 |
Search -
Finance Home -
Yahoo! -
Help |  |
|
Search -
Finance Home -
Yahoo! -
Help | |
|
Quotes & Info
|
| CELL > SEC Filings for CELL > Form 10-K on 25-Feb-2009 | All Recent SEC Filings |
25-Feb-2009
Annual Report
• Goodwill Impairment Charge. Goodwill is subject to annual reviews for impairment based on a two-step test in accordance with Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets." We perform our annual goodwill impairment test in the fourth quarter of each year.
During the fourth quarter of 2008, there were severe disruptions in the credit markets and reductions in global economic activity which had significant adverse impacts on stock markets and on the outlook for the wireless industry, both of which contributed to a significant decline in Brightpoint's stock price and corresponding market capitalization. The result of our annual goodwill impairment test was that the carrying amount of the net assets allocated to the Europe, Middle East, and Africa (EMEA) reporting unit exceeded the fair market value. The entire amount of goodwill allocated to that reporting unit was impaired, which resulted in an impairment charge of $325.9 million. The impairment charge was approved by our Board of Directors in February 2009. The goodwill allocated to the EMEA reporting unit is primarily related to the July 2007 acquisition of Dangaard Telecom. The impairment charge resulted from factors driven by current market conditions including: 1) lower market valuation multiples for
similar assets; 2) higher discount rates resulting from turmoil in the credit and equity markets; and 3) current cash flow forecasts for the EMEA markets in which we operate. The impairment will not result in any current or future cash expenditures.
• Realignment of European Operations. On June 30, 2008 we announced that as part of the natural progression of the Dangaard integration process, we were realigning our European operations in an effort to streamline our business processes and optimize our business model. We believe that these efforts, and the resultant cost reductions and operational efficiencies, will help produce additional synergies for us. We incurred restructuring costs of $9.9 million for the year ended December 31, 2008 related to these initiatives, which are included as "restructuring charge" in the Consolidated Statement of Operations.
• 2009 Spending and Debt Reduction Plan. In February 2009, we announced a plan to reduce spending in 2009 by $40 to $45 million and to reduce average daily debt by approximately $100 million to $150 million in 2009 (the 2009 Spending and Debt Reduction Plan). The highlights of this plan are:
• Eliminate 2009 Senior Executive Officers' Cash Bonuses - Brightpoint senior executive officers have voluntarily elected to waive their 2009 cash incentive compensation opportunities.
• Reduce Staff Bonuses - Cash incentive compensation opportunities for non-executives will be suspended for the first half of 2009.
• Freeze Base Pay - Employees' base salary will be frozen except adjustments required by law or other special circumstances.
• Impose General Hiring Freeze -the Company has implemented a general hiring freeze.
• Reduce Global Workforce - the Company will reduce its global workforce by at least 220 positions, or approximately 7%. This is in addition to the approximate 10% reduction in workforce announced in June 2008.
• Debt reduction - the Company expects to reduce average daily debt outstanding by $100 million to $150 million in 2009 through improvements in working capital. Working capital improvements will come through reducing aged inventory and receivables, renegotiating customer and vendor terms, and renegotiating of under-performing programs/channels or terminating those programs if satisfactory returns are not met.
In 2008, we reclassified our operating entities in South Africa and the United
Arab Emirates into the Europe reporting segment from the Asia-Pacific reporting
segment. The Europe reporting segment has been renamed the Europe, Middle East
and Africa reporting segment (EMEA). We also reclassified the financial
information related to the global IT support cost center from the Asia-Pacific
region to the Corporate section. Segment information as of and for the years
ended December 31, 2007 and 2006 has been reclassified to conform to the 2008
presentation.
The consolidated statements of operations reflect the reclassification of the
results of operations of our locally branded PC notebook business in Slovakia to
discontinued operations for all periods presented in accordance with U.S.
generally accepted accounting principles. This business was previously reported
in our EMEA reporting segment.
