<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: September 30, 1996
------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from: to
-------------------- ----------------------
Commission file number: 0-23494
-------------------------------------------------------
BRIGHTPOINT, INC.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 35-1778566
- -------------------------------------------------------------------------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
6402 Corporate Drive, Indianapolis, Indiana 46278
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(317) 297-6100
- -------------------------------------------------------------------------------
(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 October 16, 1996:
11,042,940 shares
<PAGE>
BRIGHTPOINT, INC.
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
ITEM 1
- ------
Consolidated Statements of Income
Three Months Ended September 30, 1995 and 1996......................3
Nine Months Ended September 30, 1995 and 1996.......................3
Consolidated Balance Sheets
December 31, 1995 and September 30, 1996............................4
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1995 and 1996.......................5
Notes to Consolidated Financial Statements...................................6
ITEM 2
- ------
Management's Discussion and Analysis of
Financial Condition and Results of Operations.......................9
PART II. OTHER INFORMATION..................................................14
Signatures..................................................................15
<PAGE>
BRIGHTPOINT, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1995 1996 1995 1996
------------ ---------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales $ 100,915 $ 145,290 $ 290,017 $ 378,146
Cost of sales 94,093 133,036 270,954 349,482
------------ ---------- ----------- ----------
Gross profit 6,822 12,254 19,063 28,664
Selling, general and administrative expenses 3,712 5,105 9,666 12,872
------------ ---------- ----------- ----------
Income from operations 3,110 7,149 9,397 15,792
Merger expenses (Note 4) -- -- -- 2,750
Interest expense 508 549 1,286 1,172
------------ ---------- ----------- ----------
Income before income taxes and minority interest 2,602 6,600 8,111 11,870
Income taxes 894 2,349 2,469 4,320
------------ ---------- ----------- ----------
Income before minority interest 1,708 4,251 5,642 7,550
Minority interest -- 1,042 -- 1,042
------------ ---------- ----------- ----------
Net income $ 1,708 $ 3,209 $ 5,642 $ 6,508
============ ========== =========== ==========
Pro forma financial information:
Historical income before taxes $ 2,602 $ 6,600 $ 8,111 $ 11,870
Pro forma income taxes 1,019 2,349 3,173 4,796
Minority interest -- 1,042 -- 1,042
------------ ---------- ----------- ----------
Pro forma net income $ 1,583 $ 3,209 $ 4,938 $ 6,032
============ ========== =========== ==========
Pro forma net income per share $ 0.18 $ 0.29 $ 0.56 $ 0.54
============ ========== =========== ==========
Weighted average common shares outstanding 8,961 11,221 8,859 11,169
============ ========== =========== ==========
Pro forma financial information excluding the
effect of the one-time merger expenses:
Pro forma net income $ 1,583 $ 3,209 $ 4,938 $ 8,093
============ ========== =========== ==========
Pro forma net income per share $ 0.18 $ 0.29 $ 0.56 $ 0.72
============ ========== =========== ==========
</TABLE>
See accompanying notes.
3
<PAGE>
BRIGHTPOINT, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
December 31, 1995 September 30, 1996
----------------------- -----------------------
(Note 1) (Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 726 $ 4,592
Accounts receivable (less allowance for
doubtful accounts of $691 in 1995
and $1,047 in 1996) 55,153 78,142
Accounts receivable, related parties (Note 5) 2,135 2,010
Inventories 56,313 56,110
Other current assets 2,220 1,975
----------- -------------
Total current assets 116,547 142,829
Property and equipment, net 2,934 9,802
Other assets 306 3,613
----------- -------------
Total assets $ 119,787 $ 156,244
=========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 48,665 51,359
Notes payable 5,663 --
----------- -------------
Total current liabilities 54,328 51,359
Deferred taxes 48 82
Note payable (Note 6) -- 27,208
Stockholder loans 554 --
Minority interest -- 1,047
Stockholders' equity:
Preferred stock, $.01 par value: 1,000,000 shares
authorized; no shares issued or outstanding -- --
Common stock, $.01 par value: 10,000,000 and
25,000,000 shares authorized and 8,585,000 and
11,039,444 issued and outstanding in 1995 and
1996, respectively 106 110
Additional paid-in capital 50,823 63,404
Retained earnings 13,928 13,032
Foreign currency translation adjustment -- 2
----------- -------------
Total stockholders' equity 64,857 76,548
----------- -------------
Total liabilities and stockholders' equity $ 119,787 $ 156,244
=========== =============
</TABLE>
See accompanying notes.
