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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
0-23494
(Commission File No.)
BRIGHTPOINT, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 35-1778566
(state or other juris- (I.R.S. Employer
diction of Incorporation) Identification No.)
6402 CORPORATE DRIVE, INDIANAPOLIS, INDIANA 46278
(Address of Principal Executive Offices Including Zip Code)
Registrant's Telephone Number, Including Area Code: (317) 297-6100
Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
PREFERRED SHARE PURCHASE RIGHTS
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. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |_|
The aggregate market value of the registrant's Common Stock held by
non-affiliates as of March 26, 2001 was approximately $160,000,000. As of March
26, 2001, there were 55,788,425 shares of the registrant's Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the following documents are incorporated by reference into
the parts of this Form 10-K as indicated herein:
Proxy Statement for Annual Meeting of Stockholders to
be held in 2001 Part III
2000 Annual Report to Stockholders Parts I, II & IV
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PART I
ITEM 1. BUSINESS.
GENERAL
Brightpoint, Inc. is a leading provider of outsourced services in the
global wireless telecommunications and data industry. Our innovative services
include customized packaging, prepaid and e-business solutions, inventory
management, distribution and other outsourced services. Our customers include
leading network operators, retailers and wireless equipment manufacturers. We
handle wireless products manufactured by such technology companies as Alcatel,
Audiovox, Ericsson, Handspring, Hewlett-Packard, Kyocera, Motorola, NEC, Nokia,
Novatel Wireless, Palm, Panasonic, Research In Motion, Samsung and Siemens. We
also provide integrated services to these manufacturers and some of the world's
leading wireless network operators along with their associated service
providers, resellers, agents and other retail channels. Our distribution
services include purchasing, marketing, selling, warehousing, picking, packing,
shipping and delivery of wireless handsets (including wireless data devices) and
accessories. Our integrated logistics services include support for prepaid
programs, inventory management, procurement, product fulfillment, programming,
telemarketing, private labeling, kitting and customized packaging, product
warranty, repair and refurbishment and end-user support services. We are one of
the largest distributors of wireless handsets and accessories in the world, with
operations centers and/or sales offices in various countries including
Australia, Brazil, the People's Republic of China (including Hong Kong),
Colombia, France, Germany, Ireland, Jordan, Mexico, the Netherlands, New
Zealand, the Philippines, South Africa, Sweden, the United Arab Emirates, the
United States, and Venezuela.
We were incorporated under the laws of the State of Indiana in August 1989
under the name Wholesale Cellular USA, Inc. and reincorporated under the laws of
the State of Delaware in March 1994. In September 1995, we changed our name to
Brightpoint, Inc.
RECENT DEVELOPMENTS AND FINANCIAL OVERVIEW
During 2000, we consolidated four Indianapolis, Indiana locations and a
location in Bensalem, Pennsylvania into a single, new facility located near the
Indianapolis International Airport. We recorded an unusual charge related to the
consolidation for moving costs, the disposal of assets that were not used in the
new facility and the estimated impact of vacating the unused facilities, net of
potential subleases. The total amount of the charge recorded in 2000 was $7.0
million ($4.2 million after applicable taxes or $0.07 per diluted share).
Additionally, during the fourth quarter of 2000, we repurchased approximately
94,000 of our zero-coupon subordinated, convertible notes for approximately $29
million ($310 per $1,000 face value convertible note). These repurchases
resulted in an extraordinary gain of approximately $10 million ($0.18 per
diluted share), net of applicable income taxes and transaction costs. The
repurchases were made pursuant to a plan approved by the Board of Directors to
purchase up to 130,000 of the convertible notes. Subsequent to December 31,
2000, we completed our repurchase plan by acquiring an additional 36,000 of
these convertible notes at prices ranging from $278 to $283 per convertible
note. These transactions resulted in an extraordinary gain in 2001 of
approximately $4.6 million ($0.09 per diluted share), net of applicable income
taxes and transaction costs.
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During 1999 we implemented a broad restructuring plan which included the
disposal of operations in the United Kingdom, Poland, Taiwan and Argentina;
termination of our investments in two joint operations in China; disposal of our
67% interest in a Hong Kong-based accessories company; and initiation of cost
reduction programs in certain areas of our business. Our execution of the
restructuring plan was substantially completed by the close of 1999. During 1999
we recorded non-recurring restructuring and other unusual charges of
approximately $84.9 million resulting from actions taken in accordance with the
restructuring plan. Adjustments to these charges subsequent to the initial
estimates have not been significant. The charges included the write-off of
goodwill investments and tax-related assets related to the eliminated or
terminated operations; the write-down of inventory and accounts receivable to
estimated net realizable values; and losses on the disposals of fixed and other
assets and cash expenses related to lease and employee terminations and other
exit costs.
Because of the significance of the restructuring plan discussed above, the
following discussion has been delineated between results from recurring
operations and results from non-recurring operations. Recurring operations
include all operations except those that have been eliminated or terminated in
accordance with our 1999 restructuring plan. Recurring operations also exclude
the impacts of the gain on debt extinguishment realized in 2000, the
non-recurring charges related to our facilities consolidation in 2000, the
cumulative effect of a change in accounting principle in 1999 and non-recurring
charges related to our restructuring plan in 1999 and 2000. For 2000, our
revenues and net income from recurring operations were $2.0 billion and $35.4
million, respectively, representing an increase in revenues of 20% and an
increase in net income of 111% when compared to 1999. Earnings per diluted share
from recurring operations were $0.63 in 2000 as compared to $0.31 in 1999. Our
growth in revenues reflects the worldwide demand for wireless products as well
as our distribution and integrated logistics services. The increased demand for
wireless products resulted from, among other things, increasing numbers of
wireless subscribers in many markets worldwide and increasing demand for
replacement or upgraded equipment. Our operating margins (income from operations
as a percent of revenue) from recurring operations increased during 2000 due to
a reduction in selling, general and administrative expenses as a percent of
revenue which was primarily the result of cost reduction programs initiated in
the second half of 1999.
On February 26, 2001, we reported that we anticipated revenues and net
income for the first half of 2001 and for the year ending December 31, 2001, to
fall below our previous expectations. We believed an economic slow-down in the
United States, which began in the fourth quarter of 2000, could be more severe
and potentially more sustained than anticipated. Lower consumer demand and
higher levels of inventories in the United States distribution channels
resulting from the unanticipated slow-down in the economy have resulted in lower
than anticipated demand for the products and services that we offer. We also
expect that our gross and operating margins during the first half of 2001 may
decrease as a result of reductions in revenues earned from accessory programs
and integrated logistics services due to the impact of the economic slow-down.
Although the factors impacting our United States demand are expected to improve
during the second half of 2001, approximately 35% of our revenues and 53% of our
operating income was generated in our North America region during 2000 and a
prolonged economic slow-down in the United States could continue to negatively
impact our results during the second half of 2001.
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WIRELESS TELECOMMUNICATIONS AND DATA INDUSTRY
The wireless telecommunications and data industry provides voice and data
communications utilizing various wireless terminals, including mobile
telephones, interactive pagers, personal digital assistants and other mobile
computing devices. Wireless devices are available in a variety of form factors
and using a variety of technologies including analog, digital, multi-band and
Web-enabled devices. Wireless telecommunications and data services are available
to consumers and businesses through numerous network operators who utilize
analog and digital technological standards, such as AMPS, GSM, CDMA, TDMA,
iDEN(R), as well as other new and developing technologies (such as WAP, iMode,
GPRS, EDGE and W-CDMA) to provide voice and data communication over regional,
national and multi-national networks. Developments within the wireless
telecommunications and data industry have allowed wireless subscribers to talk,
send text messages, browse the Internet and effect certain e-commerce
transactions using their wireless devices. Wireless devices and services are
also being used for monitoring services, point-of-sale transaction processing,
inter-device communications, local area networks and location monitoring. Recent
developments affecting the wireless telecommunications and data industry are
industry consolidation; the convergence of the telecommunications, data and
media domains; economic development; advances in and development of next
generation systems technology, including increasing bandwidth; the increasing
variety of terminal form factors; the proliferation of manufacturers and network
operators; and the increasing affordability of wireless airtime. These
developments have helped to grow consumer acceptance and drive increases in
worldwide demand for wireless telecommunications and data equipment and
services.
In recent years, the markets for wireless telecommunications and data
equipment and services have expanded significantly. From 1999 to 2000, the
number of worldwide wireless subscribers increased by approximately 236 million,
or 49%, to approximately 716 million. Nonetheless, at the end of 2000, wireless
penetration was estimated at slightly more than 40% of the population within the
United States and was still, on average, less than 12% of the population
globally. We believe these factors reflect worldwide opportunities for continued
growth within the wireless telecommunications and data industry. The number of
worldwide subscribers is expected to grow to approximately 1.4 billion
subscribers by the end of 2003. The percentage of handset shipments related to
replacement units has continued to grow and is forecasted to exceed 50% of total
unit sales in 2002. Additionally, the use of wireless data products, including
interactive pagers, personal digital assistants and other mobile computing
devices, has seen recent growth and wider consumer acceptance. The number of
worldwide wireless Internet subscribers is forecasted to grow from an estimated
33 million at the end of 2000 to over 100 million by the end of 2001. The
information contained in this paragraph was obtained from leading independent
industry research groups.
