UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2008

0-23494
(Commission File no.)

Brightpoint, Inc.

Indiana		35-1778566
State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization

2601 Metropolis Parkway, Suite 210, Plainfield, Indiana		46168
(Address of principal executive offices)		(Zip Code)

(317) 707-2355

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.
þ Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
Yes o No þ

The number of shares of Common Stock outstanding as of October 31, 2008: 81,648,095

 

 

PART 1 — FINANCIAL INFORMATION

Item 1. Financial Statements

Brightpoint, Inc.
Consolidated Statements of Operations
(Amounts in thousands, except per share data)
(Unaudited)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2008				2007				2008				2007
Revenue
Distribution revenue		$	1,098,800			$	1,067,791			$	3,292,703			$	2,377,940
Logistic services revenue			111,169				92,891				321,694				251,496
Total revenue			1,209,969				1,160,682				3,614,397				2,629,436
Cost of revenue
Cost of distribution revenue			1,054,383				1,018,314				3,145,861				2,289,198
Cost of logistic services revenue			68,638				64,622				202,620				188,864
Total cost of revenue			1,123,021				1,082,936				3,348,481				2,478,062
Gross profit			86,948				77,746				265,916				151,374
Selling, general and administrative expenses			63,475				51,275				206,043				112,044
Amortization expense			4,647				3,892				14,189				4,636
Restructuring charge			901				166				7,483				166
Operating income from continuing operations			17,925				22,413				38,201				34,528
Interest, net			4,435				5,758				18,616				8,971
Other expenses			1,782				424				2,809				786
Income from continuing operations before income taxes			11,708				16,231				16,776				24,771
Income tax expense (benefit)			5,648				3,005				5,469				(7,771	)
Income from continuing operations before minority interest			6,060				13,226				11,307				32,542
Minority interest, net of taxes			33				206				366				206
Income from continuing operations			6,027				13,020				10,941				32,336
Discontinued operations, net of income taxes:
(Loss) gain from discontinued operations			(538	)			(57	)			(7,013	)			153
(Loss) gain on disposal of discontinued operations			(10	)			(1	)			(5	)			11
Total discontinued operations, net of income taxes			(548	)			(58	)			(7,018	)			164
Net income		$	5,479			$	12,962			$	3,923			$	32,500
Earnings per share — basic:
Income from continuing operations		$	0.08			$	0.19			$	0.14			$	0.57
Discontinued operations, net of income taxes			(0.01	)			—				(0.09	)			—
Net income		$	0.07			$	0.19			$	0.05			$	0.57
Earnings per share — diluted:
Income from continuing operations		$	0.07			$	0.18			$	0.13			$	0.56
Discontinued operations, net of income taxes			(0.01	)			—				(0.09	)			—
Net income		$	0.06			$	0.18			$	0.04			$	0.56
Weighted average common shares outstanding:
Basic			78,549				70,076				77,968				56,488
Diluted			81,250				71,125				81,545				57,551

See accompanying notes

Brightpoint, Inc.
Consolidated Balance Sheets
(Amounts in thousands, except per share data)

		September 30,				December 31,
		2008				2007
		(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents		$	101,200			$	102,160
Accounts receivable (less allowance for doubtful accounts of $12,875 in 2008 and $17,157 in 2007)			544,491				754,238
Inventories			312,869				474,951
Other current assets			66,236				69,261
Total current assets			1,024,796				1,400,610
Property and equipment, net			56,652				55,732
Goodwill			389,005				349,646
Other intangibles, net			118,619				135,431
Other assets			36,749				30,942
Total assets		$	1,625,821			$	1,972,361
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	615,264			$	666,085
Accrued expenses			147,226				189,415
Current portion of long-term debt			1,190				19,332
Lines of credit and other short-term borrowings			13				—
Total current liabilities			763,693				874,832
Long-term liabilities:
Lines of credit, long-term			1,502				208,399
Long-term debt			182,778				233,122
Other long-term liabilities			53,882				54,425
Total long-term liabilities			238,162				495,946
Total liabilities			1,001,855				1,370,778
COMMITMENTS AND CONTINGENCIES
Minority interest			326				818
Shareholders’ equity:
Preferred stock, $0.01 par value: 1,000 shares authorized; no shares issued or outstanding			—				—
Common stock, $0.01 par value: 100,000 shares authorized; 88,702 issued in 2008 and 88,418 issued in 2007			887				884
Additional paid-in-capital			623,721				584,806
Treasury stock, at cost, 7,063 shares in 2008 and 6,930 shares in 2007			(59,983	)			(58,695	)
Retained earnings			33,389				29,467
Accumulated other comprehensive income			25,626				44,303
Total shareholders’ equity			623,640				600,765
Total liabilities and shareholders’ equity		$	1,625,821			$	1,972,361

See accompanying notes

Brightpoint, Inc.
Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)