4
<PAGE>
BRIGHTPOINT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30
1995 1996
----------------------- -----------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 5,642 $ 6,508
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation 125 573
Minority interest in income from joint venture - 1,042
Merger expenses - 2,750
Changes in current assets and liabilities:
Accounts receivable (16,680) (22,904)
Accounts receivable, related parties (1,242) (158)
Inventories (4,032) 203
Other current assets (924) (59)
Accounts payable and accrued expenses 2,660 2,531
----------- ----------
Net cash used in operating activities (14,451) (9,514)
INVESTING ACTIVITIES
Capital expenditures (1,471) (7,441)
Other assets (619) (3,186)
----------- ----------
Net cash used in investing activities (2,090) (10,627)
FINANCING ACTIVITIES
Net borrowings on notes payable 18,657 21,545
Net borrowings (repayments) on stockholder loans (801) (554)
Merger expenses - (2,168)
Proceeds from exercise of stock options and warrants 2,832 4,768
Tax effect of incentive stock option exercise 544 705
Dividend distributions to Allied Companies' stockholders
for subchapter S income taxes (1,118) (289)
----------- ----------
Net cash provided by financing activities 20,114 24,007
----------- ----------
Net increase in cash 3,573 3,866
Cash and cash equivalents at beginning of period 441 726
----------- ----------
Cash and cash equivalents at end of period $ 4,014 $ 4,592
=========== ==========
</TABLE>
See accompanying notes.
5
<PAGE>
BRIGHTPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
---------------------
The accompanying unaudited consolidated 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 consolidated financial statements have been
included.
The consolidated balance sheet at December 31, 1995 has been derived from the
audited financial statements at that date, restated for the merger with the
Allied Companies discussed below, but does not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. The consolidated statements of income for the
three and nine months ended September 30, 1996 are not necessarily indicative
of the results that may be expected for the entire year.
For further information reference is made to the unaudited pro forma
condensed combined financial statements and notes thereto contained in the
Company's proxy statement dated April 30, 1996 and the audited consolidated
financial statements and the footnotes thereto included in the Company's Form
10-K for the year ended December 31, 1995.
On June 7, 1996, the Company completed a merger with Allied Communications,
Inc., Allied Communications of Florida, Inc., Allied Communications of
Georgia, Inc., Allied Communications of Illinois, Inc. and Allied
Communications of Puerto Rico, Inc. ("the Allied Companies"), which are
engaged in substantially the same business as the Company. The transaction
was accounted for using the pooling-of-interests method and accordingly, the
Company's financial statements have been restated to reflect the consolidated
balance sheets and consolidated results of operations of both companies as if
the merger had been in effect for all periods presented. Further information
pertaining to the merger is presented in Note 4 - Merger with the Allied
Companies.
On August 1, 1996, the Company completed the formation of a joint venture
with Technology Resources International Ltd. (TRI). The newly-formed joint
venture, Brightpoint International Ltd., is owned 50 percent by the Company
and 50 percent by TRI. Because the Company has controlling voting power over
the joint venture, the operations of Brightpoint International Ltd. are
consolidated for financial reporting purposes.
6
<PAGE>
BRIGHTPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
2. Reclassifications
-----------------
Certain amounts in the 1995 consolidated financial statements have been
reclassified to conform to the current period presentation.
3. Pro Forma Financial Information
-------------------------------
Prior to the Company's merger with the Allied Companies, the Allied
Companies' stockholders had elected under Subchapter S of the Internal
Revenue Code to include the income of the Allied Companies in their own
income for income tax purposes. Therefore the pro forma financial information
is presented to include a provision for income taxes as if the Allied
Companies had been subject to income taxes.
4. Merger with the Allied Companies
--------------------------------
On June 7, 1996, the Company completed a merger with the Allied Companies
through the exchange of 2,025,000 shares of newly-issued Company common stock
for all of the outstanding shares of the Allied Companies common stock. The
merger was structured as a tax-free reorganization and was accounted for
using the pooling-of-interests method of accounting. Net sales and net income
for the Company and the Allied Companies for the three months and the nine
months ended September 30, 1995, prior to the combination, are as follows (in
thousands):
Three Months Ended Nine Months Ended
September 30, 1995 September 30, 1995
------------------- ------------------
Net sales
Brightpoint, Inc. $ 65,596 $190,111
Allied Companies 35,319 99,906
-------- --------
Combined $100,915 $290,017
======== ========
Net income
Brightpoint, Inc. $ 1,389 $ 3,842
Allied Companies (pro forma) 194 1,096
-------- --------
Combined $ 1,583 $ 4,938
======== ========
In connection with the merger, the Company recorded a non-recurring charge of
$2,750,000 ($2,061,000 net of tax) in the quarter ended June 30, 1996 for
transaction costs, including investment banking, legal, and accounting fees,
and for other estimated costs associated with the merger ("Merger expenses").
7
<PAGE>
BRIGHTPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
5. Accounts Receivable, Related Parties
------------------------------------
The Company had various trade accounts receivable due from affiliates of
$2,135,000 and $904,000 at December 31, 1995 and September 30, 1996,
respectively. Sales to affiliates were made at prevailing market prices.
In addition, the Company had a $1,106,000 receivable from the former
shareholders of Technology Resources International Ltd. at September 30,
1996.
