updated 11/3/2010 4:46:17 PM ET 2010-11-03T20:46:17

INDIANAPOLIS, Nov. 3, 2010 (GLOBE NEWSWIRE) -- Brightpoint, Inc. (Nasdaq:CELL) today announced its financial results for the third quarter ended September 30, 2010. Unless otherwise noted, amounts pertain to the third quarter of 2010.

FOR THE THIRD QUARTER OF 2010:

Revenue was $889.0 million for the third quarter of 2010, an increase of 3% compared to the third quarter of 2009 and an increase of 13% compared to the second quarter of 2010.

Units handled were 24.9 million for the third quarter of 2010, an increase of 14% compared to the third quarter of 2009 and an increase of 12% compared to the second quarter of 2010. The increase in units handled compared to the third quarter of 2009 was driven by an increase in logistic services units.

Income from continuing operations was $11.4 million or $0.16 per diluted share for the third quarter of 2010 compared to $18.4 million or $0.22 per diluted share for the third quarter of 2009 and $7.3 million or $0.10 per diluted share for the second quarter of 2010. Income from continuing operations for the third quarter of 2009 included $9.8 million of discrete tax benefit related to adjustments of valuation allowances on deferred tax assets and a reversal of a reserve on an uncertain tax position.    

Adjusted income from continuing operations (non-GAAP) was $16.4 million or $0.23 per diluted share for the third quarter of 2010 compared to $14.5 million or $0.17 per diluted share for the third quarter of 2009 and $12.0 million or $0.16 per diluted share for the second quarter of 2010. 

Please see the disclosure below regarding adjusted income from continuing operations (non-GAAP). Adjusted income from continuing operations (non-GAAP) of $0.23 per diluted share for the third quarter of 2010 excludes the following items:

  • $3.6 million (pre-tax) of non-cash amortization expense related to acquired intangible assets.
  • $2.3 million (pre-tax) of non-cash stock based compensation expense.
  • $0.9 million (pre-tax) restructuring charge.
  • $0.9 million (pre-tax) of charges related to the settlement of a dispute that arose in 2006 with the landlord of the former headquarters of Dangaard Telecom in Denmark; Dangaard Telecom was acquired by the Company in July 2007.
  • $2.2 million tax benefit related to the excluded expenses described above.
  • $0.6 million of tax benefit related to the reversal of a valuation allowance on deferred tax assets that are expected to be utilized.   

Gross margin was 8.6% for the third quarter of 2010 compared to 8.4% for the third quarter of 2009 and 9.0% for the second quarter of 2010.  

SG&A expenses were $57.4 million for the third quarter of 2010 compared to $53.1 million for the third quarter of 2009 and $53.7 million for the second quarter of 2010. SG&A expenses for the third quarter of 2010 include $4.4 million of additional accrued compensation. The additional accrued compensation in the third quarter of 2010 reflects better than expected financial performance in the current year as well as the reinstatement of cash bonuses that were suspended in the prior year as part of our 2009 Spending and Debt Reduction Plan.

Foreign currency fluctuations had an unfavorable impact on revenue for the third quarter of 2010 of $23.4 million compared to the third quarter of 2009 and a favorable impact of $8.9 million compared to the second quarter of 2010.

During the third quarter of 2010, we repurchased 2.5 million shares of Brightpoint common stock for $16.1 million under our previously announced share repurchase program. As of September 30, 2010, $11.6 million remained available under this program for repurchase of Brightpoint common stock in the open market, by block purchase, negotiated transactions, or other transactions managed by broker-dealers. Purchases are funded from working capital and/or our Global Credit Facility. The share repurchase program expires in July 2011.

EBITDA was $21.3 million for the third quarter of 2010 compared to $17.1 million for the third quarter of 2009 and $16.8 million for the second quarter of 2010.

Total debt was $112.3 million at September 30, 2010, compared to $121.5 million at June 30, 2010 and $98.8 million at September 30, 2009. Total liquidity (unrestricted cash and unused borrowing availability) was $355.5 million at September 30, 2010 compared to $332.3 million at June 30, 2010 and $423.0 million at September 30, 2009. 

