UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended June 30, 2008

0-23494
(Commission File no.)

 

Brightpoint, Inc.

Indiana		35-1778566
State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization
2601 Metropolis Parkway, Suite 210, Plainfield, Indiana		46168
(Address of principal executive offices)		(Zip Code)

(317) 707-2355

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
þ Yes o No

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

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

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

The number of shares of Common Stock outstanding as of August 1, 2008: 81,627,174

 

 

PART 1 — FINANCIAL INFORMATION

Item 1. Financial Statements

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

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2008				2007				2008				2007
Revenue
Distribution revenue		$	1,110,473			$	766,980			$	2,199,483			$	1,334,020
Logistic services revenue			104,755				84,015				210,526				158,604
Total revenue			1,215,228				850,995				2,410,009				1,492,624
Cost of revenue
Cost of distribution revenue			1,070,571				743,866				2,109,716				1,294,280
Cost of logistic services revenue			65,259				65,546				133,626				124,046
Total cost of revenue			1,135,830				809,412				2,243,342				1,418,326
Gross profit			79,398				41,583				166,667				74,298
Selling, general and administrative expenses			71,446				32,728				143,197				60,981
Amortization expense			4,819				664				9,542				744
Restructuring charge			2,969				—				6,583				—
Operating income from continuing operations			164				8,191				7,345				12,573
Interest, net			6,901				2,290				14,445				3,440
Other (income) expenses			359				243				(1,607	)			287
Income (loss) from continuing operations before income taxes			(7,096	)			5,658				(5,493	)			8,846
Income tax benefit			(4,955	)			(12,063	)			(4,251	)			(10,717	)
Income (loss) from continuing operations before minority interest			(2,141	)			17,721				(1,242	)			19,563
Minority interest, net of taxes			193				—				332				—
Income (loss) from continuing operations			(2,334	)			17,721				(1,574	)			19,563
Discontinued operations, net of income taxes:
Gain (loss) from discontinued operations			(2	)			(41	)			14				(37	)
Gain on disposal of discontinued operations			5				8				4				12
Total discontinued operations, net of income taxes			3				(33	)			18				(25	)
Net income (loss)		$	(2,331	)		$	17,688			$	(1,556	)		$	19,538
Earnings per share — basic:
Income (loss) from continuing operations		$	(0.03	)		$	0.36			$	(0.02	)		$	0.39
Discontinued operations, net of income taxes			—				—				—				—
Net income (loss)		$	(0.03	)		$	0.36			$	(0.02	)		$	0.39
Earnings per share — diluted:
Income (loss) from continuing operations		$	(0.03	)		$	0.35			$	(0.02	)		$	0.39
Discontinued operations, net of income taxes			—				—				—				—
Net income (loss)		$	(0.03	)		$	0.35			$	(0.02	)		$	0.39
Weighted average common shares outstanding:
Basic			77,829				49,671				77,676				49,580
Diluted			81,445				50,739				81,530				50,615

See accompanying notes

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

		June 30,				December 31,
		2008				2007
		(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents		$	106,734			$	102,160
Accounts receivable (less allowance for doubtful accounts of $14,195 in 2008 and $17,157 in 2007)			622,605				754,238
Inventories			384,929				474,951
Other current assets			69,782				69,261
Total current assets			1,184,050				1,400,610
Property and equipment, net			58,112				55,732
Goodwill			407,657				349,646
Other intangibles, net			135,677				135,431
Other assets			33,659				30,942
Total assets		$	1,819,155			$	1,972,361
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	667,744			$	666,085
Accrued expenses			179,403				189,415
Current portion of long-term debt			14,000				19,332
Lines of credit and other short-term borrowings			1,901				—
Total current liabilities			863,048				874,832
Long-term liabilities:
Lines of credit, long-term			7,922				208,399
Long-term debt			219,964				233,122
Other long-term liabilities			52,935				54,425
Total long-term liabilities			280,821				495,946
Total liabilities			1,143,869				1,370,778
COMMITMENTS AND CONTINGENCIES
Minority interest			352				818
Shareholders’ equity:
Preferred stock, $0.01 par value: 1,000 shares authorized; no shares issued or outstanding			—				—
Common stock, $0.01 par value: 100,000 shares authorized; 88,682 issued in 2008 and 88,418 issued in 2007			887				884
Additional paid-in-capital			622,114				584,806
Treasury stock, at cost, 7,063 shares in 2008 and 6,930 shares in 2007			(59,980	)			(58,695	)
Retained earnings			27,911				29,467
Accumulated other comprehensive income			84,002				44,303
Total shareholders’ equity			674,934				600,765
Total liabilities and shareholders’ equity		$	1,819,155			$	1,972,361