6. Credit Arrangements
-------------------
At September 30, 1996, the Company had a $75,000,000 amended credit agreement
(line of credit) with Bank One, Indianapolis, NA, as agent for a group of
banks. Borrowings on the amended line of credit bear interest, payable
monthly, at the bank's prime rate less up to 100 basis points or at LIBOR
plus 75 to 175 basis points dependent upon the ratio of the Company's funded
debt to capital. The line of credit, which expires on May 28, 1999 and does
not include provisions for demand repayment, has been classified as
long-term. Under the line of credit at September 30, 1996, there was $27.2
million outstanding, $8.3 million in letters of credit and $39.5 million
remaining available.
Substantially all of the Company's assets, including its inventories and
receivables, are pledged to the Bank as collateral. 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 among other things, incurring additional indebtedness,
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 and entering
into transactions with affiliates. The Company's inability to incur
additional indebtedness could, under certain circumstances, limit the
Company's ability to expand its operations.
7. Subsequent Events
-----------------
Effective October 11, 1996, the Company amended its credit agreement to
restate various covenants, including a provision to allow the Company to
guarantee bank debt of Brightpoint International Ltd. in an amount not to
exceed $25 million.
On October 18, 1996, the Company's subsidiary, Brightpoint International
Ltd., acquired the business and operations of Hatadicorp Pty Ltd. ("Hatadi")
which is based in Sydney, Australia. The newly formed Brightpoint Australia
Pty Ltd. is owned 80 percent by Brightpoint International Ltd. and 20 percent
by the founder and former shareholders of Hatadi. The operations of
Brightpoint Australia Pty Ltd. will be consolidated for financial reporting
purposes.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Comparison of Three and Nine Months Ended September 30, 1995 to Three and Nine
Months Ended September 30, 1996
On June 7, 1996, the Company completed a merger with Allied Communications,
Inc., Allied Communications of Florida, Inc., Allied Communications of
Georgia, Inc., Allied Communications of Illinois, Inc. and Allied
Communications of Puerto Rico, Inc. ("the Allied Companies"), which are
engaged in substantially the same business as the Company. The transaction
was accounted for using the pooling-of-interests method and accordingly, the
Company's financial statements have been restated to reflect the consolidated
balance sheets and consolidated results of operations of both companies as if
the merger had been in effect for all periods presented. In connection with
the merger, the Company recorded a non-recurring charge of $2,750,000
($2,061,000 net of tax) in the quarter ended June 30, 1996 for transaction
costs, including investment banking, legal, and accounting fees, and for
estimated costs associated with the merger ("Merger expenses").
On August 1, 1996, the Company completed the formation of a joint venture
with Technology Resources International Ltd. (TRI). The newly formed
Brightpoint International Ltd. is owned 50 percent by the Company and 50
percent by TRI. The operations of Brightpoint International Ltd. are
consolidated for financial reporting purposes.
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
consolidated statements of income and the percentage change in such items
from the prior period.
Percentage of Net Sales
Three Months Ended September 30 Percentage Change
------------------------------- -----------------
1995 1996 1995 to 1996
------ ------ ------------
Net sales 100.0% 100.0% 44.0%
Cost of sales 93.2 91.6 41.4
----- -----
Gross profit 6.8 8.4 79.6
Selling, general and
administrative expenses 3.7 3.5 37.5
----- -----
Income from operations 3.1 4.9 129.9
Interest expense, net .5 .4 8.1
----- -----
Income before income taxes
and minority interest 2.6 4.5 153.7
Pro forma income taxes 1.0 1.6 130.5
Minority interest -- .7 --
----- -----
Pro forma net income 1.6% 2.2% 102.7%
===== =====
9
<PAGE>
Results of Operations (continued)
- ---------------------------------
Percentage of Net Sales
Nine Months Ended September 30 Percentage Change
------------------------------- -----------------
1995 1996 1995 to 1996
------ ------ ------------
Net sales 100.0% 100.0% 30.4%
Cost of sales 93.4 92.4 29.0
----- -----
Gross profit 6.6 7.6 50.4
Selling, general and
administrative expenses 3.3 3.4 33.2
----- -----
Income from operations 3.3 4.2 68.1
Merger expenses -- .7 --
Interest expense, net .5 .3 (8.9)
----- -----
Income before income taxes
and minority interest 2.8 3.2 46.3
Pro forma income taxes 1.1 1.3 51.2
Minority interest -- .3 --
----- -----
Pro forma net income 1.7% 1.6% 22.2%
===== =====
Consolidated sales increased $44.4 million, or 44.0%, over sales for the third
quarter of 1995 and $88.1 million, or 30.4%, over sales for the first nine
months of 1995 reflecting continued strong demand for wireless communication
equipment in the United States and overseas. The increase in net sales over the
first nine months of 1995 is primarily attributable to a 77.0% increase in unit
volume, offset by a 49.5% decrease in per unit prices. Net sales in
international markets grew 60.9% in the first three-quarters of 1996 to 41.1% of
the Company's total net sales compared to 33.3% of total net sales for the same
period of last year. The Company anticipates that sales of its products in
foreign markets will continue to account for a greater portion of net sales in
the future.