2008 RESULTS OF OPERATIONS
Revenue and units handled by division and service line
Year Ended December 31,
% of % of
2008 Total 2007 Total Change
(Amounts in 000s)
Distribution revenue
Americas $ 705,229 17 % $ 960,405 25 % (27 %)
Asia-Pacific 1,143,293 27 % 1,495,234 38 % (24 %)
EMEA 2,363,289 56 % 1,422,464 37 % 66 %
Total $ 4,211,811 100 % $ 3,878,103 100 % 9 %
Logistic services revenue
Americas $ 184,188 43 % $ 195,028 55 % (6 %)
Asia-Pacific 47,924 11 % 36,030 10 % 33 %
EMEA 196,555 46 % 127,122 35 % 55 %
Total $ 428,667 100 % $ 358,180 100 % 20 %
Total revenue
Americas $ 889,417 19 % $ 1,155,433 27 % (23 %)
Asia-Pacific 1,191,217 26 % 1,531,264 36 % (22 %)
EMEA 2,559,844 55 % 1,549,586 37 % 65 %
Total $ 4,640,478 100 % $ 4,236,283 100 % 10 %
Year Ended
December 31,
% of % of
2008 Total 2007 Total Change
(Amounts in 000s)
Wireless devices sold through
distribution
Americas 5,397 21 % 7,117 28 % (24 %)
Asia-Pacific 10,185 40 % 13,065 51 % (22 %)
EMEA 9,711 39 % 5,553 21 % 75 %
Total 25,293 100 % 25,735 100 % (2 %)
Wireless devices handled through
logistic services
Americas 51,577 88 % 52,492 92 % (2 %)
Asia-Pacific 2,014 3 % 1,756 3 % 15 %
EMEA 5,126 9 % 2,959 5 % 73 %
Total 58,717 100 % 57,207 100 % 3 %
Total wireless devices handled
Americas 56,974 68 % 59,609 72 % (4 %)
Asia-Pacific 12,199 14 % 14,821 18 % (18 %)
EMEA 14,837 18 % 8,512 10 % 74 %
Total 84,010 100 % 82,942 100 % 1 %
|
The following table presents the percentage changes in revenue for the year ended December 31, 2008 by service line compared to the prior year, including the impact to revenue from changes in wireless devices handled, average selling price, foreign currency, and acquisitions.
2008 Percentage Change in Revenue vs. 2007
Non- Total
Wireless Average handset Percentage
devices Selling based Foreign Change in
handled (1) Price (2) revenue (3) Currency Subtotal (4) Acquisitions Revenue
Distribution (19 %) (6 %) 1 % (1 %) (25 %) 34 % 9 %
Logistic services 0 % (4 %) 8 % 3 % 7 % 13 % 20 %
Total (17 %) (6 %) 2 % (1 %) (22 %) 32 % 10 %
|
(1) Handset-based volume represents the percentage change in revenue due to the change in quantity of wireless devices sold through our distribution business and the change in quantity of wireless devices handled through our logistic services business.
(2) Average selling price represents the percentage change in revenue due to the change in the average selling price of wireless devices sold through our distribution business and the change in the average fee per wireless device handled through our logistic services business.
(3) Non-handset distribution revenue represents the percentage change in revenue from accessories sold, freight and non-voice navigation devices sold through our distribution business. Non-handset based logistic services revenue represents the percentage change in revenue from the sale of prepaid airtime, freight billed, and fee based services other than fees earned from wireless devices handled. Changes in non-handset based revenue does not include changes in reported wireless devices.
(4) The subtotal represents the percent change in distribution revenue and logistic services revenue excluding the impact of the acquisitions of the North America and Latin America operations of CellStar on March 31, 2007 and of Dangaard Telecom on July 31, 2007.
