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, 2009

Brightpoint, Inc.

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

7635 Interactive Way, Suite 200, Indianapolis, Indiana		46278
(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     No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 
o Yes     No o

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

Large accelerated filer o

Accelerated filer þ

Non-accelerated filer o (Do not check if a smaller reporting company)

Smaller reporting company o

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

The number of shares of Common Stock outstanding as of August 1, 2009: 82,008,839

 

 

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,
		2009				2008				2009				2008
Revenue
Distribution revenue		$	631,683			$	1,092,195			$	1,252,244			$	2,161,872
Logistic services revenue			91,785				104,042				180,301				209,168
Total revenue			723,468				1,196,237				1,432,545				2,371,040
Cost of revenue
Cost of distribution revenue			610,206				1,042,878				1,204,840				2,060,642
Cost of logistic services revenue			51,882				65,395				103,863				133,787
Total cost of revenue			662,088				1,108,273				1,308,703				2,194,429
Gross profit			61,380				87,964				123,842				176,611
Selling, general and administrative expenses			51,064				69,901				103,537				139,656
Amortization expense			3,905				4,819				7,653				9,542
Restructuring charge			3,851				2,969				8,938				6,583
Operating income from continuing operations			2,560				10,275				3,714				20,830
Interest, net			2,499				5,930				5,263				12,593
Other (income) expense			(3,946	)			1,477				(1,109	)			699
Income (loss) from continuing operations before income taxes			4,007				2,868				(440	)			7,538
Income tax expense (benefit)			1,201				(1,776	)			(171	)			(286	)
Income (loss) from continuing operations			2,806				4,644				(269	)			7,824
Discontinued operations, net of income taxes:
Loss from discontinued operations			(210	)			(6,787	)			(1,306	)			(9,053	)
Gain (loss) on disposal of discontinued operations			(2,429	)			5				(1,331	)			5
Total discontinued operations, net of income taxes			(2,639	)			(6,782	)			(2,637	)			(9,048	)
Net income (loss)			167				(2,138	)			(2,906	)			(1,224	)
Net income attributable to noncontrolling interest			—				(193	)			—				(332	)
Net income (loss) attributable to common shareholders		$	167			$	(2,331	)		$	(2,906	)		$	(1,556	)
Earnings per share attributable to common shareholders — basic:
Income from continuing operations		$	0.04			$	0.06			$	—			$	0.10
Discontinued operations, net of income taxes			(0.03	)			(0.09	)			(0.03	)			(0.12	)
Net income (loss)		$	0.01			$	(0.03	)		$	(0.03	)		$	(0.02	)
Earnings per share attributable to common shareholders - diluted:
Income from continuing operations		$	0.03			$	0.05			$	—			$	0.09
Discontinued operations, net of income taxes			(0.03	)			(0.08	)			(0.03	)			(0.11	)
Net income (loss)		$	0.00			$	(0.03	)		$	(0.03	)		$	(0.02	)
Weighted average common shares outstanding:
Basic			79,235				77,829				79,150				77,676
Diluted			81,730				81,445				79,150				81,530

See accompanying notes

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

		June 30,				December 31,
		2009				2008
		(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents		$	77,415			$	57,226
Accounts receivable (less allowance for doubtful accounts of $11,207 in 2009 and $11,217 in 2008)			352,800				499,541
Inventories			192,138				290,243
Other current assets			68,162				61,392
Total current assets			690,515				908,402
Property and equipment, net			56,763				56,463
Goodwill			51,686				51,439
Other intangibles, net			102,581				107,286
Other assets			17,374				22,770
Total assets		$	918,919			$	1,146,360
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	415,112			$	534,906
Accrued expenses			108,568				137,957
Current portion of long-term debt			—				—
Lines of credit and other short-term borrowings			18				798
Total current liabilities			523,698				673,661
Long-term liabilities:
Lines of credit, long-term			28				1,501
Long-term debt			96,249				174,106
Other long-term liabilities			40,372				46,528
Total long-term liabilities			136,649				222,135
Total liabilities			660,347				895,796
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; 89,166 issued in 2009 and 88,730 issued in 2008			892				887
Additional paid-in-capital			627,744				625,415
Treasury stock, at cost, 7,143 shares in 2009 and 7,063 shares in 2008			(60,382	)			(59,983	)
Retained deficit			(315,554	)			(312,647	)
Accumulated other comprehensive income (loss)			5,872				(3,108	)
Total shareholders’ equity			258,572				250,564
Total liabilities and shareholders’ equity		$	918,919			$	1,146,360