"I am pleased with our financial performance in the third quarter of 2010," said Robert J. Laikin, Chairman of the Board and Chief Executive Officer of Brightpoint, Inc. "Our results reflect our continued focus on execution and discipline in managing our business. We believe that our focus on delivering unique value through wireless supply chain services to leading smartphone manufacturers, along with our commitment to exceeding our customers' expectations, will allow us to significantly exceed the unit growth rate of the wireless handset industry in 2010."

"I am pleased we were able to deliver strong financial results for the third quarter of 2010," said Tony Boor, Brightpoint's Chief Financial Officer and Treasurer. "I am pleased with our return on invested capital and return on tangible capital metrics. Our financial performance has improved significantly over the past several quarters, and as a result our ROIC was 12% for the trailing twelve months ended September 30, 2010.  This approximates our estimated long-term weighted average cost of capital of 12% to 14%. ROTC on a trailing twelve month basis was 39%, which is also within our targeted long-term range of 35% to 40%. Both of these improved ratios reflect our disciplined approach to managing our balance sheet and the success of renegotiating or eliminating programs that did not provide an adequate return to our shareholders."

CURRENT FISCAL YEAR 2010 EXPECTATIONS

  • Wireless devices handled by the Company are anticipated to be between 98 million and 100 million. This range represents an increase of 18% to 20% compared to wireless devices handled by the Company in 2009. Global sell-in for the wireless device industry in 2010 is currently expected to grow by approximately 12% to 14% compared to 2009.
     
  • We anticipate our mix of wireless devices handled through logistic services to end the year near the top end of our previously disclosed range of 77% to 80% of total wireless devices handled.
     
  • Annual combined gross margin of between 8.6% to 8.8%, which is consistent with our previously disclosed range.
     
  • SG&A expense excluding stock based compensation, restructuring and amortization (non-GAAP) of between $210 million and $217 million. This range assumes foreign currency exchange rates will not vary significantly from their current levels.
     
  • Interest expense of between $7 million to $9 million, which is a decrease from the previously disclosed range of $8 million to $10 million due to lower average interest rates.
     
  • An as-adjusted (non-GAAP) effective tax rate of between 27% and 29%, which is a decrease from our previously disclosed range of 31% to 33%, primarily due to a higher than anticipated mix of business in lower tax jurisdictions. 
     
  • As-adjusted annual diluted weighted average shares outstanding of between 72.0 million and 73.0 million shares, a decrease from our previously disclosed range of 73.5 million and 74.5 million shares, primarily due to the repurchase of 2.5 million shares of Brightpoint common stock during the third quarter of 2010 under the previously announced share repurchase program. 

Please see the attached Schedules and the Brightpoint website at www.brightpoint.com for an explanation and reconciled presentation of the results for the quarter ended September 30, 2010 prepared in accordance with U.S. GAAP and on an as adjusted non-GAAP basis. The explanation includes the reasons why management believes such non-GAAP measures are useful both to management and investors. Any financial measure other than those prepared in accordance with U.S. GAAP should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP. In addition, please see the attached Supplemental Information for a reconciliation of EBITDA.

In the fourth quarter of 2009 we began reporting the revenue from certain prepaid airtime logistic services agreements on a net basis. The revenue under these agreements was previously reported on a gross basis within logistic services revenue. Had the revenue from these agreements been reported on a net basis for the third quarter 2009, logistic services revenue and cost of revenue would have been approximately $21.9 million lower and gross margin for the third quarter of 2009 would have been approximately 0.3% higher.

The consolidated statements of operations for all periods presented reflect the reclassification of the results of operations of our Italy and France businesses to discontinued operations in accordance with U.S. GAAP based on our decision to exit the Italy business in the first quarter of 2010 and the France business in the third quarter of 2009. Please see Brightpoint Inc.'s website at www.brightpoint.com for quarterly statements of operations for all periods that have been reclassified.

(Amounts in thousands, except per share data)


Conference Call Information

On Thursday, November 4, 2010, at approximately 8:00 a.m. EDT, Brightpoint will conduct a conference call to review the Company's operations and financial performance and will answer participants' questions. For those who prefer to join the conference call telephonically, use the following information and dial in several minutes prior to the start of the call:

U.S. toll-free dial-in number: 888-221-9518

International dial-in number: 913-312-1481

The presentation of slides can be accessed through the Investors section of the Company's website at www.brightpoint.com . Following the live presentation, an archive of the webcast will be available through the Investors section of the Company's website at www.brightpoint.com for approximately one year.

