UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005

Brightpoint, Inc.

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

501 AIRTECH PARKWAY, PLAINFIELD, INDIANA 46168
(Address of principal executive offices including zip code)

Common Stock, $.01 Par value
Preferred Share Purchase Rights

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) or the Act. Yes o No þ

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 þ No o

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. o

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

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o

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

The aggregate market value of the Registrant’s Common Stock held by non-affiliates as of June 30, 2005, which was the last business day of the registrant’s most recently completed second fiscal quarter was approximately $385,040,214.

The number of shares of Common Stock outstanding as of February 27, 2006: 41,617,675

DOCUMENTS INCORPORATED BY REFERENCE:

     Portions of the registrant’s proxy statement in connection with its annual meeting of shareholders to be held in 2006, are incorporated by reference in Items 10, 11, 12, 13 and 14 of Part III of this Form 10-K.

 

 

PART I

Item 1. Business.

General

Brightpoint, Inc. is a global leader in the distribution of wireless devices and accessories and provision of customized logistic services to the wireless industry including wireless network operators (also referred to as “mobile operators”) and Mobile Virtual Network Operators (“MVNOs”) with operations centers and/or sales offices in various countries including Australia, Colombia, Finland, Germany, India, New Zealand, Norway, the Philippines, the Slovak Republic, Sweden, United Arab Emirates and the United States. We provide 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 operators, MVNOs, resellers, retailers and wireless equipment manufacturers. We provide distribution and logistic services for wireless products manufactured by companies such as Audiovox, High Tech Computer Corp., Kyocera, LG Electronics, Motorola, Nokia, Samsung, Siemens and Sony Ericsson.

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. In June 2004, we reincorporated under the laws of the State of Indiana under the name of Brightpoint, Inc.

Our website is www.brightpoint.com. We make available, free of charge, at this website our Code of Business Conduct, annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the United States Securities and Exchange Commission (“SEC”). The information on the website listed above, is not and should not be considered part of this annual report on Form 10-K and is not incorporated by reference in this document.

In addition, we will provide, at no cost, paper or electronic copies of our reports and other filings made with the SEC. Requests for such filings should be directed to Investor Relations, Brightpoint, Inc., 501 Airtech Parkway, Plainfield, Indiana 46168, telephone number: (877) 447-2355.

Unless the context otherwise requires, the terms “Brightpoint,” “Company,” “we,” “our” and “us” means Brightpoint, Inc. and its consolidated subsidiaries.

Financial Overview and Recent Developments

Financial Overview. In 2005, our wireless devices handled grew by 57% to 42.1 million devices from 26.8 million devices in 2004, which was principally driven by an 81% growth rate of wireless devices handled through our fee-based logistic services. Revenue grew by 21% to $2.1 billion in 2005 from $1.8 billion in 2004. Gross profit was up 26% and operating income from continuing operations was $44.4 million, up 25% from 2004.

Income from continuing operations was $31.9 million or $0.77 per diluted share, which represented a 34% increase from 2004. Net income decreased by 24% to $10.4 million, or $0.25 per diluted share, in 2005 from $13.7 million, or $0.32 per diluted share, in 2004 due primarily to a $13.8 million non-cash impairment charge to the value of goodwill and other intangibles related to our discontinued operations in France. Return on invested capital from operations was 22%.

Cash and cash equivalents (unrestricted) were $106.1 million at December 31, 2005, an increase of 47% from $72.1 million at December 31, 2004. The increase in cash and cash equivalents (unrestricted) was primarily due to cash provided by operating activities of $69.0 million, partially offset by the repurchase of $15.9 million of the Company’s Common Stock, $12.6 million capital expenditures, and $8.4 million decrease in cash from changes in foreign exchange rates.

Launch of Advanced Wireless Services (“AWS”). AWS was created in the first quarter of 2005 to deliver bundled wireless products and services (such as Windows Mobile-based smart phones and pocket PC’s, activation services, bundled software applications, VoIP products/services, wireless LAN infrastructure and services, and mobile content) to our existing sales channels (mobile operators and their dealers), as well as to new channels such as value-added resellers and system integrators

targeting the enterprise and small/medium business markets. To date, our AWS business has already announced agreements with Belkin, ECCB, Intel, Microsoft, Motorola, RTX, Skype and Vonage.

Share repurchase plan. On November 11, 2005, we announced that our Board of Directors had approved an extension and increase of the $20.0 million share repurchase plan that was previously announced on November 30, 2004. The Board of Directors approved an increase of $18.0 million, allowing us to repurchase up to a total of $38.0 million of the Company’s Common Stock. The share repurchase plan that was previously scheduled to expire on December 31, 2005 has been extended to expire on December 31, 2007. As of December 31, 2005, we have repurchased a total of 1,949,588 shares under this plan at a weighted average price of $10.25 totaling $19.9 million, and approximately $18.1 million may be used to purchase additional shares under this plan.

Sale of Brightpoint France SARL. On December 16, 2005, we sold all the equity securities of Brightpoint France SARL (Brightpoint France) to an entity formed by the former managing director of Brightpoint France for an aggregate purchase price of approximately $1.6 million, of which approximately $0.1 million has been received and approximately $1.5 million is payable in annual installments on each of the first, second, and third anniversaries following the date of closing.

Purchase of Persequor Limited (Persequor). In February 2006, we purchased Persequor for approximately $1.0 million. Previously, Persequor had provided management services to Brightpoint India Limited (Brightpoint India) and Brightpoint Asia Limited pursuant to an October 31, 2003 agreement under which we sold 15% of our interest in Brightpoint India to Persequor in exchange for Persequor providing management services to Brightpoint India. The $1.0 million purchase of Persequor includes the 15% interest in Brightpoint India valued at approximately $0.2 million.

Global Wireless Industry

The global wireless industry’s primary purpose is to provide mobile voice and data connectivity to subscribers. To enable this capability for the subscriber, the global wireless industry is generally organized as follows:

	•		Mobile operators: build and operate wireless networks and provide voice and data access services to subscribers. Certain mobile operators resell voice and data access services, or airtime, from other mobile operators and do not directly build and operate their own wireless networks. These mobile operators are referred to as MVNOs.
	•		Infrastructure designers, manufacturers, builders, and operators: companies who operate in this segment provide mobile operators with technology, equipment, and cell sites to host and operate the networks.
	•		Components designers and manufacturers: design technology and components that are embedded within a wireless device. Components include semiconductor chip sets, displays, antennae and others.
	•		Content providers: develop mobile content for use with wireless devices and provide consumers with content such as ring tones, messaging, music, streaming video and television, games and other applications.
	•		Wireless device manufacturers: design, manufacture, and market the wireless devices, such as cellular phones, wireless personal digital assistants, smart-phones and pagers, which connect subscribers to a wireless network.
	•		Distributors, retailers and resellers: distributors provide logistic and distribution services to physically move wireless devices and related products from manufacturers or mobile operators closer to, or directly into, the hands of mobile subscribers; retailers, value-added resellers and system integrators provide subscribers and potential subscribers with an access point, either physical or on-line, to purchase a subscription and/or a wireless device.

Wireless voice and data services are available to consumers and businesses over regional, national and multi-national networks through mobile operators who utilize digital and analog technological standards, such as:

Generation		Technology Standards
1G Analog		AMPS
2G Digital		TDMA, CDMA, GSM, iDEN
2.5G Digital		GPRS, EDGE, CDMA 1xRTT
3G Digital		W-CDMA/UMTS, CDMA 1xEV-DO, HSDPA

Developments within the global wireless industry have allowed wireless subscribers to talk, send text messages, send and receive email, capture and transmit digital images and video recordings (multimedia messages), play games, browse the Internet and watch television using their wireless devices. Wireless devices and services are also being used for monitoring services, point-of-sale transaction processing, machine-to-machine communications, local area networks, location monitoring, sales force automation and customer relationship management.

From 2004 to 2005, the estimated number of worldwide wireless subscribers increased by approximately 300 million to over 2 billion. At the end of 2005, wireless penetration was estimated to be approximately 35% of the world’s population. During 2005, shipments of wireless devices in the global wireless industry increased by approximately 20% to 24% to an estimated 800 million wireless devices. Worldwide wireless device shipments are currently forecasted to be approximately 900 million to 1 billion devices in 2006. The percentage of replacement wireless device shipments has grown and replacement remains the single biggest factor driving global wireless device sell-in demand. 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 convergence of telecommunications, computing and media is further accelerating the replacement cycle and driving demand. The industry data contained in this paragraph and elsewhere in this subsection was based on Company and industry analyst estimates.

We believe the following major trends are taking place within the global wireless industry, although there are no assurances that we will benefit from these trends (refer to Item 1A, “Risk Factors”):

Replacement Devices. As overall subscriber penetration increases in many markets, growth in wireless device volume is more dependent on the replacement of wireless devices by existing subscribers. During 2005, shipments of replacement wireless devices in the global wireless industry increased from approximately 400 million devices in 2004 to an estimated 500 million replacement devices. In 2006, it is estimated that replacement device shipments will total approximately 650 million and represent approximately 67% of total wireless device shipments. We believe that the key drivers for the growth in volume of replacement devices shipped will be the migration to next generation systems and devices (2.5G and 3G) with streaming video and television, color displays, camera-enabled handsets including mega-pixel embedded cameras, MP3 and other audio capabilities, internet access and content such as ring tones, images and games. While the new features, enhanced functionalities and migration to next generation systems are anticipated to increase both replacement device shipments and total wireless device shipments, general economic conditions, consumer acceptance, component shortages, manufacturing difficulties, supply constraints and other factors could negatively impact anticipated wireless device shipments.

Increasing Subscribers. We expect the number of subscribers worldwide to continue to increase. Greater economic growth, increased wireless service availability or lower cost of wireless service compared to conventional fixed line systems and reductions in the cost of wireless devices may result in an increase in subscribers. In particular, markets or regions such as India, Latin America, China, Eastern Europe and Russia are expected to significantly increase their number of subscribers. Increasing deregulation, the availability of additional spectrum, increased competition and the emergence of new wireless technologies and related applications may further increase the number of subscribers in markets that have historically had high penetration rates. More mobile operators may offer services including seamless roaming, increased coverage, improved signal quality and greater data handling capabilities through increased bandwidth thus, attracting more subscribers to mobile operators which offer such services.

Next Generation Systems. In order to provide a compelling service offering for their current and prospective subscribers, mobile operators continue to expand and enhance their systems by migrating to next generation systems such as 2.5G and 3G. These next generation systems allow subscribers to send and receive email, capture and transmit digital images and video recordings (multimedia messages), play games, browse the Internet, watch television and take advantage of services such as monitoring services, point-of-sale transaction processing, machine-to-machine communications, location monitoring, sales force automation and customer relationship management. In order to realize the full advantage of these services and capabilities, many current subscribers will need to replace their wireless devices. As a result, the continued rollout of next generation systems is expected to be a key driver for replacement sales of wireless devices. However, the ability and timing of mobile operators to rollout these new services and manufacturers to provide devices which utilize these technologies may have a significant impact on consumer adoption and the rate of sale of replacement devices.

New or Expanding Industry Participants. With the opportunities presented by enhanced voice and data capabilities and an expanding market for wireless devices, many companies are entering or expanding their presence in the global wireless

industry. For example, many companies have announced their intentions to create MVNOs in order to leverage their content and brands in the wireless space. This follows the success that MVNO companies such as Virgin Mobile, Boost Mobile and TracFone have had in attracting new, incremental mobile subscribers in the United States. In addition, companies such as Microsoft (wireless device operating systems provider) and High Tech Computer Corp. (wireless device manufacturer) are bringing feature-rich operating systems or wireless devices to market in order to provide subscribers with capabilities that emulate their desktop computer. These companies and their products may heighten competition with existing manufacturers and provide consumers with more feature-rich products, broader selection and new market channels, which may result in increased wireless device shipments.

Pricing Factors and Average Selling Prices. It is estimated that in 2005 the global wireless industry’s average selling price for wireless devices declined by approximately 11%. A number of factors impacted the actual average selling prices including, but not limited to, shortening of the product life cycle, decreasing manufacturing costs due to higher volumes, manufacturing efficiencies, reductions in material costs, consumer demand, manufacturers’ promotional activities, product availability, fluctuations in currency exchange rates, product mix and device functionality. We anticipate that the global wireless industry’s average selling prices for wireless devices will continue to decline despite the fact that manufacturers have been adding enhanced features such as color screens and embedded cameras; however, no assurance can be given regarding the rate of such decline. Although the decline in average selling prices could offset growth in overall wireless shipments and have an adverse impact on both the industry’s and the Company’s distribution revenues, changes in average selling prices of wireless devices have little to no impact on our revenue from logistic services, which are fee based services.

Our Business

Our primary business is moving wireless devices closer to, or directly into, the hands of mobile subscribers. With over 42 million wireless devices handled in 2005, we are one of the largest dedicated distributors of wireless devices and providers of logistic services to mobile operators, MVNOs, resellers, retailers and wireless equipment manufacturers. Our business includes product distribution, logistic services, activation services and the sale of prepaid airtime. The majority of our business is conducted in the product distribution and logistic services business models. While our activation services and prepaid airtime businesses are important to us, they are less significant than our other businesses in terms of revenue and units handled.

Product Distribution. In our product distribution activities we purchase a wide variety of wireless voice and data products from leading manufacturers. We take ownership of the products and receive them in our facilities or have them drop-shipped directly to our customers. We actively market and sell these products to our worldwide customer base of approximately 20,000 customers. Product distribution revenue includes the value of the product sold and generates higher revenue per unit, as compared to our logistic services revenue, which does not include the value of the product. We frequently review and evaluate wireless voice and data products in determining the mix of products purchased for distribution and attempt to acquire distribution rights for those products, which we believe have the potential for enhanced financial return and significant market penetration. In 2005, 2004 and 2003, approximately 86%, 86% and 89% of our total revenue was derived from product distribution. In 2005, 2004 and 2003, approximately 28%, 38% and 52%, of our total wireless devices handled were sold through product distribution. In 2005, 2004 and 2003, our gross margin on product distribution revenue was 3.9%, 3.9% and 3.6%. Cost of revenue for product distribution includes the costs of the products sold, warehousing, labor and other operating costs.