See accompanying notes

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

		Six Months Ended
		June 30,
		2009				2008
Operating activities
Net loss		$	(2,906	)		$	(1,224	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			16,998				19,336
Non-cash compensation			3,334				3,417
Restructuring charge			9,607				6,583
Change in deferred taxes			(2,820	)			(3,677	)
Other non-cash			288				256
Changes in operating assets and liabilities, net of effects from acquisitions and divestitures:
Accounts receivable			154,183				176,899
Inventories			99,826				116,340
Other operating assets			1,837				(3,220	)
Accounts payable and accrued expenses			(178,466	)			(54,868	)
Net cash provided by operating activities			101,881				259,842
Investing activities
Capital expenditures			(8,882	)			(10,702	)
Acquisitions, net of cash acquired			—				(6,913	)
Decrease in other assets			(745	)			(132	)
Net cash used in investing activities			(9,627	)			(17,747	)
Financing activities
Net repayments on lines of credit			(1,536	)			(207,124	)
Repayments on Global Term Loans			(75,752	)			(27,856	)
Deferred financing costs paid			(392	)			—
Purchase of treasury stock			(399	)			(1,284	)
Excess (deficient) tax benefit from equity based compensation			(993	)			117
Proceeds from common stock issuances under employee stock option plans			—				22
Net cash used in financing activities			(79,072	)			(236,125	)
Effect of exchange rate changes on cash and cash equivalents			7,007				(1,396	)
Net increase in cash and cash equivalents			20,189				4,574
Cash and cash equivalents at beginning of period			57,226				102,160
Cash and cash equivalents at end of period		$	77,415			$	106,734

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 for the year ended December 31, 2008 included in Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on June 1, 2009. As used herein, the terms “Brightpoint”, “Company”, “we”, “our” and “us” mean Brightpoint, Inc. and its consolidated subsidiaries.

The Company has evaluated subsequent events through August 6, 2009, which is the date these financial statements were issued.

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,
		2009				2008				2009				2008
Income (loss) from continuing operations attributable to common shareholders		$	2,806			$	4,451			$	(269	)		$	7,492
Discontinued operations, net of income taxes			(2,639	)			(6,782	)			(2,637	)			(9,048	)
Net income (loss) attributable to common shareholders		$	167			$	(2,331	)		$	(2,906	)		$	(1,556	)
Earnings per share — basic:
Income (loss) from continuing operations attributable to common shareholders		$	0.04			$	0.06			$	—			$	0.10
Discontinued operations, net of income taxes			(0.03	)			(0.09	)			(0.03	)			(0.12	)
Net income (loss) attributable to common shareholders		$	0.01			$	(0.03	)		$	(0.03	)		$	(0.02	)
Earnings per share — diluted:
Income (loss) from continuing operations attributable to common shareholders		$	0.03			$	0.05			$	—			$	0.09
Discontinued operations, net of income taxes			(0.03	)			(0.08	)			(0.03	)			(0.11	)
Net income (loss) attributable to common shareholders		$	0.00			$	(0.03	)		$	(0.03	)		$	(0.02	)
Weighted average shares outstanding for basic earnings per share			79,235				77,829				79,150				77,676
Net effect of dilutive share options, restricted share units, shares held in escrow and restricted share based on the treasury share method using average market price			2,495				3,616				—				3,854
Weighted average shares outstanding for diluted earnings per share			81,730				81,445				79,150				81,530

Brightpoint, Inc.
Notes to Consolidated Financial Statements

Weighted average common shares outstanding for diluted earnings per share for the six months ended June 30, 2009 excludes the effect of 2.7 million common shares outstanding that are excluded from the earnings per share calculation under SFAS No. 128 Earnings Per Share as they are anti-dilutive to earnings per share.

