BRIGHTPOINT INC - 10-Q Quarterly Report

Back to GetFilings.com

UNITED STATES
SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended: September 30, 2002

or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from: to
------------- -------------

Commission file number: 0-23494

BRIGHTPOINT, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)

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

501 Airtech Parkway, 46168
Plainfield Indiana ----------
- ---------------------------------------- (Zip Code)
(Address of principal executive offices)

(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. [X] Yes [ ] No

Number of shares of common stock outstanding at November 8, 2002: 8,015,876
shares

BRIGHTPOINT, INC.
INDEX

BRIGHTPOINT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

See accompanying notes.

3

BRIGHTPOINT, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

See accompanying notes.

4

BRIGHTPOINT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)

See accompanying notes.

5

BRIGHTPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(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 required
by accounting principles generally accepted in the United States for complete
financial statements. The preparation of financial statements requires
management to make estimates and assumptions that affect amounts reported in the
financial statements and accompanying notes. Actual results are likely to differ
from those estimates, but management does not believe such differences will
materially affect the Company's financial position or results of operations. In
the opinion of the Company, all adjustments considered necessary to present
fairly the consolidated financial statements have been included.

On June 26, 2002, the Company's shareholders approved a 1-for-7 reverse split of
its common stock. Per share amounts in this report for all periods presented
have been adjusted to reflect this reverse stock split which was effective on
June 27, 2002.

The Consolidated Financial Statements include the accounts of the Company and
its majority-owned or controlled subsidiaries. Significant intercompany accounts
and transactions have been eliminated in consolidation. Certain amounts in the
2001 Consolidated Financial Statements have been reclassified to conform to the
2002 presentation.

The consolidated balance sheet at December 31, 2001 has been derived from the
audited consolidated financial statements at that date, but does not include all
of the information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements. The unaudited
consolidated statements of operations for the three and nine months ended
September 30, 2002 and the unaudited consolidated statement of cash flows for
the nine months ended September 30, 2002 are not necessarily indicative of the
operating results or cash flows that may be expected for the entire year.

The Company has not materially changed its significant accounting policies from
those disclosed in its Form 10-K for the year ended December 31, 2001, except
for, as discussed below, the implementation of Statement of Financial Accounting
Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets which was implemented in the first quarter of 2002 and Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets
which was applied retroactively to the first quarter of 2002.

For further information, reference is made 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, 2001.

6

BRIGHTPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2002
(UNAUDITED)

1. Basis of Presentation (continued)

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

On October 3, 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets ("SFAS No. 144"). SFAS No. 144
supersedes FASB Statement No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of and also supersedes the
accounting and reporting provisions of APB Opinion Number 30, Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions ("APB No. 30"), for segments of a business to be disposed of. Among
its many provisions, SFAS No. 144 retains the fundamental requirements of both
previous standards, however, it resolves significant implementation issues
related to FASB Statement No. 121 and broadens the separate presentation of
discontinued operations in the income statement required by APB No. 30 to
include a component of an entity (rather than a segment of a business). The
provisions of SFAS No. 144 became effective for financial statements issued for
fiscal years beginning after December 15, 2001 with early application
encouraged. The Company adopted SFAS No. 144 on January 1, 2002. The adoption of
SFAS No. 144 did not have a material effect on the Company's results of
operations, financial position or cash flows. See Note 2 to the Consolidated
Financial Statements for further discussion.

On June 29, 2001, the FASB issued Statement of Financial Accounting Standards
No. 142, Goodwill and Other Intangible Assets ("SFAS No. 142"). SFAS No. 142
addresses accounting and reporting of acquired goodwill and other intangible
assets. The Company completed its impairment testing under the requirements of
SFAS No. 142 during the second quarter of 2002 and the results were applied
retroactively to January 1, 2002. See Note 4 to the Consolidated Financial
Statements for further discussion.

In April of 2002, the FASB issued Statement of Financial Accounting Standards
No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB
Statement No. 13 and Technical Corrections ("SFAS No. 145"). SFAS No. 145
rescinds both FASB Statement No. 4, Reporting Gains and Losses from
Extinguishment of Debt ("FASB Statement No. 4"), and an amendment to that
Statement, FASB Statement No.64, Extinguishments of Debt Made to Satisfy Sinking
Fund Requirements ("FASB Statement No. 64"). FASB Statement No. 4 required that
all gains and losses from the extinguishment of debt be aggregated and, if
material, be classified as an extraordinary item, net of the related income tax
effect. Upon the adoption of SFAS No. 145, all gains and losses on the
extinguishment of debt for periods presented in the financial statements will be
classified as extraordinary items only if they meet the criteria in APB No. 30.
The provisions of SFAS No. 145 related to the rescission of FASB Statement No. 4
and FASB Statement No. 64 shall be applied for fiscal years beginning after May
15, 2002. Upon adoption in January of 2003, the Company expects it will be
required to classify any gains or losses on debt extinguishment as a separate
line item before Income from Continuing Operations for all periods presented.
The provisions of SFAS No. 145 related to the rescission of FASB Statement No.
44, the amendment of FASB Statement No. 13 and Technical Corrections became
effective as of May 15, 2002 and did not have a material impact on the Company.

7

BRIGHTPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2002
(UNAUDITED)

1. Basis of Presentation (continued)

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)

In June of 2002, the FASB issued Statement of Financial Accounting Standards No.
146, Accounting for Costs Associated with Exit or Disposal Activities ("SFAS
No.146"). SFAS No. 146 nullifies Emerging Issues Task Force ("EITF") Issue No,
94-3, "Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." SFAS No. 146 generally requires companies to recognize costs
associated with exit activities when they are incurred rather than at the date
of a commitment to an exit or disposal plan and is to be applied prospectively
to exit or disposal activities initiated after December 31, 2002. The Company is
currently evaluating the effects, if any, that this standard will have on its
results of operations and financial position.

NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share is based on the weighted average number of
common shares outstanding during each period, and diluted net income (loss) per
share is based on the weighted average number of common shares and dilutive
common share equivalents outstanding during each period. The Company's common
share equivalents consist of stock options and the Convertible Notes described
in Note 8 to the Consolidated Financial Statements.

8

BRIGHTPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2002
(UNAUDITED)

1. Basis of Presentation (continued)

The following is a reconciliation of the numerators and denominators of the
basic and diluted net income (loss) per share computations for the three and
nine months ended September 30, 2002 and 2001 (amounts in thousands, except per
share data):

9

BRIGHTPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2002
(UNAUDITED)

1. Basis of Presentation (continued)

COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) is comprised of net income (loss) and other
comprehensive income (loss). Other comprehensive income (loss) includes
unrealized gains or losses on derivative financial instruments and gains or
losses resulting from currency translations of foreign investments. The details
of comprehensive income (loss) for the three and nine months ended September 30,
2002 and 2001 are as follows:

2. Discontinued Operations

During the third quarter of 2002, the Company and certain of its subsidiaries
sold their respective ownership interests in Brightpoint Middle East FZE, and
its subsidiary Fono Distribution Services LLC, and Brightpoint Jordan Limited to
Persequor Limited, an entity controlled by the former Managing Director of the
Company's operations in the Middle East and certain members of his management
team. Pursuant to the transaction, the Company received two subordinated
promissory notes with face values of $1.2 million and $3.0 million that mature
in 2004 and 2006, respectively. The notes bear interest at 4% per annum and were
recorded at a discount to face value for an aggregate carrying amount at
September 30, 2002 of $3.3 million. In addition, under the Sale and Purchase
Agreement, the Company may receive additional proceeds, which are contingent
upon collection of accounts receivable from a certain customer. There can be no
assurance the Company will receive any additional proceeds. The Company recorded
a loss on the transaction of $1.6 million, including the recognition of
accumulated foreign currency translation gains of $0.3 million. Concurrent with
the completion of this transaction, $5 million of cash, which was pledged by
Brightpoint Holdings B.V. to support letters of credit utilized by the Company's
operations in the Middle East, has been released and is classified as
unrestricted. The Company will pay management fees, including performance based
bonuses, to the purchaser for providing management services relating to sales
activities of Brightpoint Asia Limited which the Company retained pursuant to
the transaction. This loss and the results of operations of the Company's former
Middle East operations are reflected in discontinued operations and prior
periods have been reclassified accordingly.

During the first quarter of 2002, the Company, as required, adopted SFAS No.
144. In connection with the adoption of SFAS No. 144, the Company has
reclassified to discontinued operations, for all periods presented, the results
and related charges for the business units that the Company discontinued or sold
pursuant to its 2001 restructuring plan, as described below.

During 2001, the Company's board of directors approved a restructuring plan
("2001 Restructuring Plan") that the Company began to implement in the fourth
quarter of 2001. The primary goal in adopting the 2001 Restructuring Plan was to
better position the Company for long-term and more consistent success by
improving its cost structure and eliminating operations in which the Company
believed potential returns were not adequate to justify the risks of those
operations. Certain markets in which the Company operated, including Brazil,
Jamaica, South Africa, Venezuela and Zimbabwe, had unusually high risk profiles
due to

10

BRIGHTPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2002
(UNAUDITED)

2. Discontinued Operations (continued)

many factors, including among other things, high importation duties, currency
restrictions and volatile political and economic environments. The Company
determined that the risks of operating in these markets could no longer be
justified given the profitability potential of its operations in those markets,
therefore, these operations were sold or otherwise discontinued pursuant to the
2001 Restructuring Plan.

Additionally, pursuant to the 2001 Restructuring Plan, the Company completed in
January 2002, through certain of its subsidiaries, the formation of a joint
venture with Hong Kong-based Chinatron Group Holdings Limited ("Chinatron").
Chinatron is involved in the wireless telecommunications and data industry and,
is beneficially owned, in part, by the former managing director of Brightpoint
China Limited and by a former executive of Brightpoint, Inc. In addition, an
independent director of Brightpoint, Inc. is also a director of Chinatron. The
Company's Chief Executive Officer (who is also a director of the Company) and
the former managing director of Brightpoint China Limited were founding
shareholders of Chinatron. Prior to the Company entering into the agreement to
form the joint venture, the Company's Chief Executive Officer disposed of his
interest in Chinatron primarily through the sale of his interest to a company
owned by the former managing director of Brightpoint China Limited and by a
former executive of Brightpoint, Inc. In exchange, the Company's Chief Executive
Officer received the unconditional promise from their company to pay him
$350,000 ($300,000 of which has been paid to date). In exchange for a 50%
interest in Brightpoint China Limited pursuant to the formation of the joint
venture, the Company received preference shares in Chinatron with a face value
of $10 million. On April 29, 2002, the Company announced that it had completed
the sale of its remaining 50% interest in Brightpoint China Limited to
Chinatron. Pursuant to this transaction, the Company received additional
preference shares in Chinatron with a face value of $11 million. The Company
currently estimates that its aggregate amount of Chinatron preference shares
have a fair value of approximately $2 million. See Note 3 to the Consolidated
Financial Statements for further discussion regarding the Company's investment
in Chinatron preference shares. The Company recorded losses related to the sale
of Brightpoint China Limited to Chinatron of approximately $8.5 million during
the three months ended March 31, 2002. Upon adoption of SFAS 142, as discussed
below, the Company reclassified these losses to cumulative effect of a change in
accounting principle effective January 1, 2002.

The 2001 Restructuring Plan was also intended to improve the Company's cost
structure and, accordingly, the Company's former North America and Latin America
divisions were consolidated in 2001 and are managed as one division, referred to
as the Americas. Warehouse and logistics functions formerly based in Miami were
transferred to Indianapolis and the warehouse in Miami was closed. Additionally
the Company's operations and activities in Germany, the Netherlands and Belgium,
including regional management, were consolidated into a new facility in Germany.
In total, the 2001 Restructuring Plan resulted in a headcount reduction of
approximately 350 employees across most areas of the Company, including
marketing, operations, finance and administration. In addition, the Miami
business and its sales office were closed during the second quarter of 2002.
This closure is reflected in discontinued operations and prior periods have been
reclassified accordingly.