The wireless devices we distribute include a variety of devices designed to work on various operating platforms and feature brand names such as Audiovox, Kyocera, LG Electronics, Motorola, Nokia, Qtek (a product of High Tech Computer Corp.), Samsung, Siemens and Sony Ericsson. In 2005, 2004 and 2003, our sales of wireless devices through product distribution totaled 11.8 million, 10.1 million and 10.4 million devices. Although the industry’s average selling prices have continued to decline, our average selling prices have increased. In 2005, 2004 and 2003, our average selling prices for wireless devices were approximately $147, $142, and $136 per unit.

We also distribute accessories used in connection with wireless devices, such as batteries, chargers, memory cards, car-kits, cases and “hands-free” products. We purchase and resell original equipment manufacturer (OEM) and aftermarket accessories, either prepackaged or in bulk. Our accessory packaging services provide mobile operators and retail chains with custom packaged and/or branded accessories based on the specific requirements of those customers.

Logistic Services. Our logistic services include 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. Generally, logistic services are fee-based services. In many of our markets, we have contracts with mobile operators and wireless equipment manufacturers to which we provide our logistic services. These customers include, but are not limited to, operating companies or subsidiaries of Sprint Nextel (United States), Virgin Mobile (United States), TracFone (United States), ALLTEL (United States), MetroPCS (United States), Cricket Communications (United States), COMCEL (Colombia), T-Mobile Slovensko (Slovak Republic) and Vodafone (Australia).

During 2005, 2004 and 2003, logistic services accounted for approximately 14%, 14% and 11% of our total revenue and accounted for approximately 72%, 62% and 48% of the total wireless devices we handled. In 2005, 2004 and 2003, our logistic services gross margin was 20.6%, 18.2% and 17.7%. Cost of revenue for logistic services is primarily composed of direct and indirect labor, warehousing, information technology and other operating costs. Since we generally do not take ownership of the inventory in our logistic services arrangements and the accounts receivable are lower due to the fee-based nature of these services, the invested capital requirements and the risks assumed in providing logistic services generally are significantly lower than our distribution business.

Activation Services. In our activation services business, we provide a cost-effective channel for mobile operators and MVNOs to add new subscribers. We do this by establishing and managing a network of independent authorized retailers (“Accesspoint Dealer Network”). We provide our Accesspoint Dealer Network with access to products and support them through commissions management, sales and marketing programs, merchandising programs, training programs, incentive programs and cooperative advertising. As these retailers activate or upgrade subscribers, they earn commissions from mobile operators. We collect these commissions from the mobile operators and pay the retailers their pro-rata portion of the commissions after deducting our fees. For mobile operators and MVNOs, we provide them with incremental points of sale, a variable-cost model for acquiring new subscribers and commissions management for our Accesspoint Dealer Network. Sales of wireless devices and related accessories to our network of independent authorized retailers are included in product distribution revenues and fees earned from commissions management services are included in logistic services revenues. We currently provide activation services in the United States to mobile operators such as Sprint Nextel and Virgin Mobile.

Prepaid Airtime. Through our prepaid airtime business model, we participate in the ongoing revenue stream generated by prepaid subscribers. We do this by purchasing physical scratch cards or electronic activation codes from mobile operators and MVNOs and distributing them to retail channels. Much of our activity in the prepaid airtime business model is in our Europe and Asia-Pacific divisions; however, we are seeing increased acceptance of prepaid or pay-as-you-go subscriber plans in the United States. Sales of physical scratch cards or electronic activation codes to retail customers are included in logistic services revenues. We distribute prepaid airtime in many of our operations on behalf of mobile operators and MVNOs such as: Virgin Mobile (United States), Vodafone (Australia and New Zealand), Sonofon (Denmark), Tele2 (Sweden) and TeliaSonera (Sweden).

Our Strategy

Our strategy is to continue to grow as a leader in product distribution and logistic services in the global wireless industry. Our objectives are to increase the Company’s earnings, increase our market share, improve our return on invested capital within certain debt-to-total-capital parameters and to enhance customer satisfaction by increasing the value we offer relative to other service alternatives and service offerings by our competitors.

Our strategy incorporates industry trends such as increasing sales of replacement devices, increasing subscribers, the migration to next generation systems and new or expanding industry participants as described in detail in the section entitled “Global Wireless Industry.” We will endeavor to grow our business through organic growth opportunities, new product and service offerings, start-up operations and joint ventures or acquisitions. In evaluating opportunities for growth, key components of our decision making process include anticipated long-term rates of return, short-term returns on invested capital and risk profiles as compared to the potential returns. No assurances can be given on the success of our strategy, refer to Item 1A, “Risk Factors”.

Key elements of our strategy include:

Expand into New Geographic Markets. We estimate that the global wireless industry shipped approximately 800 million wireless devices in 2005. In the geographic markets where we currently operate (our addressable market), we estimate the market size was approximately 245 million wireless devices in 2005. We believe we are in a position to enter into new markets, thereby expanding our addressable market. In 2006, we believe that there may be additional expansion opportunities in Latin America, Europe, Asia and the Middle East.

Add New Products and Services in Current Markets. Our strategy includes the search for new products and new service offerings within the current geographic markets in which we operate. With increasing functionality of wireless devices resulting from technological advancements and enhanced data speeds due to the migration to next generation systems, we believe that device manufacturers will introduce new innovative products, which we may distribute. Potential new product categories include wireless broadband; mobile media and applications including ring tones, images, games and music; and smart device enterprise solutions providing bundled wireless solutions to small and medium enterprise customers through the value-added resellers and system integrator channels. We launched our AWS business during 2005 in line with this strategy.

Expand Existing Product and Service Offerings in Current Markets. Our plan includes the transfer of our industry know-how, relationships, and capabilities from one market to another in an effort to expand our product and service offerings within our current markets. This is intended to enhance the service offerings and product lines of some of our operations, which have relatively limited product lines and service offerings as compared to the collective product and service offerings of the entire Company. Opportunities in expanding our product lines include wireless handsets, data devices, memory cards, sim-cards and accessories. Opportunities in expanding our service offerings include product fulfillment, electronic prepaid recharge services, reverse logistics management, repair services, and activation services.

Continue to Build and Promote the Brightpoint Brand within the Global Wireless Industry. Many of our customers and suppliers operate in multiple markets globally. We believe that strengthening our corporate brand and delivering a consistent message globally may allow us to compete for business more effectively than local unbranded distribution companies or logistic services providers who are not solely dedicated to serving the global wireless industry. We have developed distribution and logistics expertise that is unique to the global wireless industry and, with a solid brand, plan on pursuing opportunities to further grow our business.

Customers

We provide our products and services to a customer base of approximately 20,000 mobile operators, MVNOs, manufacturers, independent agents and dealers, retailers, and other distributors. During 2005, customers in each of our primary sales channels include the following:

Mobile Operators and MVNOs: ALLTEL (United States), Amp’d Mobile (United States), Dobson Cellular (United States), IDT (United States), MetroPCS (United States), Mobile ESPN (United States), Movida (United States), Sprint Nextel (United States), TracFone (United States), Virgin Mobile (United States), Comcel (Colombia), SingTel (Australia), Telstra (Australia), Vodafone (Australia, New Zealand and Germany), Reliance Infocomm (India), Tata TeleServices (India), Netcom (Norway), Tele2 (Sweden) and T-Mobile Slovensko (Slovak Republic)

Dealers and Agents: Moorehead Communications (United States), One Stop Cellular (United States), Wireless One (United States), Fone Zone (Australia), First Mobile Group (New Zealand), MV2 Telecoms Shop (Philippines), Dialect (Sweden) and Klartsvar (Sweden)

Mass Retailers: Best Buy (United States), Target (United States), Strathfield (Australia), Woolworth’s Group (Australia), and Pressbyran (Sweden)

Other Distributors: Strax (United States), Wireless Channels (United States), Computech Overseas International (Hong Kong), Charmley Trading Pte. Ltd (Singapore) and HCT Holdings Limited (Hong Kong)

For 2005, 2004 and 2003, aggregate revenues generated from our five largest customers accounted for approximately 25%, 22% and 34% of our total revenue. In 2005, 2004 and 2003, Computech Overseas International (Computech), a customer of the Company’s Brightpoint Asia Limited operations, accounted for approximately 11%, 10% and 11% of the Company’s total revenue and 21%, 19% and 19% of the Asia-Pacific division’s revenue. At December 31, 2005 and 2004, there were no amounts owed to us from Computech. See Item 1A, “Risk Factors” – “THE LOSS OR REDUCTION IN ORDERS FROM PRINCIPAL CUSTOMERS OR A REDUCTION IN PRICES WE ARE ABLE TO CHARGE THESE CUSTOMERS COULD MATERIALLY ADVERSELY AFFECT OUR BUSINESS.”

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 otherwise requested, substantially all of our products are delivered by common freight carriers. Because orders are filled shortly after receipt, backlog is generally not

material to our business. Our logistic services are typically provided pursuant to agreements with terms between one and three years which 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 voice and data equipment such as Audiovox, High Tech Computer Corp., Kyocera, LG Electronics, Motorola, Nokia, Samsung, Siemens and Sony Ericsson. We generally negotiate directly with manufacturers and suppliers in order to obtain inventories of brand name products. Inventory purchases are based on customer demand, product availability, brand name recognition, price, service, and quality. Certain of our suppliers may provide favorable purchasing terms to us, including credit, price protection, cooperative advertising, volume incentive rebates, stock balancing and marketing allowances. Product manufacturers typically provide limited warranties directly to the end consumer or to us, which we generally pass through to our customers. In certain limited circumstances, we provide warranties directly to the end customer.

Nokia, our largest supplier of wireless devices and accessories, accounted for approximately 61%, 63% and 79% of purchases for our product distribution business in 2005, 2004, and 2003. None of our other suppliers accounted for 10% or more of product purchases in 2005, 2004 or 2003. Loss of the applicable contracts with Nokia or other suppliers, or failure by Nokia or other suppliers to supply competitive products on a timely basis, at competitive prices 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 manufacturers of certain direct accounts and restrictions regarding our sale of products supplied by certain other competing manufacturers and to certain mobile operators. Typically our agreements with suppliers are non-exclusive. Our supply agreements may require us to satisfy purchase requirements based upon forecasts provided by us, in which a portion of these forecasts may be binding. Our supply agreements generally 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. Purchase orders are typically filled, subject to product availability, and shipped to our designated warehouses by common freight carriers. We believe that our relationships with our suppliers are generally good. Any failure or delay by our suppliers in supplying us with products on favorable terms and at competitive prices 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 significant suppliers, or if any supplier imposes substantial price increases or eliminates favorable terms provided to us and alternative sources of supply are not readily available, it may have a material adverse effect on our results of operations.

Sales and Marketing

We promote our product lines, our capabilities and the benefits of certain of our business models through advertising in trade publications and attending various international, national and regional trade shows, as well as through direct mail solicitation, media advertising and telemarketing activities. Our suppliers and customers use a variety of methods to promote their products and services directly to consumers, including Internet, print and media advertising.

Our sales and marketing efforts are coordinated in each of our three regional divisions by key personnel responsible for that particular division. Divisional management devotes a substantial amount of their time to developing and maintaining relationships with our customers and suppliers. In addition to managing the overall operations of the divisions, each division’s sales and operations centers are managed by either general or country managers who report to the appropriate member of divisional management and are responsible for the daily sales and operations of their particular location. Each country has sales associates who specialize in or focus on sales of our products and services to a specific customer or customer category (e.g., mobile operator, MVNOs, dealers and agents, reseller, retailer, subscriber, etc.). In addition, in many markets we have dedicated a sales force to manage most of our mobile operator relationships and to promote our logistic services including our activation services and prepaid airtime business models. Including support and retail outlet personnel, we had 396 employees involved in sales and marketing at December 31, 2005, of which 202 are in our Americas division, 65 in our Europe division, and 129 in our Asia-Pacific division. During 2005, sales and marketing efforts for our Brightpoint Asia Limited operations were outsourced to Persequor Limited, to whom we paid a management fee, including performance based commissions. Persequor Limited was a 15% partner in Brightpoint India Private Limited and oversaw our Brightpoint India Private Limited’s operations. During the first quarter of 2006, we purchased Persequor, including the 15% interest in

Brightpoint India. Therefore, sales and marketing efforts of our Brightpoint Asia Limited operations are no longer outsourced and we now have additional sales and marketing employees in our Asia-Pacific division as a result of this transaction.

Seasonality

The operating results of each of our three divisions may be influenced by a number of seasonal factors in the different countries and markets in which we operate. These factors may cause our revenue and operating results to fluctuate on a quarterly basis. These fluctuations are a result of several factors, including, but not limited to:

	•		promotions and subsidies by mobile operators;
	•		the timing of local holidays and other events affecting consumer demand;
	•		the timing of the introduction of new products by our suppliers and competitors;
	•		purchasing patterns of customers in different markets;
	•		general economic conditions; and
	•		product availability and pricing.

Consumer electronics and retail sales in many geographic markets tend to experience increased volumes of sales at the end of the calendar year, largely because of gift-giving holidays. This and other seasonal factors have contributed to increases in our revenue during the fourth quarter in certain markets. Conversely, we have experienced decreases in demand in the first quarter subsequent to the higher level of activity in the preceding fourth quarter. Our operating results may continue to fluctuate significantly in the future. 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. In addition, as a result of seasonal factors, interim results may not be indicative of annual results.

Competition

We operate in a highly competitive industry and in highly competitive markets and believe that such competition may intensify in the future. The markets for wireless voice and data products are characterized by intense price competition and significant price erosion over the lives of products. We compete principally on the basis of value, in terms of price, capability, time, product knowledge, reliability, customer service and product availability. Our competitors may possess substantially greater financial, marketing, personnel and other resources than we do, which may enable them to withstand substantial price competition, launch new products and implement extensive advertising and promotional campaigns.

The distribution of wireless devices and the provision of logistic services within the global wireless industry have, in the past, been characterized by relatively low barriers to entry. 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 information technology 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.

The markets for wireless communications products and integrated services are characterized by rapidly changing technology and evolving industry standards, often resulting in product obsolescence, short product life cycles and changing competition. Accordingly, our success is dependent upon our ability to anticipate and identify technological changes in the industry and successfully adapt our offering of products and services, to satisfy evolving industry and customer requirements. The wireless device industry is increasingly segmenting its product offering and introducing products with enhanced functionality that compete with other non-wireless consumer electronic products. Examples include wireless devices with embedded mega-pixel cameras, which now compete to a certain extent with non-wireless digital cameras, and wireless devices with MP3 capabilities that compete with non-wireless handheld audio players. These non-wireless consumer electronic products are distributed through other non-wireless distributors who may become our competitors as the wireless industry continues to introduce wireless devices with enhanced functionality. In addition, products that reach the market outside of normal distribution channels, such as gray market resellers, may also have an adverse impact on our operations.