About Brightpoint, Inc.

Brightpoint, Inc. (Nasdaq:CELL) is a global leader in providing supply chain solutions to leading stakeholders in the wireless industry. In 2009, Brightpoint handled approximately 84 million wireless devices globally. Brightpoint's innovative services include distribution channel management, procurement, inventory management, software loading, kitting and customized packaging, 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. The company has approximately 2,700 employees in more than 25 countries. In 2009, Brightpoint generated revenue of $3.2 billion. Brightpoint provides distribution and customized services to over 25,000 B2B customers worldwide.  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 presentation 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 and risk factors contained therein.  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) the loss or reduction in orders from principal customers or a reduction in the prices we are able to charge these customers could cause our revenues to decline and impair our cash flows; (ii) we buy a significant amount of our products from a limited number of suppliers, and they may not provide us with competitive products at reasonable prices when we need them in the future; (iii) our business could be harmed by consolidation of mobile operators; (iv) the current economic downturn could cause a severe disruption in our operations; (v) fluctuations in regional demand patterns and economic factors could harm our operations; (vi) our debt facilities could prevent us from borrowing additional funds, if needed; (vii) collections of our accounts receivable; (viii) our reliance on suppliers to provide trade credit facilities to adequately fund our on-going operations and product purchases; (ix) a significant percentage of our revenues are generated outside of the United States in countries that may have volatile currencies or other risks; (x) the impact that seasonality may have on our business and results; (xi) we make significant investments in the technology used in our business and rely on that technology to function effectively without interruptions; (xii) our future operating results will depend on our ability to maintain volumes and margins; (xiii) our ability to expand and implement our future growth strategy, including acquisitions; (xiv) uncertainty regarding whether wireless equipment manufacturers and wireless network operators will continue to outsource aspects of their business to us; (xv) our reliance upon third parties to manufacture products which we distribute and reliance upon their quality control procedures; (xvi) our ability to retain existing logistic services customers at acceptable returns upon expiration or termination of existing agreements; (xvii) rapid technological changes in the wireless industry could render our services or the products we handle obsolete or less marketable;  (xviii) the effect of natural disasters, epidemics, hostilities or terrorist attacks on our operations; (xix) intense industry competition; (xx) our ability to manage and sustain future growth at our historical or current rates; (xxi) our ability to continue to enter into relationships and financing that may provide us with minimal returns or losses on our investments; (xxii) our implementation of European Centers of Excellence may not be successful; (xxiii) our ability to attract and retain qualified management and other personnel and the cost of complying with labor agreements and high rate of personnel turnover; (xxiv) protecting our proprietary information; (xxv) our dependence on our computer and communications systems; (xxvi) uncertainty regarding future volatility in our Common Stock price; (xxvii) potential dilution to existing shareholders from the issuance of securities under our long-term incentive plans; and (xxviii) the 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. The words "believe," "expect," "anticipate," "estimate," "intend," "likely," "will," "should" 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.
NON-GAAP RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)

We have provided income from continuing operations and income from continuing operations per share on both a U.S. GAAP basis and on an as-adjusted non-GAAP basis because the Company's management believes it provides meaningful information to investors. Among other things, it may assist investors in evaluating the Company's on-going operations. Adjustments to earnings per share from continuing operations generally include certain non-cash charges such as stock based compensation and amortization of acquired finite lived intangible assets as well as other items that are considered to be unusual or infrequent in nature such as goodwill impairment charges and restructuring charges. The specific items excluded with respect to our third quarter non-GAAP income from continuing operations per share are stock-based compensation expense, amortization expense, restructuring charge, legal settlement, and certain discrete tax items. The Company considers these items unrelated to its core operating performance, and believes that use of this non-GAAP measure allows comparison of operating results that are consistent over time. Non-GAAP income from continuing operations per share is calculated by dividing non-GAAP income from continuing operations by non-GAAP weighted average common shares outstanding (diluted). For purposes of calculating non-GAAP income from continuing operations per share, we add back certain shares presumed to be repurchased under the U.S. GAAP treasury stock method related to stock based compensation expense. We believe these non-GAAP disclosures provide important supplemental information to management and investors regarding financial and business trends relating to the Company's financial condition and results of operations. Management uses these non-GAAP measures internally to evaluate the performance of the business and to evaluate results relative to incentive compensation targets for certain employees. Investors should consider non-GAAP measures in addition to, not as a substitute for, or as superior to measures of financial performance prepared in accordance with U.S. GAAP.