		Nine months ended
		September 30,
		2008				2007
Operating activities
Net income		$	3,923			$	32,500
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			28,249				14,658
Non-cash compensation			4,991				4,485
Restructuring charge			7,483				166
Change in deferred taxes			(13,910	)			(18,132	)
Minority interest			366				—
Other non-cash			(910	)			2,354
			30,192				36,031
Changes in operating assets and liabilities, net of effects from acquisitions and divestitures:
Accounts receivable			197,999				(10,841	)
Inventories			160,193				203,537
Other operating assets			(7,935	)			(4,312	)
Accounts payable and accrued expenses			(67,563	)			(124,864	)
Net cash provided by operating activities			312,886				99,551
Investing activities
Capital expenditures			(16,064	)			(16,172	)
Acquisitions, net of cash acquired			(5,878	)			(69,141	)
Decrease (increase) in other assets			768				(5,391	)
Net cash used in investing activities			(21,174	)			(90,704	)
Financing Activities
Net (repayments on) proceeds from lines of credit			(213,843	)			37,832
Repayments on debt assumed from Dangaard Telecom			—				(284,557	)
Borrowings (repayments) on Global Term Loans			(67,076	)			248,585
Deferred financing costs paid			(212	)			(4,433	)
Purchase of treasury stock			(1,288	)			(400	)
Excess tax benefit from equity based compensation			118				774
Proceeds from common stock issuances under employee stock option plans			39				1,903
Net cash used in financing activities			(282,262	)			(296	)
Effect of exchange rate changes on cash and cash equivalents			(10,410	)			2,869
Net (decrease) increase in cash and cash equivalents			(960	)			11,420
Cash and cash equivalents at beginning of period			102,160				54,331
Cash and cash equivalents at end of period		$	101,200			$	65,751

See accompanying notes

Brightpoint, Inc.
Notes to Consolidated Financial Statements
(Unaudited)

1. Basis of Presentation

General

The accompanying unaudited Consolidated Financial Statements have been prepared in conformity with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and footnotes necessary for fair presentation of financial position, results of operations and cash flows in conformity with U.S. generally accepted accounting principles. Operating results from interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole. The Company is subject to seasonal patterns that generally affect the wireless device industry. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates, but management does not believe such differences will materially affect Brightpoint, Inc.’s financial position or results of operations. The Consolidated Financial Statements reflect all adjustments considered, in the opinion of management, necessary to fairly present the results for the periods. Such adjustments are of a normal recurring nature.

For further information, including the Company’s significant accounting policies, refer to the audited Consolidated Financial Statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007. As used herein, the terms “Brightpoint”, “Company”, “we”, “our” and “us” mean Brightpoint, Inc. and its consolidated subsidiaries.

Earnings Per Share

Basic earnings per share is based on the weighted average number of common shares outstanding during each period, and diluted earnings per share is based on the weighted average number of common shares and dilutive common share equivalents outstanding during each period. The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations (in thousands, except per share data):

		Three Months Ended								Nine months ended,
		September 30,								September 30,
		2008				2007				2008				2007
Income from continuing operations		$	6,027			$	13,020			$	10,941			$	32,336
Discontinued operations, net of income taxes			(548	)			(58	)			(7,018	)			164
Net income		$	5,479			$	12,962			$	3,923			$	32,500
Earnings per share — basic:
Income from continuing operations		$	0.08			$	0.19			$	0.14			$	0.57
Discontinued operations, net of income taxes			(0.01	)			—				(0.09	)			—
Net income		$	0.07			$	0.19			$	0.05			$	0.57
Earnings per share — diluted:
Income from continuing operations		$	0.07			$	0.18			$	0.13			$	0.56
Discontinued operations, net of income taxes			(0.01	)			—				(0.09	)			—
Net income		$	0.06			$	0.18			$	0.04			$	0.56
Weighted average shares outstanding for basic earnings per share			78,549				70,076				77,968				56,488
Net effect of dilutive stock options, restricted stock units, shares held in escrow and restricted stock based on the treasury stock method using average market price			2,701				1,049				3,577				1,063
Weighted average shares outstanding for diulted earnings per share			81,250				71,125				81,545				57,551

Brightpoint, Inc.
Notes to Consolidated Financial Statements

Recently Issued Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) 157, Fair Value Measurements. The provisions of SFAS 157 were effective for the Company on January 1, 2008 for financial assets and liabilities and are effective for the Company on January 1, 2009 for non-financial assets and liabilities. The adoption of SFAS 157 did not have a material impact on the Company’s financial statements. The Company does not expect the adoption of SFAS 157 for non-financial assets and liabilities to have a material impact on the Company’s financial statements. SFAS 157 defines fair value, provides guidance for measuring fair value and requires certain disclosures. SFAS No. 157 discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The statement utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

	•		Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
	•		Level 2: Inputs, other than quoted prices, that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
	•		Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.