Our current competition and specific competitors varies by service line and division as follows:

Product Distribution. Our product distribution business competes with broad-based wireless distributors who carry similar product lines and specialty distributors who may focus on segments within the wireless industry such as WLAN, Wi-Fi and accessories. To a lesser extent we compete with information technology distribution companies who offer wireless devices in certain markets. Manufacturers also sell their products directly to large mobile operators and as mobile operator customers grow in scale, manufacturers may pose a competitive threat to our business.

For product distribution, specific competitors and the divisions in which they generally compete with us include BrightStar Corporation (Americas and Asia-Pacific), CellStar Corporation (Americas), Infosonics (Americas), Tessco Technologies (Americas), Cellnet Group Ltd. (Asia-Pacific), Axcom (Europe), Caudwell Communications Limited (Europe), Dangaard Telecom Holding A/S (Europe) and Ingram Micro (all divisions).

Logistic Services. Our logistic services business competes with general logistic services companies who provide logistic services to multiple industries and specialize more in the warehousing and transportation of finished goods. Manufacturers can also offer fulfillment services to our customers. Certain mobile operators have their own distribution and logistics infrastructure which competes with our outsource solutions.

For logistic services, specific competitors and the division in which they generally compete with us include Aftermarket Technologies Corp. (Americas), CAT Logistics (Americas), PFSweb, Inc. (Americas), Tessco Technologies (Americas), UPS Logistics (Americas), Bertelsmann AG (Europe), Dangaard Telecom Holding A/S (Europe) and Kuehne + Nagel (Europe).

Activation Services. Our activation services business competes with other specialists who establish and manage independent authorized retailers and value-added resellers and with mobile operators who have the infrastructure necessary to manage their indirect channels.

For activation services, specific competitors and the division in which they generally compete with us include American Wireless (Americas), Cellular Network Communication Group (Americas), QDI (Americas), Wireless Channels (Americas) and Avenir S.A. (Europe).

Prepaid Airtime. Our prepaid airtime business competes with broad-based wireless distributors who sell prepaid airtime, specialty distributors who focus on prepaid airtime and companies who manufacture or distribute electronic in-store terminals capable of delivering prepaid airtime. To a lesser extent we compete with mobile operators themselves as they distribute prepaid airtime through their own retail channels.

For prepaid airtime, specific competitors and the divisions in which they generally compete with us include American Wireless (Americas), InComm (Americas), Alphyra (Europe), Dangaard Telecom Holding A/S (Europe) and Euronet (Europe).

Information Systems

The success of our operations is largely dependent on the functionality, architecture, performance and utilization of our information systems. We have, and continue to implement, business applications that enable us to provide our customers and suppliers with solutions for the distribution of their products. These solutions include, but are not limited to, e-commerce; electronic data interchange (EDI); Web-based order entry, account management, supply chain management; warehouse management, serialized inventory tracking, inventory management and reporting. During 2005, 2004 and 2003, we invested approximately $5.0 million, $4.6 million and $5.2 million, on our information systems with the focus of increasing the functionality and flexibility of our systems. In the future, we intend to invest to further develop those solutions and integrate our internal information systems throughout all of our divisions. At December 31, 2005, there were approximately 70 employees in our information technology departments worldwide.

Employees

As of December 31, 2005, we had 1,683 employees; 856 in our Americas division, 667 in our Asia-Pacific division and 160 in our Europe division. Of these employees, approximately 5 were in executive officer positions, 978 were engaged in service operations, 396 were in sales and marketing and 304 were in finance and administration (including information technology employees). Our distribution activities and logistic services are labor-intensive and we utilize temporary laborers, particularly in our Americas division. At December 31, 2005, we had approximately 2,115 temporary laborers; 1,920 in our Americas division, 176 in our Asia-Pacific division and 19 in our Europe division. Of these temporary laborers, approximately 984 were engaged in service operations, 1,008 were in sales and marketing and 123 were in finance and administration. Worldwide, none of our employees are covered by a collective bargaining agreement, except for national collective labor agreements in Finland. We believe that our relations with our employees are good. See Item 1A, “Risk Factors” — “WE ARE SUBJECT TO CERTAIN PERSONNEL RELATED ISSUES.”

Segment and Geographic Financial Information

Financial information concerning our segments and other geographic financial information is included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the heading “OPERATING SEGMENTS AND GEOGRAPHIC INFORMATION” of this Annual Report on Form 10-K.

Item 1A. Risk Factors.

There are many important factors that have affected, and in the future could affect our business, including the factors discussed below which should be reviewed carefully, in conjunction with the other information contained in this Form 10-K. Some of these factors are beyond our control and future trends are difficult to predict. In addition, various statements, discussions and analyses throughout this Form 10-K are not based on historical fact and contain forward-looking statements. These statements are also subject to certain risks and uncertainties, including those discussed below, which could cause our actual results to differ materially from those expressed or implied in any forward-looking statements made by us. 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.

The loss or reduction in orders from principal customers or a reduction in prices we are able to charge these customers could materially adversely affect our business. — In 2005, 2004 and 2003 Computech Overseas International (Computech), a customer of the Company’s Brightpoint Asia Limited operations, accounted for approximately 11%, 10% and 11% of the Company’s total revenue and 21%, 19% and 19% of the Asia-Pacific division’s revenue. At December 31, 2005 and 2004, there were no amounts owed to us from Computech. Although Nextel Communications, Inc. (Nextel), a fee-based logistic services customer, is less than 10% of the Company’s total revenue, it is more than 10% of wireless devices handled in our business in the United States. Sprint Corporation (Sprint) is a customer and a supplier within the activation services business in the Company’s North American business. On August 12, 2005, Sprint and Nextel completed a merger to form Sprint Nextel Corporation (Sprint Nextel). There can be no assurance that we will be successful in retaining this customer. Many of our customers in the markets we serve have experienced severe price competition and for this and other reasons may seek to obtain products or services from us at lower prices than we have been able to provide these customers in the past. The loss of any of our principal customers, a reduction in the amount of product or services our principal customers order from us or the inability to maintain current terms, including price, with these or other customers could have an adverse effect on our financial condition, results of operations and liquidity. Although we have entered into contracts with certain of our largest logistic services customers, we previously have experienced losses of certain of these customers through expiration or cancellation of our contracts with them and there can be no assurance that any of our customers will continue to purchase products or services from us or that their purchases will be at the same or greater levels than in prior periods.

Our business may be adversely impacted by consolidation of mobile operators. — The past several years have witnessed a consolidation within the mobile operator community, and this trend is expected to continue. This trend could result in a reduction or elimination of promotional activities by the remaining mobile operators as they seek to reduce their expenditures, which could in turn, result in decreased demand for our products or services. Moreover, consolidation of mobile operators reduces the number of potential contracts available to us and other providers of logistic services. We could also lose business if mobile operators, which are our customers, are acquired by other mobile operators that are not our customers.

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 wireless devices and accessories that we sell from wireless communications equipment manufacturers, distributors 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 and other terms. Our agreements with our suppliers are generally 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 these suppliers are unable to fulfill our product needs, or if any principal supplier imposes substantial price increases and alternative sources of supply are not readily available, this may result in a loss of customers and may have a material adverse effect on our results of operations.

We may become subject to suits alleging medical risks associated with our wireless devices. — Lawsuits or claims have been filed or made against manufacturers of wireless devices over the past years alleging possible medical risks, including brain cancer, associated with the electromagnetic fields emitted by wireless communications devices. 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 devices has on human cells. Substantially all of our revenues are derived, either directly or indirectly, from sales of wireless devices. 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 devices 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 devices.

We may have difficulty collecting our accounts receivable. — We currently offer and intend to offer open account terms to certain of 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. The collection of our accounts receivable and our ability to accelerate our collection cycle through the sale of accounts receivable is affected by several factors, including, but not limited to, our credit granting policies, contractual provisions, our customers’ and our overall credit rating as determined by various credit rating agencies, industry and economic conditions, the ability of the customer to provide security, collateral or guarantees relative to credit granted by us, the customer’s and our recent operating results, financial position and cash flows and our ability to obtain credit insurance on amounts that we are owed. Adverse changes in any of these factors, certain of which may not be wholly in our control, could create delays in collecting or an inability to collect our accounts receivable which could have a material adverse effect on our financial position, cash flows and results of operations.

Our future operating results will depend on our ability to continue to increase volumes and maintain margins. — A large percentage of our total revenues is derived from sales of wireless devices, a part of our business that operates on a high-volume, low-margin basis. Our ability to generate these sales is based upon demand for wireless voice and data products and our having adequate supply of these products. The gross margins that we realize on sales of wireless devices could be reduced due to increased competition or a growing industry emphasis on cost containment. However, a sales mix shift to fee-based logistic services may place negative pressure on our revenue growth while having a positive impact on our gross margins. Therefore, our future profitability will depend on our ability to maintain our margins or to increase our sales to help offset future declines in margins. We may not be able to maintain existing margins for products or services offered by us or increase our sales. 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.

Our business growth strategy includes acquisitions. — We have acquired other businesses in the past and plan to continue to do so in the future based on our global business strategy. Acquisitions may not meet our expectations at the time of purchase and could adversely affect our operations causing operating losses and subsequent write-downs due to asset impairments.

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 or financial position; repurchases of Common Stock; commencement of litigation; the introduction of new services, products or technologies by us, our suppliers or our competitors; changes in other conditions or trends in the wireless voice and data industry; changes in governmental regulation and the enforcement of

such regulation; changes in the assessment of our credit rating as determined by various credit rating agencies; 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 stock for companies in the global wireless industry or in the distribution or logistic services sectors of the global wireless industry could also affect the market price of our Common Stock.

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. — We provide functions such as distribution, inventory management, fulfillment, customized packaging, prepaid and e-commerce solutions, activation management and other outsourced services for many wireless manufacturers and network operators. Certain wireless equipment manufacturers and network operators have elected, and others may elect, to undertake these services internally. Additionally, our customer service levels, industry consolidation, competition, deregulation, technological changes or other developments could reduce the degree to which members of the global wireless industry rely on outsourced logistic services such as the services we provide. Any significant change in the market for our outsourced 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 renewals or otherwise maintain these agreements on terms, including price, consistent with our current terms could have a material adverse effect on our business.

We depend on third parties to manufacture products that we distribute and, accordingly, rely on their quality control procedures. — Product manufacturers typically provide limited warranties directly to the end consumer or to us, which we generally pass through to our customers. If a product we distribute for a manufacturer has quality or performance problems, our ability to provide products to our customers could be disrupted.

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. We believe that the enhanced functionality of wireless devices and the roll-out of next generation systems has had and will continue to have an effect on overall subscriber growth and handset replacement demand. Economic slow-downs in regions served by us or changes in promotional programs offered by mobile 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. A prolonged economic slow-down in the United States or any other region in which we have significant operations could negatively impact our results of operations and financial position.

Rapid technological changes in the global wireless industry could have a material adverse effect on our business. — The technology relating to wireless voice and data equipment changes rapidly 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 or services which have perceived or actual advantages over our service offerings or products that we handle or which otherwise render those products or services obsolete or less marketable. We have made and continue to make significant capital investments in accordance with evolving industry and customer requirements including maintaining levels of inventories of currently popular products that we believe are necessary based on current market conditions. These concentrations of capital increase our risk of loss due to product obsolescence.

We rely on our suppliers to provide trade credit facilities to adequately fund our on-going operations and product purchases. — Our business is dependent on our ability to obtain adequate supplies of currently popular product at favorable pricing and on other favorable terms. Our ability to fund our product purchases is dependent on our principal suppliers providing favorable payment terms that allow us to maximize the efficiency of our capital usage. The payment terms we receive from our suppliers is dependent on several factors, including, but not limited to, pledged cash requirements, our payment history with the supplier, the supplier’s credit granting policies, contractual provisions, our overall credit rating as determined by various credit rating agencies, industry conditions, our recent operating results, financial position and cash flows and the supplier’s ability to obtain credit insurance on amounts that we owe them. Adverse changes in any of these factors, certain of which may not be wholly in our control, could have a material adverse effect on our operations.

A significant percentage of our revenues are generated outside of the United States in countries that may have volatile currencies or other risks. — We maintain operations centers and sales offices in territories and countries outside of the United States. 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 number of foreign currencies, many of which have experienced fluctuations in currency exchange rates. In the past, we entered 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. We have ceased operations or divested several of our foreign operations because they were not performing to acceptable levels. These actions resulted in significant losses to us. We may in the future, decide to divest certain existing foreign operations. This could result in our incurring significant additional losses.

Natural disasters, epidemics, hostilities and terrorist acts could disrupt our operations. — Although we have implemented policies and procedures designed to minimize the effect of a natural disaster, epidemics, outbreak of hostilities or terrorist attacks in markets served by us or on our facilities, the actual effect of any such events on our operations cannot be determined at this time but our operations could be adversely affected.

We make significant investments in the technology used in our business and rely on that technology to function effectively without interruptions. — We have made significant investments in information systems technology and have focused on the application of this technology to provide customized logistic services to wireless communications equipment manufacturers and network operators. Our ability to meet our customers’ technical and performance requirements is highly dependent on the effective functioning of our information technology systems. Further, certain of our contractual arrangements to provide services contain performance measures and criteria that if not met could result in early termination of the agreement and claims for damages. In connection with the implementation of this technology we have incurred significant costs and have experienced significant business interruptions. Business interruptions can cause us to fall below acceptable performance levels pursuant to our customers’ requirements and could result in the loss of the related business relationship. We may experience additional costs and periodic business interruptions related to our information systems as we implement new information systems in our various operations. 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 logistic 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. In addition, a significant increase in the costs of additional technology or telephone services that are not recoverable through an increase in the price of our services could have a material adverse effect on our results of operations.