Revenue and wireless devices handled by division:
Americas
(Amounts in 000s)
Year Ended December 31,
% of % of
2008 Total 2007 Total Change
REVENUE:
Distribution $ 705,229 79 % $ 960,405 83 % (27 %)
Logistic services 184,188 21 % 195,028 17 % (6 %)
Total $ 889,417 100 % $ 1,155,433 100 % (23 %)
WIRELESS DEVICES HANDLED :
Distribution 5,397 9 % 7,117 12 % (24 %)
Logistic services 51,577 91 % 52,492 88 % (2 %)
Total 56,974 100 % 59,609 100 % (4 %)
|
The following table presents the percentage changes in revenue for our Americas division by service line for the year ended December 31, 2008 compared to the prior year, including the impact to revenue from changes in wireless devices handled, average selling price, foreign currency, and the CellStar acquisition.
2008 Percentage Change in Revenue vs. 2007
Non-
Wireless Average handset
devices Selling based Foreign CellStar
handled Price revenue Currency Subtotal Acquisition Total
Distribution (42 %) 5 % (2 %) 0 % (39 %) 12 % (27 %)
Logistic services (1 %) (3 %) (2 %) 0 % (6 %) 0 % (6 %)
Total (35 %) 4 % (2 %) 0 % (33 %) 10 % (23 %)
|
The decrease in distribution handset based volume for the year ended December 31, 2008 was primarily due to weaker market conditions in North America compared to the prior year as well as the loss of key customers including Dobson Communications, Suncom, and Rural Cellular Corporation as a result of industry consolidation.
The decrease in wireless devices handled through logistic services for the year
ended December 31, 2008 was primarily due to lower volumes resulting from
current economic conditions as well as by the sale of certain assets in
Colombia, which resulted in approximately 3.6 million fewer wireless devices
handled compared to the prior year. This decrease was partially offset by a full
year of operations for the T-Mobile logistic services business which was
launched during the second quarter of 2007. The decrease in average fulfillment
fee per unit was primarily driven by the successful launch of the T-Mobile
logistic services business.
Asia-Pacific
(Amounts in 000s)
Year Ended December 31,
% of % of
2008 Total 2007 Total Change
REVENUE:
Distribution $ 1,143,293 96 % $ 1,495,234 98 % (24 %)
Logistic services 47,924 4 % 36,030 2 % 33 %
Total $ 1,191,217 100 % $ 1,531,264 100 % (22 %)
WIRELESS DEVICES HANDLED :
Distribution 10,185 83 % 13,065 88 % (22 %)
Logistic services 2,014 17 % 1,756 12 % 15 %
Total 12,199 100 % 14,821 100 % (18 %)
|
The following table presents the percentage changes in revenue for our Asia-Pacific division by service line for the year ended December 31, 2008 compared to the prior year, including the impact to revenue from changes in wireless devices handled, average selling price, and foreign currency.
2008 Percentage Change in Revenue vs. 2007
Non-
Wireless Average handset
devices Selling based Foreign
handled Price revenue Currency Total
Distribution (21 %) (2 %) 0 % (1 %) (24 %)
Logistic services 4 % 6 % 23 % 0 % 33 %
Total (20 %) (2 %) 1 % (1 %) (22 %)
|
The decrease in wireless devices sold in our Asia-Pacific division for the year
ended December 31, 2008 was driven by fewer devices sold in India due to lower
availability of high demand products compared to prior year as well as fewer
devices sold by our Singapore business. In the second half of the year, a
strengthening of the US Dollar against other currencies allowed traders from
other regions to sell wireless devices into the markets served by our Singapore
business (primarily the Middle East) at prices lower than those available to us.
The decrease in average selling price for the year ended December 31, 2008 was
driven by our Singapore business as a result of a shift in mix to lower priced
handsets due to a shift in market demand as well as lower availability of higher
priced devices. This decrease in average selling price in Singapore was
partially offset by an increase in average selling price in our Australia
business due to a higher mix of converged devices sold compared to the prior
year.
The increase in wireless devices handled through logistic services for the year
ended December 31, 2008 was primarily due to an increase in wireless devices
handled for our largest customer in Australia. The increase in average
fulfillment fee per unit was due primarily to a favorable mix of wireless
devices handled. The increase in non-handset based logistic services revenue was
primarily due to an increase in revenue from repair services in India compared
to prior year as well as an increase in revenue from non-handset based logistic
services in our New Zealand operation.
