<PAGE>
UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1996
-------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from: to
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Commission file number: 0-23494
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BRIGHTPOINT, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 35-1778566
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State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization
6402 Corporate Drive, Indianapolis, Indiana 46278
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(Address of principal executive offices) (Zip Code)
(317) 297-6100
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
Number of shares of common stock outstanding at May 7, 1996: 8,594,685 shares
1
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BRIGHTPOINT, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
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PART I. FINANCIAL INFORMATION
<S> <C> <C>
ITEM 1
Balance Sheets
December 31, 1995 and March 31, 1996..........................................3
Statements of Income
Three Months Ended March 31, 1995 and 1996....................................4
Statements of Cash Flows
Three Months Ended March 31, 1995 and 1996....................................5
Notes to Financial Statements..........................................................6
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations.................................7
PART II. OTHER INFORMATION....................................................................10
Signatures..............................................................................................11
</TABLE>
2
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BRIGHTPOINT, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1995 March 31, 1996
----------------- --------------------
(Note) (Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,000 $ 3,000
Accounts receivable, net 33,707,000 41,309,000
Accounts receivable, related party 2,135,000 10,818,000
Inventories 40,030,000 37,248,000
Other current assets 1,181,000 1,286,000
------------- --------------
Total current assets 77,058,000 90,664,000
Property and equipment, net 2,455,000 3,767,000
Other assets 257,000 1,401,000
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Total assets $ 79,770,000 $ 95,832,000
============= ==============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
expenses $ 20,725,000 $ 25,094,000
Note payable --- 9,636,000
------------- --------------
Total current liabilities 20,725,000 34,730,000
Deferred taxes 48,000 48,000
Stockholders' equity:
Common stock 86,000 86,000
Additional paid-in capital 50,803,000 50,837,000
Retained earnings 8,108,000 10,131,000
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Total stockholders' equity 58,997,000 61,054,000
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Total liabilities and stockholders' equity $ 79,770,000 $ 95,832,000
============= ==============
</TABLE>
Note: The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See accompanying notes.
3
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BRIGHTPOINT, INC.
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended March 31
1995 1996
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Net sales $ 63,545,000 $ 87,662,000
Cost of sales 59,942,000 82,314,000
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Gross profit 3,603,000 5,348,000
Selling, general and
administrative expenses 1,438,000 1,976,000
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Income from operations 2,165,000 3,372,000
Interest expense, net 115,000 51,000
-------------- --------------
Income before income taxes 2,050,000 3,321,000
Income taxes 900,000 1,298,000
-------------- --------------
Net income $ 1,150,000 $ 2,023,000
============== ==============
Net income per share:
Net income per share $ 0.17 $ 0.23
============== ===============
Weighted average common
shares outstanding 6,599,000 8,959,000
============== ===============
See accompanying notes.
4
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BRIGHTPOINT, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31
1995 1996
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<S> <C> <C>
Operating activities
Net income $ 1,150,000 $ 2,023,000
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation 20,000 111,000
Changes in current assets and liabilities:
Accounts receivable (7,243,000) (7,602,000)
Accounts receivable, related party (817,000) (8,683,000)
Inventories (1,449,000) 2,782,000
Other current assets (70,000) (105,000)
Accounts payable and accrued expenses 3,134,000 4,369,000
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Net cash used in operating activities (5,275,000) (7,105,000)
Investing activities
Capital expenditures (93,000) (1,423,000)
Other assets --- (1,144,000)
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Net cash used in investing activities (93,000) (2,567,000)
Financing activities
Net borrowings on note payable 5,425,000 9,636,000
Proceeds from exercise of stock options and warrants --- 34,000
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Net cash provided by financing activities 5,425,000 9,670,000
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Net increase (decrease) in cash 57,000 (2,000)
Cash and cash equivalents at beginning of period 52,000 5,000
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Cash and cash equivalents at end of period $ 109,000 $ 3,000
============= ===========
</TABLE>
See accompanying notes.
5
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BRIGHTPOINT, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of the Company, all adjustments
(consisting of only normal recurring accruals) considered necessary to
present fairly the financial statements have been included.
The statement of income for the three months ended March 31, 1996 is not
necessarily indicative of the results that may be expected for the entire
year. For further information reference is made to the audited financial
statements and the footnotes thereto included in the Company's Form 10-K for
the year ended December 31, 1995.
2. Reclassifications
Certain amounts in the 1995 financial statements have been reclassified to
conform to the March 31, 1996 presentation.
3. Proposed Business Combination
On March 15, 1996, the Company and Allied Communications, Inc. and affiliates
(Allied Companies) signed a definitive agreement in connection with the
Company's merger with the Allied Companies and on May 1, 1996, the Company
filed a definitive proxy statement with the Securities & Exchange Commission.