We have debt facilities, which are secured by a portion of our assets and which could prevent us from borrowing additional funds, if needed. — Our United States, Australia and New Zealand subsidiaries’ credit facilities are secured by primarily all of their respective assets and borrowing availability is based primarily on a percentage of eligible accounts receivable and inventory. Consequently, any significant decrease in eligible accounts receivable and inventory could limit our subsidiaries’ ability to borrow additional funds to adequately finance our operations and expansion strategies. The terms of our United States, Australia and New Zealand subsidiaries’ credit facilities also include negative covenants that, among other things, may limit our ability to incur additional indebtedness, sell certain assets and make certain payments, including but not limited to, dividends, repurchases of Common Stock and other payments outside the normal course of business as well as prohibiting us from merging or consolidating with another corporation or selling all or substantially all of our assets in the United States, Australia and New Zealand. If we violate any of these loan covenants, default on these obligations or become subject to a change of control, our subsidiaries’ indebtedness would become immediately due and payable, and the banks could foreclose on its security.

The global wireless industry is intensely competitive and we may not be able to continue to compete successfully in this industry. — We compete for sales of wireless voice and data equipment, and expect that we will continue to compete, with numerous well-established mobile operators, distributors and manufacturers, including our own suppliers. As a provider of logistic services, we also compete with other distributors, logistic 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 or services directly to our customers. The global wireless industry has 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 wireless telecommunications 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 prior 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. Our ability to absorb, through revenue growth, the increasing operating costs that we have incurred and continue to incur in connection with our activities and the execution of our strategy could have a material adverse effect on future earnings. In addition, our growth prospects could be adversely affected by a decline in the global wireless 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 relationships and financings, which may provide us with minimal returns or losses on our investments. — We have entered into several relationships with wireless equipment manufacturers, mobile operators and other participants in our industry. For example, we have invested in our AWS business, which may or may not provide us with acceptable returns. We intend to continue to enter into similar relationships as opportunities arise. We may enter into distribution or logistic services agreements with these parties and may provide them with equity or debt financing. Our ability to achieve future profitability through these relationships will depend in part upon the economic viability, success and motivation of the entities we select as partners and the amount of time and resources that these partners devote to our alliances. We may receive minimal or no business from these relationships and joint ventures, and any business we receive may not be significant or at the level we anticipated. The returns we receive from these relationships, if any, may not offset possible losses or our investments or the full amount of financings that we make upon entering into these relationships. We may not achieve acceptable returns on our investments with these parties within an acceptable period or at all.

Our operating results frequently vary significantly and respond to seasonal fluctuations in purchasing patterns. — The operating results of each of our three divisions may be influenced by a number of seasonal factors in the different countries and markets in which we operate. These factors may cause our revenue and operating results to fluctuate on a quarterly basis. These fluctuations are a result of several factors, including, but not limited to promotions and subsidies by mobile operators; the timing of local holidays and other events affecting consumer demand; the timing of the introduction of new products by our suppliers and competitors; purchasing patterns of customers in different markets; general economic conditions; and product availability and pricing.

Consumer electronics and retail sales in many geographic markets tend to experience increased volumes of sales at the end of the calendar year, largely because of gift-giving holidays. This and other seasonal factors have contributed to increases in our sales during the fourth quarter in certain markets. Conversely, we have experienced decreases in demand in the first quarter subsequent to the higher level of activity in the preceding fourth quarter. Our operating results may continue to fluctuate significantly in the future. 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. In addition, as a result of seasonal factors, interim results may not be indicative of annual results. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional analysis on seasonality.

We are subject to certain personnel related issues. — 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. Some labor markets are very competitive. If we are unable to attract and retain additional necessary personnel, it could delay or hinder our plans for growth.

We are subject to a number of regulatory and contractual restrictions governing our relations with certain of our employees, including national collective labor agreements for certain of our employees who are employed outside of the United States and individual employer labor agreements. These arrangements address a number of specific issues affecting our working conditions including hiring, work time, wages and benefits, and termination of employment. We could be required to make significant payments in order to comply with these requirements. The cost of complying with these requirements may materially adversely affect our business and financial condition.

Our distribution activities and logistic 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 consists of wages to hourly workers. Growth in our business, together with seasonal increases in net revenue, 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 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.

We have significant future payment obligations pursuant to certain leases and other long-term contracts. — We lease our office and warehouse/distribution facilities 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 be unable to obtain and maintain adequate business insurance at a reasonable cost. — Although we currently maintain general commercial, property liability and transportation insurance in amounts we believe are appropriate, it has become increasingly difficult in recent years to obtain adequate insurance coverage at a reasonable cost. Our operations could be adversely affected by a loss that is not covered by insurance due to our inability in the future to obtain adequate insurance. Moreover, increasing insurance premiums would adversely affect our future operating results.

There are amounts of our securities, which are issuable pursuant to our 2004 Long-Term Incentive Plan, our Amended and Restated Independent Director Stock Compensation Plan and our 1996 Stock Option Plan, which, if issued, could result in dilution to existing shareholders, reduce earnings in future periods and adversely affect the market price of our Common Stock. — We have reserved a significant number of shares of Common Stock that may be issuable pursuant to these plans. Grants made under these plans could result in dilution to existing shareholders. Moreover, effective January 1, 2006, as required under recently issued accounting pronouncement Statement of Financial Accounting Standards (SFAS) 123(R), Share-Based Payment, the compensation cost relating to share-based payment transactions will be recognized in financial statements. Pro forma disclosure is no longer an alternative. This requirement will reduce earnings, earnings per share, net operating cash flows and increase net financing cash flows in periods after adoption.

We have instituted measures to protect us against a takeover. — Certain provisions of our By-laws, shareholders rights and option plans, certain employment agreements and the Indiana Business 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.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

We provide our distribution and logistic services from our sales and operations centers located in various countries including Australia, Colombia, Finland, Germany, India, New Zealand, Norway, the Philippines, the Slovak Republic, Sweden, and the United States. 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
		Locations(1)				Square Footage
The Americas			4				891,362
Asia-Pacific			5				149,580
Europe			5				160,601
			14				1,201,543

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.

Item 3. Legal Proceedings.

The Company is from time to time involved in certain legal proceedings in the ordinary course of conducting its business. While the ultimate liability pursuant to these actions cannot currently be determined, the Company believes these legal proceedings will not have a material adverse effect on its Consolidated Financial Statements as a whole.

A Complaint was filed on November 23, 2001 against the Company and 87 other defendants in the United States District Court for the District of Arizona, entitled Lemelson Medical, Education and Research Foundation LP v. Federal Express Corporation, et.al., Cause No. CIV01-2287-PHX-PGR. The plaintiff claims that the Company and other defendants have infringed seven patents alleged to cover bar code technology. The case seeks unspecified damages, treble damages and injunctive relief. The Court has ordered the case stayed pending the decision in a related case in which a number of bar code equipment manufacturers have sought a declaration that the patents asserted are invalid and unenforceable. That trial concluded in January 2003. In January 2004, the Court rendered its decision that the patents asserted by Lemelson were found to be invalid and unenforceable. Lemelson filed an appeal to the Court of Appeals for the Federal Circuit on June 23, 2004. On September 9, 2005, the U.S. Court of Appeals for the Federal Circuit affirmed the decision of the trial court holding that the asserted patents are unenforceable. The plaintiff voluntarily dismissed this case in December 2005.

A Complaint was filed on January 4, 2005 against the Company in the Circuit Court for Baltimore County, Maryland, Case No. 03-C-05-000067 CN, entitled Iridium Satellite, LLC, Plaintiff v. Brightpoint, Inc., Defendant. The matter was removed to the United States District Court, District of Maryland, Baltimore Division. In the Complaint, the Plaintiff alleges claims of trover and conversion, fraudulent misrepresentation and breach of contract. All claims relate to the ownership and disposition of 1,500 Series 9500 satellite telephones. In the fourth quarter of 2005, a preliminary settlement was reached pursuant to which the lawsuit was dismissed without prejudice subject to reinstatement by a party only in the event a settlement is not consummated.

The Company’s subsidiary in Sweden, Brightpoint Sweden Ab, (BP Sweden) has received an assessment from the Swedish Tax Agency (STA) regarding value-added taxes the STA claims are due, relating to certain transactions entered into by BP Sweden

during 2004. BP Sweden has filed an appeal against the decision. Although the Company’s liability pursuant to this assessment by the STA, if any, cannot currently be determined, the Company believes the range of the potential liability is between $0 and $1.4 million (at current exchange rates) including penalties and interest. The Company continues to dispute this claim and intends to defend this matter vigorously.

Item 4. Submission of Matters to a Vote of Security Holders.

During the fourth quarter of 2005, no matters were submitted to a vote of security holders.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

The Company has declared the following forward and reverse common stock splits. All of the forward stock splits were effected in the form of common stock dividends.

		Dividend Payment or
Declaration Date		Stock Split Effective Date		Split Ratio
August 31, 1995		September 20, 1995		5 for 4
November 12, 1996		December 17, 1996		3 for 2
January 28, 1997		March 3, 1997		5 for 4
October 22, 1997		November 21, 1997		2 for 1
June 26, 2002		June 27, 2002		1 for 7
July 29, 2003		August 25, 2003		3 for 2
September 15, 2003		October 15, 2003		3 for 2
August 12, 2005		September 15, 2005		3 for 2
December 5, 2005		December 30, 2005		3 for 2

The information regarding equity compensation plans is incorporated by reference to Item 12 of this Form 10-K, which incorporates by reference the information set forth under the caption “Equity Compensation Plans” in the Company’s Definitive Proxy Statement in connection with the 2006 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission no later than 120 days following the end of the fiscal year.

Our Common Stock is listed on the NASDAQ Stock Market under the symbol CELL. The following tables set forth, for the periods indicated, the high and low sale prices for the Common Stock as reported by the NASDAQ Stock Market.

2005		High				Low
First Quarter		$	9.17			$	7.07
Second Quarter			10.49				8.20
Third Quarter			13.28				10.11
Fourth Quarter			20.05				12.15

2004		High				Low
First Quarter		$	10.18			$	6.11
Second Quarter			7.28				4.28
Third Quarter			7.64				5.12
Fourth Quarter			9.12				6.75

At February 27, 2006, there were approximately 310 shareholders of record.

On November 11, 2005, we announced that our Board of Directors had approved an extension and increase of the $20.0 million share repurchase plan that was previously announced on November 30, 2004. The Board of Directors approved an increase of $18.0 million, allowing us to repurchase up to a total of $38.0 million of our own common shares. The share repurchase plan that was previously scheduled to expire on December 31, 2005 has been extended to expire on December 31, 2007. As of December 31, 2005, we have repurchased a total of 1,949,588 shares under this plan at a weighted average price of $10.25 totaling $19.9 million, and approximately $18.1 million may be used to purchase additional shares under this

program. The following table provides information regarding repurchases of our Common Stock during the fourth quarter of 2005.

Issuer purchases of equity securities:

										Total number
										of shares				Total amount
										purchased as				purchased as				Maximum dollar
										part of the				part of				value of shares
		Total number				Average				publicly				the publicly				that may yet be
		of shares				price paid				announced				announced				purchased under
Month of purchase		purchased				per share				program				program				the program
October 1 — October 31, 2005			—				—				—				—			$	7,042,559
November 1 — November 30, 2005			421,500			$	16.54				421,500			$	6,970,270			$	18,072,289
December 1 — December 31, 2005			—				—				—				—			$	18,072,289
Total			421,500			$	16.54				421,500			$	6,970,270			$	18,072,289

We have not paid cash dividends on our Common Stock other than S corporation distributions made to shareholders during periods prior to the rescissions of S corporation elections. In addition, certain of our bank agreements require consent from the lender prior to declaring or paying cash dividends, making capital distributions or other payments to shareholders. The Board of Directors intends to continue a policy of retaining earnings to finance the growth and development of the business and does not expect to declare or pay any cash dividends in the foreseeable future. However, the Board of Directors approved two share repurchase programs in 2004. The first share repurchase program was completed in June 2004. The second share repurchase program was amended and extended to expire on December 31, 2007 as discussed above.

Item 6. Selected Financial Data.

 

(Amounts in thousands, except per share data)

		Year Ended December 31,
		2005(1)				2004				2003(1)				2002(1)				2001(1)
Revenue (2)		$	2,140,177			$	1,772,424			$	1,692,580			$	1,162,825			$	1,108,294
Gross profit (2)			132,012				104,764				86,324				59,609				60,566
Operating income (loss) from continuing operations (2)			44,353				35,567				20,355				(1,150	)			1,194
Income from continuing operations (2)			31,918				23,826				13,861				13,922				1,930
Total loss from discontinued operations, net of income taxes (2)			(21,478	)			(10,056	)			(2,132	)			(15,595	)			(55,231	)
Income (loss) before cumulative effect			10,440				13,770				11,729				(1,673	)			(53,301	)
Net income (loss)			10,440				13,770				11,729				(42,421	)			(53,301	)
Earnings (loss) per share — basic:
Income from continuing operations (3)		$	0.80			$	0.57			$	0.34			$	0.34			$	0.05
Discontinued operations (3)			(0.54	)			(0.24	)			(0.05	)			(0.38	)			(1.37	)
Cumulative effect of accounting change, net of tax (3)			—				—				—				(1.01	)			—
Net income (loss) (3)		$	0.26			$	0.33			$	0.29			$	(1.05	)		$	(1.32	)
Earnings (loss) per share — diluted:
Income from continuing operations (3)		$	0.77			$	0.55			$	0.32			$	0.34			$	0.05
Discontinued operations (3)			(0.52	)			(0.23	)			(0.05	)			(0.38	)			(1.37	)
Cumulative effect of accounting change, net of tax (3)			—				—				—				(1.01	)			—
Net income (loss) (3)		$	0.25			$	0.32			$	0.27			$	(1.05	)		$	(1.32	)
			2005				2004				2003				2002				2001
Working capital		$	121,336			$	103,525			$	96,839			$	58,981			$	165,566
Total assets			487,824				437,584				444,690				336,302				609,420
Total liabilities			338,782				286,847				297,106				222,659				459,407
Shareholders’ equity			149,042				150,737				147,584				113,643				150,013

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.

OVERVIEW

We measure our performance by focusing on certain key performance indicators such as the number of wireless devices handled, gross margin by service line, operating income, cash flow, cash conversion cycle, return on invested capital and liquidity. Our 42.1 million wireless devices handled in 2005 was a record for us. We continue to focus our attention on growing earnings while maintaining a strong balance sheet, which is evidenced by the $69.0 million of cash provided by operating activities during 2005.