Gross profit improved $5.4 million, or 79.6% over the third quarter of 1995, and
$9.6 million or 50.4% over the first nine months of 1995. Gross profit as a
percentage of net sales increased from 6.8% to 8.4% over the third quarter of
1995 and from 6.6% to 7.6% over the nine months ended September 30, 1995. 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 addition, the Company has increased its sales in
foreign markets and has begun to provide value added services both of which have
higher profit margins during 1996. 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.
Selling, general and administrative expenses increased by approximately $1.4
million, or 37.5%, over the third quarter 1995 and $3.2 million, or 33.2%, over
the operating expenses for the first nine months of 1995. Selling, general and
administrative expenses as a percentage of net sales increased from 3.3% to 3.4%
from the nine months ended September 30, 1995 to the nine months ended September
30, 1996. The increase is attributable to the Company's expanded level of
operations and reflects increases in
10
<PAGE>
Results of Operations (continued)
- ---------------------------------
depreciation expense relating to investments in management information systems,
rent expense for expanded facilities, compensation expense and travel costs
associated with increased international sales and marketing efforts. In
addition, during the transition period leading up to the merger with the Allied
Companies, the Company and the Allied Companies incurred duplicate expenses
which have been and will continue to be eliminated in future periods as
represented by the decrease from the three months ended September 30, 1995 of
3.7% to the three months ended September 30, 1996 of 3.5%. The Company expects
that selling, general and administrative expenses will continue to increase in
absolute dollars in connection with higher levels of sales but remain relatively
constant as a percentage of net sales.
Income from operations increased by approximately $4.0 million, or 129.9%, over
the third quarter of 1995 and $6.4 million, or 68.1%, over the first nine months
of 1995. Income from operations as a percentage of net sales increased from 3.1%
to 4.9% from third quarter of 1995 to the third quarter of 1996 and from 3.3% to
4.2% from the nine months ended September 30, 1995 to the nine months ended
September 30, 1996. These increases are primarily attributable to the increase
in gross profit.
Pro forma net income, including the effect of the one-time merger expenses,
increased $1.6 million, or 102.7%, over the third quarter of fiscal 1995 and
$1.1 million, or 22.2%, over the nine months ended September 30, 1996. Excluding
the merger expenses incurred in the second quarter of fiscal 1996, pro forma net
income would have increased by $3.2 million, or 63.9%, over the first nine
months of fiscal 1995. The increase in pro forma net income is a result of an
increase in income from operations as discussed above. Interest expense and
income taxes have remained relatively consistent as a percent of sales.
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.
Total debt was reduced $10.7 million during the quarter ended September 30, 1996
through the application of cash provided by operations. Working capital was
$91.4 million at September 30, 1996 compared to $62.2 million at December 31,
1995. Cash used by operations in the nine months ended September 30, 1996
totaled $9.5 million, compared to $14.5 million in the nine months ended
September 30, 1995. The decrease in cash used by operating activities was
primarily attributable to inventories remaining at approximately $56 million at
September 30, 1996. Additionally, an increase in accounts payable and accrued
expenses was offset by an increase in accounts receivable. Accounts receivable
increased by $22.9 million because of substantially higher sales volume in the
first nine months of 1996 compared to the first nine months of 1995. Accounts
payable and accrued expenses increased by $2.5 million primarily because of the
higher sales volume in the third quarter of 1996 versus the fourth quarter of
1995.
11
<PAGE>
Liquidity and Capital Resources (continued)
- -------------------------------------------
Cash used by investing activities totaled $10.6 million in the nine months ended
September 30, 1996 compared to $2.1 million in the nine months ended September
30, 1995. The increase in cash used by investing activities was primarily
attributable to capital expenditures relating to the purchases of information
systems equipment and software, furniture and fixtures and leasehold
improvements, and capitalization of expenditures related to the formation of
Brightpoint International Ltd. Information systems equipment and software
investments were made to accommodate the Company's growth, integrate the
operations of the Allied Companies and to develop a fulfillment system which
enables the Company to offer additional valued added services in the cellular
and personal communication services (PCS) markets.
Cash provided by financing activities was $24.0 million in the nine months ended
September 30, 1996, compared to $30.7 million in the six months ended June 30,
1996, and $20.1 million in the nine months ended September 30, 1995. The
increase in net cash provided by financing activities over the nine months ended
September 30, 1995 was primarily attributable to advances under the Company's
line of credit. The decrease in the cash provided by financing activities for
the third quarter of fiscal 1996 was achieved through the application of $9.5
million provided from operations and $4.8 million received from the proceeds
from the exercise of stock options and warrants. At September 30, 1996, the
Company had cash and cash equivalents of approximately $4.6 million.