11

BRIGHTPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2002
(UNAUDITED)

2. Discontinued Operations (continued)

As a result of actions taken in accordance with the 2001 Restructuring Plan, the
Company recorded non-recurring charges totaling approximately $2.1 million
during the nine months ended September 30, 2002 and $36.5 million in the fourth
quarter of 2001, respectively, as follows (in millions):

For the three and nine months ended September 30, 2002 these charges are
classified in discontinued operations along with the related net operating
losses from these discontinued operations totaling $0.4 million and $2.7
million, respectively. At September 30, 2002, the Company had approximately $2.1
million in restructuring reserves related to the 2001 Restructuring Plan. To
date, the Company has recorded approximately $38.6 million in charges during
2002 and 2001 relative to the actions called for by the 2001 Restructuring Plan.
As of September 30, 2002 the actions called for by the 2001 Restructuring Plan
were substantially complete, however, the Company expects to continue to record
adjustments through discontinued operations as necessary. Net assets held for
sale or disposal pursuant to the 2001 Restructuring Plan are classified in the
Consolidated Balance Sheet at September 30, 2002, as follows (in millions):

Total current assets $ 4.5
Property and equipment 0.2
Other non-current assets 0.1
------
Total assets $ 4.8
======

Accounts payable $ 0.4
Accrued expenses and other liabilities 5.1
------
Total liabilities $ 5.5
======

For the three and nine months ended September 30, 2002 discontinued operations
(including the Company's former Middle East operations) experienced total net
losses of $1.6 million and $8.8 million, respectively.

12

BRIGHTPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2002
(UNAUDITED)

2. Discontinued Operations (continued)

Total discontinued operations can be reconciled as follows:

3. Impairment of Long-Term Investment

As previously discussed, the Company received approximately $21 million face
value of Chinatron preference shares pursuant to its divestiture of Brightpoint
China Limited. The Chinatron preference shares were convertible into ordinary
shares of Chinatron at a ratio of 1:1, which represented approximately a 19.9%
interest in Chinatron at June 30, 2002. Additionally the provisions of the
Brightpoint China Limited shareholder agreement and the Chinatron preference
shares allow the Company to participate in certain capital raising activities to
protect the Company against dilution. As of June 30, 2002, the Company estimated
that its investment in Chinatron had a fair value of approximately $10.3 million
based on the Company's indirect ownership interest and the projected discounted
free cash flows of Chinatron. During the third quarter of 2002, Chinatron sought
to raise additional capital to fund its operations and meet its business
objectives. For liquidity reasons, the Company waived its rights to participate
in these capital-raising activities and to provide an incentive for other
parties to invest in Chinatron agreed to modify the conversion ratio of the
preference shares in September of 2002. These actions resulted in a significant
dilution in the Company's indirect ownership interest. Due to these changes the
Company retained an independent valuation firm to prepare a fair market value
analysis of its investment. Based on the results of this valuation, the Company
believes that the preference shares have a current estimated fair value of
approximately $2.0 million and, accordingly, have recorded an impairment charge
of approximately $8.3 million during the third quarter of 2002.

4. Cumulative Effect of a Change in Accounting Principle

As of January 1, 2002, the Company adopted SFAS No. 142. Pursuant to the
provisions of SFAS 142 the Company stopped amortizing goodwill as of January 1,
2002 and will perform an impairment test on its goodwill at least annually.
During the second quarter of 2002, the Company completed the transitional
impairment test required under SFAS No. 142. The initial step of the impairment
test was to identify potential goodwill impairment by comparing the fair value
of the Company's reporting units to their carrying values including the
applicable goodwill. These fair values were determined by calculating the
discounted free cash flow expected to be generated by each reporting unit taking
into account what the Company considers to be the appropriate industry and
market rate assumptions. If the carrying value exceeded the fair value, then a
second step was performed, which compared the implied fair value of the
applicable reporting unit's goodwill with the carrying amount of that goodwill,
to measure the amount of goodwill impairment, if any. As a result of the initial
transitional impairment test, the Company recorded an impairment charge of
approximately $40.7 million during the first quarter of 2002, which is presented
as a cumulative effect of a change in accounting principle, net of tax, for the
nine months ended September 30, 2002.

13

BRIGHTPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2002
(UNAUDITED)

4. Cumulative Effect of a Change in Accounting Principle (continued)

In addition to performing the required transitional impairment test on the
Company's goodwill, SFAS No. 142 required the Company to reassess the expected
useful lives of existing intangible assets including patents, trademarks and
trade names for which the useful life is determinable. At September 30, 2002,
these intangibles total $1.2 million, net of accumulated amortization of $0.7
million and are currently being amortized as required by SFAS 142 over three to
five years at approximately $0.4 million per year. The Company incurred no
impairment charges as a result of SFAS No. 142 for intangibles with determinable
useful lives which are subject to amortization.

The following table shows the Company's 2001 results presented on a comparable
basis to the 2002 results, adjusted to exclude amortization expense related to
goodwill (in thousands, except per share data):

The changes in the carrying amount of goodwill by operating segment for the nine
months ended September 30, 2002 are as follows (in thousands):

14

BRIGHTPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2002
(UNAUDITED)

5. Extraordinary Gain on Debt Extinguishment

During the third quarter of 2002, the Company repurchased 162,706 of its 197,033
outstanding zero-coupon, subordinated convertible notes due in the year 2018
("Convertible Notes"). The repurchases were made under a plan approved by the
Company's Board of Directors on November 1, 2001, which allows the Company to
repurchase the remaining outstanding Convertible Notes. The aggregate purchase
price for the Convertible Notes was approximately $54.0 million (at an average
cost of $332 per Convertible Note) and was funded by a combination of working
capital and a borrowing of $15 million under the credit facility with General
Electric Capital Corporation and the Company's primary North American operating
subsidiaries, Brightpoint North America L.P. and Wireless Fulfillment Services,
LLC. Approximately $30 million of the working capital funding came from
Brightpoint Holdings B.V., the Company's primary foreign finance subsidiary.
These transactions resulted in an extraordinary gain, net of tax, of
approximately $18.7 million ($2.33 per diluted share). The tax effect of the
Convertible Note repurchases will be largely offset by net operating losses
resulting in no significant cash tax payments. See Note 8 to the Consolidated
Financial Statements for further discussion.

During the second quarter of 2002, the Company repurchased 52,967 of its then
outstanding Convertible Notes. The aggregate purchase price for the Convertible
Notes was approximately $15.2 million (at an average cost of $287 per
Convertible Note) and was funded by working capital. These transactions resulted
in an extraordinary gain, net of tax, of approximately $7.5 million ($0.94 per
diluted share).

During the first quarter of 2001, the Company repurchased 36,000 of its
Convertible Notes for approximately $10 million (an average cost of $281 per
Convertible Note). These transactions resulted in an extraordinary gain, net of
tax, of approximately $4.6 million ($0.58 per diluted share). These
transactions, along with the purchase of 94,000 Convertible Notes in 2000,
completed the 130,000 Convertible Notes repurchase plan previously approved by
the Company's Board of Directors.

Between October 1, and November 8, 2002, the Company repurchased an additional
12,395 Convertible Notes using internally generated cash for a total cost of
$5.8 million ($472 per Convertible Note), with an accreted value of $6.7 million
($544 per Convertible Note). Currently, there are 21,932 Convertible Notes
outstanding with an accreted value of $11.9 million and on March 11, 2003,
holders of the outstanding Convertible Notes may require the Company to
repurchase them at the accreted value of $12.1 million.

6. Accounts Receivable Transfers

During the nine months ended September 30, 2002 and 2001, the Company entered
into certain transactions with banks and other financing organizations in
Ireland, Sweden, Australia, Mexico and France with respect to a portion of its
accounts receivable in order to reduce the amount of working capital required to
fund such receivables. These transactions have been treated as sales pursuant to
the provisions of FASB Statement No. 140, Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities ("SFAS No. 140"), which
became effective for transactions occurring after March 31, 2001.

Net funds received from the sales of accounts receivable during the three months
ended September 30, 2002 and 2001 totaled $55.0 million and $10.5 million,
respectively, and during the nine months ended September 30, 2002 and 2001
totaled $150.0 million and $83.2 million, respectively. Fees, in the form of
discounts, incurred in connection with these sales totaled $0.3 million and $0.7
million during the three months ended September 30, 2002 and 2001, respectively,
and $1.5 million and $2.6 million during the

15

BRIGHTPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2002
(UNAUDITED)

6. Accounts Receivable Transfers

nine months ended September 30, 2002 and 2001, respectively, and were recorded
as losses on the sale of assets which are included as a component of "Other
expenses" in the Consolidated Statements of Operations. The Company is the
collection agent on behalf of the financing organization for many of these
arrangements and has no significant retained interests or servicing liabilities
related to accounts receivable that it has sold. In limited circumstances,
related primarily to payment disputes regarding the Company's performance in the
original transactions, the Company may be required to repurchase the
corresponding accounts receivable sold.

7. Contract Financing Receivable

The Company offers financing of inventory and receivables to certain network
operator customers and their authorized dealer agents and wireless equipment
manufacturers under contractual arrangements. Under these arrangements, the
Company manages and finances accounts receivable and inventories for these
customers. The amount financed pursuant to these arrangements is recorded as a
current asset under the caption "Contract financing receivables." In addition,
the Company has commitments under certain contracts to provide inventory
financing for these customers pursuant to various limitations and provisions as
defined in the applicable service agreements. At September 30, 2002 and December
31, 2001, contract financing receivables of $24.1 million and $60.4 million,
respectively, were secured by $8.6 million and $23.8 million, respectively, of
wireless products located at the Company's facilities. In addition, at September
30, 2002 and December 31, 2001, the Company had $26.9 million and $45.5 million,
respectively, in vendor payables related to purchases made for these
arrangements which it considers to be the unfunded portion of these receivables.

The Company's contract financing activities are provided to network operators
and their authorized dealer agents and wireless equipment manufacturers located
primarily throughout the United States. Decisions to grant credit under these
arrangements are generally at the discretion of the Company, are made within
guidelines established by the network operators and wireless equipment
manufacturers and are subject to the Company's normal credit granting and
ongoing credit evaluation process.

8. Lines of Credit and Long-term Debt

On March 11, 1998, the Company completed the issuance of Convertible Notes with
an aggregate face value of $380 million ($1,000 per Convertible Note) and a
yield to maturity of 4.00%. The Convertible Notes are subordinated to all
existing and future senior indebtedness of the Company and all other
liabilities, including trade payables of the Company's subsidiaries. The
Convertible Notes resulted in gross proceeds to the Company of approximately
$172 million (issue price of $452.89 per Convertible Note) and require no
periodic cash payments of interest. The proceeds were used initially to reduce
borrowings under the Company's revolving credit facility and to invest in
highly-liquid, short-term investments pending use in operations.

16

BRIGHTPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2002
(UNAUDITED)

8. Lines of Credit and Long-term Debt (continued)

On October 30, 2000, the Company announced that its Board of Directors had
approved a plan under which the Company could repurchase up to 130,000
Convertible Notes. The Company repurchased 94,000 Convertible Notes during the
fourth quarter of 2000 and realized an extraordinary gain, net of tax, on the
repurchases of approximately $10.0 million. During the first quarter of 2001,
the Company repurchased the remaining 36,000 Convertible Notes under the plan
for approximately $10.1 million (at an average cost of $281 per Convertible
Note). These transactions resulted in an extraordinary gain, net of tax, of
approximately $4.6 million ($0.58 per diluted share).