The following table summarizes the bases used to measure certain financial assets and financial liabilities at fair value on a recurring basis in the balance sheet (in thousands):

						Quoted prices				Significant
		Balance at				in active				other
		September 30,				markets				observable
		2008				(Level 1)				inputs (Level 2)
Financial instruments classified as assets
Forward foreign currency contracts		$	853			$	—			$	853
Financial instruments classified as liabilities
Interest rate swaps		$	1,987			$	—			$	1,987
Forward foreign currency contracts			274				—				274

In December 2007, FASB issued SFAS 141 (R). This statement amends SFAS 141, Business Combinations, and provides revised guidance for recognizing and measuring identifiable assets and goodwill acquired, liabilities assumed, and any noncontrolling interest in the acquiree. It also provides disclosure requirements to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The provisions of SFAS 141(R) are effective for the Company on January 1, 2009. The Company does not currently expect the adoption of SFAS 141(R) to have a material impact on its financial statements since the provisions of SFAS 141 (R) are applied prospectively.

In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB 51. SFAS 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It also amends certain of ARB 51’s consolidation procedures for consistency with the requirements of SFAS 141(R). The provisions of SFAS 160 are effective for the Company on January 1, 2009. The Company does not expect the adoption of SFAS 160 to have a material impact on its financial statements.

In March 2008, the FASB issued SFAS 161, Disclosures about Derivative Instruments and Hedging Activities. This Statement enhances disclosures about derivative and hedging activities. The provisions of SFAS 161 are effective

Brightpoint, Inc.
Notes to Consolidated Financial Statements

for the Company on January 1, 2009. The Company does not expect the adoption of SFAS 161 to have a material impact on its financial statements.

Other Comprehensive Income (Loss)

Comprehensive income (loss) is comprised of net income, unrealized gains and losses on marketable securities, unrealized gains or losses on derivative instruments, and gains or losses resulting from currency translations of foreign investments. The details of comprehensive income (loss) for the three and nine months ended September 30, 2008 and 2007 are as follows (in thousands):

		Three Months Ended								Nine Months Ended,
		September 30,								September 30,
		2008				2007				2008				2007
Net income		$	5,479			$	12,962			$	3,923			$	32,500
Unrealized gain (loss) on derivative instruments			(124	)			—				397				—
Unrealized gain (loss) on marketable securities:
Net gain (loss) arising during the period			—				149				(2,087	)			149
Reclassification adjustment for losses included in net income			—				—				928				—
Foreign currency translation			(58,252	)			18,673				(17,915	)			25,326
Comprehensive (loss) income		$	(52,897	)		$	31,784			$	(14,754	)		$	57,975

2. Acquisitions

On April 28, 2008, the Company acquired the assets of Hugh Symons Group Ltd.’s wireless distribution business for $0.6 million (0.3 million pounds sterling) and the value of inventory at the date of closing. In addition, the Company agreed to contingent cash earn out payments based upon certain operating performance measures which may be payable on the first, second and third anniversary of closing. The total earn out payments shall in no event exceed 3.6 million pounds sterling (approximately $6.5 million as of September 30, 2008).

On July 31, 2007 the Company completed its acquisition of Dangaard Telecom A/S (Dangaard Telecom). The purchase price for the Dangaard Telecom acquisition was $344.9 million (including direct acquisition costs and the fair value of shares of common stock that are held in escrow). The fair value of the Company’s common stock was measured in accordance with EITF 99-12, Determination of the Measurement Date for the Market Price of Acquirer Securities Issued in a Purchase Business Combination. Total equity consideration was estimated using a stock price of $11.25 per share, which represents the average closing stock price beginning two trading days before and ending two trading days after February 20, 2007, the date of the public announcement of the definitive purchase agreement. The allocation of the purchase price was based upon the fair value of assets acquired and liabilities assumed. Results of operations related to this acquisition are included in the Company’s Consolidated Statements of Operations beginning on August 1, 2007.

The following sets forth unaudited pro forma financial information in accordance with U.S. generally accepted accounting principles assuming the Dangaard Telecom acquisition took place at the beginning of the periods presented. The unaudited pro forma results include certain adjustments as described in the notes below (in thousands, except per share data):

Brightpoint, Inc.
Notes to Consolidated Financial Statements

Three months ended :
(amounts in 000s)

		Dangaard
September 30, 2007		Telecom				Brightpoint				Adjustments				Note				Consolidated
Revenue		$	196,530			$	1,160,682			$	(26,393	)			(1	)		$	1,330,819
Income (loss) from continuing operations			(7,170	)			13,020				310				(2	)			6,160
Net (loss) income			(7,170	)			12,962				310								6,102
Weighted average shares outstanding — diluted							71,125				9,783				(3	)			80,908
Income from continuing operations — diluted						$	0.18											$	0.08