We manage our business based on two distinct service lines which include product distribution and logistic services. During 2005, wireless devices sold through distribution grew by 17%, and wireless devices handled through logistic services grew by 81%. While our distribution gross margin remained unchanged at 3.9%, our logistic services gross margin increased by 2.4 percentage points to 20.6%. We are focused on increasing the volume of wireless devices in total as opposed to increasing volume in one service line versus the other because both service lines provide a reasonable return in relation to the capital invested and the risk assumed.

Our revenues are significantly influenced by growth in the total number of wireless devices sold to subscribers globally by the entire industry. In 2005, it is estimated that the global wireless industry shipped approximately 800 million wireless devices. This was up 20% — 24% from 2004. The total number of wireless devices handled by us grew by 57% to 42.1 million devices from 2004. Revenues grew by 21% to $2.1 billion and income from continuing operations was $31.9 million or $0.77 per diluted share, which represented a 34% increase from 2004. Net income decreased by 24% to $10.4 million, or $0.25 per diluted share, in 2005 from $13.8 million, or $0.32 per diluted share, in 2004.

Significant developments and events in 2005 and early 2006 include:

	•		Increase and extension of our Common Stock repurchase plan. In 2005, we repurchased 1.5 million shares of Common Stock at a total cost of $15.9 million and are authorized to repurchase an additional $18.1 million under a repurchase plan approved by the Board of Directors and extended to December 31, 2007.
	•		Two three-for-two stock splits. In August 2005 and December 2005, the Board of Directors approved a three-for-two split of the outstanding Common Stock. The August 2005 split was payable on September 15, 2005 to holders of record on August 31, 2005 and the December 2005 split was payable on December 30, 2005 to holders of record on December 16, 2005.
	•		Sale of Brightpoint France SARL (Brightpoint France). In December 2005, we sold all the equity securities of Brightpoint France to an entity formed by the former managing director of Brightpoint France for an aggregate purchase price of approximately $1.6 million, of which approximately $0.1 million has been received and approximately $1.5 million is payable in annual installments on each of the first, second, and third anniversaries following the date of closing.
	•		Purchase of Persequor Limited (Persequor). In February 2006, we purchased Persequor for approximately $1.0 million. Previously, Persequor had provided management services to Brightpoint India Limited (Brightpoint India) and Brightpoint Asia Limited pursuant to an October 31, 2003 agreement under which we sold 15% of our interest in Brightpoint India to Persequor in exchange for Persequor providing management services to Brightpoint India. The $1.0 million purchase of Persequor includes the 15% interest in Brightpoint India valued at approximately $0.2 million.
	•		Launch of Advanced Wireless Services (AWS). AWS was created in the first quarter of 2005 to deliver bundled wireless products and services (such as Windows Mobile-based smart phones and pocket PC’s, activation services, bundled software applications, VoIP products/services, wireless LAN infrastructure and services and mobile media and applications) to our existing sales channels (mobile operators and their dealers), as well as to new channels such as value-added resellers and system integrators targeting the enterprise and small/medium business markets. To date, our AWS business has already announced agreements with Belkin, ECCB, Intel, Microsoft, Motorola, RTX, Skype and Vonage.
	•		Nokia Distribution Agreement. In January 2006, Brightpoint North America L.P. extended its distribution agreement with Nokia in the United States to December 31, 2007. During the term of this agreement, we will continue to be the exclusive authorized distributor for Nokia brand wireless devices in the United States. In instances when Nokia does

			not sell directly to selected large accounts, Nokia utilizes Brightpoint to market, sell and deliver wireless devices and accessories to network operators, independent agents and other retailers throughout the United States.
	•		MVNO Agreements. In 2005, Brightpoint North America L.P. entered into distribution and logistic services agreements with several MVNOs including: ESPN Mobile, Amp’d Mobile, IDT Telecom, Primus Wireless and Movida Communications, Inc. Pursuant to the agreements, Brightpoint will provide a number of services including inventory management, product fulfillment and distribution, returns management, credit management and other logistic services solutions.

2005 RESULTS OF OPERATIONS

Revenue and Wireless Devices Handled

		Year Ended
		December 31,				% of				December 31,				% of
		2005				Total				2004				Total				Change
					(Amounts in 000s)
REVENUE BY DIVISION:
The Americas		$	675,074				32	%		$	505,135				28	%			34	%
Asia-Pacific			1,081,529				50	%			968,150				55	%			12	%
Europe			383,574				18	%			299,139				17	%			28	%
Total		$	2,140,177				100	%		$	1,772,424				100	%			21	%
REVENUE BY SERVICE LINE:
Distribution		$	1,845,983				86	%		$	1,523,717				86	%			21	%
Logistic services			294,194				14	%			248,707				14	%			18	%
Total		$	2,140,177				100	%		$	1,772,424				100	%			21	%
WIRELESS DEVICES HANDLED BY DIVISION:
The Americas			33,002				78	%			18,886				70	%			75	%
Asia-Pacific			7,762				19	%			6,956				26	%			12	%
Europe			1,317				3	%			985				4	%			34	%
Total			42,081				100	%			26,827				100	%			57	%
WIRELESS DEVICES HANDLED BY SERVICE LINE:
Distribution			11,769				28	%			10,074				38	%			17	%
Logistic services			30,312				72	%			16,753				62	%			81	%
Total			42,081				100	%			26,827				100	%			57	%

Revenue for the year ended December 31, 2005 was $2.1 billion, which represents growth of 21% compared to 2004. Growth in revenue was driven primarily by 57% growth in the number of wireless devices handled in 2005 compared to 2004. Overall, we estimate that worldwide industry shipments of wireless devices grew approximately 20% — 24% to an estimated 800 million wireless devices in 2005. Demand for wireless devices continued to be strong in 2005, driven by next generation product introductions; compelling pricing by manufacturers; accelerated deployment of wireless data services; and aggressive customer retention, acquisition and wireless device upgrade programs by network operators. In addition to these industry factors, our growth in revenue and wireless devices handled also resulted from growth experienced by our industry leading customer and supplier base; increased penetration and market share with our existing customers and suppliers as our service offerings have increased; and successful additions of new customers and suppliers. Fluctuations in foreign exchange rates impacted revenue less than 1%.

Total wireless devices handled during 2005 were 42.1 million, which represents growth of 57% compared to 2004. The 15.3 million unit increase in wireless devices handled was due to a 13.6 million, 81% increase in wireless devices handled through logistic services and a 1.7 million, 17% increase in wireless devices handled through our distribution business. The 81% increase in wireless devices handled through our logistic services business is due primarily to our Americas division, which handled 84% more devices through logistic services in 2005 than it did in 2004.

Revenue and wireless devices handled by division:

Americas

		Year Ended
		December 31,				% of				December 31,				% of
		2005				Total				2004				Total				Change
					(Amounts in 000s)
REVENUE:
Distribution		$	507,508				75	%		$	393,883				78	%			29	%
Logistic services			167,566				25	%			111,252				22	%			51	%
Total		$	675,074				100	%		$	505,135				100	%			34	%
WIRELESS DEVICES:
Distribution			3,566				11	%			2,845				15	%			25	%
Logistic services			29,436				89	%			16,041				85	%			84	%
Total			33,002				100	%			18,886				100	%			75	%

Revenue in our Americas division increased 34% to $675.1 million in 2005 from $505.1 million in 2004. Growth in revenue in our Americas division was due primarily to a 75% increase in wireless devices handled. Product distribution revenue increased 29% in our Americas division due to a 25% increase in wireless devices sold through distribution and a 5% increase in average selling price. The number of wireless devices sold through our Americas distribution business increased as a result of efforts to diversify and grow our base of handset suppliers (LG and Samsung) in 2005, an overall increase of market demand and improved product availability. In addition, the largest supplier (Nokia) in our Americas division launched new innovative products during the second half of 2005 and offered compelling pricing on its products, which drove strong demand.

Logistic services revenue increased 51% to $167.6 million in 2005 due primarily to an 84% increase in wireless devices handled though logistic services (handset fulfillment). Handset fulfillment revenue (including freight revenue generated from handset fulfillment and other unit based service revenue) represented approximately two-thirds of logistic services revenue in our Americas division for 2005. The increase in wireless devices handled through logistic services was due primarily to market growth experienced by our current logistic services customers. Growth in logistic services revenue in our Americas division was also due to a significant increase in revenue generated from prepaid card distribution and fulfillment, for which units are not included in the total number of wireless devices handled through logistic services. Handset units handled in logistic services grew at a faster pace than revenue as our Americas division experienced a shift in services, which contributed to a decrease in the average fulfillment fee per unit. Our logistic services revenue is derived from a mix of services with different fee structures from full pallet pick, pack and ship services to more complex software loading, kitting, customized packaging and individual handset fulfillment services. While fee structures are higher for more complex services, we generally strive to maintain a consistent profit margin for each service (see “Gross Profit and Gross Margin”). In addition, the average fee per unit for logistic services decreased due to tiered pricing based on volume.

Asia-Pacific

		Year Ended
		December 31,				% of				December 31,				% of
		2005				Total				2004				Total				Change
					(Amounts in 000s)
REVENUE:
Distribution		$	1,054,051				97	%		$	924,024				95	%			14	%
Logistic services			27,478				3	%			44,126				5	%			(38	)%
Total		$	1,081,529				100	%		$	968,150				100	%			12	%
WIRELESS DEVICES:
Distribution			7,329				94	%			6,545				94	%			12	%
Logistic services			433				6	%			411				6	%			5	%
Total			7,762				100	%			6,956				100	%			12	%

Revenue in our Asia-Pacific division increased 12% to $1.1 billion in 2005 from $968.2 million in 2004. Growth in revenue in our Asia-Pacific division was due primarily to a 12% increase in wireless devices handled. Product distribution revenue increased 14% due primarily to a 12% increase in wireless devices sold. The increase in the number of devices sold through distribution was driven by growth in units sold in the India market, partially offset by a decrease in the number of wireless devices sold through our Brightpoint Asia Limited business. The increase in devices sold in India was the result of improved product availability and market demand for Nokia CDMA products. The decline in devices sold through Brightpoint Asia Limited was primarily due to competitors’ trans-shipment of product from Europe and the Middle East during the second quarter of 2005 into markets we serve, at price points below that which were available to us from our suppliers. Increases in devices sold through our operations in Australia and New Zealand also contributed to growth in product distribution revenue. Growth in wireless devices sold through distribution in our Asia-Pacific division may not continue in 2006 due to increased competition in the Australia market.

Logistic services revenue decreased 38% to $27.5 million in 2005, compared to $44.1 million in 2004. The decrease in logistic services revenue was due to declines in non handset fulfillment revenue for which units are not included in the total number of wireless devices handled through logistic services. The decrease in non handset fulfillment revenue relates primarily to declines in prepaid recharge card revenue in the Philippines market resulting from management’s decision to reduce volumes of low margin products sold in that market.

Europe

		Year Ended
		December 31,				% of				December 31,				% of
		2005				Total				2004				Total				Change
					(Amounts in 000s)
REVENUE:
Distribution		$	284,424				74	%		$	205,810				69	%			38	%
Logistic services			99,150				26	%			93,329				31	%			6	%
Total		$	383,574				100	%		$	299,139				100	%			28	%
WIRELESS DEVICES:
Distribution			875				66	%			684				69	%			28	%
Logistic services			442				34	%			301				31	%			47	%
Total			1,317				100	%			985				100	%			34	%

Revenue in our Europe division increased 28% to $383.6 million in 2005 from $299.1 million in 2004. Growth in revenue was due primarily to a 34% increase in wireless devices handled. Product distribution revenue increased 38% due to a 28% increase in devices sold and a 10% increase in the average selling price, partially offset by a 2% decrease from fluctuations in foreign exchange rates. The increase in the number of devices sold through distribution in our Europe division was due to increased demand for and availability of High Tech Computer Corp.’s (HTC) Qtek branded smart phones, network operator promotional programs in certain markets, and our entry into Finland during the second half of 2004.

Logistic services revenue increased 6% to $99.2 million in 2005 from $93.3 million in 2004. Although wireless devices sold through logistic services increased 47%, handset fulfillment revenue represents less than 2% of logistic services revenue in our Europe division. The increase in logistic services revenue was due to growth in prepaid recharge card revenue in our Sweden business and our entry into the Slovak Republic in the second half of 2004.

Gross Profit and Gross Margin

		Year Ended
		December 31,				% of				December 31,				% of
		2005				Total				2004				Total				Change
					(Amounts in 000s)
Distribution		$	71,371				54	%		$	59,598				57	%			20	%
Logistic services			60,641				46	%			45,166				43	%			34	%
Gross profit		$	132,012				100	%		$	104,764				100	%			26	%
Distribution			3.9	%			54	%			3.9	%			57	%		0.0 % points
Logistic services			20.6	%			46	%			18.2	%			43	%		2.4 % points
Gross margin			6.2	%			100	%			5.9	%			100	%		0.3 % points

Overall, our gross profit was up 26% in 2005 to $132.0 million from $104.8 million in 2004. This increase was primarily due to the 21% growth in revenue. The 0.3 percentage point increase in gross margin was a result of the 2.4 percentage point increase gross margin in our logistic services business.

Gross profit in our distribution business increased 20% to $71.4 million in 2005, which was due primarily to a 21% increase in distribution revenue. Gross margin from distribution was flat despite higher margin handsets and increased leverage of our cost infrastructure in our Americas division, which was offset by lower margin in our Asia-Pacific division caused by increased competition in markets served by our Brightpoint Asia Limited business from competitors located in Europe and the Middle East. In addition, revenue from our business in India was a larger proportion of the total revenue in the division and has had lower margins than our other businesses in the Asia-Pacific division.

Gross profit in our logistic services business increased $15.5 million or 34%, to $60.6 million in 2005, which was primarily due to the 18% growth in logistic services revenue. The 2.4 percentage point increase in gross margin was driven by our Americas division. Our Americas division experiences higher margins from logistic services than any of our other divisions; and the 51% increase in logistic services revenue in our Americas division improved our overall gross margin from logistic services. This was partially offset by a decrease in the gross margin percentage in our Americas division caused by a decline in our average fees for logistic services attributable to the mix of services provided, reduced fee structures with certain customers and changes in the scope of services provided to certain customers. Our logistic services revenue is derived from a mix of services with different fee structures from full pallet pick, pack and ship services to more complex software loading, kitting, customized packaging and fulfillment of an individual handset. While the fee structures are higher for more complex services, we generally strive to maintain a consistent profit margin for each service.