On November 1, 2001, the Company announced that its Board of Directors had
approved another plan under which the Company may repurchase the remaining
250,000 Convertible Notes. During the second quarter of 2002, the Company
repurchased 52,967 of its outstanding Convertible Notes for approximately $15.2
million (at an average purchase price of $287 per Convertible Note). These
repurchases were funded by working capital. These transactions resulted in an
extraordinary gain of approximately $7.5 million ($0.94 per diluted share) after
transaction and unamortized debt issuance costs and applicable taxes. During the
third quarter of 2002, the Company repurchased another 162,706 of its
outstanding Convertible Notes. The aggregate purchase price for the Convertible
Notes was approximately $54.0 million (at an average cost of $332 per
Convertible Note) and was funded by a combination of working capital and a
borrowing of $15 million under the credit facility with General Electric Capital
Corporation and the Company's primary North American operating subsidiaries,
Brightpoint North America L.P. and Wireless Fulfillment Services, LLC.
Approximately $30 million of the working capital funding came from Brightpoint
Holdings B.V., the Company's primary foreign finance subsidiary. These
transactions resulted in an extraordinary gain, net of tax, of approximately
$18.7 million ($2.33 per diluted share). The tax effect of the Convertible Note
repurchases will be largely offset by net operating losses resulting in no
significant cash tax payments. Additional repurchases, if any, may be made in
the open market, in privately negotiated transactions or otherwise. The timing
and amount of repurchases, if any, will depend on many factors, including but
not limited to, the availability of capital, the prevailing market price of the
Convertible Notes and overall market conditions. No assurance can be given that
the Company will repurchase any additional Convertible Notes under this plan or
otherwise. The Company has the right, subject to certain limitations, to fund
the repurchases of the Convertible Notes from borrowings under its North America
revolving credit facility (discussed below). However, no assurance can be given
that the Company will repurchase any Convertible Notes in such a manner. As of
September 30, 2002, the remaining 34,327 Convertible Notes had an accreted book
value of approximately $18.6 million or $542 per Convertible Note. Between
October 1, and November 8, 2002, the Company repurchased an additional 12,395
Convertible Notes using internally generated cash for a total cost of $5.8
million ($472 per Convertible Note), with an accreted value of $6.7 million
($544 per Convertible Note). Currently, there are 21,932 Convertible Notes
outstanding with an accreted value of $11.9 million and on March 11, 2003,
holders of the outstanding Convertible Notes may require the Company to
repurchase them at the accreted value of $12.1 million.

The $22 million face value of the remaining Convertible Notes is convertible at
the option of the holder any time prior to maturity. These notes are convertible
at the rate of 2.730 shares of common stock per $1,000 face value note, for an
aggregate of 59,874 shares of common stock. The noteholders also may require the
Company to purchase the notes on the fifth, tenth and fifteenth anniversary date
of the issuance of the notes. The five-year anniversary is March 11, 2003. The
Company has the option to pay the purchase price

17

BRIGHTPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2002
(UNAUDITED)

8. Lines of Credit and Long-term Debt (continued)

in cash or subject to certain requirements and conditions, common stock or, a
combination thereof. The Company is required to elect the method in which it
will satisfy this potential obligation on or about February 11, 2002. If the
Company is able and chooses to utilize common stock to satisfy all or a portion
of this potential obligation, the number of shares issued may be significant and
could significantly dilute the ownership interests of the Company's common
stockholders. The number of shares that would be issued to holders of the
Convertible Notes, if the Company is able and chooses to use only common stock
and no cash to purchase the Convertible Notes, would be the $12.1 million
accreted value of the Convertible Notes at the five-year anniversary date
divided by the average sales price of the common stock for the five trading day
period prior to the three trading days before the five-year anniversary date.
Because the noteholders have the ability to require the Company to repurchase
the Convertible Notes within less than a year from September 30, 2002, the
Convertible Notes have been classified as a current liability in the
Consolidated Balance Sheets at September 30, 2002.

On October 31, 2001, the Company's primary North American operating
subsidiaries, Brightpoint North America L.P. and Wireless Fulfillment Services,
LLC ("the Borrowers"), entered into a new revolving credit facility, which was
amended on December 21, 2001 ("the Revolver"), with General Electric Capital
Corporation ("GE Capital") to provide capital for its North American operations.
GE Capital acted as agent for a syndicate of banks ("the Lenders").

The Revolver replaces the Company's former Bank One multicurrency facility, does
not prohibit the Company from borrowing additional funds outside of the United
States and expires in October of 2004. The Revolver provides borrowing
availability, subject to borrowing base calculations and other limitations, of
up to a maximum of $90 million and bears interest, at the Borrowers' option, at
the prime rate plus 1.25% or LIBOR plus 2.75%, for the first twelve months and
those rates may be periodically adjusted thereafter based on certain financial
measurements. The Revolver is guaranteed by Brightpoint, Inc. and is secured by
all of the Borrowers' assets in North America. The Company also has pledged the
capital stock of certain of its subsidiaries as collateral for the Revolver.
Borrowing availability under the Revolver is based primarily on a percentage of
eligible accounts receivable and inventory. The terms of the Revolver include
negative covenants that, among other things, limit the Borrowers' ability to
sell certain assets and make certain payments, including but not limited to,
dividends, repurchases of common stock, payments to the Company and other
payments outside the normal course of business, as well as prohibit the Company
from amending the terms of the Convertible Notes without the prior written
consent of GE Capital. On September 27, 2002, the Revolver was amended primarily
in order to remove the negative covenant that related to Standard & Poor's
rating of Brightpoint, Inc. and replace it with another covenant pursuant to
which the Company must maintain a tangible net worth, as defined in the
amendment, of at least $75 million. The provisions of the Revolver are such that
if the Company's borrowing availability falls below $20 million, the Company is
then subject to a minimum fixed charge coverage ratio as defined in the Revolver
and a requirement to maintain a borrowing availability of $10 million. Any of
the following events could cause the Company to be in default under the
Revolver, including but not limited to, (i) the expiration or termination of the
Company's distribution agreement in the United States with Nokia Inc., (ii) a
change in control of the Company, (iii) failure to maintain a tangible net
worth, subject to certain adjustments, of at least $75 million, (iv) the
borrowing availability under the Revolver falling below $10 million or (v) the
violation of the fixed charge

18

BRIGHTPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2002
(UNAUDITED)

8. Lines of Credit and Long-term Debt (continued)

coverage ratio, if applicable. In the event of default, the Lenders may (i)
terminate all or a portion of the Revolver with respect to further advances or
the incurrence of further letter of credit obligations, (ii) declare all or any
portion of the obligations due and payable and require any and all of the letter
of credit obligations be cash collateralized, or (iii) exercise any rights and
remedies provided to the Lenders under the loan document or at law or equity.
Additionally, the Lenders may increase the rate of interest applicable to the
advances and the letters of credit to the default rate as defined in the
agreement.

Subject to certain restrictions and limitations set forth in the Revolver, the
Company may use certain proceeds under the Revolver to repurchase its
outstanding Convertible Notes. At September 30, 2002, there was $15.0 million
outstanding under the Revolver at an interest rate of approximately 6.0%. The
Company did not meet certain financial covenant requirements to draw upon the
$20 million minimum unused borrowing availability, therefore, the Company's
effective availability at September 30, 2002 was $7.3 million.

During 2001, one of the Company's subsidiaries, Brightpoint (France) SARL,
entered into a short-term line of credit facility with Natexis Banque. The
facility had borrowing availability of up to approximately 6.9 million Euros
(approximately $6.9 million U.S. Dollars), was guaranteed by the receivables of
one of Brightpoint (France) SARL's customers and bore interest at EURIBOR plus
2.5%. At December 31, 2001, the interest rate was approximately 5.8%. At
December 31, 2001, there was $6.1 million outstanding under this facility.
During the third quarter of 2002, this facility was terminated by the respective
parties and Brightpoint (France) SARL and Natexis Banque entered into an
agreement whereby Natexis Banque will purchase certain accounts receivable
without recourse from Brightpoint (France) SARL. See Note 6 to the Consolidated
Financial Statements.

Also, during 2001, another of the Company's subsidiaries, Brightpoint Australia
Pty Ltd, entered into a short-term line of credit facility with Westpac Banking
Corporation. The facility, which is due on demand, has borrowing availability of
up to $10 million Australian Dollars (approximately $5.1 million U.S. Dollars)
and bears interest at Westpac's base overdraft rate plus 1.95% to 3.25%. At
September 30, 2002 and December 31, 2001, the interest rate was approximately
10.4% and 8.9%, respectively. The facility is secured by a fixed and floating
charge over all of the assets of Brightpoint Australia Pty Ltd and is guaranteed
by Brightpoint, Inc. At September 30, 2002, $3.7 million was outstanding under
this facility and at December 31, 2001 there was approximately U.S. $4.2 million
outstanding under this facility. During the third quarter of 2002, Westpac
Banking Corporation notified Brightpoint Australia Pty Ltd that it desired to
terminate this facility in the fourth quarter of 2002. Brightpoint Australia Pty
Ltd is in negotiations with an alternative lender to provide financing for its
operations. There can be no assurance that Brightpoint Australia Pty Ltd will
obtain alternative financing. The termination of this facility in the fourth
quarter of 2002 is not expected to have a material adverse affect on the
financial position of the Company.

Another of the Company's subsidiaries, Brightpoint Sweden Aktiebolag, has a
short-term line of credit facility with SEB. The facility had borrowing
availability of up to $15 million Swedish Krona (approximately $1.6 million U.S.
Dollars) and bears interest at 5.0%. The facility is supported by a guarantee
provided by the Company. At September 30, 2002, $1.2 million was outstanding
under this facility and at December 31, 2001, there were no amounts outstanding
under this facility.

19

BRIGHTPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2002
(UNAUDITED)

8. Lines of Credit and Long-term Debt (continued)

In January 2002, in connection with the agreement made with Chinatron as
discussed in Note 2 to the Consolidated Financial Statements, Brightpoint China
Limited entered into two separate credit facilities which were supported by two
cash-secured letters of credit totaling approximately $10 million issued by the
Company. The Company sold its remaining interests in Brightpoint China Limited
in April of 2002 and, consequently, both of the cash-secured letters of credit
supporting these facilities were released.

9. Operating Segments

The Company operates in markets worldwide and has three operating segments.
These operating segments represent the Company's three divisions: the Americas,
Asia-Pacific and Europe. These divisions all derive revenues from sales of
wireless handsets, accessory programs and fees from the provision of integrated
logistics services. The divisions are managed separately because of the
geographic locations in which they operate.

The Company evaluates the performance of, and allocates resources to, these
segments based on income (loss) from continuing operations including allocated
corporate selling, general and administrative expenses. As discussed in Note 2
to the Consolidated Financial Statements, during the fourth quarter of 2001 the
Company implemented a restructuring plan that provided for selling or otherwise
disposing of certain operations. In January of 2002, the Company adopted SFAS
No. 144 which changed the presentation of discontinued operations. See Notes 1
and 2 to the Consolidated Financial Statements for further discussion. A summary
of the Company's operations by segment is presented below (in thousands):

20

BRIGHTPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2002
(UNAUDITED)

9. Operating Segments (continued)

(1) Includes assets of the Company's corporate operations.
(2) Includes assets held for sale or disposal of discontinued operations at
September 30, 2002.

10. Contingencies

The Company and several of its executive officers and directors were named as
defendants in two complaints filed in November and December 2001, in the United
States District Court for the Southern District of Indiana, entitled Weiss v.
Brightpoint, Inc., et. al., Cause No. IP01-1796-C-T/K; and Mueller v.
Brightpoint, Inc., et. al., Cause No. IP01-1922-C-M/S. In February 2002, the
Court consolidated the Weiss and Mueller actions and appointed John Kilcoyne as
lead plaintiff in this action which is now known as In re Brightpoint, Inc.
Securities Litigation. A consolidated amended complaint was filed in April 2002.
The amended complaint, among other things, adds the Company's current
independent auditors as a defendant.

The action is a purported class action asserted on behalf of all purchasers of
the Company's publicly traded securities between January 29, 1999 and January
31, 2002, alleging violations of Section 10(b) of the Securities Exchange Act of
1934 and Rule 10b-5 promulgated thereunder by the Company and certain of its
officers and directors, as well as the Company's current independent auditors,
and violations of Section 20(a) of the Exchange Act by the individual
defendants.

The amended complaint alleges, among other things, that the Company
intentionally concealed and falsified its financial condition, and issued
financial statements which violated generally accepted accounting principles, in
order that it would not be declared in default of its loan covenants under its
line of credit. The amended complaint also alleges that, due to the false
financial statements, the Company's stock was traded at artificially inflated
prices. Plaintiff seeks compensatory damages, including interest, against all of
the defendants and recovery of their reasonable litigation costs and expenses.
The Company disputes these claims and intends to vigorously defend this matter.
The defendants have filed motions to dismiss the amended complaint.

A complaint was filed on November 23, 2001 against the Company and 87 other
defendants in the United States District Court for the District of Arizona,
entitled Lemelson Medical, Education and Research Foundation LP v. Federal
Express Corporation, et.al., Cause No. CIV01-2287-PHX-PGR. The plaintiff claims
the Company and other defendants have infringed 7 patents alleged to cover bar
code technology. The case seeks unspecified damages, treble damages and
injunctive relief. The Court has ordered the case stayed pending the decision in
a related case in which a number of bar code equipment manufacturers have sought
a declaration that the patents asserted are invalid and unenforceable. The trial
of that related case is currently scheduled to begin in November 2002. The
Company disputes these claims and intends to defend vigorously this matter.