In June, 1996, the Company amended it 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 $75,000,000. The
amendment also eliminated all borrowing base limitations previously included in
the agreement. Borrowings on the amended line of credit bear interest, payable
monthly, at the bank's prime rate less up to 100 basis points or at LIBOR plus
75 to 175 basis points dependent upon the ratio of the Company's funded debt to
capital. Effective October 11, 1996, the Company further amended its credit
agreement to restate various covenants, including a provision to allow the
Company to guarantee bank debt of Brightpoint International Ltd. in an amount
not to exceed $25 million. Under the line of credit at September 30, 1996, there
was $27.2 million outstanding, $8.3 million in letters of credit and $39.5
million remaining available. The line of credit expires on May 28, 1999.
Substantially all of the Company's assets, including its inventories and
receivables, are pledged to the Bank as collateral. 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 among other things, incurring additional indebtedness, 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 and entering into transactions with affiliates. The
Company's inability to incur additional indebtedness could, under certain
circumstances, limit the Company's ability to expand its operations.
12
<PAGE>
Liquidity and Capital Resources (continued)
- -------------------------------------------
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. In July 1996, the Company committed to expand its
distribution facility in Indianapolis by adding 77,000 square feet to the
existing warehouse. The commitment will result in an annual increase in
operating lease payments of approximately $350,000 and an investment in
leasehold improvements not to exceed $500,000. The Company has no other material
commitments for capital expenditures as of September 30, 1996.
The Company frequently transacts business in currencies other than its
functional currency and therefore experiences some risk to exchange rate
fluctuations. The Company has not experienced significant exchange rate gains or
losses historically, however, increasing trade activity in foreign markets or
large fluctuations in exchange rates could generate more significant gains or
losses from these arrangements.
13
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
(4.3) Fifth Amendment to the Credit Agreement dated October 11, 1996
(11) Statement Re: Computation of Earnings Per Share
(27) Financial Data Schedule
(b) Reports of Form 8-K
-------------------
None
14
<PAGE>
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 October 28, 1996 /s/ J. Mark Howell
-------------------------------- ------------------
J. Mark Howell
President and Chief Operating Officer
Date October 28, 1996 /s/ Phillip A. Bounsall
-------------------------------- -----------------------
Phillip A. Bounsall
Executive Vice President
and Chief Financial Officer
15
<PAGE>
FIFTH AMENDMENT TO CREDIT AGREEMENT
BRIGHTPOINT, INC., a Delaware corporation (the "Company"), the banks
listed on the signature pages hereof (each individually a "Bank" and
collectively the "Banks") and BANK ONE, INDIANAPOLIS, NATIONAL ASSOCIATION, a
national banking association with its principal office in Indianapolis, Indiana,
as agent for the Banks (in such capacity the "Agent" and in its individual
capacity "Bank One") agree as follows:
1. CONTEXT. This Fifth Amendment is made in the context of the following agreed
statement of facts:
a. The Company, the Banks and the Agent are parties to a Credit
Agreement dated June 13, 1995, as amended by a First Amendment to
Credit Agreement dated as of September 15, 1995, a Second Amendment to
Credit Agreement dated as of January 19, 1996, a Third Amendment to
Credit Agreement dated as of June 7, 1996, and a Fourth Amendment to
Credit Agreement dated as of June 28, 1996 (collectively, the
"Agreement").
b. The Company has requested that the Banks (i) modify certain
affirmative and negative covenants to permit the Company to guarantee
certain indebtedness and to permit the Company's Subsidiary,
International, to enter into certain indebtedness, and (ii) to waive
the Company's noncompliance with its Fixed Charge Coverage Covenant,
and other covenants, as of September 30, 1996.
c. The Banks have agreed to such requests, subject to certain terms and
conditions, and the parties have executed this document (this "Fifth
Amendment") to give effect to their agreement.
2. DEFINITIONS. Terms used in this Fifth Amendment with their initial letters
capitalized are used as defined in the Agreement, unless otherwise defined
herein.
a. Amended Definition. The definition of "Funded Debt" in Section 1 of
the Agreement is hereby amended to restate clauses (d) and (e) of such
definition as follows:
"(d) to the extent not already included in clause (a) above,
all guaranties and other obligations (contingent or otherwise)
of the Company and its Subsidiaries, calculated on a
consolidated basis, to assure a creditor against loss
(including, without limitation, letters of responsibility or
comfort letters, arrangements to purchase or repurchase
property or obligations, to pay for property, goods or
services whether or not delivered or rendered, to maintain
working capital, equity capital or other financial statement
condition of, or to lend or contribute to or invest in a third
party) in respect of obligations of such third party, provided
however, that the guaranty by the Company of the line of
credit obligations of International shall be included in the
calculation of Funded Debt at the principal amount of the debt
outstanding on the date of calculation and not at the face
16
<PAGE>
amount of the guaranty; (e) to the extent not already included
in clauses (a) or (d) above, all consolidated obligations of
the Company and its Subsidiaries for extensions of credit
including the face amount of letters of credit issued for the
account of the Company or any Subsidiary, whether or not
representing obligations for borrowed money (for purposes of
this clause (e), Subsidiary shall include subsidiaries of
International),"
b. New Definition. A new definition is added to Section 1 of the
Agreement to read as follows:
o Fifth Amendment. "Fifth Amendment" means the written
amendment to this Agreement entitled "Fifth Amendment to
Credit Agreement" and dated effective as of October 11,
1996.