Although it cannot be assured that we will grow at rates comparable to
those experienced by the industry (see Business Risk Factors discussed below),
we believe that our strategies are consistent with the following major trends
taking place within the wireless telecommunications and data industry:
Industry Consolidation. Merger and acquisition activities within the
network operator community have increased significantly in recent years. In
general, this consolidation is being driven by improved economies of scale, the
opportunity to expand national or multi-national service areas and efforts to
increase revenue and profitability through additional service offerings. We
believe that this trend will continue in the near future and
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may lead network operators to focus more tightly on their core business of
providing wireless telecommunications and data services, which could in turn
increase the demand for outsourced integrated logistics services. However, these
same trends will also increase the demands placed on the providers of integrated
logistics services, as they will need to meet increasingly complex and
sophisticated customer requirements and provide services over larger geographic
regions while attempting to maintain acceptable levels of profitability. This
increased focus on profitability could cause the network operators to reduce
promotional programs which could decrease the demand for our products or
services. Additionally, this consolidation reduces the number of potential
contracts available to providers of integrated logistics services and could
reduce the degree to which members of the wireless telecommunications and data
industry rely on outsourced services such as the services that we provide. We
could also lose business in the near-term if network operators who are not our
customers acquire network operators who are our customers.
Migration to Next Generation Systems. As network operators compete to
offer anytime/anywhere telecommunications and data services to their customers
through the new technologies of third generation (3G) wireless systems (and the
transitional technologies that lie along the migration route to 3G, including
GPRS, EDGE and others), they will be increasingly focused on spectrum purchase,
infrastructure build out and customer acquisition. This could create an industry
environment in which network operators would be more likely to outsource
integrated logistics services that they do not perceive as central to these
three core activities. However, the roll-out of 3G systems could possibly
mitigate the need for some of the integrated logistics services we now offer if
the underlying technology drastically reduces or eliminates certain processes
that we currently provide to program and/or provision handsets.
New Technologies, Enhancements and Applications. First generation cellular
networks primarily used analog technologies. However, these analog technologies
presented a number of challenges for network operators and users, including
susceptibility to fraud and cloning; capacity constraints; limited battery life
and difficulty in providing enhanced features. To alleviate these concerns, new
wireless networks have increasingly been built around digital technologies,
which provide increased network capacity, more functionality, better voice
quality and greater security/privacy than analog technologies. The conversion of
subscribers from analog to digital technologies has had a positive impact on the
growth of handset demand. In addition, the emergence of new technologies is
fueling the convergence of the telecommunications, data and media domains
resulting in significant changes and opportunities in the wireless
telecommunications and data industry. As a result of this convergence, wireless
subscribers may increasingly use their wireless devices to send and receive
e-mail, browse the Internet, effect mobile commerce transactions and access
other information and services available via the Internet. This convergence is
being powered by the development of wireless Web capabilities and new standards
such as Wireless Application Protocol (WAP), Epoc, Bluetooth and 3G. Other new
wireless technologies and enhancements have also been introduced into the
wireless telecommunications and data market. These include wireless local loop
and satellite-based communications, as well as handset feature and network
enhancements, such as increased talk and standby times, smaller and lighter form
factors and multiple-band reception. All of these developments are expected to
contribute to future subscriber growth.
Proliferation of Manufacturers. With the opportunities presented by a
large market for wireless telecommunications and data equipment, many new
manufacturers are producing wireless mobile devices and accessories, including
certain manufacturers who have historically been successful in providing
consumer electronics to the mass consumer market. In addition, it appears that
manufacturers other than those that have
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historically produced wireless handsets and accessories are also entering the
market to produce wireless data devices. This greater number of manufacturers is
expected to heighten competition and may provide consumers with lower prices,
broader selection, more feature-rich products and new market channels, resulting
in higher product turnover by end users. Although the entry of new manufacturers
appears to be continuing, we believe that the three largest manufacturers of
wireless handsets--Nokia, Motorola and Ericsson--comprise approximately 56% of
the total market for wireless telecommunications equipment. We believe that
Nokia currently maintains the largest market share at approximately 31% followed
by Motorola at 15% and Ericsson at 10%.
Increasing Penetration of Markets Worldwide and New Network Operators. We
expect that the demand for wireless services may continue to drive increased
penetration of markets worldwide and the continued entry of new network
operators in certain markets. Economic growth, increased service availability or
the lower cost of service compared to conventional wireline telephony systems
(or a combination of the three) has historically driven market penetration. In
addition, certain markets characterized by higher market penetration, have also
grown, primarily as a result of increasing deregulation, the availability of
additional spectrum, increased competition and the emergence of new wireless
technologies and related applications. These developments may result in an
increased number of wireless network operators doing business in certain markets
and affect the services provided including seamless roaming, increased coverage,
improved signal quality and greater data handling capabilities through greater
bandwidth. This increase in the number of network operators, together with the
increased number of resellers of wireless communication services in certain
markets, is expected to intensify competition for new and existing subscribers,
thereby reducing prices to subscribers and driving growth in the subscriber base
and the market for wireless communications equipment.
Expanded Use of E-commerce. The ability to conduct business over the
Internet has created opportunities and challenges in many industries including
the wireless telecommunications and data industry. We believe that the continued
growth of e-commerce provides the opportunity for expanded service offerings as
well as the demand for new and innovative Internet capabilities. We also expect
both customers and suppliers may require enhanced management of these
capabilities to remain competitive. The expanded use of e-commerce is expected
to provide faster and more varied methods of delivering wireless
telecommunications and data products to the marketplace.
GROWTH STRATEGY
As (i) the variety of wireless mobile devices expands, (ii)
telecommunications, data, Internet and other technologies converge and evolve
and (iii) distribution migrates from agent/dealers to mass retailers, certain
network operators and manufacturers are finding that switching from in-house
distribution to independent distribution reduces overall costs and helps them to
meet the increasing demands of various market channels. In an effort to maintain
focus on and conserve resources for marketing, sales and customer retention,
certain new network operators are also outsourcing their handset distribution,
fulfillment and inventory management functions (as opposed to building
distribution infrastructure). At the same time, certain handset and other
wireless device manufacturers are outsourcing some of their channel management
functions and utilizing integrated logistics services as a means of simplifying
and reducing the cost of their worldwide distribution systems. They are also
increasingly outsourcing various production and manufacturing operations.
Finally,
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certain manufacturers and network operators are targeting the growing consumer
segment through mass retail channels, requiring greater levels of fulfillment
services in order to address the logistical challenges of supporting mass
retailers and consumer electronics retail stores. Our two primary strategies for
building on our position as a global leader in providing distribution and
integrated logistics services to the wireless telecommunications and data
industry are as follows:
Value Migration. This strategy calls for the integration of our services
with the key processes of our customers and suppliers, thereby producing
increased value. To achieve heightened levels of integration, we will attempt to
hasten the innovation and development of logistics and other services for the
wireless telecommunications and data industry, establish ourselves as a
recognized provider of products and valued services related to wireless data,
and deploy these products and services throughout our organization.
Supply Chain Development. This strategy focuses on our efforts to expand
our supplier base and broaden our product portfolio, continually seeking to
expand and enhance key supplier relationships within the wireless
telecommunications and data industry. We will seek to accomplish this by
attempting to grow product lines, brands and technologies handled over
increasingly larger territories, thereby extending our reach to allow us to
provide services to wireless equipment manufacturers in the markets that are
critical to their success.
We intend to pursue business opportunities in areas or markets where we
believe that these strategies can be successfully implemented. We also intend to
evaluate our operations as markets evolve to determine the continued synergy of
our business activities and relationships with our core strategies.
SERVICES
We have become one of the leading suppliers of distribution and integrated
logistics services that move wireless devices and accessories through market
channels, primarily because of our understanding of the needs within each
distribution channel and our development of the knowledge and resources
necessary to create successful solutions.
Our services are intended to provide value to wireless handset
manufacturers and network operators. Through the authorized distribution of
wireless telecommunications and data products, we intend to help manufacturers
achieve their key business objectives of increasing unit sales volume, market
share and points of sale. We target our efforts at the distribution channels
identified by the manufacturers. Our integrated logistics services are intended
to provide outsourcing solutions for the network operators' mission-critical
business requirements. These integrated logistics services are designed to
support network operators in their efforts to add new subscribers and increase
system usage.
Distribution Services. Our distribution services include the purchasing,
marketing, selling, warehousing, picking, packing, shipping and delivery of a
broad selection of wireless telecommunications and data products from leading
manufacturers. We continually review and evaluate wireless telecommunications
and data products in determining the mix of products purchased for resale and
seek to acquire distribution rights for products which we believe have the
potential for significant market penetration.