(1) Adjusted income from continuing operations (non-GAAP) for the third quarter of 2010 excludes the following items:

  • $3.6 million (pre-tax) of non-cash amortization expense related to acquired intangible assets.
  • $2.3 million (pre-tax) of non-cash stock based compensation expense.
  • $0.9 million (pre-tax) of restructuring charges which primarily consists of lease termination charges and severance charges as part of our previously announced 2009 Spending and Debt Reduction Plan.
  • $0.9 million (pre-tax) of costs related to the settlement of a legal dispute that arose in 2006 with the landlord of the former headquarters of Dangaard Telecom in Denmark; Dangaard Telecom was acquired by the Company in July 2007.
  • $2.2 million tax benefit of the excluded expenses described above.
  • $0.6 million of discrete tax benefit related to the reversal of a valuation allowance on deferred tax assets that are expected to be utilized.   

(2) Adjusted income from continuing operations (non-GAAP) for the third quarter of 2009 excludes the following items:

  • $4.0 million (pre-tax) of non-cash amortization expense related to acquired intangible assets.
  • $1.5 million (pre-tax) impairment charge for our Latin America operation's finite-lived intangible assets. The asset was recorded in connection with the acquisition of certain assets of CellStar in 2007. In the third quarter of 2009, our Latin America operation lost a significant product distribution business, and we determined that the carrying value of the asset was not recoverable. 
  • $1.5 million (pre-tax) of non-cash stock based compensation expense.
  • $1.9 million restructuring charges (pre-tax) in connection with our previously announced 2009 Spending and Debt Reduction Plan.
  • $3.0 million tax benefit of the excluded expenses described above.
  • $9.8 million of net discrete tax benefit. In the third quarter of 2009, we recorded a benefit of $13.1 million for the reversal of a valuation allowance on certain tax assets that are expected to be utilized in the U.S. and the reversal of a reserve on an uncertain tax position in Germany that became more likely than not to be sustained. This benefit was partially offset by a $3.3 million charge related to a valuation allowance on deferred tax assets resulting from previous net operating losses in Denmark that is no longer expected to be utilized. 

(3) Adjusted income from continuing operations (non-GAAP) for the nine months ended September 30, 2010 excludes the following items:

  • $11.0 million (pre-tax) of non-cash amortization expense related to acquired intangible assets.
  • $7.9 million (pre-tax) of non-cash stock based compensation expense.
  • $2.8 million restructuring charges (pre-tax) in connection with our previously announced 2009 Spending and Debt Reduction Plan.
  • $0.9 million (pre-tax) of costs related to the settlement of a legal dispute that arose in 2006 with the landlord of the former headquarters of Dangaard Telecom in Denmark; Dangaard Telecom was acquired by the Company in July 2007.
  • $6.5 million tax benefit of the excluded expenses described above.
  • $0.2 million of net discrete tax expense. $0.8 million is related to valuation allowances on deferred tax assets resulting from previous net operating losses in Colombia and Denmark that are no longer expected to be utilized. This tax expense is offset by $0.6 million of tax benefit related to the reversal of a valuation allowance on deferred tax assets that are expected to be utilized.   

