UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended September 30, 2006

Brightpoint, Inc.

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

(317) 707-2355

(Registrant’s telephone number, including area code)

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

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 Exchange Act. (Check one):

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

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

The number of shares of Common Stock outstanding as of November 2, 2006: 50,577,197

 

 

PART 1 — FINANCIAL INFORMATION

Item 1. Financial Statements

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

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2006				2005				2006				2005
Revenue
Distribution revenue		$	552,402			$	470,961			$	1,502,888			$	1,303,900
Logistic services revenue			81,337				74,014				245,264				205,643
Total revenue			633,739				544,975				1,748,152				1,509,543
Cost of revenue
Cost of distribution revenue			529,784				453,956				1,441,026				1,255,743
Cost of logistic services revenue			66,953				59,341				198,068				165,403
Total cost of revenue			596,737				513,297				1,639,094				1,421,146
Gross profit			37,002				31,678				109,058				88,397
Selling, general and administrative expenses			24,528				20,657				72,698				59,325
Facility consolidation charge (benefit)			—				(270	)			(9	)			933
Operating income from continuing operations			12,474				11,291				36,369				28,139
Interest, net			226				140				423				156
Other expenses			275				129				213				531
Income from continuing operations before income taxes			11,973				11,022				35,733				27,452
Income tax expense			3,029				2,749				9,576				7,366
Income from continuing operations			8,944				8,273				26,157				20,086
Discontinued operations, net of income taxes:
Loss from discontinued operations			(183	)			(15,452	)			(358	)			(19,827	)
Gain on disposal of discontinued operations			3				997				74				1,331
Total loss from discontinued operations, net of income taxes			(180	)			(14,455	)			(284	)			(18,496	)
Net income (loss)		$	8,764			$	(6,182	)		$	25,873			$	1,590
Earnings (loss) per share — basic:
Income from continuing operations		$	0.18			$	0.17			$	0.53			$	0.42
Discontinued operations, net of income taxes			—				(0.30	)			—				(0.39	)
Net income (loss)		$	0.18			$	(0.13	)		$	0.53			$	0.03
Earnings (loss) per share — diluted:
Income from continuing operations		$	0.18			$	0.17			$	0.52			$	0.41
Discontinued operations, net of income taxes			(0.01	)			(0.29	)			(0.01	)			(0.38	)
Net income (loss)		$	0.17			$	(0.12	)		$	0.51			$	0.03
Weighted average common shares outstanding:
Basic			49,243				47,844				49,026				47,781
Diluted			50,403				49,596				50,581				49,357

See accompanying notes

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

		September 30,				December 31,
		2006				2005
		(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents		$	103,593			$	106,053
Pledged cash			197				168
Accounts receivable (less allowance for doubtful accounts of $4,308 in 2006 and $3,621 in 2005)			179,069				168,004
Inventories			286,164				124,864
Contract financing receivable			49,735				28,749
Other current assets			23,318				22,623
Total current assets			642,076				450,461
Property and equipment, net			33,774				27,989
Goodwill and other intangibles, net			7,529				6,707
Other assets			2,799				2,667
Total assets		$	686,178			$	487,824
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	369,267			$	232,258
Accrued expenses			56,884				64,494
Unfunded portion of contract financing receivable			71,606				32,373
Total current liabilities			497,757				329,125
Total long-term liabilities			11,602				9,657
Total liabilities			509,359				338,782
COMMITMENTS AND CONTINGENCIES
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; 57,440 issued in 2006 and 55,875 issued in 2005			574				559
Additional paid-in-capital			264,558				258,443
Treasury stock, at cost, 6,890 shares in 2006 and 6,113 shares in 2005			(58,288	)			(39,928	)
Unearned compensation			—				(12,125	)
Retained deficit			(27,655	)			(53,528	)
Accumulated other comprehensive income (loss)			(2,370	)			(4,379	)
Total shareholders’ equity			176,819				149,042
Total liabilities and shareholders’ equity		$	686,178			$	487,824

See accompanying notes

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

		Nine Months Ended
		September 30,
		2006				2005
Operating activities
Net income		$	25,873			$	1,590
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization			9,139				7,935
Discontinued operations			284				18,496
Net operating cash flows used in discontinued operations			—				(1,484	)
Pledged cash requirements			(13	)			13,664
Non-cash compensation			4,120				1,608
Facility consolidation charge (benefit)			(9	)			933
Change in deferred taxes			(483	)			(863	)
Income tax benefits from exercise of stock options			—				2,236
Other non-cash			1,368				—
			40,279				44,115
Changes in operating assets and liabilities, net of effects from acquisitions and divestitures:
Accounts receivable			(9,097	)			(10,411	)
Inventories			(158,892	)			3,645
Other operating assets			(1,546	)			(13,343	)
Accounts payable and accrued expenses			127,970				30,772
Net cash provided by (used in) operating activities			(1,286	)			54,778
Investing activities
Capital expenditures			(14,122	)			(7,932	)
Acquisitions, net of cash acquired			(801	)			(357	)
Net investing cash flow from discontinued operations			—				(1,036	)
Net cash provided by contract financing arrangements			18,405				3,445
Decrease (increase) in other assets			(18	)			2,720
Net cash provided by (used in) investing activities			3,464				(3,160	)
Financing Activities
Purchase of treasury stock			(18,360	)			(9,004	)
Net financing cash used in discontinued operations			—				—
Excess tax benefit from equity based compensation			8,443				—
Proceeds from common stock issuances under employee stock option plans			5,693				3,253
Net cash used in financing activities			(4,224	)			(5,751	)
Effect of exchange rate changes on cash and cash equivalents			(414	)			(5,168	)
Net increase (decrease) in cash and cash equivalents			(2,460	)			40,699
Cash and cash equivalents at beginning of period			106,053				72,120
Cash and cash equivalents at end of period		$	103,593			$	112,819

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 accordance with accounting principles generally accepted in the United States 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, 2005. As used herein, the terms “Brightpoint”, “Company”, “we”, “our” and “us” mean Brightpoint, Inc. and its consolidated subsidiaries.