21

BRIGHTPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2002
(UNAUDITED)

10. Contingencies (continued)

In February 2002, Nora Lee, filed a complaint in the Circuit Court, Marion
County, Indiana, against all of the Company's current directors, its former
corporate controller and its current independent auditors, Ernst & Young LLP,
which action is entitled Nora Lee Derivatively on Behalf of Nominal Defendant
Brightpoint, Inc., vs. Robert J. Laikin, et. al. and Brightpoint, Inc. as a
Nominal Defendant, Cause No. 49C01-0202-CT-000399.

The plaintiff alleges, among other things, that certain of the individual
defendants sold the Company's Common Stock while in possession of material
non-public information regarding the Company, that the individual defendants
violated their fiduciary duties of loyalty, good faith and due care by, among
other things, causing the Company to disseminate misleading and inaccurate
financial information, failing to implement and maintain internal adequate
accounting control systems, wasting corporate assets and exposing the Company to
losses. The plaintiff is seeking to recover unspecified damages from all
defendants, the imposition of a constructive trust for the amounts of profits
received by the individual defendants who sold the Company's common stock and
recovery of reasonable litigation costs and expenses.

The parties have filed a stipulation agreeing to stay all proceedings in this
derivative action pending a decision on the motions to dismiss the amended
complaint in the In re Brightpoint, Inc. Securities Litigation action.

The Company has responded to requests for information and subpoenas from the
Securities and Exchange Commission ("SEC") in connection with an investigation
including its accounting treatment of a certain contract entered into with an
insurance company. In addition, certain of the Company's directors, officers and
employees have provided testimony to the SEC. The staff of the SEC may subpoena
additional testimony of certain of the Company's directors, officers or
employees.

The outcome of any litigation is uncertain and an unfavorable outcome in the
proceedings set forth above could have a material adverse affect on the Company.
In addition, the Company is from time to time, also 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.

The Company's Certificate of Incorporation and By-laws provide for it to
indemnify its officers and directors to the extent permitted by law. In
connection therewith the Company has entered into indemnification agreements
with its executive officers and directors. In accordance with the terms of these
agreements and the Company's By-laws, the Company has reimbursed certain former
officers for certain personal legal expenses in the amount of $137,000 and may
in the future reimburse them for their personal legal expenses arising from
certain pending litigation and regulatory matters.

22

BRIGHTPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2002
(UNAUDITED)

11. Subsequent Event

In October of 2002, the Company announced that it and certain of its
subsidiaries had completed the sale of certain operating assets of Brightpoint
de Mexico, S.A. de C.V. and their respective ownership interest in Servicios
Brightpoint de Mexico, S.A. de C.V. to Soluciones Inteligentes para el Mercado
Movil, S.A. de C.V. (SIMM), an entity which is wholly-owned and controlled by
Brightstar de Mexico S.A. de C.V. Pursuant to the transaction the Company
received cash consideration totaling approximately $1.7 million and a short-term
promissory note from SIMM totaling approximately $1.1 million that is payable in
November and December 2002. The repayment of the promissory note is guaranteed
by Brightstar Corp. The Company expects to record a loss in the range of $4.5
million to $5.0 million relating to the sale of these operating assets during
the fourth quarter of 2002. Additionally, the Company plans to initiate the
liquidation of the remaining assets and liabilities of its Mexican operations
during the fourth quarter of 2002 and may receive a tax benefit of $1.4 million
upon dissolution of the related legal entities. The losses and the results of
operations of Brightpoint Mexico will be classified as a part of discontinued
operations in the Company's consolidated statement of operations beginning in
the fourth quarter of 2002.

23

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. 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
amounts reported in the financial statements and accompanying notes. Actual
results are likely to differ from those estimates, but we do not believe such
differences will materially affect our financial position or results of
operations. See Note 1 to the Consolidated Financial Statements included in this
report for information regarding our critical accounting policies. 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, 2001.

On June 26, 2002 our shareholders approved a 1-for-7 reverse split of our common
stock. Per share amounts in this report for all periods presented have been
adjusted to reflect this reverse stock split which was effective on June 27,
2002.

During the third quarter of 2002, we repurchased 162,706 of our 197,033
outstanding zero-coupon, subordinated convertible notes due in the year 2018
("Convertible Notes"). The repurchases were made under a plan approved by our
Board of Directors on November 1, 2001, which allows us to repurchase the
remaining outstanding Convertible Notes. The aggregate purchase price for the
Convertible Notes was approximately $54.0 million (at an average cost of $332
per Convertible Note) and was funded by a combination of working capital and a
borrowing of $15 million under the credit facility with General Electric Capital
Corporation and our primary North American operating subsidiaries, Brightpoint
North America L.P. and Wireless Fulfillment Services, LLC. Approximately $30
million of the working capital funding came from Brightpoint Holdings B.V., our
primary foreign finance subsidiary. These transactions resulted in an
extraordinary gain, net of tax, of approximately $18.7 million ($2.33 per
diluted share). The tax effect of the Convertible Note repurchases will be
largely offset by net operating losses resulting in no significant cash tax
payments. After these repurchases, we had 34,327 Convertible Notes outstanding
with an accreted value of $18.6 million ($542 per Convertible Note) as of
September 30, 2002. See Note 8 to the Consolidated Financial Statements for
further discussion. Between October 1, and November 8, 2002, we repurchased an
additional 12,395 Convertible Notes using internally generated cash for a total
cost of $5.8 million ($472 per Convertible Note), with an accreted value of $6.7
million ($544 per Convertible Note). Currently, there are 21,932 Convertible
Notes outstanding with an accreted value of $11.9 million and on March 11, 2003,
holders of the outstanding Convertible Notes may require us to repurchase them
at the accreted value of $12.1 million.

During the third quarter of 2002, we and certain of our subsidiaries sold our
respective ownership interests in Brightpoint Middle East FZE, and its
subsidiary Fono Distribution Services LLC, and Brightpoint Jordan Limited to
Persequor Limited, an entity controlled by the former Managing Director of our
operations in the Middle East and certain members of his management team.
Pursuant to the transaction, we received two subordinated promissory notes with
face values of $1.2 million and $3.0 million that mature in 2004 and 2006,
respectively. The notes bear interest at 4% per annum and were recorded at a
discount to face value for an aggregate carrying amount at September 30, 2002 of
$3.3 million. In addition, under the Sale and Purchase Agreement, we may receive
additional proceeds, which are contingent upon collection of accounts receivable
from a certain customer. There can be no assurance

24

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW AND RECENT DEVELOPMENTS (CONTINUED)

that we will receive any additional proceeds. We recorded a loss on the
transaction of $1.6 million, including the recognition of accumulated foreign
currency translation gains of $0.3 million. Concurrent with the completion of
this transaction, $5 million of cash, which was pledged by Brightpoint Holdings
B.V. to support letters of credit utilized by our former operations in the
Middle East has been released and is classified as unrestricted. We will pay
management fees, including performance-based bonuses, to the purchaser for
providing management services relating to sales activities of Brightpoint Asia
Limited which we retained pursuant to the transaction. This loss and the results
of operations of our former Middle East operations are reflected in discontinued
operations and prior periods have been reclassified accordingly.

During the second quarter of 2002, we completed the goodwill and other
intangible asset impairment testing required by the adoption of Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets
("SFAS No. 142"). Consequently, we recorded in the first quarter of 2002 an
impairment charge totaling $40.7 million relating to this change in accounting
principle, net of tax. Approximately $8.5 million of this charge related to the
sale of Brightpoint China Limited to Chinatron Group Holdings Limited which was
previously classified in discontinued operations in our March 31, 2002 financial
statements and has now been reclassified to the cumulative effect of an
accounting change as a part of the adoption of SFAS 142.

During the first and second quarters of 2002, we completed, through certain of
our subsidiaries, the divestiture of our interests in Brightpoint China Limited
to Hong Kong based Chinatron Group Holdings Limited ("Chinatron"). Pursuant to
the transaction with Chinatron, we received preference shares in Chinatron with
an aggregate face value of $21 million. As of June 30, 2002, the preference
shares had an estimated fair market value of approximately $10.3 million. As
more fully discussed in Note 3 to the Consolidated Financial Statements, we
recorded an impairment charge during the third quarter of 2002 of $8.3 million
relating to our investment in Chinatron preference shares. This impairment
charge was based on the results of an independent valuation of our investment
precipitated by material changes in our interest in Chinatron. As a result of
these changes, our preference shares in Chinatron are now convertible into
Chinatron ordinary shares representing less than a 1% interest in Chinatron. We
currently estimate that our total investment in Chinatron preference shares has
a fair market value of approximately $2 million. See Notes 2 and 3 to the
Consolidated Financial Statements for further discussion of the divestiture of
Brightpoint China Limited and our Chinatron investment.

During the first quarter of 2002 we adopted Statement of Financial Accounting
Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets ("SFAS No. 144"). In connection with the adoption of SFAS No. 144 we have
reclassified to discontinued operations, for all periods presented, the results
of operations and related charges for the business units that we discontinued or
sold pursuant to our 2001 Restructuring Plan, including our former operations in
China which were sold in April of 2002 pursuant to the Chinatron transaction
discussed above. See further discussion below under the heading "Discontinued
Operations."

25

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS

Revenue

Revenue by Division (in thousands):

Revenue in the quarter ended September 30, 2002, decreased 7% compared to the
third quarter of 2001 and increased 10% from the second quarter of 2002. Revenue
in the Americas division during the third quarter of 2002 declined 33% compared
to the third quarter of 2001 and increased slightly compared to the second
quarter of 2002 as we experienced lower demand for our products and services due
primarily to lower demand in the dealer/agent and retail channels. The revenue
declines in the Americas and Europe divisions, in the third quarter of 2002 as
compared to the third quarter of 2001, were partially offset by an increase in
revenue in our Asia-Pacific division, in particular, our Brightpoint Asia
Limited business, managed by Persequor Limited. The increase in revenues during
the third quarter of 2002 for the Europe division when compared to the second
quarter of 2002 was primarily the result of increased demand in Sweden
(including its Norway branch office which initiated operations late in the
second quarter of 2002) and Ireland resulting from selective promotions by
certain network operators.

Revenue for the nine months ended September 30, 2002 declined 5% compared to the
comparable prior period due to lower demand for our products and services in our
Americas and Europe divisions resulting from slower growth in new wireless
subscribers and lower demand for replacement handsets. In addition, we continue
to experience a general reduction in handset subsidies and in the number of
promotional programs sponsored by network operators in these divisions, which
results in lower demand for our products and services. The revenue declines
resulting from lower demand for our products and services in the Americas and
Europe divisions, in the nine months ended September 30, 2002, were partially
offset by increases in revenue in our Asia-Pacific division, in particular,
Brightpoint Asia Limited, our Hong Kong based export sales business.

26

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

RESULTS OF OPERATIONS (CONTINUED)

Revenue (continued)

Revenue by Service Line (in thousands):

** Less than 1%

Compared to the second quarter of 2002, we experienced an increase in revenues
from wireless handset sales in the third quarter of 2002 due to increased
volumes in the Asia-Pacific and Europe divisions. When compared to the third
quarter of 2001, revenues from wireless handset sales decreased due to the
factors affecting worldwide demand for wireless handsets discussed previously.
Compared to the second quarter of 2002 and the third quarter of 2001, we
experienced decreased revenue from accessory programs, particularly in the
Americas division. Many handsets now include accessories bundled with the
product that would have previously been sold separately. This has diminished
overall demand for unbundled accessories. When compared to the second quarter of
2002 and the third quarter of 2001, the increase in integrated logistics
services revenues during the third quarter of 2002 reflects increased revenue
from our services related to prepaid wireless in Sweden and the addition of new
logistics services customers in certain markets.

Revenue from wireless handset sales for the nine months ended September 30, 2002
declined 6% compared to the comparable prior period due to the lower worldwide
demand in 2002 discussed previously. The decrease in accessory program revenues
in the first nine months of 2002 when compared to the first nine months of 2001
was due to the increase in bundling of accessories with handsets by handset
manufacturers, which has reduced demand for unbundled accessories. The increase
in integrated logistics services revenues during the nine months ended September
30, 2002 compared to the same period in 2001 reflects the addition of new
significant logistics services customers in certain markets and increased
revenue from our services related to prepaid wireless in Sweden.