See accompanying notes

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

		Six months ended
		June 30,
		2008				2007
Operating activities
Net income (loss)		$	(1,556	)		$	19,538
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization			19,336				7,244
Discontinued operations			(18	)			25
Pledged cash requirements			—				(212	)
Non-cash compensation			3,417				2,872
Restructuring charge			6,583				—
Change in deferred taxes			(3,677	)			(13,202	)
Minority interest			466				—
Other non-cash			122				980
			24,673				17,245
Changes in operating assets and liabilities, net of effects from acquisitions and divestitures:
Accounts receivable			176,899				(1,896	)
Inventories			116,340				172,792
Other operating assets			(3,220	)			100
Accounts payable and accrued expenses			(54,850	)			(200,108	)
Net cash provided by (used in) operating activities			259,842				(11,867	)
Investing activities
Capital expenditures			(10,702	)			(9,316	)
Acquisitions, net of cash acquired			(6,913	)			(68,864	)
Decrease (increase) in other assets			(132	)			219
Net cash used in investing activities			(17,747	)			(77,961	)
Financing Activities
Net proceeds from (repayments) on lines of credit			(207,124	)			76,334
Repayments on Global Term Loans			(27,856	)			—
Deferred financing costs paid			—				(1,758	)
Purchase of treasury stock			(1,284	)			(355	)
Excess tax benefit from equity based compensation			117				513
Proceeds from common stock issuances under employee stock option plans			22				1,884
Net cash provided by (used in) financing activities			(236,125	)			76,618
Effect of exchange rate changes on cash and cash equivalents			(1,396	)			2,836
Net increase (decrease) in cash and cash equivalents			4,574				(10,374	)
Cash and cash equivalents at beginning of period			102,160				54,130
Cash and cash equivalents at end of period		$	106,734			$	43,756

See accompanying notes

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

1. Basis of Presentation

General

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

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

Earnings Per Share

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

		Three Months Ended								Six months ended,
		June 30,								June 30,
		2008				2007				2008				2007
Income (loss) from continuing operations		$	(2,334	)		$	17,721			$	(1,574	)		$	19,563
Discontinued operations, net of income taxes			3				(33	)			18				(25	)
Net (loss) income		$	(2,331	)		$	17,688			$	(1,556	)		$	19,538
Earnings per share — basic:
Income (loss) from continuing operations		$	(0.03	)		$	0.36			$	(0.02	)		$	0.39
Discontinued operations, net of income taxes			—				—				—				—
Net (loss) income		$	(0.03	)		$	0.36			$	(0.02	)		$	0.39
Earnings per share — diluted:
Income (loss) from continuing operations		$	(0.03	)		$	0.35			$	(0.02	)		$	0.39
Discontinued operations, net of income taxes			—				—				—				—
Net (loss) income		$	(0.03	)		$	0.35			$	(0.02	)		$	0.39
Weighted average shares outstanding for basic earnings per share			77,829				49,671				77,676				49,580
Net effect of dilutive stock options, restricted stock units, shares held in escrow and restricted stock based on the treasury stock method using average market price			3,616				1,068				3,854				1,035
Weighted average shares outstanding for diulted earnings per share			81,445				50,739				81,530				50,615