The merger is subject to stockholder approval and the Company anticipates
that it will account for the merger using the pooling of interests method.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Comparison of Three Months Ended March 31, 1995 to Three Months Ended March 31,
1996
Results of Operations
The following table sets forth, for the periods indicated, the percentage of net
sales represented by certain items reflected in the Company's statements of
income and the percentage change in such items from the prior period.
<TABLE>
<CAPTION>
Percentage of Net Sales Percentage
Three Months Ended March 31 Change
---------------------------
1995 1996 1995 to 1996
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<S> <C> <C> <C>
Net sales 100.0% 100.0% 38.0%
Cost of sales 94.3 93.9 37.3
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Gross profit 5.7 6.1 48.4
Selling, general and
administrative expenses 2.3 2.3 37.4
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Income from operations 3.4 3.8 55.8
Interest expense, net .2 --- (55.7)
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Income before income taxes 3.2 3.8 62.0
Income taxes 1.4 1.5 44.2
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Net income 1.8% 2.3% 75.9%
======= ======
</TABLE>
Net sales increased by approximately $24,117,000, or 38.0%, from the three
months ended March 31, 1995 to the three months ended March 31, 1996. The
increase in net sales is primarily attributable to increased domestic and
foreign unit volume, offsetting a decrease in per unit prices. Foreign sales
were approximately 43.2% and 38.7% of the Company's net sales for the three
months ended March 31, 1995 and 1996, respectively. The Company anticipates that
sales of its products in foreign markets will continue to account for a
significant portion of net sales in the future.
Cost of sales increased by approximately $22,372,000, or 37.3%, from the three
months ended March 31, 1995 to the three months ended March 31, 1996. Gross
profit increased by approximately $1,745,000, or 48.4%, from the three months
ended March 31, 1995 to the three months ended March 31, 1996. Gross profit as a
percentage of net sales increased from 5.7% to 6.1% from the three months ended
March 31, 1995 to the three months ended March 31, 1996. The increase in
absolute dollars is primarily attributable to the increased number of units
sold. The increase in gross profit as a percentage of net sales is due to the
Company's ability to maintain its per unit dollar profit as per unit phone
prices have declined. In future periods, gross profit may be affected by
product, freight and other costs, price competition and by changes in the mix of
products offered by the Company.
7
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Results of Operations (continued)
Selling, general and administrative expenses increased by approximately
$538,000, or 37.4%, from the three months ended March 31, 1995 to the three
months ended March 31, 1996 while remaining constant at 2.3% of net sales for
the three months ended March 31, 1995 and 1996. The increase in absolute dollars
is attributable to the Company's expanded level of operations and reflects
increases in compensation expense, rent expense, and travel costs associated
with the increased international sales and marketing efforts. The Company
expects these expenses will continue to increase in absolute dollars in
connection with higher levels of sales.
Income from operations increased by approximately $1,207,000, or 55.8%, from the
three months ended March 31, 1995 to the three months ended March 31, 1996.
Income from operations as a percentage of net sales increased from 3.4% to 3.8%
from the three months ended March 31, 1995 to the three months ended March 31,
1996. These increases are primarily attributable to the increase in gross profit
as discussed above.
Net income increased by approximately $873,000, or 75.9%, from the three months
ended March 31, 1995 to the three months ended March 31, 1996. The increase in
net income resulted from an increase in gross profit as discussed above.
Liquidity and Capital Resources
The Company's primary cash requirements have been to fund increased levels of
accounts receivable and inventories. The Company has historically satisfied its
working capital requirements principally through cash flow from operations, bank
borrowings and the issuance of equity securities.
At March 31, 1996, the Company had working capital of approximately $55,934,000
compared to working capital of approximately $56,333,000 at December 31, 1995.
The decline in working capital was primarily attributable to increased levels of
borrowings on the Company's line of credit, increased levels of accounts payable
and accrued expenses and a decline in inventories, partially offset by an
increase in accounts receivable.
Net cash used by operating activities was approximately $7,105,000 in the three
months ended March 31, 1996, as compared to approximately $5,275,000 in the
three months ended March 31, 1995. The increase in cash used by operating
activities was primarily attributable to increases in accounts receivable
(including related party receivables) partially offset by declines in
inventories and increases in accounts payable and accrued expenses. Net cash
used by investing activities was approximately $2,567,000 in the three months
ended March 31, 1996, as compared to approximately $93,000 in the three months
ended March 31, 1995. The increase in cash used by investing activities was
primarily attributable to capital expenditures relating to the purchases of
8
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Liquidity and Capital Resources (continued)
information systems equipment and software and furniture and fixtures,
capitalization of expenditures related to the formation of Brightpoint
International Ltd. and the prepayment of a long-term contract. Net cash provided
by financing activities was approximately $9,670,000 in the three months ended
March 31, 1996, as compared to approximately $5,425,000 in the three months
ended March 31, 1995. The increase in net cash provided by financing activities
was primarily attributable to advances under the Company's line of credit. At
March 31, 1996, the Company had cash and cash equivalents of approximately
$3,000.