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The products we distribute include a variety of devices designed to work
on substantially all operating platforms (including analog platforms, such as
AMPS, N-AMPS, TACS and NMT, and digital platforms, such as CDMA, GSM, iDEN(R)
and TDMA) and feature prominent brand names such as Alcatel, Audiovox, Ericsson,
Hewlett-Packard, Kyocera, Motorola, NEC, Nokia, Novatel Wireless, Palm,
Panasonic, Research In Motion, Samsung and Siemens. In 1999 and 2000,
approximately 76% and 79%, respectively, of our revenue from recurring
operations was derived from handset sales. In those same years, distribution
services accounted for approximately 54% and 52%, respectively, of the total
units we handled.
We also distribute related wireless accessories, such as batteries,
chargers, cases and "hands-free" kits. We purchase and resell original equipment
manufacturer (OEM) and aftermarket accessories, either prepackaged or in bulk.
Our accessory packaging services provide network operators and retail chains
with custom packaged and/or branded accessories based on the specific
requirements of that customer. Additionally, we provide end-user accessory
fulfillment and distribution pursuant to contractual arrangements with certain
network operators whereby the network operators' subscribers can order their
accessories through a call center that we manage on behalf of the network
operator. Accessories typically carry higher margins than handsets. In 1999 and
2000, sales of accessories accounted for approximately 16% and 11%,
respectively, of our revenue from recurring operations.
Integrated Logistics Services. Our integrated logistics services include,
among others, support for e-business and prepaid programs, inventory management,
procurement, product fulfillment, programming, telemarketing, private labeling,
kitting and customized packaging, product warranty, repair and refurbishment and
end-user support services. In many of our markets we have contracts with network
operators and equipment manufacturers pursuant to which we currently provide our
integrated logistics services including COMCEL, Dutchtone, Esat Digifone,
Handspring, MoviStar, Nextel, Panasonic and Telstra. We also procure wireless
mobile devices and accessories for our customers using either our own sources or
the customers' specified suppliers. We also perform packaging and kitting
functions, receiving orders--either directly from customers or from our
customers' subscribers--via various forms of electronic data transfer.
During 2000, integrated logistics services accounted for approximately 10%
of our total revenue from recurring operations as compared to approximately 8%
of total revenue from recurring operations in 1999. In 1999 and 2000, integrated
logistics services accounted for approximately 46% and 48%, respectively, of the
total units we handled. Because the fees for such services have higher margins
than those associated with distribution services, they represent a higher than
proportionate percentage of our operating profits.
CUSTOMERS
We provide our services to a customer base of more than 20,000 network
operators, manufacturers, agents, resellers, dealers and retailers. For both
1999 and 2000, aggregate revenues generated from our five largest customers
accounted for approximately 11% of our total revenue and no single customer
accounted for 10% or more of our total revenue.
We generally sell our products pursuant to customer purchase orders and
subject to our terms and conditions. We generally ship products on the same day
orders are received from the customer. Unless
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otherwise requested, substantially all of our products are delivered by common
carriers. Because orders are filled shortly after receipt, backlog is generally
not material to our business. Our integrated logistics services are typically
provided pursuant to agreements with terms between one and three years that
generally may be terminated by either party subject to a short notice period.
PURCHASING AND SUPPLIERS
We have established key relationships with leading manufacturers of
wireless telecommunications and data equipment. We generally negotiate directly
with manufacturers and suppliers in order to obtain inventories of popular brand
name products on favorable pricing terms. In 2000, we made purchases from more
than 60 wireless mobile device and accessory suppliers. We expect our number of
suppliers to grow with our December 2000 acquisition of Advanced Portable
Technologies Pty Ltd due to the number of products that the entity services.
Inventory purchases are based on quality, price, service, customer demand,
product availability and brand name recognition. Certain of our suppliers
provide favorable purchasing terms to us, including price protection,
cooperative advertising and marketing allowances. Product manufacturers
typically provide limited warranties, which we extend to our customers.
Our two largest suppliers of wireless mobile devices and accessories in
the aggregate accounted for approximately 75% and 73% of our product purchases
in 1999 and 2000, respectively. During 1999, Nokia and Ericsson accounted for
approximately 68% and 7%, respectively, of our product purchases, and in 2000
they accounted for approximately 62% and 11%, respectively, of our product
purchases. None of our other suppliers accounted for 10% or more of product
purchases in 1999 or 2000. Loss of the applicable contracts with these or other
suppliers, or failure by these or other suppliers to supply competitive products
on a timely basis and on favorable terms, or at all, would have a material
adverse effect on our revenue and operating margins and our ability to obtain
and deliver products on a timely and competitive basis. See --"Competition."
We maintain agreements with certain of our significant suppliers, all of
which relate to specific geographic areas. Our agreements may be subject to
certain conditions and exceptions including the retention by the manufacturer of
certain direct accounts. Most of our agreements with suppliers are
non-exclusive. Our supply agreements may require us to satisfy minimum purchase
requirements and can be terminated on short notice by either party. We purchase
products from manufacturers pursuant to purchase orders placed from time to time
in the ordinary course of business. We generally place orders on a regular basis
with our suppliers. Purchase orders are typically filled, subject to product
availability, and shipped to our designated warehouses by common carrier. We
believe that our relationships with our suppliers are generally good, however,
we have from time to time experienced inadequate product supply from certain
manufacturers. In 1999, we were unable to obtain sufficient product supplies
from manufacturers in many of the markets in which we operate. Any future
failure or delay by our suppliers in supplying us with products on favorable
terms would severely diminish our ability to obtain and deliver products to our
customers on a timely and competitive basis. If we lose any of our principal
suppliers, or if any supplier imposes substantial price increases and
alternative sources of supply are not readily available, it would have a
material adverse effect on our results of operations.
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SALES AND MARKETING
Our sales and marketing efforts are coordinated in each of our four
regional divisions by a president for that particular division. These executives
devote a substantial amount of their time to developing and maintaining
relationships with our customers and suppliers, in addition to managing the
overall operations of their divisions. Each division's sales and operations
centers are managed by either general or country managers who report to the
appropriate divisional president and are responsible for the daily sales and
operations of their particular location. Each division has sales associates and
telemarketers who specialize in or focus on sales to a specific customer
category (e.g., network operator, dealer, reseller, retailer, etc.). In
addition, we have dedicated a sales force to manage our network operator
relationships and to further our sales of integrated logistics services. We also
market integrated logistics services through sales directors in each of our four
regional divisions and through dedicated sales personnel. Including support
personnel, we had approximately 300 employees involved in sales and marketing at
December 31, 2000, including 60 in our Asia-Pacific division, 80 in our North
America division, 120 in our Europe, Middle East and Africa division and 40 in
our Latin America division.
We believe that product recognition by customers and consumers is an
important factor in the marketing of the products that we sell. Accordingly, we
promote our capabilities and the benefits of certain of our product lines
through advertising in trade publications and attending various international,
national and regional trade shows, as well as through direct mail solicitation,
broadcast faxing and telemarketing activities. Our suppliers and customers use a
variety of methods to promote their products and services directly to consumers,
including print and media advertising.
SEASONALITY
Our operating results are influenced by a number of seasonal factors in
the different countries and markets in which we operate. These results may
fluctuate from period to period as a result of several factors, including:
- purchasing patterns of customers in different markets;
- the timing of the introduction of new products by our suppliers and
competitors;
- variations in sales by distribution channels;
- product availability and pricing; and
- promotions and subsidies by network operators.
Consumer electronics and retail sales in many geographic markets tend to
experience increased volumes of sales at the end of the calendar year. This and
other seasonal factors contribute to the usual increase in our sales during the
fourth quarter and our operating results may continue to fluctuate significantly
in the future. In addition, if unanticipated events occur, including delays in
securing adequate inventories of
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competitive products at times of peak sales or significant decreases in sales
during these periods, it could have a material adverse effect on our operating
results. Because of a number of factors adversely impacting the markets we
service, including, but not limited to, economic uncertainty in the United
States, we did not experience our historical seasonal increase in revenue in the
fourth quarter of 2000.
COMPETITION
We operate in a highly competitive business environment and in highly
competitive markets and believe that such competition may intensify in the
future. The markets for wireless telecommunications and data products are
characterized by intense price competition and significant price erosion over
the life of a product. We compete principally on the basis of value, in terms of
price, time, reliability, service and product availability. We compete with
numerous well-established manufacturers and wholesale distributors of wireless
equipment, including our customers and suppliers; wireless network operators,
including our customers; logistics service providers; electronics manufacturing
service providers and export/import and trading companies. These companies may
possess substantially greater financial, marketing, personnel and other
resources than we do. In addition, manufacturers other than those that have
historically produced wireless handsets and accessories are also entering the
market to produce various wireless mobile devices, including wireless data
devices. Their entry is creating new competitors for distribution and provision
of integrated logistics services for these new products. Certain of these
competitors have the financial resources necessary to withstand substantial
price competition and implement extensive advertising and promotional campaigns,
both generally and in response to efforts by additional competitors to enter
into new markets or introduce new products.