Brightpoint, Inc.
Notes to Consolidated Financial Statements

Recently Issued Accounting Pronouncements

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

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

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

						Quoted prices				Significant
						in active				other
		Balance at				markets				observable
		June 30, 2008				(Level 1)				inputs (Level 2)
Financial instruments classified as assets
Marketable securities		$	6,411			$	6,411			$	—
Forward foreign currency contracts			201				—				201
Financial instruments classified as liabilities
Interest rate swaps		$	1,779			$	—			$	1,779
Forward foreign currency contracts			364				—				364

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

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

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

Brightpoint, Inc.
Notes to Consolidated Financial Statements

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

Other Comprehensive Income

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

		Three Months Ended								Six Months Ended,
		June 30,								June 30,
		2008				2007				2008				2007
Net (loss) income		$	(2,331	)		$	17,688			$	(1,556	)		$	19,538
Unrealized gain on derivative instruments			1,242				—				521				—
Unrealized loss on marketable securities:
Net loss arising during period			(753	)			—				(2,087	)			—
Reclassification adjustment for losses in included net income			928				—				928				—
Foreign currency translation			2,806				4,818				40,337				6,653
Comprehensive income		$	1,892			$	22,506			$	38,143			$	26,191

2. Acquisitions

On April 28, 2008, the Company acquired the assets of Hugh Symons Group Ltd.’s wireless distribution business for $0.6 million (0.3 million pounds sterling) and the value of inventory at the date of closing. In addition, the Company agreed to contingent cash earn out payments based upon certain operating performance measures which may be payable on the first, second and third anniversary of closing. The total earn out payments shall in no event exceed 3.6 million pounds sterling (approximately $7.2 million as of June 30, 2008).

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

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

Brightpoint, Inc.
Notes to Consolidated Financial Statements

Three months ended :
(amounts in 000s)

		Dangaard
June 30, 2007		Telecom				Brightpoint				Adjustments				Note				Consolidated
Revenue		$	564,124			$	850,995			$	(78,703	)			(1	)		$	1,336,416
Income (loss) from continuing operations			(4,233	)			17,721				(1,757	)			(2	)			11,731
Net (loss) income			(4,233	)			17,688				(1,757	)							11,698
Weighted average shares outstanding — diluted							50,739				30,000				(3	)			80,739
Income from continuing operations per share — diluted						$	0.35											$	0.14

Six months ended:
(amounts in 000s)

		Dangaard
June 30, 2007		Telecom				Brightpoint				Adjustments				Note				Consolidated
Revenue		$	1,071,843			$	1,492,624			$	(128,614	)			(1	)		$	2,435,853
Income (loss) from continuing operations			(1,559	)			19,563				(4,858	)			(2	)			13,146
Net (loss) income			(1,559	)			19,538				(4,858	)							13,121
Weighted average shares outstanding — diluted							50,615				30,000				(3	)			80,615
Income from continuing operations per share — diluted						$	0.39											$	0.16

Pro forma adjustments:

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

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

(3)

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

As discussed further in Note 3, on June 30, 2008, the Company formally announced a plan to realign its European operations. Adjustments to the purchase price allocation under the preliminary plan resulted in additional liabilities of $2.3 million in 2008.

3. Restructuring

On June 30, 2008, the Company formally announced its plan to realign its European operations as a result of the acquisition of Dangaard Telecom. The Company currently expects to incur total restructuring costs of approximately $10.0 to $15.0 million during the third quarter of 2008 for severance, lease abandonment and other restructuring costs as a result of the plan to realign its European operations; and all but $1.3 million to $1.6 million of the estimated charges are directly related to the Dangaard Telecom acquisition and thus will impact the goodwill recorded in purchase accounting. These additional liabilities that impact purchase accounting will be recognized as liabilities assumed in the business combination and included in the allocation of the acquisition costs in accordance with EITF 95-3, Recognition of Liabilities in Connection with a Purchased Business Combination. All of these estimated restructuring costs are expected to result in future cash expenditures.