Certain reclassifications have been made to prior year amounts to conform to current year presentation (see Note 3).

Earnings (Loss) Per Share

Basic earnings (loss) 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. Per share amounts for all periods presented in this report have been adjusted to reflect the 6 for 5 common stock split effected in the form of a stock dividend paid on May 31, 2006 and the 3 for 2 common stock splits effected in the form of stock dividends paid on September 30, 2005 and December 30, 2005. The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations (in thousands, except per share data):

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2006				2005				2006				2005
Income from continuing operations		$	8,944			$	8,273			$	26,157			$	20,086
Discontinued operations, net of income taxes			(180	)			(14,455	)			(284	)			(18,496	)
Net income (loss)		$	8,764			$	(6,182	)		$	25,873			$	1,590
Earnings (loss) per share — basic:
Income from continuing operations		$	0.18			$	0.17			$	0.53			$	0.42
Discontinued operations, net of income taxes			—				(0.30	)			—				(0.39	)
Net income (loss)		$	0.18			$	(0.13	)		$	0.53			$	0.03
Earnings (loss) per share — diluted:
Income from continuing operations		$	0.18			$	0.17			$	0.52			$	0.41
Discontinued operations, net of income taxes			(0.01	)			(0.29	)			(0.01	)			(0.38	)
Net income (loss)		$	0.17			$	(0.12	)		$	0.51			$	0.03
Weighted average shares outstanding for basic earnings (loss) per share			49,243				47,844				49,026				47,781
Net effect of dilutive stock options, restricted stock units and restricted stock based on the treasury stock method using average market price			1,160				1,752				1,555				1,576
Weighted average shares outstanding for diluted earnings (loss) per share			50,403				49,596				50,581				49,357

Brightpoint, Inc.
Notes to Consolidated Financial Statements

Stock Based Compensation

On January 1, 2006, the Company adopted the fair value provisions of Statement of Financial Accounting Standards (SFAS) 123(R), Share-Based Payment, using the modified prospective transition method. Prior to January 1, 2006, the Company used the intrinsic value method provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees and related Interpretations to account for stock based compensation. Under the modified prospective transition method, compensation cost recognized for stock based compensation beginning January 1, 2006 includes (a) compensation cost for all equity awards granted prior to, but not yet vested as of January 1, 2006, based on the grant-date fair value estimated in accordance with the original provisions of SFAS 123, and (b) compensation cost for all equity awards granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123(R). Results for prior periods have not been restated.

As a result of adopting SFAS 123(R) on January 1, 2006, the Company’s income from continuing operations before income taxes and net income for the nine months ended September 30, 2006 are $1.9 million and $1.5 million lower than if it had continued to account for stock based compensation under APB 25. Total stock based compensation expense for the nine months ended September 30, 2006 was $2.9 million (net of related tax effects), compared to $1.4 million that would have been included in the determination of net income had the Company continued to account for stock based compensation under APB 25. Basic and diluted earnings per share for the nine months ended September 30, 2006 are $0.03 lower than if the Company had not adopted SFAS 123(R). In addition, SFAS 123(R) requires cash flows resulting from tax deductions of stock based compensation in excess of the compensation costs recognized for those awards (excess tax benefits) to be classified as financing cash flows; whereas, previously, the Company reported all tax benefits of deductions resulting from stock based compensation as operating cash flows. As a result, the $8.4 million of excess tax benefits classified as a financing cash inflow for the nine months ended September 30, 2006 would have been classified as an operating cash inflow if the Company had not adopted SFAS 123(R). Furthermore, under APB 25, grants of restricted shares were recorded in additional paid-in capital (APIC) with an offsetting amount to unearned compensation (contra equity), which was amortized to expense over the vesting period. However, under SFAS 123(R), amounts should not be recognized in equity until compensation cost is recognized over the requisite service period. Therefore, the $12.1 million unearned compensation balance at December 31, 2005 was netted against APIC during the first quarter of 2006.

The Company typically grants equity awards during the first quarter of the fiscal year based primarily on Company and individual performance. During the first quarter of 2006, the Company granted 278,177 restricted stock units and 175,200 shares of restricted stock with a weighted average grant date fair market value of $19.89 per restricted stock unit and $21.44 per share of restricted stock. A portion of the restricted stock units granted are subject to forfeiture if certain performance goals are not achieved. Those restricted stock units no longer subject to forfeiture vest in three equal annual installments beginning with the first anniversary of the grant. No stock options were granted during the nine months ended September 30, 2006.