27

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

RESULTS OF OPERATIONS (CONTINUED)

Gross Profit

Gross profit for the third quarter of 2002, decreased 3% when compared to the
third quarter of 2001 and increased 48% when compared to the second quarter of
2002. Gross margin was 6.1% for the third quarter of 2002 compared to gross
margins of 5.9% for the third quarter of 2001 and 4.5% for the second quarter of
2002. The increase in gross margin during the third quarter of 2002 when
compared to the third quarter of 2001 is primarily due to improved gross margins
in the Americas division particularly North America partially offset by a
decrease in gross margins in the Asia-Pacific division. The divisional changes
were primarily the result of changes in the mix of total revenue between higher
margin integrated logistics services and lower margin handset sales. The
increase in gross margin during the third quarter of 2002 when compared to the
second quarter of 2002 was attributable to: i) the recognition of a one-time
loss in the second quarter of 2002 related to a purchase obligation to an
accessory vendor, ii) a reduction in excess and obsolescence costs in the third
quarter of 2002 and iii) improved pricing management, sales mix planning,
inventory planning and operational efficiencies during the third quarter of
2002. For the nine months ended September 30, 2002, the decreases in gross
profit when compared to the nine months ended September 30, 2001 was the result
of the lower revenue levels in 2002. Gross margin for the nine months ended
September 30, 2002 was flat at 5.3% with the comparable prior period, however,
both periods were affected by different one-time charges discussed previously.

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses decreased $3.1 million, or
15% from the second quarter of 2002 to $18.1 million. SG&A expenses for the same
period of 2001 were $18.7 million. The decrease in SG&A compared to the third
quarter of 2001 was primarily the result of the decreased sales activity in
2002. As a percent of revenue, SG&A expenses declined to 5.2% as compared to the
second quarter 2002 SG&A expense of 6.7%. SG&A expenses include one-time charges
of $0.6 million and $1.5 million, in the third and second quarters of 2002,
respectively. One-time charges in the third quarter of 2002 pertain primarily to
the relocation of our corporate offices with our North America headquarters and
severance costs related to restructuring a merchandising inventory business line
within our German operations. One-time charges in the second quarter of 2002
pertained to the severances of our former Chief Financial Officer and employees
in worldwide cost reduction measures. The improvement in SG&A expenses during
the third quarter 2002 was driven by cost reduction action taken in the second
quarter of 2002, tight controls on expenses, and the effect of a higher revenue
base. For the nine months ended September 30, 2002, SG&A expenses increased 14%
from the comparable prior period. These increases are due primarily to the
one-time severance items discussed above and to increased corporate and overhead
costs, including legal, accounting and other professional fees related to
regulatory investigations and on-going litigation.

28

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

RESULTS OF OPERATIONS (CONTINUED)

Operating Income (Loss) from Continuing Operations

For the third quarter of 2002, we generated operating income from continuing
operations of $3.1 million compared to operating income from continuing
operations of $3.0 million in the third quarter of 2001 and operating losses of
$6.9 million in the second quarter of 2002. The higher operating income from
continuing operations in the third quarter of 2002 when compared to the second
quarter of 2002 was due to the increase in revenue and gross margin and the
decrease in SG&A discussed above. When compared to the third quarter of 2001,
the higher operating income from continuing operations in the third quarter of
2002 was the result of higher gross margin and lower SG&A partially offset by
the decline in revenue. The operating loss from continuing operations for the
nine months ended September 30, 2002 compared to the same period of 2001
increased due to the reduction in revenue and the increase in SG&A.

Impairment of Long-term Investment

During the third quarter of 2002, we recorded an investment impairment charge of
$8.3 million, or $1.04 per share (there are no tax benefits anticipated from
this charge) with regards to our ownership of $21 million face value Class B
Preference Shares in Chinatron by reducing the carrying value from $10.3 million
to $2 million. During the third and fourth quarters of 2002, for liquidity
reasons, we elected not to participate in two financing rounds and agreed to
change the terms of the Preference Shares which would materially reduce our
ownership interest if we were to convert the Preference Shares to ordinary
shares. An independent nationally recognized valuation firm estimated the fair
market value of the investment and, as a result, we adjusted the carrying value
accordingly and treated these events as a permanent impairment as of September
30, 2002.

29

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

RESULTS OF OPERATIONS (CONTINUED)

Income (Loss) from Continuing Operations

The increased losses from continuing operations for the three and nine months
ended September 30, 2002 as compared to the three and nine months ended
September 30, 2001 and the three months ended June 30, 2002 was primarily
attributable to the factors discussed above in the analyses of revenue, gross
margin, SG&A and impairment of long-term investment. Loss per diluted share from
continuing operations was $0.94 for the third quarter of 2002 compared to income
per diluted share from continuing operations of $0.06 in the third quarter of
2001 and loss per diluted share from continuing operations of $0.87 in the
second quarter of 2002. For the nine months ended September 30, 2002 and 2001,
loss per diluted share from continuing operations was $2.55 and $0.37,
respectively.

On a pro forma basis (excluding the impairment loss on our Chinatron
investment), income from continuing operations for the third quarter of 2002
would have been $0.8 million compared to income from continuing operations of
$0.4 million in the third quarter of 2001 and loss from continuing operations of
$7.0 million for the second quarter of 2002. Pro forma income per diluted share
from continuing operations would have been $0.10 for the third quarter of 2002
compared to income per diluted share from continuing operations of $0.06 in the
third quarter of 2001 and loss per diluted share from continuing operations of
$0.87 in the second quarter of 2002. A reconciliation of pro forma income from
continuing operations to income (loss) from continuing operations in accordance
with accounting principles generally accepted in the United States ("GAAP") is
as follows:

Reconciliation of Pro Forma Amounts to GAAP
(U.S. Dollars, in thousands)

30

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

RESULTS OF OPERATIONS (CONTINUED)

Discontinued Operations

During the third quarter of 2002, we and certain of our subsidiaries sold our
respective ownership interests in Brightpoint Middle East FZE, and its
subsidiary Fono Distribution Services LLC, and Brightpoint Jordan Limited to
Persequor Limited, an entity controlled by the former Managing Director of our
operations in the Middle East and certain members of his management team.
Pursuant to the transaction, we received two subordinated promissory notes with
face values of $1.2 million and $3.0 million that mature in 2004 and 2006,
respectively. The notes bear interest at 4% per annum and were recorded at a
discount to face value for an aggregate carrying amount at September 30, 2002 of
$3.3 million. In addition, under the Sale and Purchase Agreement, we may receive
additional proceeds, which are contingent upon collection of accounts receivable
from a certain customer. There can be no assurance that we will receive any
additional proceeds. We recorded a loss on the transaction of $1.6 million,
including the recognition of accumulated foreign currency translation gains of
$0.3 million. Concurrent with the completion of this transaction, $5 million of
cash, which was pledged by Brightpoint Holdings B.V. to support letters of
credit utilized by our former operations in the Middle East has been released
and is classified as unrestricted. We will pay management fees, including
performance based bonuses, to the purchaser for providing management services
relating to certain Brightpoint Asia Limited activities which we retained
pursuant to the transaction. This loss and the results of operations of our
former operations in the Middle East are reflected in discontinued operations
and prior periods have been reclassified accordingly.

During the first quarter of 2002 we adopted Statement of Financial Accounting
Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets ("SFAS No. 144"). In connection with the required adoption of SFAS No.
144 we have reclassified to discontinued operations, for all periods presented,
the results of operations and related charges for the business units (Brazil,
Belgium, Holland, Jamaica, Miami, South Africa, Venezuela and Zimbabwe
locations) that we discontinued or sold pursuant to our 2001 Restructuring Plan.
Additionally, as a result of the transaction with Chinatron discussed above in
the section entitled "Overview and Recent Developments," our former Brightpoint
China Limited operations are also classified as discontinued operations. See
Notes 1 and 2 to the Consolidated Financial Statements for further discussions
regarding the adoption of SFAS No. 144 and our 2001 Restructuring Plan.

During the third quarter of 2002, aggregate losses in discontinued operations
were approximately $1.6 million compared to $7.3 million in the third quarter of
2001 and $5.8 million in the second quarter of 2002. The aggregate loss in
discontinued operations during the third quarter of 2002 was comprised primarily
of the loss on disposal of our former Middle East operations discussed above.
The aggregate loss in discontinued operations in the third quarter of 2001
includes a $3.4 million one-time charge resulting from the settlement of
disputed amount due to us from a handset manufacturer with which we severed our
relationship. For the second quarter of 2002, the loss in discontinued
operations is primarily the result of further asset write-downs and closure
costs pursuant to our 2001 restructuring plan and losses incurred from wind-up
operations of discontinued entities.

31

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

RESULTS OF OPERATIONS (CONTINUED)

Discontinued Operations (continued)

For the three and nine months ended September 30, 2002, discontinued operations
experienced net losses of $0.4 million and $8.8 million, respectively, on
revenue of $14 million and $84 million, respectively. For the three months ended
September 30, 2002, these operations also experienced a net loss on disposal of
discontinued operations of approximately $1.3 million. These aggregate losses
include $0.5 million and $6.7 million in net losses during the three and nine
months ended September 30, 2002, respectively, from wind-up operations of
discontinued entities and other adjustments to amounts recorded pursuant to the
2001 Restructuring Plan totaling $2.1 million for the nine months ended
September 30, 2002. For the three and nine months ended September 30, 2001, our
discontinued operations experienced a net loss of approximately $7.3 million and
$8.4 million, respectively, on revenue of approximately $84 million and $216
million, respectively. To date, we have recorded approximately $38.6 million in
charges during 2002 and 2001 relative to the actions called for by the 2001
Restructuring Plan. As of September 30, 2002 the actions called for by the 2001
Restructuring Plan were substantially complete, however, we expect to continue
to record adjustments through discontinued operations as necessary.

Cumulative Effect of a Change in Accounting Principle

During the second quarter of 2002, we completed the goodwill and other
intangible asset impairment testing required by the adoption of SFAS 142.
Consequently, we recorded in the first quarter of 2002 an impairment charge
totaling $40.7 million relating to this change in accounting principle.
Approximately $8.5 million of this charge related to the sale of Brightpoint
China Limited to Chinatron Group Holdings Limited which was previously
classified in discontinued operations in our March 31, 2002 financial statements
and has now been reclassified to the cumulative effect of an accounting change
as a part of the adoption of SFAS 142. See Note 4 to the Consolidated Financial
Statements for further discussion.

Extraordinary Gain on Debt Extinguishment

During the third quarter of 2002, we repurchased 162,706 of our 197,033
outstanding zero-coupon, subordinated convertible notes due in the year 2018
("Convertible Notes"). The repurchases were made under a plan approved by our
Board of Directors on November 1, 2001, which allows us to repurchase the
remaining outstanding Convertible Notes. The aggregate purchase price for the
Convertible Notes was approximately $54.0 million (at an average cost of $332
per Convertible Note) and was funded by a combination of working capital and a
borrowing of $15 million under the credit facility with General Electric Capital
Corporation and our primary North American operating subsidiaries, Brightpoint
North America L.P. and Wireless Fulfillment Services, LLC. Approximately $30
million of the working capital funding came from Brightpoint Holdings B.V., our
primary foreign finance subsidiary. These transactions resulted in an
extraordinary gain, net of tax, of approximately $18.7 million ($2.33 per
diluted share). The tax effect of the Convertible Note repurchases will be
largely offset by net operating losses resulting in no significant cash tax
payments. As of September 30, 2002, the remaining 34,327 Convertible Notes had
an accreted book value of approximately $18.6 million or $542 per Convertible
Note.

During the second quarter of 2002, we repurchased 52,967 of our then outstanding
Convertible Notes. The aggregate purchase price for the Convertible Notes was
approximately $15.2 million (at an average cost of $287 per Convertible Note)
and was funded by working capital. These transactions resulted in an
extraordinary gain, net of tax, of approximately $7.5 million ($0.94 per diluted
share).

32

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

RESULTS OF OPERATIONS (CONTINUED)

Extraordinary Gain on Debt Extinguishment (continued)

The timing and amount of any additional repurchases, if any, will depend on many
factors, including but not limited to, the availability of capital, the
prevailing market price of the Convertible Notes and overall market conditions.
No assurance can be given that we will repurchase any additional Convertible
Notes. See the section entitled "Liquidity and Capital Resources" below and Note
8 to the Consolidated Financial Statements for further information regarding the
Convertible Notes.

