tax rate was the result of the recognition of certain deferred tax assets not previously recognized, the release of a contingency reserve for which the statute of limitations expired and the release of a contingency reserve for which the potential expense was no longer deemed probable.
Cash and cash equivalents (unrestricted) were $54.1 million at December 31, 2006, a decrease of $49.5 million from September 30, 2006. Our liquidity (unrestricted cash and unused borrowing availability) was approximately $129.8 million as of December 31, 2006 compared to $202 million as of September 30, 2006. Cash conversion cycle days increased to 22 days for the fourth quarter of 2006 from 11 days for the third quarter of 2006. The increase in cash conversion cycle days as well as the decrease in cash and liquidity was due to vendor payments related to significant purchases of wireless devices near the end of September and December 2006 in connection with the expanded global relationship with a major original equipment manufacturer. This expanded global relationship is still in its launch and development stage, and we intend to improve our liquidity and cash conversion cycle as the related new sales channels are solidified and as the new distribution model is rationalized.
Brightpoint, Inc (NASDAQ:CELL) is a global leader in the distribution of wireless devices and the provision of customized logistic services to the wireless industry. In 2006, Brightpoint handled 53.5 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 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, uncertainties relating to 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) our ability to increase volumes and maintain our margins; (iv) dependence upon principal suppliers and availability and price of wireless products; (v) possible difficulties collecting our accounts receivable; (vi) our ability to expand geographically on a satisfactory basis, through acquisition or otherwise; (vii) uncertainty regarding future volatility in our Common Stock price; (viii) uncertainty whether wireless equipment manufacturers and wireless network operators will continue to outsource aspects of their business to us; (ix) our reliance upon third parties to manufacture products which we distribute and reliance upon their quality control procedures; (x) our operations may be materially affected by fluctuations in regional demand and economic factors; (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; (xiii) risks of foreign operations, including currency, trade restrictions and political risks in our foreign markets; (xiv) effect of hostilities or terrorist attacks on our operations; (xv) investment in sophisticated information systems technologies and our reliance upon the proper functioning of such systems; (xvi) ability to borrow additional funds; (xvii) our ability to meet intense industry competition; (xviii) ability to manage and sustain future growth at our historical or industry rates; (xix) certain relationships and financings, which may provide us with minimal returns or losses on our investments; (xx) the impact that seasonality may have on our business and results; (xxi) ability to attract and retain qualified management and other personnel, cost of complying with labor agreements and high rate of personnel turnover; (xxii) ability to protect our proprietary information; (xxiii) our significant payment obligations under certain lease and other contractual arrangements; (xxiv) ability to maintain adequate insurance at a reasonable cost; (xxv) possible adverse effects of future medical claims regarding the use of wireless handsets; (xxvi) the potential issuance of additional equity, including our common shares, which could result in dilution of existing shareholders and may have an adverse impact on the price of our common shares; and (xxvii) existence of anti-takeover measures. 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. 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 OPERATIONS
(Amounts in thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
----------------------- -----------------------
2006 2005 2006 2005
----------------------- -----------------------
(Unaudited) (Unaudited) (Unaudited)
Revenue
Distribution revenue $594,622 $542,083 $2,097,510 $1,845,983
Logistic services
revenue 82,599 88,551 327,863 294,194
----------- ----------- ----------- -----------
Total revenue 677,221 630,634 2,425,373 2,140,177
Cost of revenue
Cost of distribution
revenue 574,710 518,869 2,015,736 1,774,612
Cost of logistic
services revenue 60,663 68,150 258,731 233,553
----------- ----------- ----------- -----------
Total cost of revenue 635,373 587,019 2,274,467 2,008,165