Selling, General and Administrative (SG&A) Expenses

		Year Ended
		December 31,				December 31,
		2005				2004				Change
		(Amounts in 000s)
SG&A expenses		$	86,726			$	69,433				25	%
Percentage of revenue			4.1	%			3.9	%		0.2 % points

SG&A expenses increased $17.3 million or 25% compared to 2004. As a percent of revenue, SG&A expenses increased 0.2 percentage points compared to 2004. The increase in SG&A expenses, both in dollars and as a percent of revenue was due in part to $6.8 million of increased personnel costs to support the overall growth in unit volumes. In addition, SG&A increased due to $2.8 million in additional executive incentive compensation related to performance, a $2.5 million increase in non-cash compensation related to equity awards under the Company’s various long-term compensation plans, and a $1.2 million increase to support our investment in AWS in the Americas.

Facility Consolidation Charge

In September 2004, our subsidiary in Australia entered into a new facility lease arrangement, which commenced in the first quarter of 2005. We vacated our previous location in Australia during the first quarter of 2005, which resulted in a pre-tax charge of $0.9 million. The provision includes approximately $0.7 million for lease termination costs and non-cash losses on the disposal of assets of approximately $0.2 million. At December 31, 2005, the remaining reserve of approximately $0.1 million represents additional payments to be made to terminate the lease obligation. The Company does not anticipate making any other payments related to this facility consolidation. During 2004, we recorded a $0.2 million benefit from our

facility consolidation charge related to the Richmond, California call center operation due to the fact that we terminated the lease for less than we had originally estimated.

Operating Income from Continuing Operations

Operating Income by Division:

		Year Ended
		December 31,				% of				December 31,				% of
		2005				Total				2004				Total				Change
		(Amounts in 000s)
The Americas		$	33,901				76	%		$	21,731				61	%			56	%
Asia-Pacific			9,573				22	%			11,614				33	%			(18	)%
Europe			879				2	%			2,222				6	%			(60	)%
Total		$	44,353				100	%		$	35,567				100	%			25	%

Operating Income as a Percent of Revenue by Division:

		Year Ended
		December 31,				December 31,
		2005				2004				Change
		(Amounts in 000s)
The Americas			5.0	%			4.3	%		0.7% points
Asia-Pacific			0.9	%			1.2	%		(0.3)% points
Europe			0.2	%			0.7	%		(0.5)% points
Total			2.1	%			2.0	%		0.1% points

Operating income from continuing operations increased 25% to $44.4 million in 2005 from $35.6 million in 2004. The increase in operating income was due to the 26% increase in gross profit, compared to only 25% increase in SG&A expense. Operating income was also impacted by the $1.2 million increase in the facility consolidation charge during 2005.

In our Americas division, operating income from continuing operations increased 56% to $33.9 million in 2005 from $21.7 million in 2004. As a percent of revenue, operating income increased 0.7 percentage points. The increase in operating income in our Americas division was due to a 38% increase in gross profit, compared to an increase in SG&A of 23%, which reflects increased efficiency and leverage of fixed costs at higher volumes.

Operating income from continuing operations in our Asia-Pacific division decreased 18% to $9.6 million in 2005 from $11.6 million in 2004. As a percent of revenue, operating income decreased 0.3 percentage points. This decrease was due to a decrease in distribution margin partially resulting from estimated non-recoverable value added taxes. In addition, operating income in our Australia business was lower as a result of the $0.9 million facility consolidation charge and higher SG&A expenses as a percent of revenue compared to 2004. The lower operating income from our business in Australia was partially offset by increased operating income from our business in India.

Operating income from continuing operations in our Europe division decreased 60% to $0.9 million in 2005 from $2.2 million in 2004. As percent of revenue, operating income decreased 0.5 percentage points. This decrease was due to a decrease in operating income in our businesses in Sweden and Norway resulting from lower margins due to decreased demand for our products and services resulting from competitive pressures, which was partially offset by increases in operating income in our other businesses in Europe including Germany, Slovakia and Finland.

Interest

The components of interest, net are as follows:

		Year Ended
		December 31,				December 31,
		2005				2004				Change
		(Amounts in 000s)
Interest expense		$	1,163			$	949				23	%
Interest income			(1,309	)			(986	)			33	%
Interest, net		$	(146	)		$	(37	)			295	%

Interest expense includes interest on outstanding debt, fees paid for unused capacity on credit lines and amortization of deferred financing fees. Interest expense was offset by an increase in interest income from short-term investments. There were no outstanding balances on lines of credit at December 31, 2005 and 2004. However, the timing of payments to suppliers and collections from customers causes the Company’s cash balances and borrowings to fluctuate throughout the year; and during 2005, the largest outstanding borrowings on a given day were approximately $36.3 million with an average outstanding balance of approximately $14.0 million.

Other Expenses

		Year Ended
		December 31,				December 31,
		2005				2004				Change
		(Amounts in 000s)
Other expense		$	1,523			$	1,526				0	%
Percentage of revenue			0.1	%			0.1	%

Other expense was flat compared to 2004. This line item is composed of the cost of the sale of certain receivables to financial institutions conducted routinely throughout the year by certain subsidiaries, fines and penalties, and other unusual items that are not operating expenses. The cost on the sale of certain receivables was $0.7 million and $0.9 million for 2005 and 2004. The receivables sold were $247.4 million and $298.2 million during 2005 and 2004. Also included as a component of other expenses during 2005 is a $0.4 million non-cash loss on the sale of our investment in Chinatron Group Holdings Limited, which is further discussed in Note 3 of the Notes to Consolidated Financial Statements.

Income Tax Expense

		Year Ended
		December 31,				December 31,
		2005				2004				Change
		(Amounts in 000s)
Income tax expense		$	11,058			$	10,252				7.9	%
Effective tax rate			25.7	%			30.1	%		(4.4)% points

Income tax expense for 2005 and 2004 was $11.1 million and $10.3 million, resulting in effective income tax rates of 25.7% and 30.1%. The decrease in the effective tax rate from 2004 to 2005 is due primarily to the recognition of deferred tax assets for which a valuation allowance had previously been recorded. In 2005 entities that did not have a history of making profits were profitable, resulting in the recognition of certain deferred tax assets related to prior net operating losses. Also, as of the end of 2005, our business in the United States had a significantly smaller net operating loss carry-forward which increased the likelihood that alternative minimum tax credits may be utilized in the future and as a result, previously recorded valuation allowances against alternative minimum tax credits were reversed. Our effective income tax rate is typically lower than the United States statutory tax rates primarily due to the benefit from foreign operations that have lower statutory tax rates than the United States.

Discontinued Operations

		Year Ended
		December 31,				December 31,
		2005				2004				Change
		(Amounts in 000s)
Loss from discontinued operations		$	(20,600	)		$	(4,343	)			374	%
Loss on disposal of discontinued operations			(878	)			(5,713	)			(85	)%
Total discontinued operations		$	(21,478	)		$	(10,056	)			114	%
Percentage of Revenue			(1.0	)%			(0.6	)%		0.4% points
Diluted loss per share		$	(0.52	)		$	(0.23	)			126	%

Loss from discontinued operations for 2005 relates primarily to losses incurred in Brightpoint France of $20.1 million, including a $13.8 million non-cash impairment charge to the value of goodwill and other intangible assets recorded in the third quarter of 2005. On December 16, 2005, our subsidiary, Brightpoint Holdings B.V., completed the sale of all the equity securities of Brightpoint France to an entity formed by the former managing director of Brightpoint France, which resulted in a non-cash loss from the sale of approximately $2.2 million. The loss on the sale of Brightpoint France was partially offset by approximately $1.0 million of tax benefits from previous disposals.

The loss from discontinued operations for 2004 was primarily attributable to losses incurred in Brightpoint France of $3.9 million. The loss on disposal of discontinued operations for 2004, was largely attributable to a $3.8 million loss on the sale of Brightpoint Ireland, a $0.6 million loss on the sale of one of our subsidiaries, Brightpoint do Brasil Ltda., and unrealized foreign currency translation losses caused by the strengthening of foreign currencies relative to the U.S. dollar. On February 19, 2004, our subsidiary, Brightpoint Holdings B.V., completed the sale of its entire interest in Brightpoint Ireland to Celtic Telecom Consultants Ltd. Cash consideration for the sale was approximately $1.7 million.

2004 RESULTS OF OPERATIONS

Revenue and Wireless Devices Handled

Wireless Devices Handled by Division:

		Year Ended
		December 31,				% of				December 31,				% of
		2004				Total				2003				Total				Change
		(Amounts in 000s)
The Americas			18,886				70	%			12,403				62	%			52	%
Asia-Pacific			6,956				26	%			6,940				35	%			—
Europe			985				4	%			587				3	%			68	%
Total			26,827				100	%			19,930				100	%			35	%

Wireless devices handled grew by 35% in 2004 compared to 2003. This compares to our estimated growth of the global wireless devices industry of 29%. Our 2004 growth rate is similar to the 36% year-over-year growth rate we experienced in 2003.

Of the 6.9 million increase in wireless devices handled, 6.5 million occurred in the Americas division, which experienced a 52% rate of growth, and represented 70% of the Company’s wireless devices handled in 2004. The Americas proportion of total wireless devices handled grew from 62% in 2003. Within the Americas division, our North America business experienced a 40% increase and our Colombia business experienced a 166% increase. In North America, the logistic services business experienced a 57% increase. This was driven by an overall strength in demand in the U.S. market, which benefited our mobile operator customers such as Nextel, Virgin Mobile, Metro PCS and TracFone. Additionally, we acquired a significant new customer, Cricket Communications, a subsidiary of Leap Wireless International, Inc., in 2004, which contributed to our growth rate. Growth in our North America business was tempered by a 7% decline in wireless devices handled in our distribution business. This decline was significantly attributable to the transition of certain regional mobile operators from TDMA to either GSM or CDMA and we lost market share in this channel due to a key supplier’s relatively weaker market position in GSM and CDMA as compared to TDMA. We were able to fill a portion of the demand with alternative suppliers, however, not sufficiently enough to maintain our historical market share in this segment. Additionally, a certain mobile operator promoted wireless devices directly to its dealer channel at subsidized pricing that made our offering

to our dealer channel for that same mobile operator’s wireless devices uncompetitive. The increase in our Colombia business was ascribable to a successful conversion from TDMA to GSM of our key logistics mobile operator customer, combined with promotional activity and with a general increase in demand in the Colombia market.

The remainder of the increase in wireless devices handled was in the Europe division, which experienced a 68% increase. This was principally due to our entries into the Slovak Republic and Finland during 2004. Demand was generally higher in our European markets and we were able to fill growing demand for high-end wireless data devices.

Wireless devices handled in the Asia-Pacific division were flat. 73% and 31% increases in our Australia and New Zealand businesses were offset by a 72% decline in our India CDMA business and a 43% decline in our Philippines business. Shipments of GSM wireless devices through our Brightpoint Asia Limited business, which represented 17% of our total wireless devices handled, experienced a modest growth rate of 8% from 2003. Our Australia and New Zealand businesses benefited from significant promotional activity by mobile operators and the replacement cycle. In India, in 2003, we were successful at launching a certain model of a CDMA wireless device with a large mobile operator. In 2004, we were unable to launch follow-on CDMA products at the same quantities. With regards to Brightpoint Asia Limited, we believe that shifts toward in-country product sourcing in a key export market tempered growth in GSM export sales. GSM wireless device shipments through Brightpoint Asia Limited grew 97% and 101% in 2003 and 2002. We believe this business was closer to reaching its volume potential in 2004 than in prior years; therefore, we experienced market demand resistance to further significant growth.

Wireless Devices Handled by Service Line:

		Year Ended
		December 31,				% of				December 31,				% of
		2004				Total				2003				Total				Change
		(Amounts in 000s)
Distribution			10,074				38	%			10,428				52	%			(3	)%
Logistic services			16,753				62	%			9,502				48	%			76	%
Total			26,827				100	%			19,930				100	%			35	%

The decrease in wireless devices handled through product distribution was primarily caused by a 7% decline in the Americas division due to a shift in demand from TDMA wireless devices, a segment where we previously had a leading product offering, to GSM and CDMA, where our key supplier has a relatively weaker market position in GSM and CDMA as compared to TDMA. A disparity in our pricing in certain channels relative to a certain mobile operator’s subsidized pricing further contributed to the decline. Additionally, we experienced 72% decline in India CDMA volumes. Our entry into Finland with a distribution business model and a general increase in demand in our European division, particularly for high-end wireless data devices, partially offset the decrease.

The strength and relatively large scale of our Americas logistic services business, combined with our entry into the Slovak Republic with a logistic services offering and an increase in demand by a key logistic services customer in Australia generated the 76% increase in wireless devices handled through logistic services.

Within the 26.8 million wireless devices handled and as compared to the 19.9 million units that we handled last year, we saw a significant sales mix shift from product distribution sales to fee-based logistic services. Total wireless devices handled drive our profitability and our business model benefits from activity in both product distribution and logistic services. Shifts in sales mix from one to another can significantly affect our revenue line without having as significant of an impact on profitability.

Revenue by Service Line:

		Year Ended
		December 31,				% of				December 31,				% of
		2004				Total				2003				Total				Change
		(Amounts in 000s)
Distribution		$	1,523,717				86	%		$	1,506,772				89	%			1	%
Logistic services			248,707				14	%			185,808				11	%			34	%
Total		$	1,772,424				100	%		$	1,692,580				100	%			5	%

Product distribution revenue grew modestly at 1% due to a 3% decline in wireless devices handled through distribution that was offset by a 3% increase due to the general strengthening of foreign currencies relative to the U.S. dollar, a slight increase in the average selling price of wireless devices and a slight increase in accessory revenue.

Although the overall increase in average selling price of wireless devices was up slightly, we experienced different rates of change within each division. Excluding the effect of the general strengthening of foreign currencies relative to the U.S. dollar, the Europe and Americas divisions experienced 15% and 9% increases in average selling prices. This was primarily due to the increased functionality and consequently higher market value of wireless devices in 2004 as compared to products sold in 2003. The Asia-Pacific division, on the other hand, experienced a 6% decline in average selling price (excluding the effects of foreign currency fluctuations). In the second quarter, Nokia, a key supplier, launched an aggressive pricing campaign that significantly reduced our average selling price in the Asia-Pacific division. The pressure on average selling price caused by this action was mostly limited to the second quarter. Our Australia business experienced a 34% decline in average selling price (excluding the effects of foreign currency fluctuations) due to a notable shift in demand to lower end wireless devices. This shift was a function of a key mobile operator promoting and subsidizing low-end prepaid wireless devices and subscriptions.