(4) Adjusted income from continuing operations (non-GAAP) for the nine months ended September 30, 2009 excludes the following items:

  • $11.4 million (pre-tax) of non-cash amortization expense related to acquired intangible assets.
  • $1.5 million (pre-tax) impairment charge for our Latin America operation's finite-lived intangible assets. The asset was recorded in connection with the acquisition of certain assets of CellStar in 2007. In the third quarter of 2009, our Latin America operation lost a significant product distribution business, and we determined that the carrying value of the asset was not recoverable. 
  • $4.8 million (pre-tax) of non-cash stock based compensation expense.
  • $10.7 million restructuring charges (pre-tax) in connection with our previously announced 2009 Spending and Debt Reduction Plan.
  • $9.0 million tax benefit of the excluded expenses described above.
  • $9.8 million of net discrete tax benefit. In the third quarter of 2009, we recorded a benefit of $13.1 million for the reversal of a valuation allowance on certain tax assets that are expected to be utilized in the U.S. and the reversal of a reserve on an uncertain tax position in Germany that became more likely than not to be sustained. This benefit was partially offset by a $3.3 million charge related to a valuation allowance on deferred tax assets resulting from previous net operating losses in Denmark that is no longer expected to be utilized. 

(5) Weighted average common shares outstanding – diluted for the three months ended September 30, 2010 and 2009 includes the effect of 2.4 million (2010) and 1.8 million (2009) common shares outstanding that are presumed to be repurchased under the U.S. GAAP treasury stock method related to stock based compensation expense. Weighted average common shares outstanding – diluted for the nine months ended September 30, 2010 and 2009 includes the effect of 2.6 million (2010) and 2.2 million (2009) common shares outstanding that are presumed to be repurchased under the U.S. GAAP treasury stock method related to stock based compensation expense.

(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 September 30, 2010 and 2009, and June 30, 2010 were as follows:

Please see the Brightpoint website at www.brightpoint.com for a detailed calculation of cash conversion cycle days for the three months ended September 30, 2010. 

Supplemental Information (continued)
(Amounts in thousands)

Return on Invested Capital ("ROIC")

Management uses ROIC to measure the effectiveness of its use of invested capital to generate profits. ROIC for the quarters and trailing four quarters ended September 30, 2010 and 2009, and June 30, 2010, was as follows:

 

(1) Estimated income taxes were calculated by multiplying the sum of operating income from continuing operations, the restructuring charge and the goodwill impairment charge by an effective tax rate of 35%, which represents an estimated, blended statutory tax rate for the markets in which we operate.

(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 non-GAAP operating income after taxes by average invested capital. ROIC for quarterly periods is stated on an annualized basis and is calculated by dividing non-GAAP operating income after taxes by average invested capital and multiplying the results by four.

*We exclude unusual items such as restructuring charges from our calculation of "Operating income after taxes (non-GAAP)" because we do not believe such items are representative of expected future returns. Therefore, we believe decisions to allocate resources should not be influenced by such items. 

Supplemental Information (continued)
(Amounts in thousands)

Return on Tangible Capital ("ROTC")

Management uses Return on Tangible Capital, or ROTC, to provide a measurement which can be consistently and fairly applied internally to all operating entities to determine the effectiveness of each entity's use of tangible capital. ROTC eliminates the influence of intangible assets balances (and related amortization expense), cash transfer capabilities and income tax rates which vary amongst Brightpoint operating entities and are not controllable by operating entity management. We exclude unusual items such as restructuring charge from our calculation of "Operating income before amortization and restructuring charges (non-GAAP)" because we do not believe such items are controllable by operating entity management or representative of expected future returns. Therefore, we believe decisions to allocate resources should not be influenced by such items. ROTC indicates the return which can be expected on the tangible capital consumed and replaced through the normal business cycle. To calculate ROTC, operating income from continuing operations is adjusted for restructuring charges, goodwill impairment charge and amortization of intangible assets, and this adjusted non-GAAP operating income is applied to average tangible capital. Average tangible capital is calculated as total assets less cash, investments, goodwill, and intangible assets, net of current liabilities excluding short term borrowings. The details of this measurement are outlined below.
 

(1) Average tangible capital for quarterly periods represents the simple average of the beginning and ending tangible capital amounts for the respective quarter.

(2) ROTC is calculated by dividing non-GAAP operating income before amortization and restructuring charges by average tangible capital. ROTC for quarterly periods is stated on an annualized basis and is calculated by dividing non-GAAP operating income before amortization and restructuring charges by average tangible capital and multiplying the results by four. ROTC is a non-GAAP pre-tax measure, thereby eliminating the influence of income tax rates which vary amongst Brightpoint operating entities and are not controllable by operating entity management.

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