----------- ----------- ----------- -----------
Gross profit 41,848 43,615 150,906 132,012
Selling, general and
administrative
expenses 29,846 27,401 102,544 86,726
Facility consolidation
charge (benefit) - - (9) 933
----------- ----------- ----------- -----------
Operating income from
continuing operations 12,002 16,214 48,371 44,353
Interest, net 130 (302) 553 (146)
Other (income) expenses (823) 992 (610) 1,523
----------- ----------- ----------- -----------
Income from continuing
operations before
income taxes 12,695 15,524 48,428 42,976
Income tax expense 2,662 3,692 12,238 11,058
----------- ----------- ----------- -----------
Income from continuing
operations 10,033 11,832 36,190 31,918
Discontinued
operations, net of
income taxes:
Loss from
discontinued
operations (59) (773) (417) (20,600)
Loss on disposal of
discontinued
operations (237) (2,209) (163) (878)
----------- ----------- ----------- -----------
Total discontinued
operations, net of
income taxes (296) (2,982) (580) (21,478)
----------- ----------- ----------- -----------
Net income $9,737 $8,850 $35,610 $10,440
=========== =========== =========== ===========
Earnings per share -
basic:
Income from
continuing
operations $0.20 $0.24 $0.74 $0.67
Discontinued
operations, net of
income taxes (0.01) (0.06) (0.01) (0.45)
----------- ----------- ----------- -----------
Net income $0.19 $0.18 $0.73 $0.22
=========== =========== =========== ===========
Earnings per share -
diluted:
Income from
continuing
operations $0.20 $0.23 $0.72 $0.64
Discontinued
operations, net of
income taxes (0.01) (0.05) (0.02) (0.43)
----------- ----------- ----------- -----------
Net income $0.19 $0.18 $0.70 $0.21
=========== =========== =========== ===========
Weighted average common
shares outstanding:
Basic 49,336 48,468 49,104 47,954
=========== =========== =========== ===========
Diluted 50,429 50,381 50,554 49,657
=========== =========== =========== ===========
BRIGHTPOINT, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share data)
December 31,
---------------------
2006 2005
----------- ---------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $54,130 $106,053
Pledged cash 201 168
Accounts receivable (less allowance for
doubtful accounts of $4,926 in 2006 and $3,621
in 2005) 228,186 168,004
Inventories 391,657 124,864
Contract financing receivable 20,161 15,630
Contract financing inventory 7,293 13,119
Other current assets 25,870 22,623
----------- ---------
Total current assets 727,498 450,461
Property and equipment, net 37,904 27,989
Goodwill and other intangibles, net 8,219 6,707
Other assets 4,732 2,667
----------- ---------
Total assets $778,353 $487,824
=====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $454,552 $232,258
Accrued expenses 68,320 64,494
Contract financing payable 30,991 32,373
Lines of credit, short-term 13,875 -
----------- ---------
Total current liabilities 567,738 329,125
Long-term liabilities:
Lines of credit 3,750 -
Other long-term liabilities 12,037 9,657
----------- ---------
Total long-term liabilities 15,787 9,657
----------- ---------
Total liabilities 583,525 338,782
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; 57,536 issued in 2006 and 55,875
issued in 2005 575 559
Additional paid-in-capital 266,756 258,443
Treasury stock, at cost, 6,891 shares in 2006
and 6,113 shares in 2005 (58,295) (39,928)
Unearned compensation - (12,125)
Retained deficit (17,918) (53,528)
Accumulated other comprehensive income (loss) 3,710 (4,379)
---------------------
Total shareholders' equity 194,828 149,042
---------------------
Total liabilities and shareholders' equity $778,353 $487,824
=====================
BRIGHTPOINT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Three Months Ended Twelve Months Ended
December 31, December 31,
----------------------- ---------------------
2006 2005 2006 2005
----------------------- ---------------------
(Unaudited) (Unaudited) (Unaudited)
Operating activities
Net income $9,737 $8,850 $35,610 $10,440
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Depreciation and
amortization 3,095 3,166 12,234 11,101
Discontinued operations 296 2,982 580 21,478
Net operating cash
flows used in
discontinued
operations - (601) - (2,085)
Pledged cash
requirements (2) (2) (15) 13,662
Non-cash compensation 1,885 1,229 6,005 2,837
Facility consolidation
charge (benefit) - - (9) 933
Change in deferred
taxes (2,537) 473 (3,020) (390)
Income tax benefits
from exercise of stock
options - 3,141 - 5,377
Other non-cash 758 401 2,126 401
----------- ----------- ----------- ---------
13,232 19,639 53,511 63,754
Changes in operating
assets and liabilities,
net of effects from
acquisitions and
divestitures:
Accounts receivable (13,812) (37,367) (41,135) (47,778)