Logistic services revenue increased as a result of a 35% increase in the sales of prepaid airtime, which was up across all three divisions, and a 76% increase in wireless devices handled. The increase in sales of prepaid airtime was a result of the continued success of prepaid airtime offerings by our customers such as Tele2, Vodafone, SFR and Virgin Mobile, and the continued expansion of our electronic recharge terminals in our Europe division. The strength and relatively large scale of our Americas logistic services business, combined with our entry into the Slovak Republic with a logistic services offering and an increase in demand by a key logistic services customer in Australia, generated the significant increase in wireless devices handled through logistic services. The revenue increase due to wireless device volume increases were partially offset by negotiated price decreases with key customers, customers qualifying for additional volume discounts and sales mix changes among logistics customers. Our logistic services revenue is derived from a mix of services with different fee structures from simple full pallet pick, pack and ship services to more complex software loading, kitting, customized packaging and fulfillment of an individual handset. While the fee structures are higher for more complex services, we generally strive to maintain a consistent profit margin for each service.

Revenue by Division:

		Year Ended
		December 31,				% of				December 31,				% of
		2004				Total				2003				Total				Change
		(Amounts in 000s)
The Americas		$	505,135				28	%		$	469,618				28	%			8	%
Asia-Pacific			968,150				55	%			995,797				59	%			(3	)%
Europe			299,139				17	%			227,165				13	%			32	%
Total		$	1,772,424				100	%		$	1,692,580				100	%			5	%

As discussed in the section entitled “Wireless Devices Handled by Division,” the Americas division generated the majority of the Company’s 35% growth in wireless devices handled. This was primarily accomplished through its logistic services business, which does not have as much relative sensitivity to the total revenue line. Europe, on the other hand, experienced higher relative growth in its distribution business, which does have higher sensitivity in the total revenue line. The Europe division generated the majority of the Company’s revenue growth. The Asia-Pacific division experienced a modest decline.

The Europe division experienced a 15% increase in the average selling price (excluding the effect of foreign currency fluctuations) and a 17% increase in wireless devices handled through distribution. The added functionality of wireless devices and an increase in mix of high-end wireless data devices were principal causes of the increase in the average selling price. The effect of the general strengthening of European currencies relative to the U.S. dollar further contributed 9% to our revenue growth. Excluding the effect of foreign currency fluctuations, the Europe division’s logistic services business increased by $8.5 million. Growth in the sale of prepaid airtime, which is classified under logistic services, constituted the majority of the increase. Our entry into Finland (distribution) and the Slovak Republic (logistic services) also contributed to the Europe division’s revenue growth, which was partially offset by a decline in accessories sold.

The increase in revenue in the Americas division was predominantly due to a 75% increase in wireless devices handled through its logistic services business and the significant growth impact of prepaid airtime on its revenue stream. This was partially offset by a reduction in the average fee in wireless device transactions due to negotiated price decreases with key

customers, customers qualifying for additional volume discounts and sales mix changes among logistic customers. The Americas division was able to reduce its operating costs in line with average fee reductions. Distribution revenue was flat in the Americas. This was a result of a 7% decline in wireless devices handled through distribution, coupled with a decline in accessories revenue and offset by a 9% increase in the average selling price of wireless devices sold. The increase in the average selling price was due to the added functionality of wireless devices.

The Asia-Pacific division experienced a slight decrease in revenue. A 4% decrease in wireless devices handled through distribution, combined with a 6% decrease in average selling price (excluding the effect of foreign currency fluctuations) were key contributors to the decrease. The general strengthening of foreign currencies relative to the U.S. dollar, an increase in accessories revenue and an increase in wireless devices handled through logistic services partially offset the overall revenue decline.

Gross Profit and Gross Margin

Gross Profit by Service Line:

		Year Ended
		December 31,				% of				December 31,				% of
		2004				Total				2003				Total				Change
		(Amounts in 000s)
Distribution		$	59,598				57	%		$	53,528				62	%			11	%
Logistic services			45,166				43	%			32,796				38	%			38	%
Gross profit		$	104,764				100	%		$	86,324				100	%			21	%

Our gross profit was up 21%, which was significantly higher than our revenue growth of 5%. Our 35% increase in wireless devices handled was the primary driver for the increase in gross profit. Wireless devices handled through logistic services grew by 76%, while wireless devices handled through distribution declined by 3%. The gross profit per wireless device handled in logistic services was lower than the gross profit per wireless device handled through distribution (which is generally the case). The significant sales mix shift toward logistic services, combined with the lower gross profit yield per unit, explain the lower 21% growth in gross profit as compared to the 35% growth in wireless devices handled. Logistic services generally requires less invested capital and sales and administrative resources and has a lower risk profile than distribution; therefore, logistic services generally warrants a lower gross profit per unit. Improved efficiencies due to higher volumes and productivity improvements also contributed to the increase in gross profit. The general strengthening of foreign currencies relative to the U.S. dollar contributed $3.6 million to the increase.

A significant portion of the increase in gross profit was generated by the Americas division, which experienced high growth in wireless devices handled and drove improvements in productivity. Through its revenue increase and as a result of the general strengthening of foreign currencies relative to the U.S. dollar, the Europe division also contributed to the improvement in gross profit. As a result of a modest revenue decline and a 0.1 percentage point decrease in gross margin, the Asia-Pacific division experienced a 1% decline in gross profit.

The 11% improvement in gross profit in product distribution in light of a 1% increase in revenue was due to a sales mix shift from lower gross margin distribution revenue in the Asia-Pacific division to the higher relative gross margin distribution revenue in the Europe division and productivity improvements.

The 38% improvement in gross profit in logistic services was primarily the result of a 34% increase in revenue.

Gross Margin by Service Line:

		Year Ended
		December 31,				December 31,
		2004				2003				Change
Distribution			3.9	%			3.6	%		0.3% points
Logistic services			18.2	%			17.7	%		0.5% points
Gross margin			5.9	%			5.1	%		0.8% points

Gross margin improved by 0.8 percentage points to 5.9%. This was principally the result of a sales mix shift from lower relative gross margin distribution sales to higher relative gross margin logistic services revenue.

The 0.3 percentage point increase in product distribution gross margin was the result of an increase in relative weight of the Europe division’s revenue and associated gross margin, which yielded a higher gross margin than the Americas and Asia-Pacific divisions. The increase in sales of higher end, higher gross margin wireless devices and improvements in gross margin in accessory sales further improved the Europe division’s product distribution gross margin as compared to 2003. The Asia-Pacific division experienced a slight decline in gross margin through product distribution. This was the result of reduced sales in our India CDMA business and the tightening of incentives by a key supplier within the division. The Americas experienced a slight increase in product distribution gross margin because of improvements in productivity.

Logistic services experienced a 0.5 percentage point increase in gross margin. This increase was primarily due to the Americas division, which experienced a slight increase in logistic services gross margin as a consequence of higher volumes and productivity improvements, which offset reductions in average fees earned in the provision of services on wireless devices.

Selling, General and Administrative (SG&A) Expenses

		Year Ended
		December 31,				December 31,
		2004				2003				Change
		(Amounts in 000s)
SG&A expenses		$	69,433			$	60,508				15	%
Percentage of revenue			3.9	%			3.6	%		0.3% points

SG&A expenses increased $8.9 million, or 15%, in 2004. As a percent of revenue, SG&A expenses increased 0.3 percentage points. The increase in dollars and SG&A as a percent of revenue was a result of:

	•		$2.4 million unfavorable effect of the strengthening of foreign currencies relative to the U.S. dollar,
	•		our entry into Finland and the Slovak Republic,
	•		increases in variable costs to support our growth and expansion in current markets, including our continued business development in India,
	•		a $2.1 million increase in expenses related to being a publicly traded company, which included $1.6 million related to compliance efforts with Section 404 of the Sarbanes-Oxley Act of 2002, and
	•		the effect of the benefit of a $0.9 million legal expense recovery in 2003, which did not recur in 2004.

SG&A expenses as a percent of revenue was adversely impacted by the effect of a sales mix shift from product distribution to fee-based logistic services in relation to total revenue growth. Since our 5% revenue growth did not correlate with the 35% growth in wireless devices handled, comparisons of SG&A expenses as a percent of revenue on a year-over-year basis may not be as meaningful. As a percent of gross profit, SG&A expenses were down, year over year.

Operating Income from Continuing Operations

Operating Income by Division:

		Year Ended
		December 31,				% of				December 31,				% of
		2004				Total				2003				Total				Change
		(Amounts in 000s)
The Americas (1)		$	21,731				61	%		$	3,620				18	%			500	%
Asia-Pacific			11,614				33	%			14,088				69	%			(18	)%
Europe			2,222				6	%			2,647				13	%			(16	)%
Total		$	35,567				100	%		$	20,355				100	%			75	%

Operating Income as a Percent of Revenue by Division:

		Year Ended
		December 31,				December 31,
		2004				2003				Change
The Americas (1)			4.3	%			0.8	%		3.5% points
Asia-Pacific			1.2	%			1.4	%		(0.2)% points
Europe			0.7	%			1.2	%		(0.5)% points
Total			2.0	%			1.2	%		0.8 % points

Operating income from continuing operations grew by $15.2 million, or 75%. This improvement was primarily the result of a 35% increase in wireless devices handled that generated an $18.4 million, or 21% increase in gross profit, partially offset by an $8.9 million, or 15% increase in SG&A spending. The facility consolidation charges of $5.5 million in 2003, which did not recur in 2004, also contributed to the improvement.

The 35% increase in wireless devices handled was primarily driven by a 52% growth rate in our largest division (the Americas division) as measured by wireless devices handled. A high growth rate of our logistic services business in the Americas division was the primary contributor to its growth. The Europe division, which represented 4% of the Company’s total wireless devices handled, experienced a 68% growth rate. The Asia Pacific division, which represented 26% of the Company’s total wireless devices handled, experienced a less than 1% increase. Although worldwide demand was strong in the wireless device industry, declines in volume in our India CDMA business and modest volume growth in our Brightpoint Asia Limited GSM export business contained the Asia-Pacific division’s overall growth. For the Company, a sales mix shift from high revenue product distribution wireless devices handled to lower revenue fee-based logistics wireless devices handled affected our revenue growth rate, which was 5%. Included in our revenue growth was the sale of prepaid airtime, which grew in all divisions, however, the increase was more apparent in the Europe division. The higher volumes contributed to a 21% increase in gross profit and the sales mix shift to higher gross margin logistic services revenue contributed to a 0.8 percentage point increase in gross margin.

The increase in SG&A expenses was related to a $2.4 million unfavorable effect of the strengthening of foreign currencies relative to the U.S. dollar, our entry into Finland and the Slovak Republic, increases in variable costs to support our growth and expansion in current markets, including our continued business development in India, a $2.1 million increase in expenses related to being a publicly traded company, which included $1.6 million related to compliance efforts with Section 404 of the Sarbanes-Oxley Act of 2002, and the effect of the benefit of a $0.9 million legal expense recovery in 2003, which did not recur in 2004.

The general strengthening of foreign currencies relative to the U.S. dollar had an increasing effect on revenue, gross profit, SG&A expenses and operating income. The effect on operating income was 8%.

The Americas division experienced an $18.1 million increase in operating income from continuing operations. This was the result of a 52% increase in wireless devices handled that contributed to a 40% increase in gross profit in conjunction with a modest 5% increase in SGA expenses, excluding corporate allocations. The increase in wireless devices handled was predominantly driven by its logistic services business and was partially offset by a decline in its product distribution business. Demand was strong in the Americas division for our logistic services customers for whom we fulfilled orders. Demand in our distribution business was significantly and negatively affected by a key supplier’s relatively weaker market position in GSM and CDMA as compared to TDMA and in related shifts in demand by our mobile operator customers. The facility consolidation charges of $5.5 million in 2003 related to the closure of our former Richmond, California call center, which did not recur in 2004, also contributed to the improvement. The Americas division’s operating income was also negatively affected by our increased costs of being a public company.

The increase in operating income from continuing operations in the Americas division was partially offset by reductions in the Asia-Pacific and Europe divisions. The reduction in the Asia-Pacific division was related to mixed operating results among the various subsidiaries within the division. Significant increases in wireless devices handled in Australia and New Zealand were offset by declines in volume in our India CDMA business and in the Philippines. Additionally, a relatively modest volume increase of 7% in our Brightpoint Asia Limited GSM export business contained the Asia-Pacific division’s overall growth. Primarily due to a decrease in the average selling price of wireless devices handled through distribution and

partially offset by the favorable effect of the general weakening of the U.S. dollar relative to foreign currencies, revenue for the division declined by 2%. Furthermore, the division experienced a 0.2 percentage point decline in gross margin. This was largely the result of reduced sales in our India CDMA business and the tightening of incentives by a key supplier. A significant contributor to the reduction in operating income from continuing operations was a $2.4 million operating loss in our India CDMA business. This business was profitable in 2003 when we were successful at launching a certain model of a CDMA wireless device with a large mobile operator. In 2004, we were unable to launch follow-on CDMA products at the same quantities and incurred additional costs related to building our operating infrastructure for the long term. The Asia-Pacific division’s operating income was also negatively affected by our increased costs of being a public company.

Although our Europe division experienced a 68% increase in wireless devices handled and a related 32% increase in revenue, its operating income declined by $0.4 million, or 16%. We entered into Finland and the Slovak Republic in 2004 and both businesses incurred operating losses. Conversely, our Germany business, which had incurred significant operating losses in previous years, generated a positive operating result. The initiation of sales of high-end wireless data devices contributed to our Germany business’ improved operating results. The Europe division’s operating income was also negatively affected by our increased costs of being a public company.