3. AMENDMENT TO FINANCIAL COVENANTS. Section 5.g(iii) of the Agreement is hereby
amended and restated in its entirety as follows:
(iii) Fixed Charge Coverage. At the end of each fiscal quarter, for the
four consecutive fiscal quarters ending as of such fiscal quarter end,
from the date of the Fifth Amendment and until December 30, 1996, the
Company shall maintain a fixed charge coverage ratio of not less than
1.25 to 1.0. At December 31, 1996, and at each fiscal quarter
thereafter until December 30, 1997, the Company shall maintain a fixed
charge coverage ratio of not less than 1.35 to 1.0. At December 31,
1997, and at each fiscal quarter thereafter, the Company shall maintain
a fixed charge coverage ratio of not less than 1.50 to 1.0. For
purposes of this covenant, the phrase "fixed charge coverage ratio"
means, for any relevant period, the ratio of the sum of net income plus
depreciation, amortization and interest expense plus cash taxes paid
over the sum of payments made on term debt during the period for which
the ratio is being calculated, including current capital lease payments
but excluding any payments made on account of the Loan, plus interest
expense, plus expenditures for fixed assets not funded with borrowed
funds, plus dividends paid, plus cash taxes paid; provided that for
purposes of this covenant, net income shall not be reduced by the
expenses incurred by the Company related to the Allied transaction in a
maximum sum of $2,500,000.00.
4. AMENDMENTS TO NEGATIVE COVENANTS. Section 6 of the Agreement is amended as
follows:
a. Section 6.c. of the Agreement is hereby amended and restated in
its entirety as follows:
c. Guaranties. The Company shall not be, and shall not permit
any Subsidiary to be, a guarantor or surety of, or otherwise
be responsible in any manner with respect to any undertaking
of any other person or entity, whether by guaranty agreement
or by agreement to purchase any obligations, stock, assets,
17
<PAGE>
goods or services, or to supply or advance any funds, assets,
goods or services or otherwise except for:
(i) guaranties in favor of the Banks or the Agent on
behalf of the Banks;
(ii) the guaranty by the Company of certain debt of
International or a subsidiary of International, in an
aggregate amount not to exceed $25,000,000 plus
interest and costs of collection;
(iii) guaranties by endorsement of instruments for deposit
made in the ordinary course of business;
(iv) guaranties by International in favor of its
subsidiaries; and
(v) those specific existing guaranties listed on the
"Schedule of Exceptions" attached as Exhibit "D".
b. Subsections (iv) and (vi) of Section 6.d. of the Agreement are
amended and restated in their entirety as follows:
(iv) loans, advances or guaranties from the Company to or
on behalf of International not in excess of the
aggregate principal amount of $30,000,000.00,
including any guaranty by the Company for
indebtedness of any subsidiary of International and
provided that any Letters of Credit issued for the
account of the Company but on behalf of International
shall be included in the amount of loans, advances or
guaranties for purposes of this subsection;
(vi) loans and advances from International to any
subsidiaries of International and a Shareholder Note
dated July 1, 1996 owed to International from Dana
Marlin and John M. Maclean-Arnott, with a present
principal balance of $1,106,000.00;
c. Section 6.e. of the Agreement is hereby amended to increase the
amount of Two Million Dollars in the second sentence of such Subsection
to "Five Million Dollars ($5,000,000.00)", which amount shall exclude
the acquisition of Hatadicorp Pty. Ltd of Australia by a subsidiary of
International, which acquisition is specifically consented to by the
Banks.
d. Section 6.k. of the Agreement is hereby amended and restated in its
entirety as follows:
k. Lease Obligations. The Company shall not incur, and shall
not permit any Subsidiary to incur, obligations under any
operating leases if as a result, the aggregate payment
obligations of the Company and its Subsidiaries under all such
leases in any fiscal year would exceed $1,000,000; except:
18
<PAGE>
(i) an operating lease for computer equipment, software,
and certain furniture and fixtures in a total
aggregate amount not to exceed $5,000,000 to be
entered into prior to December 31, 1996; and
(ii) those existing obligations disclosed on the "Schedule
of Exceptions" attached as Exhibit "D".