Nine months ended:
(amounts in 000s)

		Dangaard
September 30, 2007		Telecom				Brightpoint				Adjustments				Note				Consolidated
Revenue		$	1,268,373			$	2,629,436			$	(155,007	)			(1	)		$	3,742,802
Income (loss) from continuing operations			(8,722	)			32,336				(5,891	)			(2	)			17,723
Net (loss) income			(8,722	)			32,500				(5,891	)							17,887
Weighted average shares outstanding — diluted							57,551				23,187				(3	)			80,738
Income from continuing operations — diluted						$	0.56											$	0.22

Pro forma adjustments:

	(1)		To reclassify the cost of revenue that was historically presented by Dangaard Telecom on a gross basis to a net basis to conform to EITF 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent and Brightpoint accounting policy.
	(2)		To record the following:

	•		amortization of the intangible assets recorded as a result of the acquisition, and
	•		income tax provision for the effect of the pro forma adjustments above based on statutory tax rates.

(3)

To adjust the weighted average number of shares outstanding used to determine diluted pro forma earnings per share assuming the 30,000,000 shares of the Company’s unregistered Common Stock used to acquire Dangaard Telecom were issued at the beginning of the period presented.

As discussed further in Note 3, on June 30, 2008, the Company formally announced a plan to realign its European operations. Adjustments to the purchase price allocation under the plan resulted in additional liabilities of $16.0 million in 2008.

3. Restructuring

On June 30, 2008, the Company formally announced its plan to realign its European operations as a result of the acquisition of Dangaard Telecom. The Company incurred restructuring costs of $14.6 million in the third quarter of 2008 related to these initiatives. Approximately $13.7 million of the total restructuring costs were directly related to the Dangaard Telecom acquisition and thus resulted in additional goodwill recorded in purchase accounting. These additional liabilities that impact purchase accounting have been recognized as liabilities assumed in the business combination and included in the allocation of the acquisition costs in accordance with EITF 95-3, Recognition of Liabilities in Connection with a Purchased Business Combination. The remaining $0.9 million of restructuring costs incurred during the third quarter of 2008 were not directly related to the Dangaard Telecom acquisition and thus are included as “restructuring charge” in the Consolidated Statement of Operations for the three months ended September 30, 2008. All of these restructuring and integration costs are expected to result in future cash expenditures.

Brightpoint, Inc.
Notes to Consolidated Financial Statements

Reserve activity for the restructuring for the nine months ended September 30, 2008 is as follows (in thousands):

						Lease				Asset
		Employee				Termination				Impairment
		Terminations				Costs				Charges				Other				Total
Balance at December 31, 2007		$	3,336			$	728			$	—			$	—			$	4,064
Restructuring charge			1,584				3,732				2,167				—				7,483
Dangaard Telecom goodwill adjustment			4,373				10,630				733				297				16,033
Foreign currency translation			1,452				(1,177	)			—				(25	)			250
Total activity:			10,745				13,913				2,900				272				27,830
Less:
Cash usage			(6,838	)			(589	)			(733	)			—				(8,160	)
Non-cash usage			—				(164	)			(2,167	)			—				(2,331	)
Balance at September 30, 2008		$	3,907			$	13,160			$	—			$	272			$	17,339

Restructuring charge was $7.5 million for the nine months ended September 30, 2008. The restructuring charge consists of the following:

	•		A $1.8 million charge in connection with the sale of certain assets in Colombia.
	•		A $1.1 million charge to write-off IT projects that were abandoned after the acquisition of Dangaard Telecom.
	•		A $3.6 million charge associated with the exit of our redundant warehouse and office facility in Germany
	•		$1.0 million of other lease termination costs and severance costs associated with previously announced realignment of our European operations

Adjustments to goodwill acquired in the purchase of Dangaard Telecom related to exiting activities of the acquired operations include $16.0 million associated primarily with lease abandonment costs and the severance of certain employees under the previously announced reorganization plan of our Europe operations. During the third quarter of 2008, $13.6 million of these adjustments were recorded.

In October 2008 the Company reached an agreement with the landlord of its European headquarters to terminate the building’s lease. The Company will record an additional charge of approximately $3.0 million to $3.5 million related to the termination of this lease in its results of operations for the fourth quarter of 2008.

4. Discontinued Operations

The consolidated statements of operations reflect the reclassification of the results of operations of the Company’s locally branded PC notebook business in Slovakia to discontinued operations for all periods presented in accordance with U.S. generally accepted accounting principles. Details of discontinued operations for the three and nine months ended September 30, 2008 and 2007 are as follows (in thousands):

		Three Months Ended								Nine months ended,
		September 30,								September 30,
		2008				2007				2008				2007
Revenue		$	11,065			$	17,304			$	16,646			$	41,174
Income (loss) from discontinued operations before income taxes		$	(635	)		$	(65	)		$	(11,182	)		$	203
Income tax expense (benefit)			(97	)			(8	)			(4,169	)			50
Gain (loss) from discontinued operations		$	(538	)		$	(57	)		$	(7,013	)		$	153

5. Borrowings

At September 30, 2008, the Company and its subsidiaries were in compliance with the covenants in each of its material credit agreements. Interest expense includes interest on outstanding debt, charges for accounts receivable factoring programs, fees paid for unused capacity on credit lines and amortization of deferred financing fees.