EMEA
(Amounts in 000s)
Year Ended December 31,
% of % of
2008 Total 2007 Total Change
REVENUE:
Distribution $ 2,363,289 92 % $ 1,422,464 92 % 66 %
Logistic services 196,555 8 % 127,122 8 % 55 %
Total $ 2,559,844 100 % $ 1,549,586 100 % 65 %
WIRELESS DEVICES HANDLED :
Distribution 9,711 65 % 5,553 65 % 75 %
Logistic services 5,126 35 % 2,959 35 % 73 %
Total 14,837 100 % 8,512 100 % 74 %
|
The following table presents the percentage changes in revenue for the year ended December 31, 2008 by service line for our EMEA division compared to the prior year, including the impact to revenue from changes in wireless devices handled, average selling price, foreign currency, and the Dangaard Telecom acquisition.
2008 Percentage Change in Revenue vs. 2007
Wireless devices Average Selling Non-handset based Dangaard Telecom
handled Price revenue Foreign Currency Subtotal Acquisition Total
Distribution (1 %) (19 %) 3 % (3 %) (20 %) 86 % 66 %
Logistic services (1 %) (8 %) 20 % 7 % 18 % 37 % 55 %
Total (1 %) (18 %) 5 % (3 %) (17 %) 82 % 65 %
|
The increase in distribution revenue for the year ended December 31, 2008 was
due to the July 2007 acquisition of Dangaard Telecom. Excluding the Dangaard
Telecom operations, distribution revenue in our Europe division was estimated to
have decreased 20% when assuming that revenue from legacy Brightpoint operations
in overlapping countries (Germany, Norway, and Sweden) remained constant from
the year ended December 31, 2007. The decrease in average selling price was due
to a shift in demand to lower priced handsets in Europe compared to the prior
year.
The increase in logistic services revenue for the year ended December 31, 2008
was primarily due to the acquisition of Dangaard Telecom. In order to conform to
Brightpoint accounting policies and US GAAP, Dangaard Telecom changed its
revenue recognition for arrangements where Dangaard Telecom serves as the
"agent" in the transaction. The revenue from these arrangements is included in
logistic services revenue. Excluding the Dangaard Telecom operations, logistic
services revenue in our Europe division increased 18% due to an increase in
revenue from the sale of prepaid airtime in Sweden as well as an increase in
revenue from non-handset based logistic services agreements from the re-launch
of our Middle East based business in which we resumed operations in August 2007.
Gross Profit and Gross Margin
Year Ended
December 31,
% of % of
2008 Total 2007 Total Change
(Amounts in 000s)
Distribution $ 184,336 53 % $ 166,036 62 % 11 %
Logistic services 162,387 47 % 103,338 38 % 57 %
Gross profit $ 346,723 100 % $ 269,374 100 % 29 %
Distribution 4.4 % 4.3 % 0.1 % points
Logistic services 37.9 % 28.9 % 9.0 % points
Gross margin 7.5 % 6.4 % 1.1 % points
|
The 1.1 percentage point increase in gross margin for the year ended
December 31, 2008 was driven by both a 0.1 percentage point increase in gross
margin from our distribution business and a 9.0 percentage point increase in
gross margin from our logistic services business. The increases in gross profit
and gross margin from logistic services were driven by incremental logistic
services gross profit and gross margin from the Dangaard Telecom operations as
well the impact of conforming Dangaard Telecom to Brightpoint accounting
policies. In addition, gross margin from logistic services was positively
impacted by an improved cost structure resulting from the impact of spending
reductions in our North America operations. The increases in distribution gross
profit and gross margin were primarily driven by a shift in mix toward higher
margin distribution business in Europe resulting from the acquisition of
Dangaard Telecom.
Selling General and Administrative (SG&A) Expenses
Year Ended
December 31,
2008 2007 Change
(Amounts in 000s)
SG&A expenses $ 266,201 $ 184,979 (44 %)
Percent of revenue 5.7 % 4.4 % 1.3 % points
|
The increase in SG&A expenses for the year ended December 31, 2008 compared to . . .
|
|