Recently Issued Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (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) were effective for the Company on January 1, 2009. The adoption of SFAS 141(R) did not 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 were effective for the Company on January 1, 2009. The adoption of SFAS 160 did not have a material impact on its financial statements.

Other Comprehensive Income (Loss)

The components of comprehensive income (loss) for the three and six months ended June 30, 2009 and 2008 are as follows (in thousands, net of tax):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2009				2008				2009				2008
Net income(loss) attributable to common shareholders		$	167			$	(2,331	)		$	(2,906	)		$	(1,556	)
Unrealized gain on derivative instruments:
Net gain arising during period			691				1,242				668				521
Reclassification adjustment for losses included in net income			(128	)			—				(128	)			—
Unrealized loss on marketable securities:
Net loss arising during period			—				(753	)			—				(2,087	)
Reclassification adjustment for losses included in net income			—				928				—				928
Pension benefit obligation:			(248	)			—				(248	)			—
Foreign currency translation:
Net gain arising during period			18,584				2,806				10,371				40,337
Reclassification adjustment for losses included in net income			(739	)			—				(1,683	)			—
Comprehensive income		$	18,327			$	1,892			$	6,074			$	38,143

Derivative Instruments and Hedging Activities

The Company is exposed to certain risks relating to its ongoing business activities. The primary risks managed by the use of derivative instruments are interest rate risk and foreign currency fluctuation risk. Interest rate swaps are entered into in order to manage interest rate risk associated with the Company’s variable rate borrowings. Forward contracts are entered into to manage the foreign currency risk associated with various commitments arising from trade accounts receivable, trade accounts payable and fixed purchase obligations. The volume and impact to the Consolidated Balance Sheets and Statements of Operations of these contracts is immaterial. The Company holds the following types of derivatives at June 30, 2009 that have been designated as hedging instruments:

Derivative		Risk Being Hedged
Interest rate swap		Cash flows of interest payments on variable rate debt

Brightpoint, Inc.
Notes to Consolidated Financial Statements

Derivatives are held only for the purpose of hedging such risks, not for speculation. Generally, the Company enters into hedging relationships such that the cash flows of items and transactions being hedged are expected to be offset by corresponding changes in the values of the derivatives. At June 30, 2009, a hedging relationship exists related to $54.0 million of the Company’s variable rate debt. The swap is accounted for as a cash flow hedge. This interest rate swap transaction effectively locks in a fixed interest rate for variable rate interest payments that are expected to be made from July 1, 2009 through January 31, 2012. Under the terms of the swap, the Company will pay a fixed rate and will receive a variable rate based on the three month USD LIBOR rate plus a credit spread. There was a $0.1 million (net of income taxes) loss due to the ineffective portion of the interest rate swaps included in the results of operations for the three and six months ended June 30, 2009. The ineffective portion of the interest rate swaps relates to prepayments on the Company’s variable rate debt in the second quarter of 2009. The unrealized loss associated with the effective portion of the interest rate swaps included in other comprehensive income was immaterial for the three and six months ended June 30, 2009.

The fair value of interest rate swaps in the Consolidated Balance Sheets is $4.0 million. The fair value of the interest rate swap maturing within one year is included in “Accrued expenses” in the Consolidated Balance Sheets. The fair value of the interest rate swap maturing after one year is included in “Other long-term liabilities” in the Consolidated Balance Sheets.

Fair Value of Financial Instruments

The carrying amounts at June 30, 2009 and December 31, 2008, of cash and cash equivalents, accounts receivable, other current assets, accounts payable, and accrued expenses approximate their fair values because of the short maturity of those instruments. The carrying amount at June 30, 2009 and December 31, 2008 of the Company’s borrowings approximate their fair value because these borrowings bear interest at a variable (market) rate.

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 in				Significant other
		Balance at				active markets				observable inputs
		June 30, 2009				(Level 1)				(Level 2)
Financial instruments classified as assets
Forward foreign currency contracts		$	170			$	—			$	170
Financial instruments classified as liabilities
Interest rate swaps		$	3,982			$	—			$	3,982
Forward foreign currency contracts			1,037				—				1,037

2. Acquisitions

Effective December 31, 2008, the Company acquired the assets of Bradian Warehousing and Distribution (Pty), Ltd. for $1.4 million. In addition, the Company agreed to contingent cash earn out payments based upon certain operating performance measures which may be payable for each of the three fiscal years after the acquisition. The total earn out payments will in no event exceed 20.5 million South African Rand (approximately $2.6 million as of June 30, 2009).