The wireless telecommunications and data industry has, in the past, been
characterized by relatively low barriers to entry. However, as the key market
requirement shifts from pure distribution services to a mix of distribution
services and integrated logistics services, and because of the effects of
convergence discussed above under the heading "New Technologies, Enhancements
and Applications," entry barriers are expected to rise. Increases in the cost of
entry will most likely be driven by rising infrastructure costs, the expanded
human resource requirement and the advanced management and information systems
capabilities mandated by the integrated logistics services segment of the
business. Our ability to continue to compete successfully will be largely
dependent on our ability to anticipate and respond to various competitive and
other factors affecting the industry, including new or changing outsourcing
requirements; new product introductions; inconsistent or inadequate supply of
product; changes in consumer preferences; demographic trends; international,
national, regional and local economic conditions; and discount pricing
strategies and promotional activities by competitors.
Competitors in our North America division include wireless equipment
manufacturers, network operators and other dedicated wireless distributors such
as CellStar Corporation. We also compete with logistics service providers and
electronics manufacturing service providers in our North America operations,
such as CTDI, UPS Logistics and CAT Logistics. In the Asia-Pacific market, our
primary competitors are state-owned distributors that have retail outlets with
direct end-user access as well as United States- and foreign-based exporters,
traders and distributors, including CellStar Corporation, Global Tech (Holdings)
Ltd. and Telepacific Pty Limited. In our Europe, Middle East and Africa division
our competitors include wireless
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equipment manufacturers that sell directly to the region's network operators and
retailers, network operators themselves, and traders and other distributors,
such as Cellstar Corporation, 20/20 Logistics Ltd., European Telecom plc, Avenir
S.A. and Banner Twin Choice plc, and logistics and transportation companies such
as Vitesse. In our Latin America division we compete primarily with CellStar
Corporation and various other distributors.
The markets for wireless communications products are characterized by
rapidly changing technology and evolving industry standards, often resulting in
product obsolescence or short product life cycles. Accordingly, our success is
dependent upon our ability to anticipate technological changes in the industry
and to continually and successfully identify, obtain or develop and market new
products, including integrated logistics services, that satisfy evolving
industry and customer requirements. The use of alternative wireless
telecommunications technologies or the convergence of wireless
telecommunications and computer technologies may reduce demand for existing
wireless telecommunications products. Upon widespread commercial introduction,
new wireless communications or convergent technologies could materially change
the types of products sold by us and our suppliers and result in significant
price competition. In addition, products that reach the market outside of normal
distribution channels, such as "gray market" resales (e.g., unauthorized resales
or illegal resales, which may avoid applicable duties and taxes), may also have
an adverse impact on our operations.
INFORMATION SYSTEMS
Our operations are dependent on the functionality, design, performance and
utilization of our information systems. We have implemented multiple business
applications systems throughout the world which enable us to provide our
customers and suppliers with distribution and service capabilities. These
capabilities include e-commerce solutions; electronic data interchange;
Web-based order entry account management, reporting, product catalogue and
supply chain management; and various inventory tracking, management and
reporting capabilities. During 1998, 1999 and 2000, we invested approximately
$22.1 million, $6.1 million and $5.5 million, respectively, to install and
enhance systems in newly acquired operations, to continue to develop and enhance
our systems to provide electronic data interchange capabilities, to further
automate our customer interfaces and enhance our overall e-business
capabilities, to create solutions for our customers and to provide a flexible
service delivery system in support of our integrated logistics services. We
intend to use additional funds to further develop information systems throughout
our four divisions, in part to utilize technology to advance our base of
existing service competencies and develop new capabilities that will attempt to
meet the challenges posed by convergence and consolidation. We intend to invest
an aggregate of between $40 to $50 million in capital expenditures (related
primarily to information technology) over the next two years. At December 31,
2000, there were approximately 110 employees in our information technology
departments worldwide.
EMPLOYEES
As of December 31, 2000, we had approximately 1,800 employees; 270 in our
Asia-Pacific division, 900 in our North America division, 360 in our Europe,
Middle East and Africa division and 270 in our Latin America division. Of these
employees, approximately 9 were in executive positions, 300 were engaged in
sales and marketing, 970 were in service operations and 521 were in finance and
administration (including
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information technology employees). None of our employees are covered by a
collective bargaining agreement. We believe that our relations with our
employees are good. See Business Risk Factors-Our labor force experiences a high
rate of personnel turnover.
BUSINESS RISK FACTORS
Various statements, discussions and analyses throughout this Form 10-K are
not based on historical fact and contain forward-looking statements. These
statements are subject to certain risks and uncertainties, including those
discussed below that could cause our actual results to differ materially from
those expressed or implied in any forward-looking statements made by us. There
are many important factors that have affected, and in the future could affect,
our business, some of which are beyond our control and future trends are
difficult to predict. Readers are cautioned not to place undue reliance on any
forward-looking statement contained in this Form 10-K and should also be aware
that we undertake no obligation to update any forward-looking information
contained herein to reflect events or circumstances after the date of this Form
10-K or to reflect the occurrence of unanticipated events.
Our operations may be materially affected by fluctuations in regional
demand patterns and economic factors -- The demand for our products and
services has fluctuated and may continue to vary substantially within the
regions served by us. Economic slow-downs in regions served by us or changes in
promotional programs offered by network operators may lower consumer demand and
create higher levels of inventories in our distribution channels which results
in lower than anticipated demand for the products and services that we offer and
can decrease our gross and operating margins. We believe our operations were
adversely affected by an economic slow-down in the United States during the
fourth quarter of 2000. We also believe that this economic slow-down will
continue to impact our operations in 2001. Although the factors impacting our
United States demand are currently expected to improve during the second half of
2001, approximately 35% of our revenues and 53% of our operating income was
generated in our North America region during 2000. A prolonged economic
slow-down in the United States or any other regions in which we have significant
operations could negatively impact our results of operations.
Our business may be adversely impacted by consolidation of network
operators -- The past several years has witnessed a consolidation within the
network operator community which trend is expected to continue in at least the
near future. This trend could result in a reduction or elimination of
promotional activities by the remaining network operators as they seek to reduce
their expenditures, which could, in turn result in decreased demand for our
products or services. Moreover, consolidation of network operators reduces the
number of potential contracts available to us and other providers of integrated
logistic services. We could also lose business if network operators which are
our customers are acquired by other network operators which are not our
customers.
Our business depends on the continued tendency of wireless equipment
manufacturers and network operators to outsource aspects of their business to us
in the future -- Our business depends in large part on wireless equipment
manufacturers and network operators outsourcing some or all of their business
functions to us. We fulfill functions such as customized packaging, prepaid and
e-commerce solutions, inventory management, distribution and other outsourced
services for many of these manufacturers and network operators. Certain wireless
equipment manufacturers and network operators have elected, and others may
elect,
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to undertake these services internally. Additionally, industry consolidation,
competition, deregulation, technological changes or other developments could
reduce the degree to which members of the wireless telecommunications and data
industry rely on outsourced integrated logistics services such as the services
we provide. Any significant change in the market for our outsourcing services
could have a material adverse effect on our business. Our outsourced services
are generally provided under multi-year renewable contractual arrangements.
Service periods under certain of our contractual arrangements are expiring or
will expire in the near future. The failure to obtain renewal of these
agreements could have a material adverse effect on our business.
Rapid technological changes in the wireless telecommunications and data
industry could have a material adverse effect on our business -- The technology
relating to wireless telecommunications and data equipment changes rapidly, and
industry standards are constantly evolving, resulting in product obsolescence or
short product life cycles. We are required to anticipate future technological
changes in our industry and to continually identify, obtain and market new
products in order to satisfy evolving industry and customer requirements.
Competitors or manufacturers of wireless equipment may market products which
have perceived or actual advantages over products that we handle or which
otherwise render those products obsolete or less marketable. We have made and
continue to make significant capital investments in accordance with evolving
industry and customer requirements. These concentrations of capital increase our
risk of loss as a result of rapid technological changes in the wireless
telecommunications and data industry.
The use of emerging wireless communications technologies, including GPRS,
EDGE, W-CDMA, Bluetooth, wireless local loop, satellite-based communications
systems and other new technologies, may reduce the demand for existing cellular
and PCS products. If other companies develop and commercialize new technologies
or products in related market segments that compete with existing cellular and
PCS technology, it could materially change the types of products that we may be
required to offer or result in significant price competition for us. Product
obsolescence could result in significantly increased inventories of our unsold
products. However, if we elect to stock our inventories in the future with any
of these technologies and products, we will run the risk that our existing
customers and consumers may not be willing, for financial or other reasons, to
purchase new equipment necessary to utilize these new technologies. In addition,
the complex hardware and software contained in new wireless handsets could
contain defects which become apparent subsequent to widespread commercial use,
resulting in product recalls and returns and leaving us with additional unsold
inventory.