Brightpoint, Inc.
Notes to Consolidated Financial Statements

The table below summarizes the borrowings that were available to the Company as of September 30, 2008 (in thousands):

										Letters of Credit &				Net
		Gross Availability				Outstanding				Guarantees				Availability
Global Term Loans		$	183,968			$	183,968			$	—			$	—
Global Credit Facility			300,000				1,502				338				298,160
Other			56,639				13				—				56,626
Total		$	540,607			$	185,483			$	338			$	354,786

Average daily debt outstanding was approximately $301.0 million in the third quarter of 2008. Additional details on the above available borrowings are discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

6. Guarantees

In accordance with FIN 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, guarantees are recorded at fair value and disclosed, even when the likelihood of making any payments under such guarantees is remote.

The Company has issued certain guarantees on behalf of its subsidiaries with regard to lines of credit. Although the guarantees relating to lines of credit are excluded from the scope of FIN 45, the nature of these guarantees and the amounts outstanding are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

The Company has entered into indemnification agreements with its officers and directors, to the extent permitted by law, pursuant to which the Company has agreed to reimburse its officers and directors for legal expenses in the event of litigation and regulatory matters. The terms of these indemnification agreements provide for no limitation to the maximum potential future payments. The Company has a directors and officers insurance policy that may, in certain instances, mitigate the potential liability and payments.

Late in 2004, the Company entered into a non-exclusive agreement to distribute wireless devices in Europe for a certain supplier. Subject to this agreement, the Company provides warranty repair services on certain devices it distributes for this supplier. The warranty period for these devices ranges from 12 to 24 months, and the Company is liable for providing warranty repair services unless failure rates exceed a certain threshold. The Company records estimated expenses related to future warranty repair at the time the devices are sold. Estimates for warranty costs are calculated primarily based on management’s assumptions related to cost of repairs and anticipated failure rates. During 2006, this supplier re-branded its devices and provides aftermarket support services including warranty repairs. The Company does not provide warranty repair services on the re-branded devices on behalf of the supplier; however, the Company does provide aftermarket support services including warranty repairs for wireless devices sold by one of the Company’s European operations to one customer. Sales of devices for which the Company provides warranty repair services have decreased significantly since this supplier re-branded its devices. The Company assumed an obligation through the acquisition of Dangaard Telecom that is related to a similar program. Warranty accruals are adjusted from time to time when the Company’s actual warranty claim experience differs from its estimates. A summary of the changes in the product warranty accrual is as follows (in thousands):

		Nine Months Ended
		September 30,
		2008				2007
January 1		$	3,944			$	3,063
Warranty liability assumed from Dangaard Telecom			—				3,308
Provision for product warranties			3,045				3,331
Settlements during the period			(4,060	)			(5,514	)
September 30		$	2,928			$	4,188

Brightpoint, Inc.
Notes to Consolidated Financial Statements

7. Operating Segments

The Company has operations centers and/or sales offices in various countries including Australia, Austria, Belgium, Colombia, Denmark, Finland, France, Germany, India, Italy, the Netherlands, New Zealand, Norway, Poland, Portugal, Russia, Singapore, Slovakia, South Africa, Spain, Sweden, Switzerland, Turkey, the United Arab Emirates, the United Kingdom and the United States. All of the Company’s operating entities generate revenue from the distribution of wireless devices and accessories and/or the provision of logistic services. During the third quarter of 2008, the Company reclassified its operating entities in South Africa and the United Arab Emirates into the Europe reporting segment from the Asia-Pacific reporting segment. The Europe reporting segment has been renamed the Europe Middle East and Africa reporting segment (EMEA). In the first quarter of 2008, the Company reclassified the financial information related to the global IT support cost center from the Asia-Pacific region to the Corporate and Reconciling section of the segment information presented below. Segment information as of and for the three and nine months ended September 30, 2007 has been reclassified to conform to the 2008 presentation. Segment information as of and for the three and nine months ended September 30, 2007 has been reclassified to conform to the 2008 presentation. The Company identifies its reportable segments based on management responsibility of its three geographic divisions: the Americas, Asia-Pacific, and EMEA. The Company’s operating segments have been aggregated into these three geographic reporting segments.