Brightpoint, Inc.
Notes to Consolidated Financial Statements

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

						Lease				Asset
		Employee				Termination				Impairment
		Terminations				Costs				Charges				Total
Balance at December 31, 2007		$	3,336			$	728			$	—			$	4,064
Restructuring charge			1,165				3,336				2,082				6,583
Dangaard Telecom goodwill adjustment			2,336				—				—				2,336
Foreign currency translation			1,819				110				—				1,929
Total activity:			8,656				4,174				2,082				14,912
Less:
Cash usage			(2,661	)			(365	)			—				(3,026	)
Non-cash usage			—				—				(2,082	)			(2,082	)
Balance at June 30, 2008		$	5,995			$	3,809			$	—			$	9,804

Restructuring charge was $6.6 million for the six months ended June 30, 2008. The restructuring charge consists of the following:

	•		A $1.6 million charge in connection with the sale of certain assets in Colombia.
	•		A $1.1 million charge to write-off IT projects that were abandoned after the acquisition of Dangaard Telecom.
	•		A $3.2 million charge associated with the exit of our redundant warehouse and office facility in Germany
	•		$0.7 million of lease termination costs and severance costs associated with consolidating the Company’s redundant operations in Germany, Sweden and Norway

Adjustments to goodwill acquired in the purchase of Dangaard Telecom related to exiting activities of the acquired operations include $2.3 million associated with the severance of certain employees under the previously announced reorganization plan of our Europe operations.

4. Borrowings

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

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

										Letters of Credit &				Net
		Gross Availability				Outstanding				Guarantees				Availability
Global Term Loans		$	233,964			$	233,964			$	—			$	—
Global Credit Facility			300,000				7,922				421				291,657
Other			60,602				1,901				—				58,701
Total		$	594,566			$	243,787			$	421			$	350,358

Additional details on the above available borrowings are discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

Brightpoint, Inc.
Notes to Consolidated Financial Statements

5. Guarantees

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

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

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

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

		Six Months Ended
		June 30,
		2008				2007
January 1		$	3,944			$	3,063
Provision for product warranties			1,875				3,021
Settlements during the period			(2,246	)			(3,721	)
June 30		$	3,573			$	2,363

Brightpoint, Inc.
Notes to Consolidated Financial Statements

6. Operating Segments

The Company has operations centers and/or sales offices in various countries including Australia, Austria, Belgium, Colombia, Denmark, Finland, France, Germany, India, Italy, the Netherlands, New Zealand, Norway, Poland, Portugal, Russia, Singapore, Slovakia, South Africa, Spain, Sweden, Switzerland, Turkey, the United Arab Emirates, the United Kingdom and the United States. All of the Company’s operating entities generate revenue from the distribution of wireless devices and accessories and/or the provision of logistic services. The Company identifies its reportable segments based on management responsibility of its three geographic divisions: the Americas, Asia-Pacific and Europe. The Company’s operating segments have been aggregated into these three geographic reporting segments.

The Company evaluates the performance of and allocates resources to these segments based on operating income from continuing operations (excluding corporate selling, general and administrative expenses and other unallocated expenses). In the first quarter of 2008, the Company reclassified the financial information related to the global IT support cost center from the Asia-Pacific region to the Corporate and Reconciling section of the segment information presented below. Segment information as of and for the three and six months ended June 30, 2007 has been reclassified to conform to the 2008 presentation. A summary of the Company’s operations by segment is presented below (in thousands) for the three and six months ended June 30, 2008 and 2007:

														Corporate and
Three Months Ended June 30, 2008:		Americas				Asia-Pacific				Europe				Reconciling Items				Total
Distribution revenue		$	171,809			$	308,735			$	629,929			$	—			$	1,110,473
Logistic services revenue			44,055				13,024			$	47,676				—				104,755
Total revenue from external customers		$	215,864			$	321,759			$	677,605			$	—			$	1,215,228
Operating income from continuing operations		$	9,176			$	6,266			$	(6,578	)		$	(8,700	)		$	164
Depreciation and amortization			2,505				593				6,454				277				9,829
Capital expenditures			632				275				3,099				318				4,324
Three Months Ended June 30, 2007:
Distribution revenue		$	266,918			$	379,166			$	120,896			$	—			$	766,980
Logistic services revenue			49,327				8,360				26,328				—				84,015
Total revenue from external customers		$	316,245			$	387,526			$	147,224			$	—			$	850,995
Operating income from continuing operations		$	8,463			$	6,038			$	1,039			$	(7,349	)		$	8,191
Depreciation and amortization			3,072				752				239				123				4,186
Capital expenditures			3,133				751				532				82				4,498
Six Months Ended June 30, 2008:
Distribution revenue		$	372,662			$	639,183			$	1,187,638			$	—			$	2,199,483
Logistic services revenue			90,805				23,664				96,057				—				210,526
Total revenue from external customers		$	463,467			$	662,847			$	1,283,695			$	—			$	2,410,009
Operating income from continuing operations		$	17,432			$	12,351			$	(5,633	)		$	(16,805	)		$	7,345
Depreciation and amortization			5,188				1,337				12,270				541				19,336
Capital expenditures			1,709				129				8,051				813				10,702
Six Months Ended June 30, 2007:
Distribution revenue		$	406,869			$	697,443			$	229,708			$	—			$	1,334,020
Logistic services revenue			91,553				15,595				51,432				24				158,604
Total revenue from external customers		$	498,422			$	713,038			$	281,140			$	24			$	1,492,624
Operating income from continuing operations		$	13,946			$	10,351			$	1,764			$	(13,488	)		$	12,573
Depreciation and amortization			5,132				1,376				501				235				7,244
Capital expenditures			6,660				1,672				726				258				9,316

Brightpoint, Inc.
Notes to Consolidated Financial Statements

Additional segment information is as follows (in thousands):

		June 30,				December 31,
		2008				2007
Total segment assets:
Americas		$	266,384			$	354,910
Asia-Pacific			241,648				243,084
Europe			1,277,906				1,343,621
Corporate			33,217				30,746
		$	1,819,155			$	1,972,361

7. Legal Proceedings and Contingencies

LN Eurocom

On June 11, 2008 LN Eurocom (“LNE”) filed a lawsuit in the City Court of Frederiksberg, Denmark against Brightpoint Smartphone A/S and Brightpoint International A/S, each a wholly owned subsidiary of the Company (collectively, “Smartphone”). The lawsuit alleges that Smartphone breached a contract relating to call center services performed or to be performed by LNE. The total amount claimed is approximately 9 million DKK (approximately $1.9 million as of June 30, 2008). Smartphone disputes this claim and intends to defend this matter vigorously.

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

German value-added tax authorities

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

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

Fleggaard group of companies

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

Brightpoint, Inc.
Notes to Consolidated Financial Statements

Norwegian tax authorities

Dangaard Telecom’s subsidiary, Dangaard Telecom Norway AS Group, received notice from the Norwegian tax authorities regarding tax claims in connection with certain capital gains. The Norwegian tax authorities have claimed $2.7 million. Dangaard Telecom Norway AS Group has disputed this claim; however, The Norwegian Tax Authorities ruled against Dangaard Telecom Norway AS in April 2008, and a law firm has been asked to give an assessment of whether or not to appeal the case. The former shareholders of Dangaard Telecom agreed to indemnify Dangaard Holding with respect to 80% of this claim when Dangaard Holding acquired Dangaard Telecom, and Dangaard Holding agreed in the purchase agreement with the Company to transfer and assign these indemnification rights to the Company (or enforce them on our behalf if such transfer or assignment is not permitted). The Company is currently evaluating the actions to be taken towards former shareholders of the Dangaard group of companies in relation to the indemnification agreement.