Our future operating results will depend on our ability to continue to
increase our sales significantly -- A large percentage of our total revenues in
recent periods has come from sales of wireless handsets, a segment of our
business that operates on a high-volume, low-margin basis. Our ability to
generate these sales is based upon our having adequate supply of products. The
gross margins that we realize on sales of wireless handsets could be reduced due
to increased competition or a growing industry emphasis on cost containment. In
addition, our operating expenses have increased significantly. We expect these
expenses to continue to increase as we expand our activities and increase our
provision of integrated logistics services. Therefore, our future profitability
will depend on our ability to increase sales to cover our additional expenses.
We may not be able to cause our sales rates to grow substantially. Even if our
sales rates do increase, the gross margins that we receive from our sales may
not be sufficient to make our future operations profitable.
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A significant percentage of our revenues is generated outside of North
America in countries that may have volatile currencies or other risks -- We
maintain operations centers and sales offices in many territories and countries.
The fact that our business operations are conducted in a wide variety of
countries exposes us to increased credit risks, customs duties, import quotas
and other trade restrictions, potentially greater inflationary pressures,
shipping delays, the risk of failure or material interruption of wireless
systems and services, possible wireless product supply interruption and
potentially significant increases in wireless product prices. Changes may occur
in social, political, regulatory and economic conditions or in laws and policies
governing foreign trade and investment in the territories and countries where we
currently have operations. U.S. laws and regulations relating to investment and
trade in foreign countries could also change to our detriment. Any of these
factors could have a material adverse effect on our business and operations. We
purchase and sell products and services in a large number of foreign currencies,
many of which have experienced fluctuations in currency exchange rates. On
occasion, we enter into forward exchange swaps, futures or options contracts as
a means of hedging our currency transaction and balance sheet translation
exposures. However, our management has had limited prior experience in engaging
in these types of transactions. Even if done well, hedging may not effectively
limit our exposure to a decline in operating results due to foreign currency
translation. We cannot predict the effect that future exchange rate fluctuations
will have on our operating results. During 1999, and pursuant to our
restructuring plan, we terminated or eliminated several of our foreign
operations because they were not performing to acceptable levels. These
terminations resulted in significant losses to us. We may in the future, decide
to terminate certain existing foreign operations. This could result in our
incurring significant additional losses.
We buy a significant amount of our products from a limited number of
suppliers, who may not provide us with competitive products at reasonable prices
when we need them in the future -- We purchase all of the wireless handsets and
accessories that we sell from third-party wireless communications equipment
manufacturers, dealers and network operators. We depend on these suppliers to
provide us with adequate inventories of currently popular brand name products on
a timely basis and on favorable pricing terms. Our agreements with our suppliers
generally are non-exclusive, require us to satisfy minimum purchase
requirements, can be terminated on short notice and provide for certain
territorial restrictions, as is common in our industry. We generally purchase
products pursuant to purchase orders placed from time to time in the ordinary
course of business. In the future, our suppliers may not offer us competitive
products on favorable terms without delays. From time to time we have been
unable to obtain sufficient product supplies from manufacturers in many markets
in which we operate. Any future failure or delay by our suppliers in supplying
us with products on favorable terms would severely diminish our ability to
obtain and deliver products to our customers on a timely and competitive basis.
If we lose any of our principal suppliers, or if any supplier imposes
substantial price increases and alternative sources of supply are not readily
available, it would have a material adverse effect on our results of operations.
The wireless telecommunications and data industry is intensely
competitive and we may not be able to continue to compete successfully in this
industry -- We compete for sales of wireless telecommunications and data
equipment, and expect that we will continue to compete, with numerous
well-established wireless network operators, distributors and manufacturers,
including our own suppliers. As a provider of integrated logistics services, we
also compete with other distributors, logistics services companies and
electronic manufacturing services companies. Many of our competitors possess
greater financial and other resources than we do and may market similar products
directly to our customers. The wireless telecommunications and data industry has
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generally had low barriers to entry. As a result, additional competitors may
choose to enter our industry in the future. The markets for wireless handsets
and accessories are characterized by intense price competition and significant
price erosion over the life of a product. Many of our competitors have the
financial resources to withstand substantial price competition and to implement
extensive advertising and promotional programs, both generally and in response
to efforts by additional competitors to enter into new markets or introduce new
products. Our ability to continue to compete successfully will depend largely on
our ability to maintain our current industry relationships. We may not be
successful in anticipating and responding to competitive factors affecting our
industry, including new or changing outsourcing requirements, the entry of
additional well-capitalized competitors, new products which may be introduced,
changes in consumer preferences, demographic trends, international, national,
regional and local economic conditions and competitors' discount pricing and
promotion strategies. As the cellular markets mature and as we seek to enter
into new markets and offer new products in the future, the competition that we
face may change and grow more intense.
We may not be able to manage and sustain future growth at our historical
or current rates -- In recent years we have experienced domestic and
international growth. We will need to manage our expanding operations
effectively, maintain or accelerate our growth as planned and integrate any new
businesses which we may acquire into our operations successfully in order to
continue our desired growth. If we are unable to do so, particularly in
instances in which we have made significant capital investments, it could have a
material adverse effect on our operations. In addition, our growth prospects
could be adversely affected by a decline in the wireless telecommunications and
data industry generally or in one of our regional divisions, either of which
could result in reduction or deferral of expenditures by prospective customers.
Our business strategy includes entering into strategic relationships and
financings, which may provide us with minimal returns or losses on our
investments -- As part of our expansion strategy, we have entered into several
strategic relationships and joint ventures with wireless equipment manufacturers
and network operators. We intend to continue to enter into similar strategic
relationships as opportunities arise. We may enter into distribution or
integrated logistics services agreements with these strategic partners and may
provide them with equity or debt financing. Our ability to achieve future
profitability through our strategic relationships will depend in part upon the
economic viability, success and motivation of the entities we select as
strategic partners and the amount of time and resources that these partners
devote to our alliances. We may receive minimal or no business from future
relationships and joint ventures, and any business we receive may not be
significant or at the level we anticipated. The future profits we receive from
these strategic relationships, if any, may not offset possible losses on our
investments or the full amount of financings that we extend upon entering into
these relationships. Any loan to or investment in a future strategic partner
will be subject to many of the same risks faced by the strategic partner in
seeking to operate and grow its businesses. We may not achieve acceptable
returns on our future investments with strategic partners within an acceptable
period or at all. As a part of our restructuring plan in 1999 we terminated two
joint operations in China resulting in significant losses on our investments in
those operations. A failure in the establishment and operation of such
relationships could have a material adverse effect on our operations.
We have incurred significant losses during certain quarterly periods --
Although we achieved a profit during each quarter in the year ended December 31,
2000, we incurred net losses for each of the first two quarters of 1999 and a
net loss of $93.1 million for the year ended December 31, 1999. We also incurred
a net loss of $7.1 million for the three months ended December 31, 1998. The net
loss for 1999 includes
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approximately $84.9 million of restructuring and other unusual charges as well
as the cumulative effect of an accounting change of $14.1 million. The net loss
for the three months ended December 31, 1998 includes approximately $25.7
million of trading and other unusual charges resulting from our decision to
eliminate our trading activities. Several business factors appear to have
contributed to our losses in these periods including an inadequate supply of
products for sale through our distribution services, our inability to replace,
during 1999, revenues which had been generated by the trading business that we
exited in the fourth quarter of 1998, the impacts of the devaluation of the
Brazilian Real and price competition from trading companies in our Asia-Pacific
and Latin America divisions. We may incur additional future losses.
We have significant outstanding indebtedness, which is secured by a large
portion of our assets and which could prevent us from borrowing additional
funds, if needed -- If we violate our loan covenants, default on our obligations
or become subject to a change of control, our indebtedness could become
immediately due and payable, and the banks could foreclose on our assets. The
terms of our senior credit facility substantially prohibit us from incurring
additional indebtedness, which could limit our ability to expand our operations.
Our senior credit facility also limits or prohibits us from declaring or paying
cash dividends, making capital distributions or other payments to stockholders,
merging or consolidating with another corporation or selling all or
substantially all of our assets.
There are significant amounts of our securities which are issuable upon
exercise of outstanding convertible securities as well as under other stock
plans which could affect the market price of our common stock -- The $250
million face value of our 20-year zero-coupon, subordinated, convertible notes
are convertible at the option of the holder any time prior to maturity. These
notes are convertible at the rate of 19.109 shares of common stock per $1,000
face value note, for an aggregate of 4,777,250 shares of common stock.
Additionally, we have reserved a significant number of shares of common stock
that may be issuable pursuant to our employee stock option and purchase plans,
and upon the exercise of currently outstanding warrants. These securities, when
issued and outstanding, may reduce earnings per share in periods that they are
considered dilutive under Generally Accepted Accounting Principles and, to the
extent that they are exercised and shares of common stock are issued, dilute
percentage ownership to existing stockholders which could have an adverse effect
on the market price of our common stock.