Brightpoint, Inc.
Notes to Consolidated Financial Statements

The following table illustrates the effect on net income (loss) and earnings (loss) per share if the Company had applied the fair value recognition provision of SFAS 123 for the three and nine months ended September 30, 2005 (in thousands, except per share data):

		Three Months Ended				Nine Months Ended
		September 30, 2005				September 30, 2005
Net income (loss) as reported		$	(6,182	)		$	1,590
Add back; stock compensation included in net income (loss)			329				1,006
Stock-based employee compensation cost, net of related tax effects, that would have been included in the determination of net income (loss) if the fair value method had been applied			(620	)			(2,282	)
Pro forma net income (loss)		$	(6,473	)		$	314
Earnings (loss) per share — basic:
Net income (loss) as reported		$	(0.13	)		$	0.03
Add back; stock compensation included in net income (loss)			—				0.02
Stock-based employee compensation cost, net of related tax effects, that would have been included in the determination of net income (loss) if the fair value method had been applied			(0.01	)			(0.04	)
Pro forma net income (loss)		$	(0.14	)		$	0.01
Earnings (loss) per share — diluted:
Net income (loss) as reported		$	(0.12	)		$	0.03
Add back; stock compensation included in net income (loss)			—				0.02
Stock-based employee compensation cost, net of related tax effects, that would have been included in the determination of net income (loss) if the fair value method had been applied			(0.01	)			(0.04	)
Pro forma net income (loss)		$	(0.13	)		$	0.01

Recently Issued Accounting Pronouncements

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. (FIN) 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109, which clarifies the accounting for uncertainty in tax positions. This Interpretation requires the recognition of a tax position when it is more likely than not that the tax position will be sustained upon examination by relevant taxing authorities, based on the technical merits of the position. The provisions of FIN 48 are effective for the Company on January 1, 2007, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. The Company is currently evaluating the impact of adopting FIN 48 on its financial statements.

In September 2006, the FASB issued SFAS 157, Fair Value Measurements. This Statement defines fair value and provides guidance for how to measure fair value. SFAS 157 applies to assets and liabilities required or permitted to be measured at fair value under other accounting pronouncements; however, this Statement does not provide guidance whether assets and liabilities are required or permitted to be measured at fair value. The provisions of SFAS 157 are effective for the Company on January 1, 2008. The Company does not expect the adoption of SFAS 157 to have material impact on its financial statements.

In September 2006, the FASB issued SFAS 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — An Amendment of FASB Statements No. 87, 88, 106 and 132(R). This Statement requires the recognition of a liability for the unfunded status of a plan or an asset for a plan’s overfunded status in the balance sheet. The statement also requires the recognition of changes in the funded status through comprehensive income during the year in which that change occurred. The provisions of SFAS 158 are effective for the Company on December 31, 2006. The Company is currently evaluating the impact of adopting SFAS 158, but it does not expect the adoption of this statement to have a material impact on its financial statements.

Brightpoint, Inc.
Notes to Consolidated Financial Statements

Other Comprehensive Income (Loss)

Comprehensive income (loss) is comprised of net income and gains or losses resulting from currency translations of foreign investments. The details of comprehensive income (loss) for the three and nine months ended September 30, 2006 and 2005 are as follows (in thousands):

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2006				2005				2006				2005
Net income (loss)		$	8,764			$	(6,182	)		$	25,873			$	1,590
Foreign currency translation			774				(3,217	)			2,009				(7,629	)
Comprehensive income (loss)		$	9,538			$	(9,399	)		$	27,882			$	(6,039	)

T-Mobile Agreement

In August 2006, the Company entered into a Master Service Agreement (the Agreement) with T-Mobile in the United States to provide a full range of integrated forward logistic services enabling T-Mobile to deliver its wireless devices to its direct and indirect distribution channels, as well as directly to T-Mobile’s subscribers from a dedicated facility leased by the Company in Louisville, Kentucky. This Agreement has multiple service deliverables that do not qualify for a separate unit of accounting under Emerging Issues Task Force (EITF) Issue No. 00-21, Revenue Arrangements with Multiple Deliverables. Accordingly, revenue and direct costs associated with the initial facility preparation phase of this Agreement have been deferred and will be realized on a straight-line basis over the term of the Agreement beginning in 2007, once the facility becomes operational. At September 30, 2006, approximately $0.8 million of revenue has been deferred and approximately $0.2 million of direct facility preparation costs have been deferred. Deferred revenue is included as a component of “Accrued expenses” and deferred costs are included as a component of “Other current assets” in the Company’s Consolidated Balance Sheet. If direct facility preparation costs exceed the amount of revenue deferred during the start-up phase, these excess costs will be expensed in the period in which they are incurred.

2. Acquisitions

On February 23, 2006, the Company’s wholly-owned subsidiary, Brightpoint Holdings B.V. (Brightpoint Holdings), acquired all of the outstanding shares of Persequor Limited (Persequor) effective as of January 1, 2006 for approximately $0.6 million (net of cash acquired), which included Persequor’s 15% minority interest in Brightpoint India Private Limited (Brightpoint India) valued at approximately $0.2 million. Previously, Persequor provided management services to Brightpoint Asia Limited and Brightpoint India and held a 15% minority interest in Brightpoint India. In connection with the acquisition, the management services agreements with Persequor have been terminated and Brightpoint Holdings obtained ownership of Persequor’s 15% interest in Brightpoint India. As a result of the acquisition of Persequor and the termination of the management services agreements, the sales and marketing efforts for Brightpoint Asia and Brightpoint India, which were previously outsourced to Persequor, are now handled internally. The shareholders’ agreement among Brightpoint India, Brightpoint Holdings and Persequor dated November 1, 2003 was also terminated in connection with the acquisition by Brightpoint Holdings of Persequor. The operating results of Persequor are included in the Company’s Consolidated Statement of Operations from the effective date of the acquisition. The impact of the acquisition was not material in relation to the Company’s consolidated results of operations. Consequently, pro forma information is not presented.