On April 28, 2008, the Company acquired the assets of Hugh Symons Group Ltd.’s wireless distribution business for $0.6 million (0.3 million pounds sterling) and the value of inventory at the date of closing. In addition, the Company agreed to contingent cash earn out payments based upon certain operating performance measures which may be payable on the first, second and third anniversary of closing. The total earn out payments shall in no event exceed 3.6 million pounds sterling (approximately $6.0 million as of June 30, 2009).

Brightpoint, Inc.
Notes to Consolidated Financial Statements

3. Restructuring

In February 2009, the Company announced that it initiated its 2009 Spending and Debt Reduction Plan. Included in this plan is a global workforce reduction of 220 positions. The Company reduced its global workforce by approximately 200 positions during the first half of 2009. The Company will continue to reduce its workforce to achieve the previously stated target of at least 220 positions. Most of the remaining reductions in workforce will occur throughout the second half of 2009.

Europe Realignment

The balance of the restructuring reserve at December 31, 2008 relates to the plan to realign the Company’s European operations that was announced on June 30, 2008. Reserve activity for the realignment of the Company’s European operations and for the workforce reduction included in the 2009 Spending and Debt Reduction Plan for the six months ended June 30, 2009 is as follows (in thousands):

						Lease
		Employee				Termination
		Terminations				Costs				Total
Balance at December 31, 2008		$	3,325			$	3,445			$	6,770
Restructuring charge			8,244				127				8,371
Foreign currency translation			475				(46	)			429
Total activity:			12,044				3,526				15,570
Less:
Cash usage			(5,949	)			(3,371	)			(9,320	)
Non-cash usage			—				—				—
Balance at June 30, 2009		$	6,095			$	155			$	6,250

Restructuring charge was $8.4 million for the six months ended June 30, 2009. The restructuring charge consists of the following:

	•		$6.2 million of severance charges in connection with the global workforce reduction announced as part of the Company’s 2009 Spending and Debt Reduction Plan. The Company reduced its workforce by approximately 180 positions in its EMEA division in the first half of 2009.
	•		A $2.1 million severance charge in connection with the departure of the Company’s President of the Europe, Middle East and Africa region.
	•		A $0.4 million charge associated with the exit of our headquarters facility in Europe.
	•		A $0.8 million benefit associated with the favorable settlement of the operating lease of the Company’s redundant warehouse and office facility in Germany.
	•		$0.5 million of other charges associated with our 2009 Spending and Debt Reduction Plan.

Americas Realignment

In addition to the realignment of the Company’s European operations discussed above, the Company also began initiatives to better leverage its cost structure in the Americas region. The Americas realignment includes severance for employees in our Americas operations ($0.7 million) as well as a benefit related to the closure of the Company’s distribution facility in Reno, Nevada ($0.1 million). The Company reduced its workforce by approximately 20 positions in its Americas division in the first half of 2009.

Brightpoint, Inc.
Notes to Consolidated Financial Statements

Reserve activity for the realignment of the Company’s Americas operations for the six months ended June 30, 2009 is as follows (in thousands):

						Lease
		Employee				Termination
		Terminations				Costs				Total
Balance at December 31, 2008		$	236			$	897			$	1,133
Restructuring charge			679				(112	)			567
Foreign currency translation			—				—				—
Total activity:			915				785				1,700
Less:
Cash usage			(815	)			(251	)			(1,066	)
Non-cash usage			—				—				—
Balance at June 30, 2009		$	100			$	534			$	634

In addition, the Company expects to exit certain programs, channels and/or countries that are not expected to meet its profitability targets including return on the Company’s investment. As a result of exiting underperforming programs, channels and/or countries in its EMEA region, the Company would expect to incur additional restructuring charges. The Company will provide updates on these activities and related estimated charges, which could be material, as appropriate throughout the year. The Company did not exit any material programs, channels or countries during the second quarter of 2009.