We have instituted measures to protect us against a takeover -- Certain
provisions of our by-laws, stockholders rights and option plans, certain
employment agreements and the Delaware General Corporation Law are designed to
protect us in the event of a takeover attempt. These provisions could prohibit
or delay mergers or attempted takeovers or changes in control of us and,
accordingly, may discourage attempts to acquire us.
We may have difficulty collecting our accounts receivable -- We currently
offer and intend to offer open account terms to our customers, which may subject
us to credit risks, particularly in the event that any receivables represent
sales to a limited number of customers or are concentrated in particular
geographic markets. Any delays in collecting or inability to collect our
receivables could have a material adverse effect on our business.
Our operating results frequently vary significantly and respond to
seasonal fluctuations in purchasing patterns -- Our operating results are
influenced by a number of seasonal factors in the different countries and
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markets in which we operate. These results may fluctuate from period to period
as a result of several factors, including:
- purchasing patterns of customers in different markets;
- the timing of introduction of new products by our suppliers and
competitors;
- variations in sales by distribution channels; and
- product availability and pricing.
Consumer electronics and retail sales have historically experienced
increased volumes of sales at the end of the calendar year. This and other
seasonal factors contribute to the usual increase in our sales during the fourth
quarter of our fiscal year. However, this increase did not occur in 2000. Our
operating results may continue to fluctuate significantly in the future. In
addition, if unanticipated events occur, including delays in securing adequate
inventories of competitive products at times of peak sales or significant
decreases in sales during these periods, it could have a material adverse effect
on our operating results.
Our continued growth depends on retaining our current key employees and
attracting additional qualified personnel -- Our success depends in large part
on the abilities and continued service of our executive officers and other key
employees. Although we have entered into employment agreements with several of
our officers and employees, we may not be able to retain their services. We also
have non-competition agreements with our executive officers and some of our
existing key personnel. However, courts are sometimes reluctant to enforce
non-competition agreements. The loss of executive officers or other key
personnel could have a material adverse effect on us. In addition, in order to
support our continued growth, we will be required to effectively recruit,
develop and retain additional qualified management. If we are unable to attract
and retain additional necessary personnel, it could delay or hinder our plans
for growth.
We rely to a great extent on trade secret and copyright laws and
agreements with our key employees and other third parties to protect our
proprietary rights -- Our business success is substantially dependent upon our
proprietary business methods and software applications relating to our
information systems. We currently hold one patent relating to certain of our
business methods. Concerning other business methods and software we rely on
trade secret and copyright laws to protect our proprietary knowledge. We also
regularly enter into non-disclosure agreements with our key employees and limit
access to and distribution of our trade secrets and other proprietary
information. These measures may not prove adequate to prevent misappropriation
of our technology. Our competitors could also independently develop technologies
that are substantially equivalent or superior to our technology, thereby
eliminating one of our competitive advantages. We also have offices and conduct
our operations in a wide variety of countries outside the United States. The
laws of some other countries do not protect our proprietary rights to the same
extent as do laws in the United States. In addition, although we believe that
our business methods and proprietary software have been developed independently
and do not infringe upon the rights of others, third parties might assert
infringement claims against us in the future or our business methods and
software may be found to infringe upon the proprietary rights of others.
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We make significant investments in the technology used in our business
and rely on this technology to function effectively without interruptions -- We
have made significant investments in sophisticated and specialized information
systems technology and have focused on the application of this technology to
provide customized integrated logistics services to wireless communications
equipment manufacturers and network operators. Our sales and marketing efforts,
a large part of which are telemarketing based, are highly dependent on computer
and telephone equipment. We anticipate that we will need to continue to invest
significant amounts to enhance our information systems in order to maintain our
competitiveness and to develop new logistics services. Our property and business
interruption insurance may not compensate us adequately, or at all, for losses
that we may incur if we lose our equipment or systems either temporarily or
permanently through a casualty or operating malfunction. In addition, a
significant increase in the costs of additional technology or telephone services
that is not recoverable through an increase in the price of our services could
have a material adverse effect on our results of operations.
Our labor force experiences a high rate of personnel turnover -- Our
distribution and integrated logistics services are labor-intensive, and we
experience high personnel turnover and can be adversely affected by shortages in
the available labor force in geographical areas where we operate. A significant
portion of our labor force is contracted through temporary agencies, and a
significant portion of our costs consist of wages to hourly workers. Growth in
our business, together with seasonal increases in net sales, requires us to
recruit and train personnel at an accelerated rate from time to time. We may not
be able to continue to hire, train and retain a significant labor force of
qualified individuals when needed, or at all. An increase in hourly costs,
employee benefit costs, employment taxes or commission rates could have a
material adverse effect on our operations. In addition, if the turnover rate
among our labor force increased further, we could be required to increase our
recruiting and training efforts and costs, and our operating efficiencies and
productivity could decrease.
We have significant future payment obligations pursuant to certain leases
and other long-term contracts -- We lease our office and warehouse/distribution
facilities as well as certain furniture and equipment under real property and
personal equipment leases. Many of these leases are for terms that exceed one
year and require us to pay significant monetary charges for early termination or
breach by us of the lease terms. We cannot be certain of our ability to
adequately fund these lease commitments from our future operations and our
decision to modify, change or abandon any of our existing facilities could have
a material adverse effect on our operations.
We may become subject to suits alleging medical risks associated with our
wireless handsets -- Lawsuits or claims have been filed or made against
manufacturers of wireless handsets over the past years alleging possible medical
risks, including brain cancer, associated with the electromagnetic fields
emitted by wireless communications handsets. There has been only limited
relevant research in this area, and this research has not been conclusive as to
what effects, if any, exposure to electromagnetic fields emitted by wireless
handsets has on human cells. Substantially all of our revenues are derived,
either directly or indirectly, from sales of wireless handsets. We may become
subject to lawsuits filed by plaintiffs alleging various health risks from our
products. If any future studies find possible health risks associated with the
use of wireless handsets or if any damages claim against us is successful, it
could have a material adverse effect on our business. Even an unsubstantiated
perception that health risks exist could adversely affect our ability or the
ability of our customers to market wireless handsets.
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The market price of our common stock may continue to be volatile -- The
market price of our common stock has fluctuated significantly from time to time
since our initial public offering in April 1994. The trading price of our common
stock could experience significant fluctuations in the future in response to
certain factors, which could include actual or anticipated variations in our
quarterly operating results; the introduction of new services, products or
technologies by us, our suppliers or our competitors; changes in other
conditions or trends in the wireless telecommunications and data industry;
changes in governmental regulation; or changes in securities analysts' estimates
of our future performance or that of our competitors or our industry in general.
General market price declines or market volatility in the prices of stocks for
companies in the wireless telecommunications and data industry or in the
distribution or integrated logistics services sectors of the wireless
telecommunications and data industry could also affect the market price of our
common stock.
SEGMENT FINANCIAL INFORMATION
Reference is made to the information set forth in our 2000 Annual Report
to Stockholders on pages 28 and 29 under the caption "Operating Segments," which
information is incorporated herein by reference.
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ITEM 2. PROPERTIES.
We provide our distribution and integrated logistics services from our
sales and operations centers located in various countries including Australia,
Brazil, the People's Republic of China (including Hong Kong), Colombia, France,
Germany, Ireland, Jordan, Mexico, the Netherlands, New Zealand, the Philippines,
South Africa, Sweden, the United Arab Emirates, the United States, and
Venezuela. Substantially all of these facilities are occupied pursuant to
operating leases. The table below summarizes information about our sales and
operations centers by operating division.
NUMBER OF AGGREGATE APPROXIMATE
LOCATIONS (1) SQUARE FOOTAGE MONTHLY RENT
----------------------------------------------
North America 3 823,410 $ 430,000
Asia-Pacific 7 104,269 43,000
Europe, Middle East and Africa 10 175,428 94,000
Latin America 6 218,360 50,000
-----------------------------------------------
26 1,321,467 $ 617,000
===============================================
(1) Refers to geographic areas in which we maintain facilities and
considers multiple buildings located in the same area as a single geographic
location.
In 2000, the Company consolidated four Indianapolis, Indiana locations and
a location in Bensalem, Pennsylvania into a single, new facility located near
the Indianapolis International Airport and designed specifically for the Company
and its processes. We have entered into a twenty-year lease for this facility
and with 495,000 square feet of office and plant space it is our largest
operations center. In addition, we have been attempting to sublease the former
North America headquarters and distribution center located at 6402 Corporate
Drive in Indianapolis, Indiana, which is currently serving as our Corporate
headquarters. The lease term of this facility expires in 2006 and current rental
payments are approximately $80,000 per month.
We believe that our existing facilities are adequate for our current
requirements and that suitable additional space will be available as needed to
accommodate future expansion of our operations.