During October 2006, the Company announced that a subsidiary of its Americas division, Wireless Fulfillment Services LLC, completed its acquisition of all of the outstanding shares of Trio Industries, Inc. (d/b/a/ Trio Teknologies) (TrioTek). TrioTek is a leading provider of bundled wireless products and solutions to Value Added Resellers (VARs), system integrators, and other customers focused on providing wireless data services. TrioTek is an authorized master agent for Sprint Nextel, Cingular Wireless and Verizon Wireless and distributes a wide variety of wireless data products from several original equipment manufacturers. The initial purchase price, including direct acquisition costs is approximately $0.7 million. Furthermore, up to $4.3 million in additional contingent consideration could be paid through 2008, depending on when and if certain performance-related milestones are

Brightpoint, Inc.
Notes to Consolidated Financial Statements

reached provided the total purchase price does not exceed $5.0 million. The acquisition of TrioTek was part of the Company’s continued investment in Advanced Wireless Services (AWS) in the Americas.

3. Discontinued Operations

Details of discontinued operations are as follows (in thousands):

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2006				2005				2006				2005
Revenue		$	—			$	30,136			$	—			$	75,122
Loss from discontinued operations		$	(183	)		$	(15,452	)		$	(358	)		$	(19,827	)
Gain on disposal of discontinued operations			3				997				74				1,331
Total loss from discontinued operations		$	(180	)		$	(14,455	)		$	(284	)		$	(18,496	)

The loss from discontinued operations for the three and nine months ended September 30, 2005 relates primarily to losses incurred in Brightpoint France, which was sold during the fourth quarter of 2005.

4. Lines of Credit

There were no outstanding balances on lines of credit at September 30, 2006 and December 31, 2005. However, the timing of payments to suppliers and collections from customers causes the Company’s cash balances and borrowings to fluctuate throughout the year. In addition, in certain subsidiaries, our local lenders restrict the amount of funds that can be transferred offshore to affiliates and the parent company, or our local lenders restrict the use of intercompany funds that can be used to pay down lines of credit. During the three-month and nine-month periods ended September 30, 2006, the largest outstanding borrowings on a given day were approximately $34.4 million and $35.7 million, and average outstanding balances were approximately $16.2 million and $17.7 million for the same respective periods.

At September 30, 2006, the Company and its subsidiaries were in compliance with the covenants in each of its credit agreements. Interest expense includes fees paid for unused capacity on credit lines and amortization of deferred financing fees.

The table below summarizes lines of credit that were available to the Company as of September 30, 2006 (in thousands):

														Letters of Credit &				Net
		Commitment				Gross Availability				Outstanding				Guarantees				Availability
North America		$	70,000			$	63,000			$	—			$	20,000			$	43,000
Australia			37,295				36,717				—				11,043				25,674
New Zealand			7,836				6,626				—				—				6,626
Sweden			2,045				2,045				—				—				2,045
Slovakia			21,000				21,000				—				—				21,000
Total		$	138,176			$	129,388			$	—			$	31,043			$	98,345

In April 2006, the credit facility utilized by the Company’s primary operating subsidiary in the Philippines, Brightpoint Philippines, Inc., matured and was not renewed. Future borrowing needs of Brightpoint Philippines, Inc. will be funded with either existing liquidity or new credit facilities. In addition, the credit facility utilized by the Company’s primary operating subsidiary in the Slovak Republic, Brightpoint Slovakia s.r.o., matured in May 2006 and was not renewed. In August 2006, Brightpoint Slovakia s.r.o. entered into a credit facility with Všeobecná úverová banka, a.s. (VUB). This facility, which matures in August 2007, provides borrowing availability of up to a maximum of $21.0 million. The facility bears interest at the 1-month Libor rate plus 0.60% (5.92% at September 30, 2006). At September 30, 2006, there were no amounts outstanding under the facility with available funding of $21.0 million. The facility is supported by a guarantee from the Company. Additional details on the above lines of credit are disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005.

Brightpoint, Inc.
Notes to Consolidated Financial Statements

5. Guarantees

In 2002, the FASB issued FIN 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN 45 requires guarantees to be recorded at fair value and requires a guarantor to make significant disclosure, 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, 2005.

In some circumstances, the Company purchases inventory with payment terms requiring letters of credit. As of September 30, 2006, the Company has issued $31.0 million in standby letters of credit. These standby letters of credit are generally issued for a one-year term and are supported by availability under the Company’s credit facilities. The underlying obligations for which these letters of credit have been issued are recorded in the financial statements at their full value. Should the Company fail to pay its obligation to one or all of these suppliers, the suppliers may draw on the standby letter of credit issued for them. As of September 30, 2006, the maximum future payments under these letters of credit are $31.0 million.