The Company evaluates the performance of and allocates resources to these segments based on operating income from continuing operations (excluding corporate selling, general and administrative expenses and other unallocated expenses). A summary of the Company’s operations by segment is presented below (in thousands) for the three and nine months ended September 30, 2008 and 2007:

														Corporate and
		Americas				Asia-Pacific				EMEA				Reconciling Items				Total
Three Months Ended September 30, 2008:
Distribution revenue		$	169,345			$	320,807			$	608,648			$	—			$	1,098,800
Logistic services revenue			45,615				13,425				52,129				—				111,169
Total revenue from external customers		$	214,960			$	334,232			$	660,777			$	—			$	1,209,969
Operating income from continuing operations		$	12,553			$	6,851			$	6,354			$	(7,833	)		$	17,925
Depreciation and amortization			2,302				471				5,894				247				8,914
Capital expenditures			1,882				842				1,854				784				5,362
Three Months Ended September 30, 2007:
Distribution revenue		$	256,013			$	379,360			$	432,418			$	—			$	1,067,791
Logistic services revenue			51,083				9,259				32,549				—				92,891
Total revenue from external customers		$	307,096			$	388,619			$	464,967			$	—			$	1,160,682
Operating income from continuing operations		$	13,036			$	8,573			$	7,632			$	(6,828	)		$	22,413
Depreciation and amortization			2,552				554				4,063				244				7,413
Capital expenditures			1,026				131				5,612				86				6,855
Nine Months Ended September 30, 2008:
Distribution revenue		$	542,007			$	941,477			$	1,809,219			$	—			$	3,292,703
Logistic services revenue			136,420				35,811				149,463				—				321,694
Total revenue from external customers		$	678,427			$	977,288			$	1,958,682			$	—			$	3,614,397
Operating income from continuing operations		$	29,986			$	20,734			$	12,327			$	(24,846	)		$	38,201
Depreciation and amortization			7,490				1,704				18,268				787				28,249
Capital expenditures			3,591				885				9,990				1,597				16,063
Nine Months Ended September 30, 2007:
Distribution revenue		$	662,882			$	1,073,379			$	641,679			$	—			$	2,377,940
Logistic services revenue			142,636				24,855				84,005				—				251,496
Total revenue from external customers		$	805,518			$	1,098,234			$	725,684			$	—			$	2,629,436
Operating income from continuing operations		$	26,981			$	20,019			$	7,844			$	(20,316	)		$	34,528
Depreciation and amortization			7,684				1,667				4,591				716				14,658
Capital expenditures			8,814				1,771				5,200				387				16,172

Brightpoint, Inc.
Notes to Consolidated Financial Statements

Additional segment information is as follows (in thousands):

		September 30,				December 31,
		2008				2007
Total segment assets:
Americas		$	270,543			$	354,910
Asia-Pacific			208,330				218,953
EMEA			1,120,314				1,367,752
Corporate			26,634				30,746
		$	1,625,821			$	1,972,361

8. Legal Proceedings and Contingencies

LN Eurocom

On June 11, 2008 LN Eurocom (“LNE”) filed a lawsuit in the City Court of Frederiksberg, Denmark against Brightpoint Smartphone A/S and Brightpoint International A/S, each a wholly owned subsidiary of the Company (collectively, “Smartphone”). The lawsuit alleges that Smartphone breached a contract relating to call center services performed or to be performed by LNE. The total amount claimed is approximately 9 million DKK (approximately $1.6 million as of September 30, 2008). Smartphone disputes this claim and intends to defend this matter vigorously.

On July 31, 2007, we acquired Dangaard Telecom which had the following material claims and/or disputes:

German value-added tax authorities

There are two disputes pending with Finanzamt Flensburg, the German value-added tax, or VAT, authorities (the Finanzamt):

	1.		Dangaard Telecom’s subsidiary, Dangaard Telecom Denmark A/S, received an assessment from the Finanzamt claiming that local German VAT should be applied on sales made by Dangaard Telecom Denmark A/S to two specific German customers in 1997 and 1998. Finanzamt claimed approximately $2.9 million. The case is currently in abeyance waiting for a principal decision or settlement involving similar cases pending in Germany. Dangaard Telecom Denmark A/S continues to dispute this claim and intends to defend this matter vigorously. The former shareholders of Dangaard Telecom agreed to indemnify Dangaard Holding with respect to this dispute when Dangaard Holding acquired Dangaard Telecom, and Dangaard Holding has agreed in the purchase agreement to transfer and assign these indemnification rights to us (or enforce them on our behalf if such transfer or assignment is not permitted).
	2.		Dangaard Telecom’s subsidiary, Dangaard Telecom Denmark A/S, received a notice from the Finanzamt claiming that local German VAT should be applied on all sales made by Dangaard Telecom Denmark A/S to German customers during the years 1999 to 2004. Finanzamt claimed approximately $8.1 million. The case is currently in abeyance waiting for a principal decision or settlement involving similar cases pending in Germany. Dangaard Telecom Denmark A/S continues to dispute this claim and intends to defend this matter vigorously. The former shareholders of Dangaard Telecom agreed to indemnify Dangaard Holding with respect to 80% of this claim when Dangaard Holding acquired Dangaard Telecom, and Dangaard Holding has agreed in the purchase agreement to transfer and assign these indemnification rights to us (or enforce them on our behalf if such transfer or assignment is not permitted).