In January 1996, the Company amended its credit agreement (line of credit) with
Bank One, Indianapolis, NA, as agent for a group of banks (the "Bank"), to
increase available borrowings on the line of credit to $50,000,000. Borrowings
in excess of $35,000,000 through June 30, 1996 and $42,000,000 subsequent to
June 30, 1996 are limited to the lesser of $50,000,000 or the borrowing base
which is equal to 80% of the Company's eligible accounts receivable (33% of
foreign receivables), 85% of confirmed accounts receivable and 50% of the
Company's qualified inventories (subject to a limit on inventories of the lesser
of 50% of the borrowing base or $13,500,000). Borrowings on the amended line of
credit bear interest at the bank's prime rate less up to 75 basis points or at
LIBOR plus 100 to 175 basis points dependent upon the ratio of the Company's
funded debt to capital, and is payable monthly. At March 31, 1996, there was
$9,636,000 outstanding and $32,299,000 available on the line of credit. The line
of credit expires on May 29, 1998.
Substantially all of the Company's assets, including its inventories and
receivables, are pledged to the Bank as collateral and the Company is prohibited
from incurring additional indebtedness, except for trade indebtedness, certain
of which is subordinated to the Company's indebtedness to the banks. The
Company's inability to incur additional indebtedness could, under certain
circumstances, limit the Company's ability to expand its operations. In addition
to covenants requiring the maintenance of certain financial ratios, the
Company's agreement with the Bank limits or prohibits the Company, subject to
certain exceptions, from declaring or paying cash dividends, making capital
distributions or other payments to stockholders, merging or consolidating with
another corporation, forming subsidiaries, selling all or substantially all of
its assets, creating liens or security interests on the Company's assets,
entering into transactions with affiliates and making payments on subordinated
indebtedness without the bank's prior consent.
The Company believes that projected cash flow from operations together with
existing capital resources, including cash and borrowings available under its
line of credit, will be sufficient to satisfy the Company's current working
capital requirements. Other than in connection with implementing the Company's
management information system, the Company has no material commitments for
capital expenditures as of March 31, 1996.
9
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PART II. OTHER INFORMATION
Item 5. Other Information
On March 15, 1996, the Company and Allied Communications, Inc. and affiliates
(Allied Companies) signed a definitive agreement in connection with the
Company's merger with the Allied Companies.
On May 1, 1996, the Company filed a definitive proxy statement with the
Securities & Exchange Commission in connection with the Company's merger with
the Allied Companies.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Statement Re: Computation of Earnings Per Share
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended March 31,
1996.
10
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Brightpoint, Inc.
-----------------
(Registrant)
Date May _____, 1996 /s/ Robert J. Laikin
--------------------------- ----------------------
Robert J. Laikin
President and Chief Executive Officer
Date May _____, 1996 /s/ J. Mark Howell
--------------------------- ----------------------
J. Mark Howell
Chief Financial Officer
11
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Exhibit Index
-------------
Page in
Sequentially
Exhibit No. Description Numbered Copy
----------- ----------- -------------
` (11) Statement Re: Computation of 13
Earnings Per Share
12
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Exhibit (11) Statement Re: Computation of Earnings Per Share
(000's omitted, except per share data)
Three Months Ended March 31
1995 1996
------ ------
Primary:
Average shares outstanding 6,125 8,588
Net effect of stock options and
warrants - based on the treasury stock
method using average market price
449 331
======= =======
Totals 6,574 8,919
======= =======
Net income $ 1,150 $ 2,023
======= =======
Per share amount $ 0.17 $ 0.23
======= =======
Fully diluted:
Average shares outstanding 6,125 8,588
Net effect of stock options and
warrants - based on the treasury stock
method using quarter end market price
which is greater than average market
price 474 371
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Totals 6,599 8,959
======= =======
Net income $ 1,150 $ 2,023
======= =======
Per share amount $ 0.17 $ 0.23
======= =======
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q AT
MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,000
<SECURITIES> 0
<RECEIVABLES> 52,627,000
<ALLOWANCES> 500,000
<INVENTORY> 37,248,000
<CURRENT-ASSETS> 90,664,000
<PP&E> 4,046,000
<DEPRECIATION> 279,000
<TOTAL-ASSETS> 95,832,000
<CURRENT-LIABILITIES> 34,730,000
<BONDS> 0
86,000
0
<COMMON> 0
<OTHER-SE> 60,968,000
<TOTAL-LIABILITY-AND-EQUITY> 95,832,000
<SALES> 87,662,000
<TOTAL-REVENUES> 87,662,000
<CGS> 82,314,000
<TOTAL-COSTS> 82,314,000
<OTHER-EXPENSES> 1,976,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,000
<INCOME-PRETAX> 3,321,000
<INCOME-TAX> 1,298,000
<INCOME-CONTINUING> 2,023,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,023,000
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