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 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. 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 activity is as follows (in thousands):

		Nine Months Ended
		September 30,
		2006				2005
January 1		$	2,117			$	369
Provision for product warranties			4,026				1,451
Change in estimate			(461	)			—
Settlements during the period			(2,459	)			(1,105	)
September 30		$	3,223			$	715

6. Operating Segments

The Company’s operations are divided into three geographic operating segments. These operating segments represent its three divisions: The Americas, Asia-Pacific and Europe. These divisions all derive revenues from sales of wireless devices, accessories, prepaid cards and fees from the provision of logistic services.

Brightpoint, Inc.
Notes to Consolidated Financial Statements

The Company has previously discontinued several operating entities, which materially affected certain operating segments. The operating results for all periods presented below reflect the reclassification of discontinued operating entities to discontinued operations. A summary of the Company’s operations by segment is presented below (in thousands) for the three and nine months ended September 30, 2006 and 2005:

		Distribution				Logistic								Operating
		Revenue				Services				Total				Income
		from				Revenue from				Revenue from				from
		External				External				External				Continuing
		Customers				Customers				Customers				Operations(1)
Three Months Ended September 30, 2006:
Americas		$	158,278			$	48,567			$	206,845			$	7,191
Asia-Pacific			284,559				5,666				290,225				2,115
Europe			109,565				27,104				136,669				3,168
		$	552,402			$	81,337			$	633,739			$	12,474
Three Months Ended September 30, 2005:
Americas		$	131,829			$	41,444			$	173,273			$	8,737
Asia-Pacific			274,725				6,538				281,263				2,627
Europe			64,407				26,032				90,439				(73	)
		$	470,961			$	74,014			$	544,975			$	11,291
Nine Months Ended September 30, 2006:
Americas		$	445,102			$	154,827			$	599,929			$	25,138
Asia-Pacific			780,001				18,871				798,872				4,829
Europe			277,785				71,566				349,351				6,402
		$	1,502,888			$	245,264			$	1,748,152			$	36,369
Nine Months Ended September 30, 2005:
Americas		$	353,470			$	112,817			$	466,287			$	21,495
Asia-Pacific			765,253				20,452				785,705				6,793
Europe			185,177				72,374				257,551				(149	)
		$	1,303,900			$	205,643			$	1,509,543			$	28,139

Additional segment information is as follows (in thousands):

		September 30,				December 31,
		2006				2005
Total segment assets:
Americas(1)		$	215,534			$	211,608
Asia-Pacific			328,862				172,414
Europe			141,782				103,802
		$	686,178			$	487,824

The increase in segment assets in the Asia-Pacific division resulted primarily from a significant purchase of wireless device inventory as part of an expanded global relationship with a major original equipment manufacturer. The wireless devices were procured under the terms of an existing supply agreement in the Philippines, however, the Company intends to sell the products through all of its international operations including those outside of the Asia-Pacific region. The terms of the purchase provided for more favorable payment terms than were reflected in the existing supply agreement.

Brightpoint, Inc.
Notes to Consolidated Financial Statements

7. Contingencies

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 financial position or results of operations.

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 $1.5 million (at current exchange rates) including penalties and interest. The Company continues to dispute this claim and intends to defend this matter vigorously.

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 are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 policies and estimates, the policies 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, 2005, 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, 2005.

Brightpoint, Inc. is a global leader in the distribution of wireless devices and accessories and the 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). Brightpoint has operations centers and/or sales offices in various countries including Australia, Colombia, Finland, Germany, India, New Zealand, Norway, the Philippines, Russia, Slovakia, 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 High Tech Computer Corp., Kyocera, LG Electronics, Motorola, Nokia, Samsung, Siemens, Sony Ericsson and UTStarcom.

Recent developments during 2006 include:

•

Purchase of Trio Industries, Inc. (TrioTek). In October 2006, our Americas division completed its acquisition of TrioTek for an initial purchase price of approximately $0.7 million. The acquisition of TrioTek was part of the Company’s continued investment in Advanced Wireless Services (AWS) in the Americas.

•

Supplier Diversification. In September 2006, we made a significant purchase of wireless device inventory as part of an expanded global relationship with a major original equipment manufacturer. The wireless devices were procured under the terms of an existing supply agreement in the Philippines, however, we intend to sell the products through all of our international operations including those outside of the Asia-Pacific region. The terms of the purchase provided for more favorable payment terms than were reflected in the existing supply agreement.

•

T-Mobile USA, Inc. (T-Mobile) Master Service Agreement. In August 2006, we entered into a Master Service Agreement (the Agreement) with T-Mobile in the United States to provide a full range of integrated forward logistic services enabling T-Mobile to deliver its wireless devices to its direct and indirect distribution channels, as well as directly to T-Mobile’s subscribers. Revenue and direct costs associated with the initial facility preparation phase of this Agreement have been deferred as further discussed in Note 1 of the Notes to the unaudited Consolidated Financial Statements.

•

Purchase of Persequor Limited (Persequor). In February 2006, we acquired all of the outstanding shares of Persequor for approximately $0.6 million (net of cash acquired).