Fleggaard group of companies

The former headquarters of Dangaard Telecom was in premises rented from a member of the Fleggaard group of companies, which was a former shareholder of Dangaard Telecom. A fire in March 2006 caused by another tenant in the building destroyed the headquarters and Dangaard Telecom had to leave the building while awaiting renovation of its space. Because of Fleggaard’s failure to renovate the space, Dangaard Telecom terminated the lease. Fleggaard has disputed the lease termination and has claimed $1.4 million in damages. Dangaard Telecom continues to dispute this claim and intends to defend this matter vigorously.

Brightpoint, Inc.
Notes to Consolidated Financial Statements

Norwegian tax authorities

Dangaard Telecom's subsidiary, Dangaard Telecom Norway AS Group, received notice from the Norwegian tax authorities regarding tax claims in connection with certain capital gains. The Norwegian tax authorities have claimed $2.7 million. Dangaard Telecom Norway AS Group has disputed this claim; however, The Norwegian Tax Authorities ruled against Dangaard Telecom Norway AS in April 2008. The case is currently pending before the Tax Appeal Board. The former shareholders of Dangaard Telecom agreed to indemnify Dangaard Holding with respect to 80% of this claim when Dangaard Holding acquired Dangaard Telecom, and Dangaard Holding agreed in the purchase agreement with the Company to transfer and assign these indemnification rights to the Company (or enforce them on our behalf if such transfer or assignment is not permitted).

German tax authorities

Dangaard Telecom’s subsidiary, Dangaard Telecom Germany Holding GmbH, received notice from the German tax authorities regarding tax claims in connection with the deductibility of certain stock adjustments and various fees during the period 1998 to 2002. Dangaard Telecom Germany Holding GmbH agreed to pay part of the claim, and the current amount in dispute is $1.8 million. Dangaard Telecom Germany Holding GmbH continues to dispute this claim and intends to defend this matter vigorously. The former shareholders of Dangaard Telecom are obliged to indemnify Dangaard Holding with respect to any such tax claims. Due to the claim’s limited size, however, it will be below an agreed upon threshold, therefore the indemnification would not be activated by this claim if no other claims for indemnification have been or are asserted.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

OVERVIEW AND RECENT DEVELOPMENTS

This discussion and analysis should be read in conjunction with the accompanying Consolidated Financial Statements and related notes. Our discussion and analysis of the financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in conformity with U.S. generally accepted accounting principles. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent assets and liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-going basis we review our estimates and assumptions. Our estimates were based on our historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from those estimates but we do not believe such differences will materially affect our financial position or results of operations. Our critical accounting estimates, the estimates we believe are most important to the presentation of our financial statements and require the most difficult, subjective and complex judgments are outlined in our Annual Report on Form 10-K for the year ended December 31, 2007, and have not changed significantly. Certain statements made in this report may contain forward-looking statements. For a description of risks and uncertainties relating to such forward-looking statements, see the cautionary statements contained in Exhibit 99.1 to this report and our Annual Report on Form 10-K for the year ended December 31, 2007.

Brightpoint, Inc. is a global leader in the distribution of wireless devices and accessories and provision of customized logistic services to the wireless industry. We have operations centers and/or sales offices in various countries including Australia, Austria, Belgium, Colombia, Denmark, Finland, France, Germany, India, Italy, the Netherlands, New Zealand, Norway, Poland, Portugal, Russia, Singapore, Slovakia, South Africa, Spain, Sweden, Switzerland, Turkey, the United Arab Emirates, the United Kingdom and the United States. We provide customized integrated logistic services including procurement, inventory management, software loading, kitting and customized packaging, fulfillment, credit services and receivables management, call center and activation services, website hosting, e-fulfillment solutions and other services within the global wireless industry. Our customers include mobile network operators, mobile virtual network operators (MVNOs), resellers, retailers and wireless equipment manufacturers. We distribute wireless communication devices and we provide value-added distribution and logistic services for wireless products manufactured by companies such as High Tech Computer Corp., Kyocera, LG Electronics, Motorola, Nokia, Samsung, Siemens, Sony Ericsson and UTStarcom.

On July 31, 2007 we completed our acquisition of Dangaard Telecom A/S (Dangaard Telecom). Results of operations related to this acquisition are included in our Consolidated Statements of Operations beginning on August 1, 2007.