4. Discontinued Operations

The consolidated statements of operations reflect the reclassification of the results of operations of the Company’s operations in Poland and Turkey as well as its locally branded PC notebook business in Slovakia to discontinued operations for all periods presented in accordance with U.S. generally accepted accounting principles. The Company exited its Poland and Turkey operations in the first quarter of 2009, and it exited the locally branded PC notebook business in the third quarter of 2008. There were no material impairments of tangible or intangible assets related to these discontinued operations. Discontinued operations for the three and six months ended June 30, 2009 and 2008 are as follows (in thousands):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2009				2008				2009				2008
Revenue		$	—			$	18,991			$	1,664			$	38,969
Loss from discontinued operations before income taxes		$	(210	)		$	(8,304	)		$	(1,306	)		$	(10,951	)
Income tax benefit			—				(1,517	)			—				(1,898	)
Loss from discontinued operations		$	(210	)		$	(6,787	)		$	(1,306	)		$	(9,053	)
Gain (loss) on disposal from discontinued operations (1)			(2,429	)			5				(1,331	)			5
Total discontinued operations, net of income taxes		$	(2,639	)		$	(6,782	)		$	(2,637	)		$	(9,048	)

Brightpoint, Inc.
Notes to Consolidated Financial Statements

5. Borrowings

At June 30, 2009, the Company and its subsidiaries were in compliance with the covenants in each of their 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 borrowing capacity that was available to the Company as of June 30, 2009 (in thousands):

										Letters of Credit &				Net
		Gross Availability				Outstanding				Guarantees				Availability
Global Term Loans		$	96,249			$	96,249			$	—			$	—
Global Credit Facility			300,000				—				721				299,279
Other			45,000				—				577				44,423
Total		$	441,249			$	96,249			$	1,298			$	343,702

The Company had an immaterial amount of other borrowings outstanding at June 30, 2009 that were not under any of the Company’s credit agreements and $2.7 million of letters of credit that do not impact the Company’s net availability.

During the second quarter of 2009, the Company made additional principal payments of approximately $42.0 million on its Global Term Loans. With these payments, the Company has no required principal payments on its Global Term Loans until September 2011.

Additional details on the above available borrowings are discussed in the Company’s Annual Report for the year ended December 31, 2008 included in Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on June 1, 2009.

6. Guarantees

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. The nature of these guarantees and the amounts outstanding are described in the Company’s Annual Report for the year ended December 31, 2008 included in Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on June 1, 2009.

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.

7. Operating Segments

The Company has operation centers and/or sales offices in various countries including Australia, Austria, Belgium, Colombia, Denmark, Finland, France, Germany, Guatemala, India, Italy, the Netherlands, New Zealand, Norway, Portugal, Russia, Singapore, Slovakia, South Africa, Spain, Sweden, Switzerland, the United Arab Emirates, the United Kingdom and the United States. All of the Company’s operating entities generate revenue from the distribution of wireless devices and accessories and/or the provision of logistic services. During the third quarter of 2008, the Company reclassified its operating entities in South Africa and the United Arab Emirates into the Europe reporting segment from the Asia-Pacific reporting segment. The Europe reporting segment has been renamed the Europe Middle East and Africa reporting segment (EMEA). Segment information as of and for the three and six months ended June 30, 2008 has been reclassified to conform to this presentation. The Company identifies its reportable segments based on management responsibility of its three geographic divisions: the Americas, Asia-

Brightpoint, Inc.
Notes to Consolidated Financial Statements

Pacific, and EMEA. The Company’s operating components have been aggregated into these three geographic reporting segments.