RESULTS OF OPERATIONS

Revenue and Wireless Devices Handled

		Three Months Ended
		September 30,
						% of								% of
		2006				Total				2005				Total				Change
		(Amounts in 000s)
REVENUE BY DIVISION:
Americas		$	206,845				33	%		$	173,273				32	%			19	%
Asia-Pacific			290,225				46	%			281,263				52	%			3	%
Europe			136,669				21	%			90,439				16	%			51	%
Total		$	633,739				100	%		$	544,975				100	%			16	%
REVENUE BY SERVICE LINE:
Distribution		$	552,402				87	%		$	470,961				86	%			17	%
Logistic services			81,337				13	%			74,014				14	%			10	%
Total		$	633,739				100	%		$	544,975				100	%			16	%
WIRELESS DEVICES HANDLED BY DIVISION:
Americas			9,722				77	%			8,510				79	%			14	%
Asia-Pacific			2,414				19	%			1,981				18	%			22	%
Europe			480				4	%			320				3	%			50	%
Total			12,616				100	%			10,811				100	%			17	%
WIRELESS DEVICES HANDLED BY SERVICE LINE:
Distribution			3,417				27	%			3,057				28	%			12	%
Logistic services			9,199				73	%			7,754				72	%			19	%
Total			12,616				100	%			10,811				100	%			17	%

Total worldwide revenue was $633.7 million for the three months ended September 30, 2006, which represents growth of 16% compared to the same period in the prior year. Worldwide distribution revenue increased 17% to $552.4 million for the three months ended September 30, 2006 compared to $471.0 million for the same period in the prior year. Growth in wireless devices sold through distribution contributed to 11% of the increase in distribution revenue, and a higher average selling price positively impacted distribution revenue by approximately 4%. An increase in revenue from the sale of accessories positively impacted distribution revenue by 1%. Fluctuations in foreign currencies positively impacted worldwide product distribution revenue by approximately 1% for the three months ended September 30, 2006.

Worldwide logistic services revenue increased 10% to $81.3 million for the three months ended September 30, 2006 compared to $74.0 million for the same period in the prior year. Growth in wireless devices handled contributed to 8% of the increase in logistic services revenue, and a higher average fulfillment fee per unit positively impacted logistic services revenue by approximately 3%. These increases were partially offset by a decrease in non-handset based revenue, which negatively impacted worldwide logistic services revenue by 1%. Fluctuations in foreign currencies negatively impacted worldwide logistic services revenue by less than 1%.

		Nine Months Ended
		September 30,
						% of								% of
		2006				Total				2005				Total				Change
		(Amounts in 000s)
REVENUE BY DIVISION:
Americas		$	599,929				34	%		$	466,287				31	%			29	%
Asia-Pacific			798,872				46	%			785,705				52	%			2	%
Europe			349,351				20	%			257,551				17	%			36	%
Total		$	1,748,152				100	%		$	1,509,543				100	%			16	%
REVENUE BY SERVICE LINE:
Distribution		$	1,502,888				86	%		$	1,303,900				86	%			15	%
Logistic services			245,264				14	%			205,643				14	%			19	%
Total		$	1,748,152				100	%		$	1,509,543				100	%			16	%
WIRELESS DEVICES HANDLED BY DIVISION:
Americas			30,851				80	%			21,565				77	%			43	%
Asia-Pacific			6,363				17	%			5,438				20	%			17	%
Europe			1,176				3	%			848				3	%			39	%
Total			38,390				100	%			27,851				100	%			38	%
WIRELESS DEVICES HANDLED BY SERVICE LINE:
Distribution			9,157				24	%			8,306				30	%			10	%
Logistic services			29,233				76	%			19,545				70	%			50	%
Total			38,390				100	%			27,851				100	%			38	%

Total worldwide revenue was $1.7 billion for the nine months ended September 30, 2006, which represents growth of 16% compared to the same period in the prior year. Worldwide distribution revenue increased 15% to $1.5 billion for the nine months ended September 30, 2006 compared to $1.3 billion for the same period in the prior year. Growth in wireless devices sold through distribution contributed to 10% of the increase in distribution revenue, and a higher average selling price positively impacted distribution revenue by approximately 5%. An increase in revenue from the sale of accessories contributed to approximately 1% of the increase in distribution revenue. Fluctuations in foreign currencies negatively impacted worldwide product distribution revenue by approximately 1% for the nine months ended September 30, 2006.

Worldwide logistic services revenue increased 19% to $245.3 million for the nine months ended September 30, 2006 compared to $205.6 million for the same period in the prior year. Growth in wireless devices handled contributed to 17% of the increase in logistic services revenue, and an increase in revenue from non-handset based services positively impacted logistic services revenue by approximately 5%. These increases were partially offset by a lower average fulfillment fee per unit, which negatively impacted worldwide logistic services revenue by 3%. Fluctuations in foreign currencies negatively impacted worldwide logistic services revenue by less than 1%.