During the first quarter of 2001, we repurchased 36,000 of our then outstanding
Convertible Notes for approximately $10 million (an average cost of $281 per
Convertible Note). These transactions resulted in an extraordinary gain, net of
tax, of approximately $4.6 million ($0.58 per diluted share).

Between October 1, and November 8, 2002, we repurchased an additional 12,395
Convertible Notes using internally generated cash for a total cost of $5.8
million ($472 per Convertible Note), with an accreted value of $6.7 million
($544 per Convertible Note). Currently, there are 21,932 Convertible Notes
outstanding with an accreted value of $11.9 million and on March 11, 2003,
holders of the outstanding Convertible Notes may require us to repurchase them
at the accreted value of $12.1 million.

Net Income (Loss)

As a result of the factors, charges and gains discussed above, our net income
for the third quarter of 2002 was $9.5 million, or $1.19 per diluted share,
compared to net losses of $6.9 million, or $0.86 per diluted share, in the third
quarter of 2001 and $5.2 million, or $0.65 per diluted share, for the second
quarter of 2002. During the nine months ended September 30, 2002, we experienced
a net loss of $43.7 million, or $5.47 per diluted share, compared to a net loss
of $6.7 million, or $0.84 per diluted share, during the comparable period in
2001. These losses were due to the factors, charges and gains discussed above.

33

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

LIQUIDITY AND CAPITAL RESOURCES

(1) Total current assets, less total current liabilities, excluding our
Convertible Notes, which were classified as a current liability at
September 30, 2002.
(2) Does not include our Convertible Notes, which were classified as a current
liability at September 30, 2002.

We have historically satisfied our working capital requirements principally
through cash flow from operations, vendor financing, bank borrowings and the
issuance of equity and debt securities. The decrease in working capital at
September 30, 2002 compared to December 31, 2001 is comprised primarily of the
effect of decreases in cash and cash equivalents, accounts receivable,
inventories and funded contract financing activities, partially offset by a
decrease in accounts payable. We believe that cash flow from operations and
available bank borrowings will be sufficient to continue funding our short-term
capital requirements. However, repurchases of Convertible Notes (described
below), if any, significant changes in our business model, significant operating
losses or expansion of operations in the future may require us to seek
additional and alternative sources of capital. Consequently, there can be no
assurance that we will be able to obtain any additional funding on terms
acceptable to us or at all.

Net cash provided by operating activities was $42.6 million for the nine months
ended September 30, 2002, as compared to $43.6 million in the comparable prior
period. The slight decrease in 2002 was primarily the result of the increased
net loss offset by improved working capital management. Additionally, as of
September 30, 2002, average days revenue in accounts receivable were
approximately 29 days, compared to approximately 36 days for the third quarter
of 2001 and 34 days for the second quarter of 2002, respectively. During the
third quarter of 2002, annualized inventory turns were 19 times compared to 12
times in the third quarter of 2001 and 15 times in the second quarter of 2002.
Average days costs in accounts payable were 34 days for the third quarter of
2002, compared to 40 days for the third quarter of 2001 and 35 days for the
second quarter of 2002, respectively. These changes combined to create a
decrease in cash conversion cycle days to 14 days in the third quarter of 2002
from 27 days in the third quarter of 2001 and 23 days in the second quarter of
2002. This reduction was the result of our efforts to reduce accounts receivable
and inventory levels during the quarter, the divestiture of our Middle East
operations and the growth in our Brightpoint Asia Limited business managed by
Persequor Limited. During the fourth quarter, which can be subject to seasonal
increases in demand, we may experience increased levels in accounts receivable
and inventory and therefore a cash conversion cycle of 14 days may not be
sustainable.

Unrestricted cash and cash equivalents at September 30, 2002 decreased by
approximately $30.5 million when compared to December 31, 2001 and pledged cash
decreased by approximately $4.9 million at September 30, 2002 when compared to
December 31, 2001. The reduction in unrestricted cash is primarily due to the
repurchases of Convertible Notes during the quarter. The reduction in pledged
cash is primarily the result of the elimination of certain cash-secured letters
of credit pursuant to the divestitures of Brightpoint China Limited and our
former Middle East operations.

The reduction in accounts receivable during the nine months ended September 30,
2002, was attributable to the decreased sales activity, successful acceleration
of our accounts receivable collection cycle and sales or financing transactions
of certain accounts receivable to banks and other financing organizations.
During 2001 and the nine months ended September 30, 2002, we entered into
certain transactions with financing organizations with respect to a portion of
our accounts receivable in order to reduce the amount of working capital
required to fund such receivables.

34

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

Certain of these transactions qualify as sales pursuant to current accounting
principles generally accepted in the United States. Net funds received from the
sales of accounts receivable during the three months ended September 30, 2002
and 2001 totaled $55.0 million and $10.5 million, respectively, and during the
nine months ended September 30, 2002 and 2001 totaled $150.0 million and $83.2
million, respectively. We are the collection agent on behalf of the financing
organization for many of these arrangements. We have no significant retained
interests or servicing liabilities related to accounts receivable that we have
sold. In limited circumstances, related primarily to payment disputes regarding
our performance in the original transactions, we may be required to repurchase
the accounts. The collection of our accounts receivable and our ability to
accelerate our collection cycle through the sale of accounts receivable is
affected by several factors, including, but not limited to, our credit granting
policies, contractual provisions, our customers' and our overall credit rating
as determined by various credit rating agencies, industry and economic
conditions, the ability of the customer to provide security, collateral or
guarantees relative to credit granted by us, the customer's and our recent
operating results, financial position and cash flows and our ability to obtain
credit insurance on amounts that we are owed. Adverse changes in any of these
factors, certain of which may not be wholly in our control, could create delays
in collecting or an inability to collect our accounts receivable which could
have a material adverse effect on our financial position, cash flows and results
of operations.

At September 30, 2002, our allowance for doubtful accounts was $5.1 million
compared to $6.3 million at December 31, 2001, which we believe was adequate for
the size and nature of our receivables at those dates. Bad debt expense as a
percent of revenues was less than 1.0% for the first nine months of 2002.
However, we have incurred significant accounts receivable impairments in
connection with our 1999 and 2001 restructuring plans because we ceased doing
business in certain markets, significantly reducing our ability to collect the
related receivables. Also, our accounts receivable are concentrated with network
operators, agent dealers and retailers operating in the wireless
telecommunications and data industry and delays in collection or the
uncollectibility of accounts receivable could have an adverse effect on our
liquidity and working capital position. We believe that during 2001 and the
first part of 2002 many participants in the wireless telecommunications and data
industry, including certain of our customers, experienced operating results that
were below previous expectations, were subject to decreases in overall credit
ratings and faced higher costs in obtaining capital. We believe this trend will
continue for the remainder of 2002 and could have a material adverse effect on
our financial position and results of operations. In connection with our
on-going business activities, we intend to offer open account terms to
additional customers, which subjects us to further credit risks, particularly in
the event that receivables are concentrated in particular geographic markets or
with particular customers. We seek to minimize losses on credit sales by closely
monitoring our customers' credit worthiness and by obtaining, where available,
credit insurance or security on open account sales to certain customers.

The decrease in inventories and corresponding increase in average inventory
turns during the first nine months of 2002 are due primarily to a reduction in
our inventory levels resulting from improved inventory level management and
overall lower demand in 2002, which we expect to continue in certain markets
during 2002. Additionally, during the first and second quarters of 2002, we
recorded inventory valuation adjustments of approximately $4.1 million in
Germany, Mexico and North America to adjust inventories to their estimated net
realizable value based on current market conditions. These valuation adjustments
were the result of the over-supply of product in our distribution channels and
the lower-than-anticipated level of demand experienced in 2002. Significant
portions of the impacted inventories were wireless accessories.

35

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

We offer financing of inventory and receivables to certain network operator
customers and their agents and manufacturer customers under contractual
arrangements. Under these contracts we manage and finance inventories and
receivables for these customers resulting in a contract financing receivable.
Contract financing receivables decreased to $24.2 million at September 30, 2002
from $60.4 million at December 31, 2001. In addition, we have vendor payables of
$26.9 million and $45.5 million at September 30, 2002 and December 31, 2001,
respectively that represent the unfunded portion of these contract financing
receivables. The decrease in contract financing receivables is due to the
overall lower demand being experienced by some of these customers and the
conversion of certain of these customers to a consignment arrangement, whereby
we do not finance the related inventory and accounts receivable. These
receivables were secured at September 30, 2002 and December 31, 2001 by $8.6
million and $23.8 million, respectively, of wireless products located at our
facilities. In addition, we have commitments under these contracts to provide
inventory financing for these customers pursuant to various limitations defined
in the applicable service agreements.

The reduction in accounts payable at September 30, 2002 when compared to
December 31, 2001 is due primarily to the reduced business activity in the first
nine months of 2002, including inventory purchases and the reduction in average
days costs in accounts payable days. We rely on our suppliers to provide trade
credit facilities and favorable payment terms to adequately fund our on-going
operations and product purchases. The payment terms received from our suppliers
is dependent on several factors, including, but not limited to, our payment
history with the supplier, the supplier's credit granting policies, contractual
provisions, our overall credit rating as determined by various credit rating
agencies, our recent operating results, financial position and cash flows and
the supplier's ability to obtain credit insurance on amounts that we owe them.
Adverse changes in any of these factors, certain of which may not be entirely
within our control, could have a material adverse effect on our operations. We
have, from time to time, obtained extended payment terms from certain
significant vendors at the end of each quarter. Consequently, our accounts
payable and cash balances at quarter end may be higher than what is experienced
throughout the quarter.

At September 30, 2002, net property and equipment decreased due primarily to the
effect of the divestiture of Brightpoint China Limited and the Middle East
operations and depreciation expense in excess of capital expenditures. Capital
expenditures totaled $7.3 million in the first nine months of 2002. A
significant decrease from the $22.3 million in capital expenditures for the nine
months ended September 30, 2001.

The decrease in goodwill and other intangibles at September 30, 2002 as compared
to December 31, 2001 is primarily the result of the non-cash impairment of
approximately $40.7 million of goodwill and other intangibles recorded pursuant
to our adoption of SFAS No. 142 effective January 1, 2002 and approximately $8.0
million of goodwill sold pursuant to the Chinatron transaction discussed
previously. See Note 4 to the Consolidated Financial Statements for further
discussion regarding our adoption of SFAS No. 142.

Net cash provided by investing activities for the nine months ended September
30, 2002 was $4.6 million compared to net cash used by investing activities of
$26.0 in the same period of 2001. The increase is due primarily to the decrease
in our funded contract financing activities discussed above and a reduction in
our capital expenditures of approximately $15.0 million from $22.3 million for
the nine months ended September 30, 2001 to $7.3 million for the nine months
ended September 30, 2002.

36

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

On March 11, 1998, we completed the issuance of zero-coupon, subordinated,
convertible notes due in the year 2018 ("Convertible Notes") with an aggregate
face value of $380 million ($1,000 per Convertible Note) and a yield to maturity
of 4.00%. The Convertible Notes are subordinated to all of our existing and
future senior indebtedness and all other liabilities, including trade payables
of our subsidiaries. The Convertible Notes resulted in gross proceeds of
approximately $172 million (issue price of $452.89 per Convertible Note) and
require no periodic cash payments of interest. The proceeds were used initially
to reduce borrowings under our revolving credit facility and to invest in highly
liquid, short-term investments pending use in operations. On October 30, 2000,
we announced that our Board of Directors had approved a plan under which we
could repurchase up to 130,000 Convertible Notes. We repurchased 94,000
Convertible Notes during the fourth quarter of 2000 and realized an
extraordinary gain, net of tax, on the repurchases of approximately $10.0
million. During the first quarter of 2001, we repurchased 36,000 Convertible
Notes for approximately $10.1 million (at an average cost of $281 per
Convertible Note), resulting in an extraordinary gain, net of tax, of
approximately $4.6 million ($0.58 per diluted share). As of March 31, 2001, our
plan to repurchase 130,000 Convertible Notes was completed.