The Company evaluates the performance of and allocates resources to these segments based on income from continuing operations before income taxes (excluding corporate selling, general and administrative expenses and other unallocated expenses). A summary of the Company’s continuing operations by segment is presented below (in thousands) for the three and six months ended June 30, 2009 and 2008:

														Corporate
														and
														Reconciling
		Americas				Asia-Pacific				EMEA				Items				Total
Three Months Ended June 30, 2009:
Distribution revenue		$	102,537			$	188,851			$	340,295			$	—			$	631,683
Logistic services revenue			44,869				7,598				39,318				—				91,785
Total revenue from external customers		$	147,406			$	196,449			$	379,613			$	—			$	723,468
Operating income (loss) from continuing operations		$	11,697			$	5,527			$	(4,495	)		$	(10,169	)		$	2,560
Depreciation and amortization			2,422				537				5,178				429				8,566
Capital expenditures			1,474				1,316				1,439				294				4,523
Three Months Ended June 30, 2008:
Distribution revenue		$	171,808			$	298,421			$	621,966			$	—			$	1,092,195
Logistic services revenue			44,055				12,184				47,803				—				104,042
Total revenue from external customers		$	215,863			$	310,605			$	669,769			$	—			$	1,196,237
Operating income (loss) from continuing operations		$	9,175			$	6,236			$	3,565			$	(8,701	)		$	10,275
Depreciation and amortization			2,505				542				6,479				277				9,803
Capital expenditures			632				220				3,153				321				4,326
Six Months Ended June 30, 2009:
Distribution revenue		$	213,839			$	363,635			$	674,770			$	—			$	1,252,244
Logistic services revenue			90,965				15,845				73,491				—				180,301
Total revenue from external customers		$	304,804			$	379,480			$	748,261			$	—			$	1,432,545
Operating income (loss) from continuing operations		$	24,492			$	8,393			$	(10,436	)		$	(18,735	)		$	3,714
Depreciation and amortization			5,354				944				9,775				815				16,888
Capital expenditures			3,037				1,509				3,321				1,015				8,882
Six Months Ended June 30, 2008:
Distribution revenue		$	372,662			$	620,670			$	1,168,540			$	—			$	2,161,872
Logistic services revenue			90,805				22,387				95,976				—				209,168
Total revenue from external customers		$	463,467			$	643,057			$	1,264,516			$	—			$	2,371,040
Operating income (loss) from continuing operations		$	17,433			$	14,005			$	6,407			$	(17,015	)		$	20,830
Depreciation and amortization			5,188				1,233				11,683				541				18,645
Capital expenditures			1,709				43				7,993				957				10,702

Brightpoint, Inc.
Notes to Consolidated Financial Statements

Additional segment information is as follows (in thousands):

		June 30,				December 31,
		2009				2008
Total segment assets:
Americas		$	208,799			$	244,922
Asia-Pacific			157,437				198,779
EMEA			547,073				690,882
Corporate			5,610				11,777
		$	918,919			$	1,146,360

8. Legal Proceedings and Contingencies

LN Eurocom

On June 11, 2008 LN Eurocom (“LNE”) filed a lawsuit in the City Court of Frederiksberg, Denmark against Brightpoint Smartphone A/S and Brightpoint International A/S, each a wholly-owned subsidiary of the Company (collectively, “Smartphone”). The lawsuit alleges that Smartphone breached a contract relating to call center services performed or to be performed by LNE. The total amount now claimed is approximately 13 million DKK (approximately $2.5 million as of June 30, 2009). Smartphone disputes this claim and intends to defend this matter vigorously. Currently, this matter is set for trial in October 2009.

Fleggaard group of companies

The former headquarters of Dangaard Telecom was located 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. This matter is currently set for trial in January 2010.

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. On February 3, 2009, the Norwegian Tax Authorities determined that the capital gains were within Brightpoint Norway’s core business and, therefore, that Brightpoint Norway was responsible for tax on the gain in the amount of 8.1 million NOK (approximately $1.3 million as of June 30, 2009). Brightpoint Norway is currently assessing its options including appealing this determination by the initiation of court proceedings. The former shareholders of Dangaard Telecom agreed to indemnify Dangaard Holding with respect to 80% of this claim when Dangaard Holding acquired Dangaard Telecom, and Dangaard Holding agreed in the purchase agreement with the Company to transfer and assign these indemnification rights to the Company (or enforce them on our behalf if such transfer or assignment is not permitted).