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ITEM 3. LEGAL PROCEEDINGS.
We are from time to time, involved in certain legal proceedings in the
ordinary course of conducting our business. We believe there are no pending
legal proceedings in which we are currently involved which will have a material
adverse effect on our financial position.
We and certain of our executive officers, two of whom are also directors,
were named as defendants in four actions filed in June and July 1999, in the
United States District Court for the Southern District of Indiana. These actions
were subsequently consolidated by the court into a single action entitled In re
Brightpoint Securities Litigation, United States District Court, Southern
District of Indiana, Indianapolis Division, Cause No. IP 99-870-C H/G. The
action asserts claims under Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934, and Rule 10b-5 of the Exchange Act, based on allegations that false
and misleading statements were rendered and/or statements were omitted
concerning the Company's then current and future financial condition and
business prospects. The action involves a purported class of purchasers of the
Company's stock during the period October 2, 1998 through March 10, 1999. The
Company and the individual defendants intend to vigorously defend the action.
The Company and the individual defendants have filed a motion to dismiss the
action and such motion is currently pending before the court. Discovery has not
yet commenced. The outcome of any litigation is uncertain and it is possible
that an unfavorable decision could have a material adverse effect on the
Company's financial position, results of operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
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PART II
With the exception of the information expressly incorporated by reference
from the Company's 2000 Annual Report to Stockholders into Parts I, II and IV of
this Form 10-K, the Company's Annual Report to Stockholders is not to be deemed
filed as part of this report.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The information required by this Item is set forth in the Company's 2000
Annual Report to Stockholders, on page 60 under the caption "Common Stock
Information," which information is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this Item is set forth in the Company's 2000
Annual Report to Stockholders, on page 61 under the caption "Selected Financial
Data," which information is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information required by this Item is set forth in the Company's 2000
Annual Report to Stockholders, on pages 25-29, 31-35, 38-40, and 42, which
information is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information required by this Item is set forth in the Company's 2000
Annual Report to Stockholders, on page 42 under the caption "Financial Market
Risk Management," which information is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this Item is set forth in the Company's 2000
Annual Report to Stockholders, on pages 24, 30, 36, 37, 41 and 43 through 59,
which information is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
22
24
PART III
Certain information required by Part III is omitted from this report in
that the Company will file its definitive Proxy Statement for the Annual Meeting
of Stockholders for the Annual Meeting of Stockholders to be held in 2001,
pursuant to Regulation 14A of the Securities Exchange Act of 1934 (the "Proxy
Statement"), not later than 120 days after the end of the fiscal year covered by
this report, and certain information included in the Proxy Statement is
incorporated herein by reference.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this Item is in the Proxy Statement under the
Section entitled "Election of Directors," which information is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item is set forth in the Proxy Statement
under the Section entitled "Executive Compensation," which information is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item is set forth in the Proxy Statement
under the Section entitled "Voting Security Ownership of Certain Beneficial
Owners and Management," which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item is set forth in the Proxy Statement
under the Section entitled "Certain Transactions," which information is
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) The following financial statements of the Company included in the
Company's 2000 Annual Report to Stockholders, are incorporated herein
by reference:
Report of Independent Auditors
Consolidated Statements of Operations for the Years Ended December
31, 1998, 1999 and 2000
23
25
Consolidated Balance Sheets as of December 31, 1999 and 2000
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1998, 1999 and 2000
Consolidated Statements of Cash Flows for the Years Ended December
31, 1998, 1999 and 2000
Notes to Consolidated Financial Statements
(a)(2) The following financial statement schedule for the year ended
December 31, 2000, including the Report of Independent Auditors on
Financial Statement Schedule for the three years ended December 31,
2000, is submitted herewith:
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or
the required information is shown in the financial statements or
notes thereto.
(a)(3) Exhibits
24
26
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.1 Certificate of Incorporation of the Company, as amended (6)
3.2 Amended and Restated By-Laws of the Company (6)
3.3 Certificate of Merger of Brightpoint, Inc. into Wholesale Cellular
USA, Inc., effective September 15, 1995 (2)
4.1 Indenture between the Company and the Chase Manhattan Bank, as
Trustee (8)
10.1 1994 Stock Option Plan, as amended (15)*
10.2 1996 Stock Option Plan, as amended (15)*
10.3 Non-Employee Directors Stock Option Plan (1)
10.4 Employee Stock Purchase Plan (13)
10.5 Amended and Restated Employment Agreement between the Company and
Robert J. Laikin dated July 1, 1999 (14)*
10.6 Amended and Restated Employment Agreement between the Company and J.
Mark Howell dated July 1, 1999 (14)*
10.7 Amended and Restated Employment Agreement between the Company and
Phillip A. Bounsall dated July 1, 1999 (14)*
10.8 Amended and Restated Employment Agreement between the Company and
Steven E. Fivel dated July 1, 1999 (14)*
10.9 Lease Agreement between the Company and Corporate Drive Associates,
LLC, dated June 6, 1995 (3)
10.10 Amendment to Lease Agreement between the Company and Corporate Drive
Associates, LLC, dated October 3, 1995 (3)
10.11 Second Amendment to Lease agreement between the Company and Corporate
Drive Associates, LLC, dated as of July 17, 1996 (6)
25
27
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.12 Lease Agreement (Building Expansion) between the Company and
Corporate Drive Associates, LLC, dated as of July 17, 1996 (6)
10.13 Rights Agreement, dated as of February 20, 1997, between the Company
and Continental Stock Transfer Trust Company, as Rights Agent (4)
10.14 Lease Agreement between the Company and DP Operating Partnership,
L.P., dated as of March 1, 1997 (5)
10.15 Multicurrency Credit Agreement dated as of June 24, 1997 (the "Credit
Agreement") among the Company, Brightpoint International Ltd., the
Subsidiary Borrowers from time to time party thereto, the Guarantors
from time to time party thereto, the Financial Institutions from time
to time party thereto as lenders, The First National Bank of Chicago
as administrative agent and Bank One, Indiana, N.A. as syndication
agent (6)
10.16 Form of Waiver and Amendment No. 1 to Credit Agreement dated as of
November 15, 1997 (7)
10.17 Third Amendment to Multicurrency Credit Agreement dated March 20,
1998 (9)
10.18 Fourth Amendment to Multicurrency Credit Agreement dated April 16,
1998 (10)
10.19 Amended and Restated Multicurrency Credit Agreement originally dated
June 24, 1997 and amended and restated as of May 13, 1998 (10)
10.20 Lease Agreement between the Company and New World Partners Joint
Venture Number Five, dated July 30, 1998 (11)
10.21 Lease Agreement between the Company and Airtech Parkway Associates,
LLC, dated September 18, 1998 (11)
10.22 Form of Indemnification Agreement of certain officers and directors
(16)
10.23 Amendment No. 1 to Amended and Restated Multicurrency Credit
Agreement dated October 19, 1998 (12)
10.24 Amendment No. 2 to Amended and Restated Multicurrency Credit
Agreement dated September 30, 1998 (12)
26
28
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.25 Amendment No. 3 to Amended and Restated Multicurrency Credit
Agreement dated January 1, 1999 (12)
10.26 Fourth Amendment to Multicurrency Agreement dated May 13, 1998 (13)
10.27 Second Amended and Restated Multicurrency Credit Agreement dated May
13, 1998 and amended and restated as of July 27, 1999 (14)
10.28 Amendment Number 1 to the Rights Agreement (the "Agreement") by and
between Brightpoint, Inc. (the "Company") and Continental Stock
Transfer & Trust Company, as Rights Agent, dated as of January 4,
1999 (13)
10.29 Amendment Number 1 to the Second Amended and Restated Multicurrency
Credit Agreement dated as of March 20, 2000 (17)
10.30 Amendment Number 2 to the Second Amended and Restated Multicurrency
Credit Agreement dated as of June 28, 2000 (18)
10.31 Amendment Number 3 to the Second Amended and Restated Multicurrency
Credit Agreement dated as of October 27, 2000 (19)
10.32 Amendment Number 4 to the Second Amended and Restated Multicurrency
Credit Agreement dated as of December 27, 2000 (20)
10.33 Amendment dated January 1, 2001 to the Amended and Restated Agreement
between the Company and Robert J. Laikin dated July 1, 1999 (20)*
10.34 Amendment dated January 1, 2001 to the Amended and Restated Agreement
between the Company and J. Mark Howell dated July 1, 1999 (20)*
10.35 Amendment dated January 1, 2001 to the Amended and Restated Agreement
between the Company and Phillip A. Bounsall dated July 1, 1999 (20)*
10.36 Amendment dated January 1, 2001 to the Amended and Restated Agreement
between the Company and Steven E. Fivel dated July 1, 1999 (20)*
10.37 Lease Agreement between the Company and Harbour Properties, LLC,
dated April 25, 2000 (20)
27
29
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.38 Pledge Supplement for Brightpoint North America, Inc. dated January
1, 2001 to the Second Amended and Restated Multicurrency Credit
Agreement dated as of July 27, 1999 (20)
10.39 Pledge Supplement for Brightpoint North America L.P. dated January 1,
2001 to the Second Amended and Restated Multicurrency Credit
Agreement dated as of July 27, 1999 (20)
10.40 Subsidiary Borrower and Guarantor Letter for Brightpoint North
America, Inc. dated January 1, 2001 under the Second Amended and
Restated Multicurrency Credit Agreement dated as of July 27, 1999 (20)
10.41 Subsidiary Borrower and Guarantor Letter for Brightpoint North
America L.P. dated January 1, 2001 under the Second Amended and
Restated Multicurrency Credit Agreement dated as of July 27, 1999 (20)
10.42 Security Agreement dated January 1, 2001 between Brightpoint North
America, Inc. and Bank One, Indiana, National Association under the
Second Amended and Restated Multicurrency Credit Agreement dated as
of July 27, 1999 (20)
10.43 Security Agreement dated January 1, 2001 between Brightpoint North
America L.P. and Bank One, Indiana, National Association under the
Second Amended and Restated Multicurrency Credit Agreement dated as
of July 27, 1999 (20)
13 Specific portions of the Company's Annual Report to Stockholders for
the fiscal year ended December 31, 2000 incorporated by reference
herein (20)
21 Subsidiaries (20)
23 Consent of Ernst & Young LLP (21)
99 Cautionary Statements (20)
(1) Incorporated by reference to the exhibit filed with the Company's
Registration Statement (33-75148) effective April 7, 1994.