On November 1, 2001, we announced that our Board of Directors had approved
another plan under which we may repurchase the remaining 250,000 Convertible
Notes. During the second quarter of 2002, we repurchased 52,967 outstanding
Convertible Notes. The aggregate purchase price for the Convertible Notes was
approximately $15.2 million (at an average cost of $287 per Convertible Note)
and was funded by working capital. These transactions resulted in an
extraordinary gain, net of tax, of approximately $7.5 million ($0.94 per diluted
share). During the third quarter of 2002, we repurchased 162,706 of our
outstanding Convertible Notes. The aggregate purchase price for the Convertible
Notes was approximately $54.0 million (at an average cost of $332 per
Convertible Note) and was funded by a combination of working capital and a
borrowing of $15 million under the credit facility with General Electric Capital
Corporation and our primary North American operating subsidiaries, Brightpoint
North America L.P. and Wireless Fulfillment Services, LLC. Approximately $30
million of the working capital funding came from Brightpoint Holdings B.V., our
primary foreign finance subsidiary. These transactions resulted in an
extraordinary gain, net of tax, of approximately $18.7 million ($2.33 per
diluted share). The tax effect of the Convertible Note repurchases will be
largely offset by net operating losses resulting in no significant cash tax
payments.

After these repurchases, we had 34,327 Convertible Notes outstanding with an
accreted value of $18.6 million ($542 per Convertible Note) as of September 30,
2002. In the fourth quarter of 2002, we repurchased an additional 12,395
Convertible Notes using internally generated cash for a total cost of $5.8
million ($472 per Convertible Note), with an accreted value of $6.7 million
($544 per Convertible Note). Currently, there are 21,932 Convertible Notes
outstanding with an accreted value of $11.9 million and on March 11, 2003,
holders of the outstanding Convertible Notes may require us to repurchase them
at the accreted value of $12.1 million. Further repurchases, if any, may be made
in the open market, in privately negotiated transactions or otherwise. The
timing and amount of repurchases, if any, will depend on many factors, including
but not limited to, the availability of capital, the prevailing market price of
the Convertible Notes and overall market conditions. We have the right, subject
to certain limitations, to fund the repurchases of the Convertible Notes from
borrowings under our North America revolving credit facility (discussed below).
However, no assurance can be given that we will repurchase any Convertible
Notes.

37

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

The $22 million face value of the Convertible Notes is convertible at the option
of the holder any time prior to maturity. These notes are convertible at the
rate of 2.730 shares of common stock per $1,000 face value note, for an
aggregate of 59,874 shares of common stock. The noteholders also may require us
to purchase the Convertible Notes on the fifth, tenth and fifteenth anniversary
date of their issuance. The five-year anniversary is March 11, 2003. We have the
option to pay the purchase price in cash or subject to certain requirements and
conditions, common stock or a combination thereof. We are required to elect the
method in which it will satisfy this potential obligation on or about February
11, 2002. If we are able and choose to utilize common stock to satisfy all or a
portion of this potential obligation, the number of shares issued may be
significant and could significantly dilute the ownership interests of our common
stockholders. The number of shares that would be issued to holders of the
Convertible Notes, if we are able and choose to use only common stock and no
cash to purchase the notes, would be the $12.1 million accreted value of the
Convertible Notes at the five-year anniversary date divided by the average sales
price of the common stock for the five trading day period prior to the three
trading days before the five-year anniversary date. Because the noteholders have
the ability to require us to repurchase the Convertible Notes within less than a
year from September 30, 2002, the Convertible Notes have been classified as a
current liability in the Consolidated Balance Sheets at September 30, 2002.

On October 31, 2001, our primary North American operating subsidiaries,
Brightpoint North America L.P. and Wireless Fulfillment Services, LLC ("the
Borrowers"), entered into a new revolving credit facility, which was amended on
December 31, 2001 ("the Revolver"), with General Electric Capital Corporation
("GE Capital") to provide capital for our North American operations. GE Capital
acted as agent for a syndicate of banks ("the Lenders").

The Revolver replaces our former Bank One multicurrency facility, does not
prohibit us from borrowing additional funds outside of the United States and
expires in October of 2004. The Revolver provides borrowing availability,
subject to borrowing base calculations and other limitations, of up to a maximum
of $90 million and bears interest, at the Borrowers' option, at the prime rate
plus 1.25% or LIBOR plus 2.75%, for the first twelve months and those rates may
be periodically adjusted thereafter based on certain financial measurements. The
Revolver is guaranteed by Brightpoint, Inc. and is secured by all of the
Borrowers' assets in North America. Borrowing availability under the Revolver is
based primarily on a percentage of eligible accounts receivable and inventory.
The terms of the Revolver include negative covenants that, among other things,
limit the Borrowers' ability to sell certain assets and make certain payments,
including but not limited to, dividends, repurchases of common stock, payments
to us and other payments outside the normal course of business, as well as
prohibit us from amending the terms of the Convertible Notes without the prior
written consent of GE Capital. On September 27, 2002, the Revolver was amended
primarily in order to remove the negative covenant that related to Standard &
Poor's rating of Brightpoint, Inc. and replace it with another covenant pursuant
to which the Company must maintain a tangible net worth, as defined in the
amendment, of at least $75 million. The provisions of the Revolver are such that
if our borrowing availability falls below $20 million, we are then subject to a
minimum fixed charge coverage ratio as defined in the Revolver and a requirement
to maintain borrowing availability of $10 million. Any of the following events
could cause us to be in default under the Revolver, including but not limited
to, (i) the expiration or termination of our distribution agreement in the
United States with Nokia Inc., (ii) a change in control of Brightpoint, Inc.,
(iii) failure to maintain a tangible net worth, subject to certain adjustments,
of at least $75 million, (iv) the borrowing availability under the Revolver
falling below $10 million or (v) the violation of the fixed charged coverage
ratio, if applicable. In the event of default, the Lenders may (i) terminate all
or a portion of the Revolver with respect to further advances or the incurrence
of further letter of credit obligations, (ii) declare all or any portion of the
obligations due and payable and require any and all of the letter of credit
obligations be cash collateralized, or (iii) exercise any rights and remedies
provided to the Lenders under the loan document or at law or equity.
Additionally, the Lenders may

38

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

increase the rate of interest applicable to the advances and the letters of
credit to the default rate as defined in the agreement.

Subject to certain restrictions, we may use proceeds under the Revolver to
repurchase our outstanding Convertible Notes. At September 30, 2002, there was
$15 million outstanding under the Revolver. We did not meet certain financial
covenant requirements to draw upon the $20 million minimum unused borrowing
availability, therefore, our effective availability at September 30, 2002 was
$7.3 million.

During 2001, one of our subsidiaries, Brightpoint (France) SARL, entered into a
short-term line of credit facility with Natexis Banque. The facility had
borrowing availability of up to approximately 6.9 million Euros (approximately
$6.9 million U.S. Dollars), was guaranteed by the receivables of one of
Brightpoint (France) SARL's customers and bore interest at EURIBOR plus 2.5%. At
December 31, 2001, the interest rate on this facility was approximately 5.8%. At
December 31, 2001, there was $6.1 million outstanding under this facility.
During the third quarter of 2002, this facility was terminated by the respective
parties and Brightpoint (France) SARL and Natexis Banque entered into an
agreement whereby Natexis Banque will purchase certain accounts receivable
without recourse from Brightpoint (France) SARL. See Note 6 to the Consolidated
Financial Statements. Also, during 2001, another of our subsidiaries,
Brightpoint Australia Pty Ltd, entered into a short-term line of credit facility
with Westpac Banking Corporation. The facility, which is due on demand, has
borrowing availability of up to $10 million Australian Dollars (approximately
$5.1 million U.S. Dollars) and bears interest at Westpac's base overdraft rate
plus 1.95% to 3.25%. At September 30, 2002 and December 31, 2001, the interest
rate was approximately 10.4% and 8.9%, respectively. The facility is secured by
a fixed and floating charge over all of the assets of Brightpoint Australia Pty
Ltd and is guaranteed by Brightpoint, Inc. At September 30, 2002, $3.7 million
was outstanding under this facility and at December 31, 2001, there was
approximately U.S. $4.2 million outstanding under this facility. During the
third quarter of 2002, Westpac Banking Corporation notified Brightpoint
Australia Pty Ltd that it desired to terminate this facility in the fourth
quarter of 2002. Brightpoint Australia Pty Ltd is in negotiations with an
alternative lender to provide financing for its operations. There can be no
assurance that Brightpoint Australia Pty Ltd will obtain alternative financing.
The termination of this facility in the fourth quarter of 2002 is not expected
to have a material adverse affect on our financial position. Another of our
subsidiaries, Brightpoint Sweden Aktiebolag, has a short-term line of credit
facility with SEB. The facility had borrowing availability of up to $15 million
Swedish Krona (approximately $1.6 million U.S. Dollars) and bears interest at
5.0%. The facility is supported by a guarantee provided by us. At September 30,
2002, $1.2 million was outstanding under this facility and at December 31, 2001,
there were no amounts outstanding under this facility.

In January 2002, in connection with the agreement made with Chinatron as
discussed in Note 2 to the Consolidated Financial Statements, Brightpoint China
Limited entered into two separate credit facilities which were supported by two
cash-secured letters of credit totaling approximately $10 million that we
issued. We sold our remaining interests in Brightpoint China Limited in April of
2002 and, consequently, both of the cash-secured letters of credit supporting
these facilities were released.

Net cash used by financing activities during the nine months ended September 30,
2002 increased when compared to same period in 2001 due to the repurchases of
Convertible Notes during the third quarter of 2002 as discussed above.

The decrease in stockholders' equity from December 31, 2001 to September 30,
2002 of $43.2 million resulted primarily from the net loss for the nine months
ended September 30, 2002 of $43.7 million.

39

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In April of 2002, the FASB issued Statement of Financial Accounting Standards
No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB
Statement No. 13 and Technical Corrections ("SFAS No. 145"). SFAS No. 145
rescinds both FASB Statement No. 4, Reporting Gains and Losses from
Extinguishment of Debt ("FASB Statement No. 4"), and an amendment to that
Statement, FASB Statement No.64 Extinguishments of Debt Made to Satisfy Sinking
Fund Requirements ("FASB Statement No. 64"). FASB Statement No. 4 required that
all gains and losses from the extinguishment of debt be aggregated and, if
material, be classified as an extraordinary item, net of the related income tax
effect. Upon the adoption of SFAS No. 145, all gains and losses on the
extinguishment of debt for periods presented in the financial statements will be
classified as extraordinary items only if they meet the criteria in APB Opinion
No. 30, Reporting the Results of Operations - Reporting the Effects of Disposal
of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions ("APB No. 30"). The provisions of SFAS No. 145
related to the rescission of FASB Statement No. 4 and FASB Statement No. 64
shall be applied for fiscal years beginning after May 15, 2002. Upon adoption in
January of 2003, we expect that we will be required to classify any gains or
losses on debt extinguishment as a separate line item before Income from
Continuing Operations for all periods presented. The provisions of SFAS No. 145
related to the rescission of FASB Statement No. 44, the amendment of FASB
Statement No. 13 and Technical Corrections became effective as of May 15, 2002
and did not have a material impact on us.

In June of 2002, the FASB issued Statement of Financial Accounting Standards No.
146, Accounting for Costs Associated with Exit or Disposal Activities ("SFAS
No.146"). SFAS No. 146 nullifies Emerging Issues Task Force ("EITF") Issue No,
94-3, "Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." SFAS No. 146 generally requires companies to recognize costs
associated with exit activities when they are incurred rather than at the date
of a commitment to an exit or disposal plan and is to be applied prospectively
to exit or disposal activities initiated after December 31, 2002. We are
currently evaluating the effects, if any, that this standard will have on our
results of operations and financial position.

SUBSEQUENT EVENT

In October of 2002, we and certain of our subsidiaries completed the sale of
certain operating assets of Brightpoint de Mexico, S.A. de C.V. and our
respective ownership interest in Servicios Brightpoint de Mexico, S.A. de C.V.
to Soluciones Inteligentes para el Mercado Movil, S.A. de C.V. (SIMM), an entity
which is wholly-owned and controlled by Brightstar de Mexico S.A. de C.V.
Pursuant to the transaction we received cash consideration totaling
approximately $1.7 million and a short-term promissory note from SIMM totaling
approximately $1.1 million that is payable in November and December 2002. The
repayment of the promissory note is guaranteed by Brightstar Corp. We expect to
record a loss in the range of $4.5 million to $5.0 million relating to the sale
of these operating assets during the fourth quarter of 2002. Additionally, we
plan to initiate the liquidation of the remaining assets and liabilities of our
Mexican operations during the fourth quarter of 2002 and may receive a tax
benefit of $1.4 million upon dissolution of the related legal entities. The
losses and the results of operations of Brightpoint Mexico will be classified as
a part of discontinued operations in our consolidated statement of operations
beginning in the fourth quarter of 2002.