German tax authorities

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

ECP South Perry Road, LLC

ECP South Perry Road, LLC (ECP) filed a complaint against the Company claiming $0.8 million in damages allegedly arising from the Company’s alleged violations of (i) a lease agreement between the Company and ECP’s predecessor-in-interest for certain real property located in Hendricks County, Indiana (the Leased Premises), and (ii)

Brightpoint, Inc.
Notes to Consolidated Financial Statements

Indiana’s Uniform Fraudulent Transfer Act. The Company and ECP have entered into a settlement agreement, pursuant to which ECP has agreed to dismiss the lawsuit with prejudice.

NC Holding Indemnification Claims

In connection with the acquisition of Dangaaard Telecom, initially 3,000,000 shares of common stock issued in connection with the acquisition were placed in escrow with American Stock Transfer & Trust Company to secure NC Telecom Holding A/S’s (NC Holding) indemnification obligations under the acquisition agreement. We have previously made indemnification claims against NC Holding pursuant to the acquisition agreement which we believe are in excess of the value of these 3,000,000 shares. We understand that NC Holding intends to defend against these claims, and we can give no assurance that all or any part of our indemnification claims against NC Holding will be successful. Of these 3,000,000 shares, 2,000,000 remain in the escrow account and 1,000,000 shares have been released from escrow subject to our reservation of a right to assert a claim for indemnification.

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 for the year ended December 31, 2008 included in Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on June 1, 2009, 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 for the year ended December 31, 2008 included in Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on June 1, 2009.

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, Guatemala, India, Italy, the Netherlands, New Zealand, Norway, Portugal, Russia, Singapore, Slovakia, South Africa, Spain, Sweden, Switzerland, 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.

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

On February 9, 2009, we announced a plan to reduce forecasted spending for the year by approximately $40 to $45 million. This plan is comprised of $12 to $14 million of cost avoidance and $28 to $31 million of spending reductions. On May 7, 2009 we announced a revised debt reduction target of having less than $100 million of average daily debt outstanding during the fourth quarter of 2009. The spending reduction measures included, among other things, a workforce reduction of at least 220 positions, or approximately 7% of our workforce. The majority of the foregoing reductions in spending are reflected in our results of operations for the three and six months ended June 30, 2009 as a reduction of selling, general, and administrative expenses (SG&A).

We reduced our global workforce by approximately 200 positions during the first half of 2009. We will continue to reduce our workforce to achieve the previously stated target of at least 220 positions. Most of the remaining reductions in workforce will occur throughout the second half of 2009.

Based on our progress through the six months ended June 30, 2009, we believe that we are on track to realize the previously stated forecasted spending reduction and cost avoidance targets as well as our debt reduction targets for 2009. For the second quarter of 2009 SG&A expenses were $51.1 million, which represents a decrease of $1.4

million (3%) from the first quarter of 2009 and $8.2 million (14%) from the fourth quarter of 2008. Fluctuations in foreign currency negatively impacted SG&A by approximately $1.8 million compared to the first quarter of 2009. Average daily debt outstanding for the second quarter of 2009 was $165.9 million as compared to $216.0 million for the first quarter of 2009 and $413.4 million for the second quarter of 2008.

We continue to focus on optimizing our European operating and financial structure. We expect to exit certain programs, channels and/or countries that are not expected to meet our profitability targets included return on investment. As a result of exiting underperforming programs, channels and/or countries in our European region, we would expect to incur additional restructuring charges. We will provide updates on these activities and related estimated charges, which could be material, as appropriate throughout the year. We did not exit any material programs, channels or countries during the second quarter of 2009.