During the third quarter of 2008, we reclassified our operating entities in South Africa and the United Arab Emirates into the Europe reporting segment from the Asia-Pacific reporting segment. The Europe reporting segment has been renamed the Europe, Middle East and Africa reporting segment (EMEA). In the first quarter of 2008, we reclassified the financial information related to the global IT support cost center from the Asia-Pacific region to the Corporate section. Segment information as of and for the three and nine months ended September 30, 2007 has been reclassified to conform to the 2008 presentation.

The consolidated statements of operations reflect the reclassification of the results of operations of our locally branded PC notebook business in Slovakia to discontinued operations for all periods presented in accordance with U.S. generally accepted accounting principles. This business was previously reported in our EMEA reporting segment.

RESULTS OF OPERATIONS

Revenue and wireless devices handled by division and service line

		Three Months Ended September 30,
						% of								% of
		2008				Total				2007				Total				Change
		(Amounts in 000s)
Distribution revenue
Americas		$	169,345				15	%		$	256,013				24	%			(34	%)
Asia-Pacific			320,807				29	%			379,360				36	%			(15	%)
EMEA			608,648				56	%			432,418				40	%			41	%
Total		$	1,098,800				100	%		$	1,067,791				100	%			3	%
Logistic services revenue
Americas		$	45,615				41	%		$	51,083				55	%			(11	%)
Asia-Pacific			13,425				12	%			9,259				10	%			45	%
EMEA			52,129				47	%			32,549				35	%			60	%
Total		$	111,169				100	%		$	92,891				100	%			20	%
Total revenue
Americas		$	214,960				18	%		$	307,096				26	%			(30	%)
Asia-Pacific			334,232				27	%			388,619				34	%			(14	%)
EMEA			660,777				55	%			464,967				40	%			42	%
Total		$	1,209,969				100	%		$	1,160,682				100	%			4	%

		Three Months Ended September 30,
						% of								% of
		2008				Total				2007				Total				Change
		(Amounts in 000s)
Wireless devices sold through distribution
Americas			1,360				21	%			1,966				27	%			(31	%)
Asia-Pacific			2,810				43	%			3,670				49	%			(23	%)
EMEA			2,348				36	%			1,780				24	%			32	%
Total			6,518				100	%			7,416				100	%			(12	%)
Wireless devices handled through logistic services
Americas			12,051				87	%			13,310				91	%			(9	%)
Asia-Pacific			495				4	%			405				3	%			22	%
EMEA			1,284				9	%			898				6	%			43	%
Total			13,830				100	%			14,613				100	%			(5	%)
Total wireless devices handled
Americas			13,411				66	%			15,276				70	%			(12	%)
Asia-Pacific			3,305				16	%			4,075				18	%			(19	%)
EMEA			3,632				18	%			2,678				12	%			36	%
Total			20,348				100	%			22,029				100	%			(8	%)

		Nine Months Ended September 30,
						% of								% of
		2008				Total				2007				Total				Change
		(Amounts in 000s)
Distribution revenue
Americas		$	542,007				16	%		$	662,882				28	%			(18	%)
Asia-Pacific			941,477				29	%			1,073,379				45	%			(12	%)
EMEA			1,809,219				55	%			641,679				27	%			182	%
Total		$	3,292,703				100	%		$	2,377,940				100	%			38	%
Logistic services revenue
Americas		$	136,420				42	%		$	142,636				57	%			(4	%)
Asia-Pacific			35,811				11	%			24,855				10	%			44	%
EMEA			149,463				47	%			84,005				33	%			78	%
Total		$	321,694				100	%		$	251,496				100	%			28	%
Total revenue
Americas		$	678,427				19	%		$	805,518				31	%			(16	%)
Asia-Pacific			977,288				27	%			1,098,234				42	%			(11	%)
EMEA			1,958,682				54	%			725,684				27	%			170	%
Total		$	3,614,397				100	%		$	2,629,436				100	%			37	%

		Nine Months Ended September 30,
						% of								% of
		2008				Total				2007				Total				Change
		(Amounts in 000s)
Wireless devices sold through distribution
Americas			4,273				22	%			4,958				29	%			(14	%)
Asia-Pacific			8,295				43	%			9,306				55	%			(11	%)
EMEA			6,661				35	%			2,552				16	%			161	%
Total			19,229				100	%			16,816				100	%			14	%
Wireless devices handled through logistic services
Americas			37,840				89	%			36,794				94	%			3	%
Asia-Pacific			1,378				3	%			1,139				3	%			21	%
EMEA			3,580				8	%			1,236				3	%			190	%
Total			42,798				100	%			39,169				100	%			9	%
Total wireless devices handled
Americas			42,113				68	%			41,752				75	%			1	%
Asia-Pacific			9,673				16	%			10,445				19	%			(7	%)
EMEA			10,241				16	%			3,788				6	%			170	%
Total			62,027				100	%			55,985				100	%			11	%