40

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE AND FOREIGN CURRENCY EXCHANGE RATE RISKS

We are exposed to financial market risks, including changes in interest rates
and foreign currency exchange rates. To mitigate interest rate risks, we have
periodically utilized interest rate swaps to convert certain portions of our
variable rate debt to fixed interest rates. To mitigate foreign currency
exchange rate risks, we periodically utilize derivative financial instruments
under the Foreign Currency Risk Management Policy approved by our Board of
Directors. We do not use derivative instruments for speculative or trading
purposes.

We are exposed to changes in interest rates on our variable interest rate
revolving lines of credit. A 10% increase in short-term borrowing rates during
2002 would have resulted in only a nominal increase in interest expense. We did
not have any interest rate swaps outstanding at September 30, 2002.

A substantial portion of our revenue and expenses are transacted in markets
worldwide and are denominated in currencies other than the U.S. Dollar.
Accordingly, our future results could be adversely affected by a variety of
factors, including changes in specific countries' political, economic or
regulatory conditions and trade protection measures.

Our foreign currency risk management program is designed to reduce but not
eliminate unanticipated fluctuations in earnings, cash flows and the value of
foreign investments caused by volatility in currency exchange rates by hedging,
where believed to be cost-effective, significant exposures with foreign currency
exchange contracts, options and foreign currency borrowings. Our hedging
programs reduce, but do not eliminate, the impact of foreign currency exchange
rate movements. An adverse change (defined as a 10% strengthening of the U.S.
Dollar) in all exchange rates would not have had a negative impact on our
results of operations for the nine months ended September 30, 2002, due to the
aggregate losses experienced in our foreign operations. At September 30, 2002,
there were no cash flow or net investment hedges open. Our sensitivity analysis
of foreign currency exchange rate movements does not factor in a potential
change in volumes or local currency prices of our products sold or services
provided. Actual results may differ materially from those discussed above.

EQUITY PRICE RISKS

We have issued zero-coupon, subordinated, convertible notes ("Convertible
Notes"). The Convertible Notes have an accreted value at September 30, 2002 of
approximately $18.6 million (approximately $542 per Convertible Note). The
holders of the Convertible Notes may cause us to repurchase the Convertible
Notes on March 11, 2003, at the accreted value at that date for cash or subject
to certain requirements and conditions, common stock or a combination thereof.
The accreted value at March 11, 2003 will be approximately $553 per Convertible
Note.

If we are able and choose to use common stock to satisfy all of or a portion of
this potential obligation, the number of shares to be issued will be directly
affected by the market price of the common stock on the five trading days prior
to the three trading days before March 11, 2003. The number of shares that would
be issued to satisfy this potential obligation if we are able and choose to
utilize only common stock would be calculated as the total number of Convertible
Notes outstanding (21,932 as of November 7, 2002) multiplied by the accreted
value per Convertible Note at March 11, 2003 (approximately $553 per Convertible
Note) divided by the average sales price of the common stock for the five
trading day period prior to the three trading days before the five year
anniversary date. If common stock is used to satisfy this potential obligation,
it could result in significant dilution to the holders of our common stock.

We have, and may from time to time in the future, repurchase Convertible Notes
depending on many factors including but not limited to, the availability of
capital, the prevailing market price of the Convertible Notes and overall market
conditions, however, no assurance can be given that we will repurchase any
Convertible Notes.

41

ITEM 4. CONTROLS AND PROCEDURES

Within the 90-day period prior to the filing of this report, an evaluation was
carried out under the supervision and with the participation of the Company's
management, including the Chief Executive Officer ("CEO") and Chief Financial
Officer ("CFO"), of the effectiveness of the Company's disclosure controls and
procedures. Based on that evaluation, the CEO and CFO have concluded that the
Company's disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in reports that it files or
submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms. Subsequent to the date of their evaluation,
there were no significant changes in the Company's internal controls or in other
factors that could significantly affect the internal controls, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

42

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company and several of its executive officers and directors were named as
defendants in two complaints filed in November and December 2001, in the United
States District Court for the Southern District of Indiana, entitled Weiss v.
Brightpoint, Inc., et. al., Cause No. IP01-1796-C-T/K; and Mueller v.
Brightpoint, Inc., et. al., Cause No. IP01-1922-C-M/S. In February 2002, the
Court consolidated the Weiss and Mueller actions and appointed John Kilcoyne as
lead plaintiff in this action which is now known as In re Brightpoint, Inc.
Securities Litigation. A consolidated amended complaint was filed in April 2002.
The amended complaint, among other things, adds the Company's current
independent auditors as a defendant.

The action is a purported class action asserted on behalf of all purchasers of
the Company's publicly traded securities between January 29, 1999 and January
31, 2002, alleging violations of Section 10(b) of the Securities Exchange Act of
1934 and Rule 10b-5 promulgated thereunder by the Company and certain of its
officers and directors, as well as the Company's current independent auditors,
and violations of Section 20(a) of the Exchange Act by the individual
defendants.

The amended complaint alleges, among other things, that the Company
intentionally concealed and falsified its financial condition, and issued
financial statements which violated generally accepted accounting principles, in
order that it would not be declared in default of its loan covenants under its
line of credit. The amended complaint also alleges that, due to the false
financial statements, the Company's stock was traded at artificially inflated
prices. Plaintiff seeks compensatory damages, including interest, against all of
the defendants and recovery of their reasonable litigation costs and expenses.
The Company disputes these claims and intends to vigorously defend this matter.
The defendants have filed motions to dismiss the amended complaint.

A complaint was filed on November 23, 2001 against the Company and 87 other
defendants in the United States District Court for the District of Arizona,
entitled Lemelson Medical, Education and Research Foundation LP v. Federal
Express Corporation, et.al., Cause No. CIV01-2287-PHX-PGR. The plaintiff claims
the Company and other defendants have infringed 7 patents alleged to cover bar
code technology. The case seeks unspecified damages, treble damages and
injunctive relief. The Court has ordered the case stayed pending the decision in
a related case in which a number of bar code equipment manufacturers have sought
a declaration that the patents asserted are invalid and unenforceable. The trial
of that related case is currently scheduled to begin in November 2002. The
Company disputes these claims and intends to defend vigorously this matter.

In February 2002, Nora Lee, filed a complaint in the Circuit Court, Marion
County, Indiana, against all of the Company's current directors, its former
corporate controller and its current independent auditors, Ernst & Young LLP,
which action is entitled Nora Lee Derivatively on Behalf of Nominal Defendant
Brightpoint, Inc., vs. Robert J. Laikin, et. al. and Brightpoint, Inc. as a
Nominal Defendant, Cause No. 49C01-0202-CT-000399.

The plaintiff alleges, among other things, that certain of the individual
defendants sold the Company's Common Stock while in possession of material
non-public information regarding the Company, that the individual defendants
violated their fiduciary duties of loyalty, good faith and due care by, among
other things, causing the Company to disseminate misleading and inaccurate
financial information, failing to implement and maintain internal adequate
accounting control systems, wasting corporate assets and exposing the Company to
losses. The plaintiff is seeking to recover unspecified damages from all
defendants, the imposition of a constructive trust for the amounts of profits
received by the individual defendants who sold the Company's common stock and
recovery of reasonable litigation costs and expenses.

The parties have filed a stipulation agreeing to stay all proceedings in this
derivative action pending a decision on the motions to dismiss the amended
complaint in the In re Brightpoint, Inc. Securities Litigation action.

43

PART II. OTHER INFORMATION (CONTINUED)

Item 1. Legal Proceedings (continued)

The Company has responded to requests for information and subpoenas from the
Securities and Exchange Commission ("SEC") in connection with an investigation
including its accounting treatment of a certain contract entered into with an
insurance company. In addition, certain of the Company's directors, officers and
employees have provided testimony to the SEC. The staff of the SEC may subpoena
additional testimony of certain of the Company's directors, officers or
employees.

The outcome of any litigation is uncertain and an unfavorable outcome in the
proceedings set forth above could have a material adverse affect on the Company.
In addition, the Company is from time to time, also 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.

The Company's Certificate of Incorporation and By-laws provide for it to
indemnify its officers and directors to the extent permitted by law. In
connection therewith, the Company has entered into indemnification agreements
with its executive officers and directors. In accordance with the terms of these
agreements and the Company's By-laws, the Company has reimbursed certain former
officers for certain personal legal expenses in the amount of $137,000 and may
in the future reimburse them for their personal legal expenses arising from
certain pending litigation and regulatory matters.

Item 5. Other Information

The Company's Audit Committee has approved the provision by the Company's
external auditor, Ernst & Young, of the non-audit service of rendering tax
advice. This disclosure is made pursuant to Section 10A(i)(2) of the Securities
Exchange Act, as added by Section 202 of the Sarbanes-Oxley Act of 2002.

Item 6. Exhibits

(a) Exhibits
--------

The list of exhibits is hereby incorporated by reference to
the Exhibit Index on page 49 of this report.

(b) Reports on Form 8-K
-------------------

The Company filed a Current Report on Form 8-K for the event
dated September 27, 2002 under Item 5 to report that the
Company repurchased an additional 132,381 of its 166,708
outstanding convertible, subordinated, zero-coupon Convertible
Notes due 2018.

The Company filed a Current Report on Form 8-K for the event
dated September 23, 2002 under Item 5 to report that the
Company repurchased an additional 30,325 of its 197,033
outstanding convertible, subordinated, zero-coupon Convertible
Notes due 2018.

44

PART II. OTHER INFORMATION (CONTINUED)

Item 6. Exhibits (continued)

(b) Reports on Form 8-K (continued)

The Company filed a Current Report on Form 8-K for the event dated
August 30, 2002 under Item 5 to report that the Company and certain of
its subsidiaries completed the sale of their respective interests in
Brightpoint Middle East FZE and its subsidiary Fono Distribution
Services LLC and Brightpoint Jordan Limited to Persequor Limited.

The Company filed a Current Report on Form 8-K for the event dated
August 21, 2002 under Item 5 to report that Rollin M. Dick had
resigned, effective immediately, his positions as a director and member
of the Company's Audit and Executive Committees and, Jerre L. Stead, a
current member of the Board of Directors and Audit Committee, has been
appointed to serve as the interim Chairman of the Audit Committee.

The Company filed a Current Report on Form 8-K for the event dated
August 14, 2002 under Item 9 to furnish the Statements Under Oath of
its Principal Executive Officer, Robert J. Laikin, and Principal
Financial Officer, Frank Terence, Regarding Facts and Circumstances
Relating to Exchange Act Filings. The statements were submitted for
filing with the Securities and Exchange Commission on August 14, 2002,
pursuant to the Securities and Exchange Commission's Order No. 4-460
issued on June 27, 2002.

The Company filed a Current Report on Form 8-K for the event dated July
1, 2002 under Item 5 to report that the Company repurchased an
additional 17,890 of its 214,923 outstanding convertible, subordinated,
zero-coupon Convertible Notes due 2018.

45

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Brightpoint, Inc.
(Registrant)

Date: November 14, 2002 /s/ Frank Terence
---------------------------------------
Frank Terence
Executive Vice President,
Chief Financial Officer and Treasurer
(Principal Financial Officer)

Date: November 14, 2002 /s/ Gregory L. Wiles
---------------------------------------
Gregory L. Wiles
Vice President and Corporate Controller
(Principal Accounting Officer)

46

Certification of Principal Executive Officer

I, Robert J. Laikin, Chief Executive Officer of Brightpoint, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Brightpoint, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.

Date: November 14, 2002
/s/ Robert J. Laikin
------------------------
Robert J. Laikin
Chief Executive Officer

47

Certification of Principal Financial Officer

I, Frank Terence, Executive Vice President and Chief Financial Officer of
Brightpoint, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Brightpoint, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.

Date: November 14, 2002
/s/ Frank Terence
-------------------------------------
Frank Terence
Executive Vice President and Chief
Financial Officer

48

EXHIBIT INDEX