RESULTS OF OPERATIONS

Revenue and wireless devices handled by division and service line

		Three Months Ended June 30,
						% of								% of
		2009				Total				2008				Total				Change
						(Amounts in 000s)
Distribution revenue
Americas		$	102,537				16	%		$	171,808				16	%			(40	%)
Asia-Pacific			188,851				30	%			298,421				27	%			(37	%)
EMEA			340,295				54	%			621,966				57	%			(45	%)
Total		$	631,683				100	%		$	1,092,195				100	%			(42	%)
Logistic services revenue
Americas		$	44,869				49	%		$	44,055				42	%			2	%
Asia-Pacific			7,598				8	%			12,184				12	%			(38	%)
EMEA			39,318				43	%			47,803				46	%			(18	%)
Total		$	91,785				100	%		$	104,042				100	%			(12	%)
Total revenue
Americas		$	147,406				20	%		$	215,863				18	%			(32	%)
Asia-Pacific			196,449				27	%			310,605				26	%			(37	%)
EMEA			379,613				53	%			669,769				56	%			(43	%)
Total		$	723,468				100	%		$	1,196,237				100	%			(40	%)
Wireless devices sold through distribution
Americas			710				17	%			1,319				21	%			(46	%)
Asia-Pacific			1,418				35	%			2,762				44	%			(49	%)
EMEA			1,958				48	%			2,199				35	%			(11	%)
Total			4,086				100	%			6,280				100	%			(35	%)
Wireless devices handled through logistic services
Americas			13,005				86	%			11,759				87	%			11	%
Asia-Pacific			593				4	%			507				4	%			17	%
EMEA			1,545				10	%			1,184				9	%			30	%
Total			15,143				100	%			13,450				100	%			13	%
Total wireless devices handled
Americas			13,715				71	%			13,078				66	%			5	%
Asia-Pacific			2,011				10	%			3,269				17	%			(38	%)
EMEA			3,503				19	%			3,383				17	%			4	%
Total			19,229				100	%			19,730				100	%			(3	%)

		Six Months Ended June 30,
						% of								% of
		2009				Total				2008				Total				Change
		(Amounts in 000s)
Distribution revenue
Americas		$	213,839				17	%		$	372,662				17	%			(43	%)
Asia-Pacific			363,635				29	%			620,670				29	%			(41	%)
EMEA			674,770				54	%			1,168,540				54	%			(42	%)
Total		$	1,252,244				100	%		$	2,161,872				100	%			(42	%)
Logistic services revenue
Americas		$	90,965				50	%		$	90,805				43	%			0	%
Asia-Pacific			15,845				9	%			22,387				11	%			(29	%)
EMEA			73,491				41	%			95,976				46	%			(23	%)
Total		$	180,301				100	%		$	209,168				100	%			(14	%)
Total revenue
Americas		$	304,804				21	%		$	463,467				20	%			(34	%)
Asia-Pacific			379,480				26	%			643,057				27	%			(41	%)
EMEA			748,261				53	%			1,264,516				53	%			(41	%)
Total		$	1,432,545				100	%		$	2,371,040				100	%			(40	%)
Wireless devices sold through distribution
Americas			1,505				18	%			2,912				23	%			(48	%)
Asia-Pacific			3,028				36	%			5,485				44	%			(45	%)
EMEA			3,942				46	%			4,166				33	%			(5	%)
Total			8,475				100	%			12,563				100	%			(33	%)
Wireless devices handled through logistic services
Americas			25,874				88	%			25,789				90	%			0	%
Asia-Pacific			1,037				4	%			883				3	%			17	%
EMEA			2,585				8	%			2,118				7	%			22	%
Total			29,496				100	%			28,790				100	%			2	%
Total wireless devices handled
Americas			27,379				72	%			28,701				69	%			(5	%)
Asia-Pacific			4,065				11	%			6,368				16	%			(36	%)
EMEA			6,527				17	%			6,284				15	%			4	%
Total			37,971				100	%			41,353				100	%			(8	%)

The following table presents the percentage changes in revenue for the three and six months ended June 30, 2009 by service line compared to the same period in the prior year, including the impact to revenue from changes in wireless devices handled, average selling price and foreign currency.

		2009 Percentage Change in Revenue vs. 2008
										Non-								Total
		Wireless				Average				handset								Percentage
		devices				Selling				based				Foreign				Change in
		handled (1)				Price (2)				revenue (3)				Currency				Revenue
Three months ended June 30, 2009:
Distribution			(17	%)			(11	%)			(8	%)			(6	%)			(42	%)
Logistic services			8	%			(4	%)			(14	%)			(2	%)			(12	%)
Total			(15	%)			(11	%)			(9	%)			(5	%)			(40	%)
Six months ended June 30, 2009:
Distribution			(16	%)			(13	%)			(7	%)			(6	%)			(42	%)
Logistic services			5	%			(3	%)			(14	%)			(2	%)			(14	%)
Total			(14	%)			(12	%)			(8	%)			(6	%)			(40	%)