Inventories (99,471) (27,302) (258,070) (23,656)
Other operating assets 4 7,160 (1,542) (6,183)
Accounts payable and
accrued expenses 42,599 52,052 197,319 82,823
----------- ----------- ----------- ---------
Net cash provided by
(used in) operating
activities (57,448) 14,182 (49,917) 68,960
Investing activities
Capital expenditures (6,657) (4,717) (20,779) (12,649)
Acquisitions, net of cash
acquired (612) (56) (1,413) (413)
Net investing cash flow
from discontinued
operations - (61) - (1,097)
Net cash provided by
(used in) contract
financing arrangements (2,628) (8,730) 6,960 (5,285)
Decrease (increase) in
other assets (1,835) 1,225 (1,853) 3,945
----------- ----------- ----------- ---------
Net cash used in
investing activities (11,732) (12,339) (17,085) (15,499)
Financing Activities
Net proceeds from credit
facilities 15,825 - 15,825 -
Purchase of treasury
stock (7) (6,914) (18,367) (15,918)
Net financing cash used
in discontinued
operations - - - -
Excess tax benefit from
equity based
compensation 247 - 8,690 -
Proceeds from common
stock issuances under
employee stock option
plans 67 1,497 5,760 4,750
----------- ----------- ----------- ---------
Net cash provided by
(used in) financing
activities 16,132 (5,417) 11,908 (11,168)
Effect of exchange rate
changes on cash and cash
equivalents 3,585 (3,192) 3,171 (8,360)
----------- ----------- ----------- ---------
Net increase (decrease)
in cash and cash
equivalents (49,463) (6,766) (51,923) 33,933
Cash and cash equivalents
at beginning of period 103,593 112,819 106,053 72,120
----------- ----------- ----------- ---------
Cash and cash equivalents
at end of period $54,130 $106,053 $54,130 $106,053
=========== =========== =========== =========
Supplemental Information
(Amounts in thousands)
Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA")
Three Months Twelve Months
Ended Ended
December 31, December 31,
----------------- -----------------
2006 2005 2006 2005
-------- -------- -------- --------
Net income (1) $9,737 $8,850 $35,610 $10,440
Net interest (income) expense (1) 130 (83) 545 1,236
Income taxes (1) 2,681 3,692 12,314 11,554
Depreciation and amortization (1) 3,095 3,230 12,234 11,766
-------- -------- -------- --------
EBITDA $15,643 $15,689 $60,703 $34,996
======== ======== ======== ========
(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, 2006 and 2005, and September 30, 2006 were as follows:
Three Months Ended
---------------------------------------
December 31, December 31, September 30,
2006 2005 2006
------------ ------------ -------------
Days sales outstanding in
accounts receivable 25 23 24
Days inventory on-hand 59 20 47
Days payable outstanding (62) (38) (60)
------------ ------------ -------------
Cash Conversion Cycle Days 22 5 11
============ ============ =============
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, 2006 and 2005, and
September 30, 2006, was as follows:
Three Months Ended
---------------------------------------
December 31, December 31, September 30,
2006 2005 2006
------------ ------------ -------------
Operating income after taxes:
Operating income from
continuing operations $12,002 $16,214 $12,474
Plus: Facility consolidation
charge (benefit) - - -
Less: estimated income taxes
(1) (2,516) (3,856) (3,157)
------------ ------------ -------------
Operating income after taxes $9,486 $12,358 $9,317
============ ============ =============
Invested Capital:
Debt $17,625 $- $-
Shareholders' equity 194,828 149,042 176,819
------------ ------------ -------------
Invested capital $212,453 $149,042 $176,819
============ ============ =============
Average invested capital (2) $194,636 $145,917 $170,971
ROIC (3) 19% 34% 22%
Trailing Four Quarters Ended
---------------------------------------
December 31, December 31, September 30,
2006 2005 2006
------------ ------------ -------------
Operating income after taxes:
Operating income from
continuing operations $48,371 $44,353 $52,583
Plus: Facility consolidation
charge (benefit) (9) 933 (9)
Less: estimated income taxes
(1) (12,254) (11,728) (13,594)
------------ ------------ -------------
Operating income after taxes $36,108 $33,558 $38,980
============ ============ =============
Invested Capital:
Debt $17,625 $- $-
Shareholders' equity 194,828 149,042 176,819
------------ ------------ -------------
Invested capital $212,453 $149,042 $176,819
============ ============ =============
Average invested capital (2) $170,480 $149,578 $156,548
ROIC (3) 21% 22% 25%
(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 quarters represents the simple average of the 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 results by four
(4).
CONTACT: Brightpoint, Inc.
Anthony Boor, 317-707-2355
SOURCE: Brightpoint, Inc.