e. Section 6.l. of the Agreement is hereby amended and restated in its
entirety as follows:
l. Debt. The Company shall not incur or permit to exist, and
shall not permit any Subsidiary to incur or permit to exist,
any Indebtedness in excess of the aggregate amount of
$2,000,000.00 at any time outstanding, except for:
(i) Indebtedness owed to the Banks under this Agreement;
(ii) Rate Hedging Obligations with any Bank;
(iii) Indebtedness of International or a subsidiary of
International in an aggregate amount not to exceed
$25,000,000.00 under a revolving line of credit or
for the purchase of Hatadicorp Pty. Ltd;
(iv) the Company's guaranties of the Indebtedness of
International or a subsidiary of International, which
guaranties shall not exceed in the aggregate
$25,000,000.00 plus interest and costs of collection;
(v) the operating lease obligations permitted to be
incurred under Section 6.k. hereof;
(vi) to the extent not already included above, the
Indebtedness permitted under Section 6.d. hereof; and
(vii) those existing obligations disclosed on the "Schedule
of Exceptions" attached as Exhibit "D".
5. WAIVER OF NONCOMPLIANCE WITH FINANCIAL COVENANT. The Banks acknowledge that
the Company was not in compliance with the Fixed Charge Coverage Ratio set forth
in Section 5.g.(iii) at September 30, 1996. The Banks hereby waive such
noncompliance at such date and waive their right to exercise remedies available
under the Agreement as the result of the Company's failure to maintain its Fixed
Charge Coverage Ratio at required levels. Such waiver shall not constitute any
agreement or waiver on the part of the Banks to any further or other default or
noncompliance on the part of the Company or any Subsidiary.
19
<PAGE>
6. WAIVER OF CONSOLIDATING FINANCIAL STATEMENTS OF ACQUISITION. The Company has
informed the Banks that the assets and liabilities of Acquisition have been or
will be transferred to the books and records of the Company and that, as of
September 30, 1996, there will be no separate books and records of Acquisition.
The Banks waive the remedies available under the Agreement for the failure of
the Company to comply with the provisions of Section 5.b(ii) with respect to
furnishing the consolidating financial statements of Acquisition for the months
ending September 30, 1996, October 31, 1996 and November 30, 1996; provided that
the Company agrees to take all action necessary to effect the merger of
Acquisition into the Company on or before December 31, 1996, and provided
further that the Company will provide (A) a written certification to the Banks
that Acquisition has no assets or business operations which are not reflected in
the financial statements of the Company, which certification will accompany each
of the financial statements furnished to the Banks pursuant to the Agreement
prior to the merger of Acquisition into the Company, and (B) written notice to
the Banks when the merger has been completed accompanied by copies of the
Articles of Merger, or comparable appropriate documents, certified by the
Secretary of State of Delaware. The Company acknowledges that if the merger of
Acquisition into the Company is not completed by December 31, 1996, the Company
shall comply with the provisions of Section 5.b(ii) which provisions require the
consolidating financial statements of Acquisition.
7. CONDITIONS PRECEDENT. As conditions precedent to the effectiveness of this
Fifth Amendment, the Agent shall have received, each duly executed and in form
and substance satisfactory to the Banks, the following:
a. This Fifth Amendment, and
b. Such other documents as may be reasonably required by the Agent or
the Banks.
8. REPRESENTATIONS AND WARRANTIES. To induce the Banks and the Agent to enter
into this Fifth Amendment, the Company represents and warrants, as of the date
of this Fifth Amendment, and except as otherwise provided in this Fifth
Amendment, that no Event of Default or Unmatured Event of Default has occurred
or is continuing and that the representations and warranties contained in
Section 3 of the Agreement are true and correct, except that the representations
contained in Section 3.d. refer to the latest financial statements furnished to
the Banks by the Company pursuant to the requirements of the Agreement.
9. REAFFIRMATION OF THE AGREEMENT. Except as amended by this Fifth Amendment,
all terms and conditions of the Agreement shall remain unchanged and in full
force and effect and the Obligations of the Company shall continue to be secured
and guaranteed as therein provided until payment and performance in full of all
Obligations.
10. COUNTERPARTS. This Fifth Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
20
<PAGE>
IN WITNESS WHEREOF, the Company, the Agent and the Banks, by their
respective duly authorized officers, have executed this Fifth Amendment to
Credit Agreement with effect as of October 11, 1996.
BRIGHTPOINT, INC.