German tax authorities

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

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

OVERVIEW AND RECENT DEVELOPMENTS

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

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

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

RESULTS OF OPERATIONS

Revenue and wireless devices handled by division and service line

		Three Months Ended June 30,
						% of								% of
		2008				Total				2007				Total				Change
		(Amounts in 000s)
Distribution revenue
Americas		$	171,809				15	%		$	266,918				35	%			(36	)%
Asia-Pacific			308,735				28	%			379,166				49	%			(19	)%
Europe			629,929				57	%			120,896				16	%			421	%
Total		$	1,110,473				100	%		$	766,980				100	%			45	%
Logistic services revenue
Americas		$	44,055				42	%		$	49,327				59	%			(11	)%
Asia-Pacific			13,024				12	%			8,360				10	%			56	%
Europe			47,676				46	%			26,328				31	%			81	%
Total		$	104,755				100	%		$	84,015				100	%			25	%
Total revenue
Americas		$	215,864				18	%		$	316,245				37	%			(32	)%
Asia-Pacific			321,759				26	%			387,526				46	%			(17	)%
Europe			677,605				56	%			147,224				17	%			360	%
Total		$	1,215,228				100	%		$	850,995				100	%			43	%

		Three Months Ended June 30,
						% of								% of
		2008				Total				2007				Total				Change
		(Amounts in 000s)
Wireless devices sold through distribution
Americas			1,319				21	%			2,005				36	%			(34	)%
Asia-Pacific			2,784				44	%			3,098				56	%			(10	)%
Europe			2,250				35	%			399				8	%			464	%
Total			6,353				100	%			5,502				100	%			15	%
Wireless devices handled through logistic services
Americas			11,759				87	%			13,363				96	%			(12	)%
Asia-Pacific			507				4	%			369				3	%			37	%
Europe			1,276				9	%			192				1	%			565	%
Total			13,542				100	%			13,924				100	%			(3	)%
Total wireless devices handled
Americas			13,078				66	%			15,368				79	%			(15	)%
Asia-Pacific			3,291				16	%			3,467				18	%			(5	)%
Europe			3,526				18	%			591				3	%			497	%
Total			19,895				100	%			19,426				100	%			2	%

		Six Months Ended June 30, 2008
						% of								% of
		2008				Total				2007				Total				Change
		(Amounts in 000s)
Distribution revenue
Americas		$	372,662				17	%		$	406,869				31	%			(8	)%
Asia-Pacific			639,183				29	%			697,443				52	%			(8	)%
Europe			1,187,638				54	%			229,708				17	%			417	%
Total		$	2,199,483				100	%		$	1,334,020				100	%			65	%
Logistic services revenue
Americas		$	90,805				43	%		$	91,553				58	%			(1	)%
Asia-Pacific			23,664				11	%			15,595				10	%			52	%
Europe			96,057				46	%			51,432				32	%			87	%
Total		$	210,526				100	%		$	158,580				100	%			33	%
Total revenue
Americas		$	463,467				19	%		$	498,422				33	%			(7	)%
Asia-Pacific			662,847				28	%			713,038				48	%			(7	)%
Europe			1,283,695				53	%			281,140				19	%			357	%
Total		$	2,410,009				100	%		$	1,492,600				100	%			61	%

		Six Months Ended June 30,
						% of								% of
		2008				Total				2007				Total				Change
		(Amounts in 000s)
Wireless devices sold through distribution
Americas			2,912				23	%			2,992				32	%			(3	)%
Asia-Pacific			5,524				43	%			5,662				60	%			(2	)%
Europe			4,275				34	%			746				8	%			473	%
Total			12,711				100	%			9,400				100	%			35	%
Wireless devices handled through logistic services
Americas			25,789				89	%			23,484				96	%			10	%
Asia-Pacific			883				3	%			733				3	%			20	%
Europe			2,296				8	%			339				1	%			577	%
Total			28,968				100	%			24,556				100	%			18	%
Total wireless devices handled
Americas			28,701				69	%			26,476				78	%			8	%
Asia-Pacific			6,407				15	%			6,395				19	%			0	%
Europe			6,571				16	%			1,085				3	%			506	%
Total			41,679				100	%			33,956				100	%			23	%