(2) Incorporated by reference to the exhibit filed with the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1994.
(3) Incorporated by reference to the exhibit filed with the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1995.
28
30
(4) Incorporated by reference to the exhibit filed with the Company's
Current Report on Form 8-K, dated March 28, 1997.
(5) Incorporated by reference to the exhibit filed with the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997.
(6) Incorporated by reference to the exhibit filed with the Company's
Registration Statement on Form S-3 (333-29533) effective August 6,
1997.
(7) Incorporated by reference to the exhibit filed with the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1997.
(8) Incorporated by reference to the exhibit filed with the exhibit filed
with the Company's Current Report on Form 8-K dated April 1, 1998 for
the event dated March 5, 1998.
(9) Incorporated by reference to the exhibit filed with the exhibit filed
with the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998.
(10) Incorporated by reference to the exhibit filed with the exhibit filed
with the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998.
(11) Incorporated by reference to the exhibit filed with the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1998.
(12) Incorporated by reference to the exhibit filed with the Company's Form
10-K for the fiscal year ended December 31, 1998.
(13) Incorporated by reference to Appendix A filed with the Company's Proxy
Statement dated April 15, 2000 relating to its Annual Stockholders
meeting held May 18, 2000.
(14) Incorporated by reference to the exhibit filed with the Company's
Quarterly report on Form 10-Q for the quarter ended June 30, 1999.
(15) Incorporated by reference to the exhibit filed with the Company's
Registration Statement on Form S-8 (333-87863) dated September 27,
1999.
(16) Incorporated by reference to the exhibit filed with the Company's Form
10-K for the fiscal year ended December 31, 1999.
(17) Incorporated by reference to the exhibit filed with the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2000.
29
31
(18) Incorporated by reference to the exhibit filed with the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2000.
(19) Incorporated by reference to the exhibit filed with the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
2000.
(20) Filed herewith.
(21) Filed as page F-2 of this report.
* Denotes management compensation plan or arrangement.
(b) Reports on Form 8-K:
The Company filed a Current Report on Form 8-K for the event dated
October 30, 2000 under Item 5 to report the plan to purchase up to
130,000 of its outstanding convertible subordinated zero-coupon bonds
due 2018.
In addition, the Company filed a Current Report on Form 8-K for the
event dated December 20, 2000 under Item 5 to report the update of
revenue and earnings estimates.
30
32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 29, 2001 /s/ Robert J. Laikin
------------------------------
By: Robert J. Laikin
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Robert J. Laikin Chairman of the Board
----------------------- Chief Executive Officer and
Robert J. Laikin Director (Principal Executive Officer) March 29, 2001
/s/ J. Mark Howell President, Chief Operating Officer and
----------------------- Director March 29, 2001
J. Mark Howell
/s/ Phillip A. Bounsall Executive Vice President and Chief
----------------------- Financial Officer (Principal Financial
Phillip A. Bounsall Officer and Principal Accounting
Officer) March 29, 2001
/s/ John W. Adams Director March 29, 2001
-----------------------
John W. Adams
/s/ Rollin M. Dick Director March 29, 2001
-----------------------
Rollin M. Dick
/s/ Stephen H. Simon Director March 29, 2001
-----------------------
Stephen H. Simon
/s/ Jerre L. Stead Director March 29, 2001
-----------------------
Jerre L. Stead
/s/ Todd H. Stuart Director March 29, 2001
-----------------------
Todd H. Stuart
/s/ Robert F. Wagner Director March 29, 2001
-----------------------
Robert F. Wagner
33
BRIGHTPOINT, INC.
INDEX TO FINANCIAL STATEMENT SCHEDULE
PAGE
Report of Independent Auditors on Financial Statement Schedule............ F-1
Consent of Ernst & Young LLP.............................................. F-2
Financial Statement Schedule for the years 2000, 1999 and 1998:
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS......................... F-3
34
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
Brightpoint, Inc.
We have audited the consolidated financial statements of Brightpoint, Inc. as of
December 31, 2000 and 1999, and for each of the three years in the period ended
December 31, 2000, and have issued our report thereon dated January 22, 2001
(except Note 8, as to which the date is March 1, 2001). Our audits also included
the financial statement schedule listed in Item 14(a) of this Form 10-K. This
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ ERNST & YOUNG, LLP
Indianapolis, Indiana
January 22, 2001
F-1
35
CONSENT OF ERNST & YOUNG LLP
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-87863) pertaining to the Brightpoint, Inc. 1994 Stock Option Plan,
as amended, the 1996 Brightpoint, Inc. Stock Option Plan, as amended, the
Brightpoint, Inc. Non-employee Director Stock Option Plan, and the Brightpoint,
Inc. Employee Stock Purchase Plan, in the Registration Statement (Form S-8 No.
333-2242) pertaining to the Brightpoint, Inc. 401(k) Plan, in the Registration
Statement (Form S-3 No. 33-91112) pertaining to certain options and warrants of
Brightpoint, Inc., in the Registration Statement (Form S-3 No. 333-3569)
pertaining to certain warrants of Brightpoint, Inc., and in the Registration
Statements (Form S-3 No. 333-15663, 333-29533, 333-07892, 333-37587, 333-55945,
333-58863, 333-34952, and 333-37022) pertaining to certain common stock of
Brightpoint, Inc. of our report dated January 22, 2001 (except Note 8, as to
which the date is March 1, 2001) with respect to the consolidated financial
statements incorporated by reference and our report dated January 22, 2001 with
respect to the financial statement schedule included in this Annual Report (Form
10-K) of Brightpoint, Inc.
/s/ ERNST & YOUNG, LLP
Indianapolis, Indiana
March 26, 2001
F-2
36
BRIGHTPOINT, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
COL. A COL. B COL. C COL. D COL. E
------ ------ ------ ------ ------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END
DESCRIPTION OF PERIOD EXPENSES(1) ACCOUNTS DEDUCTIONS OF PERIOD
----------- --------- ----------- -------- ---------- ---------
Year ended December 31, 2000:
Deducted from asset
accounts:
Allowance for
doubtful accounts.......... $ 6,220,000 $ 6,328,000 $ -- $ 6,000,000(2) $ 6,548,000
----------- ------------ --------- ------------ -----------
Total....................... $ 6,220,000 $ 6,328,000 $ -- $ 6,000,000 $ 6,548,000
=========== ============ ========= ============ ===========
Year ended December 31, 1999:
Deducted from asset
accounts:
Allowance for
doubtful accounts.......... $ 6,045,000 $ 10,906,000 $ -- $ 10,731,000(2) $ 6,220,000
----------- ------------ --------- ------------ -----------
Total....................... $ 6,045,000 $ 10,906,000 $ -- $ 10,731,000 $ 6,220,000
=========== ============ ========= ============ ===========
Year ended December 31, 1998:
Deducted from asset
accounts:
Allowance for
doubtful accounts........... $ 3,394,000 $ 5,601,000 $ -- $ 2,950,000(2) $ 6,045,000
----------- ------------ --------- ------------ -----------
Total........................ $ 3,394,000 $ 5,601,000 $ -- $ 2,950,000 $ 6,045,000
=========== ============ ========= ============ ===========
(1) Does not include impairments of accounts receivable recognized in
connection with the Company's trading, restructuring and other unusual
charges. See notes to Consolidated Financial Statements.
(2) Uncollectible accounts written off.
F-3