Revenue and wireless devices handled by division:

Americas

		Three Months Ended																				Nine Months Ended
		September 30,																				September 30,
						% of								% of												% of								% of
(Amounts in 000s)		2006				Total				2005				Total				Change				2006				Total				2005				Total				Change
REVENUE:
Distribution		$	158,278				77	%		$	131,829				76	%			20	%		$	445,102				74	%		$	353,470				76	%			26	%
Logistic services			48,567				23	%			41,444				24	%			17	%			154,827				26	%			112,817				24	%			37	%
Total		$	206,845				100	%		$	173,273				100	%			19	%		$	599,929				100	%		$	466,287				100	%			29	%
WIRELESS DEVICES HANDLED :
Distribution			1,166				12	%			977				11	%			19	%			3,132				10	%			2,561				12	%			22	%
Logistic services			8,556				88	%			7,533				89	%			14	%			27,719				90	%			19,004				88	%			46	%
Total			9,722				100	%			8,510				100	%			14	%			30,851				100	%			21,565				100	%			43	%

Revenue in our Americas division increased 19% to $206.8 million for the three months ended September 30, 2006 compared to $173.3 million for the same period in the prior year. Product distribution revenue increased 20% in our Americas division to $158.3 million for the third quarter of 2006 compared to $131.8 million for the third quarter of 2005. Growth in wireless devices handled positively impacted distribution revenue by 19%, and an increase in revenue from the sale of accessories positively impacted distribution revenue by approximately 1%. Average selling price remained relatively unchanged for the third quarter of 2006 compared to the same period in the prior year. The number of wireless devices sold through our Americas distribution business increased primarily as a result of an overall increase in market demand and the addition of new suppliers and customers in 2006 and late 2005. Manufacturers continued to launch new innovative products and offer compelling pricing on products, which drove strong market demand. During the third quarter of 2006 we believe we continued to increase our market share with Tier 2 and Tier 3 operators through our preferred supplier agreements with Revol and the Associated Carrier Group (ACG). We believe these preferred supplier agreements continue to enhance our relationship with Motorola and other product suppliers within the Regional Carrier channel.

Logistic services revenue in our Americas division increased 17% to $48.6 million for the third quarter of 2006 compared to $41.4 million for the third quarter of 2005. Growth in wireless devices handled contributed to 11% of the increase in logistic services revenue, and an increase in average fulfillment fee per unit contributed to 5% of the increase in logistic services revenue in our Americas division. Growth in non-handset based revenue positively impacted logistic services revenue in our Americas division by 1%. The increase in wireless devices handled through logistic services in our Americas division was due primarily to increased demand as a result of market growth experienced by current logistic services customers as well as expanded services offered to our current logistic services customers. The growth in wireless devices handled through logistic services in our Americas division was tempered by a significant reduction in volume with our primary network operator customer in Colombia as a result of their decision to radically curtail promotional activities during the third quarter of 2006 due to market saturation in Colombia. Higher volumes of wireless devices handled in Colombia were previously driven primarily by aggressive promotional activity by this operator customer in order to increase their market share. As a result of this operator’s decision to focus on profitability and asset management, we do not expect volume to return to levels we experienced in previous quarters. Average fulfillment fee per unit increased as a result of a shift in the nature of services provided during the third quarter of 2006 as well as an increased fee structure in Colombia due to the reduced volume. 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. The average fulfillment fee per unit may be negatively impacted during the fourth quarter of 2006 due to a reduced fee structure associated with the modification and extension of a logistic services agreement with a significant customer in our North America business. It is anticipated that the reduction in average fulfillment fee per unit will be partially offset by increased volumes with this customer beginning in 2007.

For the nine months ended September 30, 2006, revenue in our Americas division increased 29% to $599.9 million compared to $466.3 million for the same period in the prior year. Distribution revenue increased 26% to $445.1

million for the nine months ended September 30, 2006 compared to $353.5 million for the same period in the prior year. Logistic services revenue in our Americas division increased 37% to $154.8 million for the nine months ended September 30, 2006 compared to $112.8 million for the same period in the prior year.

Asia-Pacific

		Three Months Ended																				Nine Months Ended
		September 30,																				September 30,
						% of								% of												% of								% of
(Amounts in 000s)		2006				Total				2005				Total				Change				2006				Total				2005				Total				Change
REVENUE:
Distribution		$	284,559				98	%		$	274,725				98	%			4	%		$	780,001				98	%		$	765,253				97	%			2	%
Logistic services			5,666				2	%			6,538				2	%			(13	)%			18,871				2	%			20,452				3	%			(8	)%
Total		$	290,225				100	%		$	281,263				100	%			3	%		$	798,872				100	%		$	785,705				100	%			2	%
WIRELESS DEVICES HANDLED :
Distribution			1,934				80	%			1,862				94	%			4	%			5,201				82	%			5,159				95	%			1	%
Logistic services			480				20	%			119				6	%			303	%			1,162				18	%			279				5	%			316	%
Total			2,414				100	%			1,981				100	%			22	%			6,363				100	%			5,438				100	%			17	%