Interest

		Year Ended
		December 31,				December 31,
		2004				2003				Change
		(Amounts in 000s)
Interest expense		$	949			$	1,147				(17	)%
Interest income			(986	)			(652	)			51	%
Interest, net		$	(37	)		$	495				(107	)%

Net interest changed by $0.5 million, or 107%, from $0.5 million interest expense in 2003 to less than $0.1 million interest income in 2004. Interest expense includes interest on outstanding debt, fees paid for unused capacity on credit lines and amortization of deferred financing fees. Interest expense was offset by an increase in interest income from short-term investments. Our cash balances fluctuate throughout the year as we routinely make large payments to suppliers and collect large receipts from customers. These payments or collections can be in excess of $10 million on any given day and the timing of these payments or collections can cause a need to draw against our existing credit facilities or can provide excess cash to invest on a short-term basis, which can affect our interest expense and interest income.

Other Expenses

		Year Ended
		December 31,				December 31,
		2004				2003				Change
		(Amounts in 000s)
Other expense		$	1,526			$	1,927				(21	)%
Percentage of revenue			0.1	%			0.1	%

Other expenses decreased by $0.4 million, or 21%. This line item is composed of the cost on the sale of certain receivables to financial institutions conducted routinely throughout the year by certain subsidiaries, fines and penalties, and other unusual items that are not operating expenses. The cost on the sale of certain receivables was $0.9 million and $1.0 million for 2004 and 2003. Total receivables sold were $298.2 million and $232.6 million during 2004 and 2003. Included in other expenses in 2003 was a $0.5 million fine paid in connection with the Company’s settlement with the SEC, which did not recur in 2004.

Income Tax Expense

		Year Ended
		December 31,				December 31,
		2004				2003				Change
		(Amounts in 000s)
Income tax expense		$	10,252			$	3,731				175	%
Effective tax rate			30.1	%			21.2	%		8.9% points

The $6.5 million increase in income tax expense was a result of increased operating income and a 30.1% effective income tax rate in 2004, as compared to a 21.2% effective income tax rate in 2003. The increase in the effective income tax rate was primarily attributable to the increased profitability of our business in certain jurisdictions such as North America and Australia, which have higher statutory tax rates than other jurisdictions that we operate in, and the recognition of valuation

allowances against the tax benefit of net operating losses for four subsidiaries whose ability to realize the benefits of net operating losses is uncertain at this time. Our effective income tax rate differs from the United States Federal income tax rate of 35% due to a significant portion of our taxable income having been generated in foreign tax jurisdictions, many which have lower tax rates.

Income from Continuing Operations

		Year Ended
		December 31,				December 31,
		2004				2003				Change
		(Amounts in 000s)
Operating income		$	35,567			$	20,355				75	%
Interest expense, net			(37	)			495				(107	)%
Loss on extinguishment of debt			—				365				N/A
Other expenses			1,526				1,927				(21	)%
Income from continuing operations before taxes			34,078				17,568				94	%
Income tax expense			10,252				3,731				175	%
Income from continuing operations before minority interest			23,826				13,837				72	%
Income from continuing operations			23,826				13,861				72	%
Diluted earnings per share		$	0.55			$	0.32				72	%

Income from continuing operations grew by $10.0 million, or 72%. This improvement was primarily the result of a 35% increase in wireless devices handled that generated an $18.4 million, or 21% increase in gross profit, partially offset by an $8.9 million, or 15% increase in SG&A spending and $6.5 million increase in income tax expense. The facility consolidation charge of $5.5 million in 2003, which did not recur in 2004, also contributed to the improvement. Our effective income tax rate increased from 21.2% to 30.1% in 2004, which was primarily attributable to the increased profitability in certain tax jurisdictions such as North America and Australia, which have higher average statutory tax rates than other tax jurisdictions where we operate, and the recognition of valuation allowances against the tax benefit of net operating losses for four subsidiaries whose ability to realize the benefits of net operating losses is uncertain at this time.

Income from continuing operations per diluted share was $0.55, as compared to $0.32 in 2003.

Discontinued Operations

		Year Ended
		December 31,				December 31,
		2004				2003				Change
		(Amounts in 000s)
Loss from discontinued operations		$	(4,343	)		$	(1,604	)			171	%
Loss on disposal of discontinued operations			(5,713	)			(528	)			982	%
Total discontinued operations		$	(10,056	)		$	(2,132	)			372	%
Percentage of Revenue			(0.6	)%			(0.1	)%		0.5% points
Diluted loss per share		$	(0.23	)		$	(0.05	)			360	%

The loss from discontinued operations for 2004 was mainly ascribable to losses incurred in Brightpoint France’s operations of $3.9 million. The loss on disposal of discontinued operations for 2004 was largely attributable to a $3.8 million loss on the sale of Brightpoint Ireland, a $0.6 million loss on the sale of one of our subsidiaries, Brightpoint do Brasil Ltda., and unrealized foreign currency translation losses caused by the strengthening of foreign currencies relative to the U.S. dollar. On February 19, 2004, our subsidiary, Brightpoint Holdings B.V., completed the sale of its entire interest in Brightpoint Ireland to Celtic Telecom Consultants Ltd. Cash consideration for the sale was approximately $1.7 million. The $3.8 million loss included the non-cash write-off of approximately $1.6 million of cumulative currency translation adjustments.

The loss from discontinued operations for 2003 was primarily attributable to losses incurred by Brightpoint Ireland’s operations of $2.2 million and various professional and liquidation fees. The loss on disposal of discontinued operations for 2003 was significantly comprised of unrealized foreign currency translation losses caused by the strengthening of foreign currencies relative to the U.S. dollar and various professional and liquidation fees, substantially offset by the receipt of $1.3 million in contingent consideration relating to the divestiture of our Middle East operations in the third quarter of 2002.

Our decisions to exit certain markets were based upon historical and projected profitability, historical and projected return on invested capital, the economic, legal, and regulatory environment and other factors. We plan on continuing to evaluate non-performing businesses and may restructure those businesses or exit the markets in which they operate. We have been

successful at restructuring certain non-performing businesses and have made decisions to remain in certain markets due to the improved financial performance and prospects for continual improvement.

Net Income

		Year Ended
		December 31,				December 31,
		2004				2003				Change
		(Amounts in 000s)
Net income		$	13,770			$	11,729				17	%
Percentage of Revenue			0.8	%			0.7	%		0.1% points
Diluted earnings per share		$	0.32			$	0.27				19	%

Net income grew by $2.0 million, or 17%. This improvement was primarily the result of a 35% increase in wireless devices handled that generated an $18.4 million, or 21% increase in gross profit, partially offset by an $8.9 million, or 15% increase in SG&A spending, a $6.5 million increase in income tax expense and a $7.9 million increased loss from discontinued operations. The facility consolidation charge of $5.5 million in 2003, which did not recur in 2004, also contributed to the improvement. Our effective income tax rate increased from 21.2% to 30.1% in 2004, which was primarily attributable to the increased profitability in certain jurisdictions such as North America and Australia, which have higher average statutory tax rates than other jurisdictions that we operate in, and the recognition of valuation allowances against the tax benefit of net operating losses for four subsidiaries whose ability to realize the benefits of net operating losses is uncertain at this time. The loss from discontinued operations for 2004 was largely attributable to losses incurred in Brightpoint France’s operations, a loss on the sale of Brightpoint Ireland, a loss on the sale of Brightpoint Brazil and unrealized foreign currency translation losses caused by the strengthening of foreign currencies relative to the U.S. dollar.

Earnings per diluted share was $0.32, as compared to $0.27 in 2003.

RETURN ON INVESTED CAPITAL FROM OPERATIONS, LIQUIDITY AND CAPITAL RESOURCES

Return on Invested Capital from Operations (ROIC)

We believe that it is equally as important for a business to manage its balance sheet as its statement of operations. A measurement that ties the statement of operation performance with the balance sheet performance is Return on Invested Capital from Operations, or ROIC. We believe if we are able to grow our earnings while minimizing the use of invested capital, we will be optimizing shareholder value and concurrently preserving resources in preparation for further potential growth opportunities. We take a simple approach in calculating ROIC: we apply an estimated average tax rate to the operating income of our continuing operations with adjustments for unusual items, such as facility consolidation charges, and apply this tax-adjusted operating income to our average capital base, which, in our case, is our shareholders’ equity and debt. The details of this measurement for 2005, 2004 and 2003 are outlined below.

		Year Ended December 31,
		2005				2004				2003
		(Amounts in 000s)
Operating income after taxes:
Operating income from continuing operations		$	44,353			$	35,567			$	20,355
Plus: facility consolidation charge (benefit)			933				(236	)			5,461
Less: estimated income taxes(1)			(11,728	)			(10,633	)			(5,715	)
Operating income after taxes		$	33,556			$	24,698			$	20,101
Invested capital:
Debt		$	—			$	—			$	16,207
Shareholders’ equity			149,042				150,737				147,584
Invested capital		$	149,042			$	150,737			$	163,791
Average invested capital(2)		$	149,567			$	145,977			$	137,463
ROIC(3)			22	%			17	%			15	%

Our ROIC was approximately 22% for 2005 and approximately 17% and 15% for 2004 and 2003. Our ROIC improved for 2005 because our operating income increased while invested capital remained relatively flat.

Cash Conversion Cycle

		Year Ended
		December 31,
		2005				2004				2003
Days sales outstanding in accounts receivable			27				24				21
Days inventory on-hand			24				24				25
Days payable outstanding			(44	)			(42	)			(43	)
Cash conversion cycle days			7				6				3

A key source of our liquidity is our ability to invest in inventory, sell the inventory to our customers, pay our suppliers and collect cash from our customers. We refer to this as the cash conversion cycle. The cash conversion cycle is measured by the number of days it takes to effect the cycle of investing in inventory, selling the inventory, paying suppliers and collecting cash from customers. The components in the cash conversion cycle are days of sales outstanding in accounts receivable, days inventory on hand, and days payables outstanding. The cash conversion cycle, as we measure it, is the netting of days sales outstanding in accounts receivable and days inventory on hand with the days payable outstanding. Circumstances when the cash conversion cycle decreases generally generate cash for the Company. Conversely, circumstances when the cash conversion cycle increases generally consume cash in the form of additional investment in working capital. Although our cash conversion cycle increased by 1 day in 2005, we generated cash during 2005 primarily due to increased operating income.

During 2005, the cash conversion cycle increased to 7 days from 6 days in 2004. The change in the cash conversion cycle was the result of a 3-day increase in the days sales outstanding in accounts receivable, partially offset by a 2-day increase in the number of days payable outstanding. The increase in the days sales outstanding was due to a higher percentage of our revenue occurring during the fourth quarter during 2005 compared to 2004 (see “Seasonality”), combined with a 33% growth in revenue during the fourth quarter of 2005 compared to the fourth quarter of 2004. In addition, days sales outstanding in accounts receivable increased by almost 1 day due to our decision to discontinue the sale of trade receivables to third party financial institutions in Sweden and Norway (see “Off-balance Sheet Arrangements – Accounts Receivable Transfers”). The increase in days payable outstanding was due to more purchases with suppliers with whom we have longer payment terms at December 31, 2005 compared to 2004.

A cash conversion cycle of 7 days is a low number for a distribution company and it is unlikely that we can sustain this short cycle in the future. From time to time, we may pay our suppliers prior to the invoice due date in order to take advantage of early settlement discounts. Increases in the cash conversion cycle could have the effect of consuming our cash, causing us to borrow from lenders or issuing stockholders’ equity to fund the related increase in working capital. Our potential investments in new markets may cause us to increase our inventory levels in conditions where our customer base is relatively new and whose purchasing behavior is less predictable. This situation can have the effect of increasing our cash conversion cycle and consequently consume our cash or increase our debt levels.

The detail calculation of the components of the cash conversion cycle is as follows:

(A) Days sales outstanding in accounts receivable = Ending accounts receivable for continuing operations divided by average daily revenue (inclusive of value-added taxes for foreign operations) for the period.

(B) Days inventory on-hand = Ending inventory for continuing operations divided by average daily cost of revenue (excluding indirect product and service costs) for the period.

(C) Days payables outstanding = Ending accounts payable for continuing operations divided by average daily cost of revenue (excluding indirect product and service costs) for the period.

		Year Ended December 31,
		2005				2004				2003
						(Amounts in 000s)
Days sales outstanding in accounts receivable:
Continuing operations revenue		$	2,140,177			$	1,772,424			$	1,692,580
Value-added taxes invoiced for continuing operations			110,707				110,733				86,944
Total continuing operations revenue and value-added taxes			2,250,884				1,883,157				1,779,524
Daily sales including value-added taxes			6,252				5,231				4,943
Continuing operations ending accounts receivable		$	168,004			$	126,274			$	105,137
Days sales outstanding in Accounts Receivable(A)			27				24				21
Days inventory on-hand
Continuing operations cost of revenue		$	2,008,165			$	1,667,660			$	1,606,256
Indirect product and service costs			(126,700	)			(99,053	)			(88,154	)
Total continuing operations cost of products sold			1,881,465				1,568,607				1,518,102
Daily cost of products sold			5,226				4,357				4,217
Continuing operations ending inventory		$	124,864			$	105,469			$	103,362
Days inventory on-hand(B)			24				24				25
Days payables outstanding in accounts payable
Daily cost of products sold		$	5,226			$	4,357			$	4,217
Continuing operations ending accounts payable		$	232,258			$	181,634			$	182,857
Days payable outstanding(C)			44				42				43
Cash conversion cycle days (A+B-C)			7				6				3

Consolidated Statement of Cash Flows

We use the indirect method of preparing and presenting our statements of cash flows. In our opinion, it is more practical than the direct method and provides the reader with a good perspective and analysis of the Company’s cash flows.

		Year Ended December 31,
		2005				2004				Change
		(Amounts in 000s)
Net cash provided by (used in):
Operating activities		$	68,960			$	7,742			$	61,218
Investing activities			(15,499	)			(5,923	)			(9,576	)
Financing activities			(11,168	)			(34,497	)			23,329
Effect of exchange rate changes on cash and cash equivalents			(8,360	)			5,919				(14,279	)
Net increase (decrease) in cash and cash equivalents		$	33,933			$	(26,759	)		$	60,692

Net cash provided by operating activities was $69.0 million in 2005, an increase of $61.2 million compared to prior year primarily due to:

	•		$39.9 million more cash provided by changes in working capital in 2005 compared to 2004
	•		$10.9 million more cash from income adjusted for non-cash expenses in 2005 compared to 2004 as a result of $39.6 million of non-cash expense during 2005 compared to only $25.4 million non-cash expense during 2004, partially offset by $3.3 million of lower net income in 2005 compared to 2004
	•		$10.5 million additional cash provided by reductions in cash collateral requirements during 2005 compared to 2004