By /s/ J. Mark Howell
----------------------------------------------------
J. Mark Howell, President and
Chief Operating Officer
Address: 6402 Corporate Drive
Indianapolis, Indiana 46278
Attn: President and Chief Operating Officer
Fax: (317) 387-5493
[BALANCE OF PAGE INTENTIONALLY BLANK]
21
<PAGE>
BANK ONE, INDIANAPOLIS, NATIONAL
ASSOCIATION Individually and as Agent
By /s/ Brian D. Smith
-----------------------------------------------------
Brian D. Smith, Vice President and
Senior Relationship Manager
PERCENTAGE: 41.5%
Address: Bank One Center/Tower
111 Monument Circle, Suite 1921
P.O. Box 7700
Indianapolis, Indiana 46277-0119
Attn: Manager, Metropolitan Department B
Fax: (317) 321-8079
THE FIRST NATIONAL BANK OF CHICAGO
By
-----------------------------------------------------
-----------------------------------------------------
Printed Name & Title
PERCENTAGE: 26.0%
Address: One First National Plaza
Mail Suite 0088
Chicago, Illinois 60670-0088
Attn: Cory M. Olson
Fax: (312) 732-5161
22
<PAGE>
BANK ONE, INDIANAPOLIS, NATIONAL
ASSOCIATION Individually and as Agent
By /s/
-----------------------------------------------------
Brian D. Smith, Vice President and
Senior Relationship Manager
PERCENTAGE: 41.5%
Address: Bank One Center/Tower
111 Monument Circle, Suite 1921
P.O. Box 7700
Indianapolis, Indiana 46277-0119
Attn: Manager, Metropolitan Department B
Fax: (317) 321-8079
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ Cory M. Olson
-----------------------------------------------------
Cory M. Olson V.P.
-----------------------------------------------------
Printed Name & Title
PERCENTAGE: 26.0%
Address: One First National Plaza
Mail Suite 0088
Chicago, Illinois 60670-0088
Attn: Cory M. Olson
Fax: (312) 732-5161
23
<PAGE>
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By /s/ C. A. Black
------------------------------------------------------
Christopher A. Black, V.P.
------------------------------------------------------
Printed Name & Title
PERCENTAGE: 19.0%
Address: SunTrust Bank, Central Florida, N.A.
200 South Orange Avenue
Orlando, Florida 32801
Attn: Chris Black, Vice President
Fax: (407) 237-6894
CORESTATES BANK, N.A.
By
------------------------------------------------------
------------------------------------------------------
Printed Name & Title
PERCENTAGE: 13.5%
Address: CoreStates Bank, N.A.
2240 Butler Pike
Plymouth Meeting, Pennsylvania 19462
Attn: William Johnston
Fax: (610) 834-2069
SS-87748-4
24
<PAGE>
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By
------------------------------------------------------
------------------------------------------------------
Printed Name & Title
PERCENTAGE: 19.0%
Address: SunTrust Bank, Central Florida, N.A.
200 South Orange Avenue
Orlando, Florida 32801
Attn: Chris Black, Vice President
Fax: (407) 237-6894
CORESTATES BANK, N.A.
By /s/ William Johnston
------------------------------------------------------
William Johnston, VP
------------------------------------------------------
Printed Name & Title
PERCENTAGE: 13.5%
Address: CoreStates Bank, N.A.
2240 Butler Pike
Plymouth Meeting, Pennsylvania 19462
Attn: William Johnston
Fax: (610) 834-2069
SS-87748-4
25
<PAGE>
Exhibit (11) Statement Re: Computation of Earnings Per Share
-----------------------------------------------
(000's omitted, except per share data)
<TABLE>
<CAPTION>
Three Months Ended September 30 Nine Months Ended September 30
1995 1996 1995 1996
-------------------------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
Primary:
Average shares outstanding 8,603 10,819 8,366 10,700
Net effect of stock options and
warrants - based on the
treasury stock method
using average market price 358 377 362 417
------------ ------------ ------------ ------------
Totals 8,961 11,196 8,728 11,117
============ ============ ============ ============
Net income (A) $ 1,583 $ 3,209 $ 4,938 $ 6,032
============ ============ ============ ============
Per share amount $ 0.18 $ 0.29 $ 0.57 $ 0.54
============ ============ ============ ============
Fully diluted:
Average shares outstanding 8,603 10,819 8,366 10,700
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 358 402 493 469
------------ ------------ ------------ ------------
Totals 8,961 11,221 8,859 11,169
============ ============ ============ ============
Net income (A) $ 1,583 $ 3,209 $ 4,938 $ 6,032
============ ============ ============ ============
Per share amount $ 0.18 $ 0.29 $ 0.56 $ 0.54
============ ============ ============ ============
</TABLE>
(A) Includes a provision for income taxes as if the Company had been
subject to income taxes for the entire period presented.
26
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 4,592
<SECURITIES> 0
<RECEIVABLES> 80,152
<ALLOWANCES> 1,047
<INVENTORY> 56,110
<CURRENT-ASSETS> 142,829
<PP&E> 10,885
<DEPRECIATION> 1,083
<TOTAL-ASSETS> 156,244
<CURRENT-LIABILITIES> 51,393
<BONDS> 0
<COMMON> 110
0
0
<OTHER-SE> 76,438
<TOTAL-LIABILITY-AND-EQUITY> 156,244
<SALES> 378,146
<TOTAL-REVENUES> 378,146
<CGS> 349,482
<TOTAL-COSTS> 349,482
<OTHER-EXPENSES> 12,872
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,172
<INCOME-PRETAX> 11,870
<INCOME-TAX> 4,320
<INCOME-CONTINUING> 6,508
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,508
<EPS-PRIMARY> .54
<EPS-DILUTED> .54
</TABLE>