Revenue in our Asia-Pacific division increased 3% to $290.2 million for the three months ended September 30, 2006 compared to $281.3 million for the same period in the prior year. Product distribution revenue increased 4% to $284.6 million for the third quarter of 2006 compared to $274.7 million for the third quarter of 2005. Growth in wireless devices handled and an increase in accessories revenue positively impacted distribution revenue in our Asia-Pacific division by approximately 4% and 1%, respectively. These increases were partially offset by a lower average selling price, which negatively impacted distribution revenue in our Asia-Pacific division by 1%. Fluctuations in foreign currencies negatively impacted distribution revenue by less than 1% in our Asia-Pacific division for the third quarter of 2006. The increases in distribution revenue and wireless devices sold in our Asia-Pacific division were driven by our Brightpoint Asia Limited business as a result of improved product availability at competitive prices. Revenue in our Asia-Pacific division also increased as a result of an expanded global relationship with a major original equipment manufacturer. We made a significant purchase of wireless devices near the end of September, which were procured under the terms of an existing supply agreement with this manufacturer in the Philippines. However, we intend to sell the products through all of our international operations including those outside of the Asia-Pacific region. Sales of these wireless devices positively contributed to growth in distribution revenue in our Asia-Pacific division; however, a significant portion of this inventory remained unsold as of the end of the third quarter of 2006. The terms of the purchase provided for more favorable payment terms than were reflected in the existing supply agreement. The increases in revenue from our Brightpoint Asia Limited business and from this expanded global relationship were partially offset by a decrease in revenue and wireless devices sold through our distribution business in Australia. The decrease in wireless devices sold through our distribution business in Australia was due to the decision by a certain network operator to change to a closed distribution model for 3G wireless devices as well as a change in terms with a significant customer in that market to a fee-based logistic services arrangement from a distribution arrangement.

Logistic services revenue decreased 13% to $5.7 million for third quarter of 2006 compared to $6.5 million for the same period in the prior year. The decrease in logistic services revenue in our Asia-Pacific division was due primarily to a decrease in revenue from the sale of prepaid airtime in New Zealand as a result of the decision by a major network operator to change from prepaid airtime cards to electronic distribution in which we are not participating in that market. This decrease was partially offset by an increase in handset fulfillment revenue from our Australia business due to a shift to a fee-based logistic services arrangement from a distribution arrangement with a significant customer in that market as discussed previously.

For the nine months ended September 30, 2006, revenue in our Asia-Pacific division increased 2% to $798.9 million compared to $785.7 million for the same period in the prior year. Product distribution revenue increased 2% to $780.0 million for the nine months ended September 30, 2006 compared to $765.3 million for the same period in the prior year. Logistic services revenue decreased 8% to $18.9 million for the nine months ended September 30, 2006 compared to $20.5 million for the same period in the prior year.

Europe

		Three Months Ended																				Nine Months Ended
		September 30,																				September 30,
						% of								% of												% of								% of
(Amounts in 000s)		2006				Total				2005				Total				Change				2006				Total				2005				Total				Change
REVENUE:
Distribution		$	109,565				80	%		$	64,407				71	%			70	%		$	277,785				80	%		$	185,177				72	%			50	%
Logistic services			27,104				20	%			26,032				29	%			4	%			71,566				20	%			72,374				28	%			(1	)%
Total		$	136,669				100	%		$	90,439				100	%			51	%		$	349,351				100	%		$	257,551				100	%			36	%
WIRELESS DEVICES HANDLED :
Distribution			317				66	%			218				68	%			45	%			824				70	%			586				69	%			41	%
Logistic services			163				34	%			102				32	%			60	%			352				30	%			262				31	%			34	%
Total			480				100	%			320				100	%			50	%			1,176				100	%			848				100	%			39	%

Revenue in our Europe division increased 51% to $136.7 million for the three months ended September 30, 2006 compared to $90.4 million for the same period in the prior year. Product distribution revenue increased 70% to $109.6 million for the third quarter of 2006 compared to $64.4 million for the third quarter of 2005. Growth in wireless devices handled contributed to approximately 39% of the increase in distribution revenue, and a higher average selling price contributed to 23% of the growth in distribution revenue in our Europe division. Fluctuations in foreign currencies positively impacted distribution revenue by 7%, and an increase in revenue from the sale of accessories contributed to 1% of the growth in distribution revenue in our Europe division. The increases in average selling price and the number of devices sold through distribution in our Europe division were due primarily to increased demand for an availability of branded converged wireless devices as well as our entry into Russia during the second quarter of 2006. In addition, we believe our Europe division benefited from an expansion of the addressable market in Sweden as well as gains in share within that market.

Logistic services revenue increased 4% to $27.1 million for the third quarter of 2006 compared to $26.0 million for the third quarter of 2005. The increase in logistic services revenue was primarily due to growth in non-handset based logistic services revenue, which was driven by an increase in revenue from repair services within our business in Germany.

For the nine months ended September 30, 2006, revenue in our Europe division increased 36% to $349.4 million compared to $257.6 million for the same period in the prior year. Product distribution revenue increased 50% to $277.8 million compared to $185.2 million for the same period in the prior year. Logistic services revenue decreased 1% to $71.6 million compared to $72.4 million for the same period in the prior year.

Gross Profit and Gross Margin

		Three Months Ended																				Nine Months Ended
		September 30,																				September 30,
						% of								% of												% of								% of
(Amounts in 000s)		2006				Total				2005				Total				Change				2006				Total				2005				Total				Change
Distribution		$	22,618				61	%		$	17,005				54	%			33	%		$	61,862				57	%		$	48,157				54	%			28	%
Logistic services			14,384				39	%			14,673				46	%			(2	)%			47,196				43	%			40,240				46	%			17	%
Gross profit		$	37,002				100	%		$	31,678				100	%			17	%		$	109,058				100	%		$	88,397				100	%			23	%
Distribution			4.1	%							3.6	%			0.5	% points							4.1	%							3.7	%			0.4	% points
Logistic services			17.7	%							19.8	%			(2.1	)% points							19.2	%							19.6	%			(0.4	)% points
Gross margin			5.8	%							5.8	%			0.0	% points							6.2	%							5.9	%			0.3	% points