Attached files
file | filename |
---|---|
EXCEL - IDEA: XBRL DOCUMENT - INSIGHT ENTERPRISES INC | Financial_Report.xls |
EX-31.1 - EXHIBIT 31.1 - INSIGHT ENTERPRISES INC | c23696exv31w1.htm |
EX-10.1 - EXHIBIT 10.1 - INSIGHT ENTERPRISES INC | c23696exv10w1.htm |
EX-32.1 - EXHIBIT 32.1 - INSIGHT ENTERPRISES INC | c23696exv32w1.htm |
EX-31.2 - EXHIBIT 31.2 - INSIGHT ENTERPRISES INC | c23696exv31w2.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended: September 30, 2011
OR
o | 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: 0-25092
INSIGHT ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Delaware | 86-0766246 | |
(State or other jurisdiction of | (I.R.S. Employer Identification Number) | |
incorporation or organization) |
6820 South Harl Avenue, Tempe, Arizona 85283
(Address of principal executive offices) (Zip Code)
(Address of principal executive offices) (Zip Code)
(480) 902-1001
(Registrants telephone number, including area code)
(Registrants telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Date File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No þ
The number of shares outstanding of the issuers common stock as of October 28, 2011 was
43,876,093.
INSIGHT ENTERPRISES, INC.
QUARTERLY REPORT ON FORM 10-Q
Three Months Ended September 30, 2011
QUARTERLY REPORT ON FORM 10-Q
Three Months Ended September 30, 2011
TABLE OF CONTENTS
Page | ||||||||
1 | ||||||||
2 | ||||||||
3 | ||||||||
4 | ||||||||
18 | ||||||||
28 | ||||||||
28 | ||||||||
28 | ||||||||
29 | ||||||||
29 | ||||||||
29 | ||||||||
29 | ||||||||
29 | ||||||||
30 | ||||||||
31 | ||||||||
Exhibit 10.1 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT |
Table of Contents
INSIGHT ENTERPRISES, INC.
FORWARD-LOOKING INFORMATION
Certain statements in this Quarterly Report on Form 10-Q, including statements in
Managements Discussion and Analysis of Financial Condition and Results of Operations in Part I,
Item 2 of this report, are forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements may include: projections of
matters that affect net sales, gross profit, operating expenses, earnings from operations,
non-operating income and expenses, net earnings or cash flows, working capital needs, sources and
uses, cash needs and the sufficiency of our capital resources and the payment of accrued expenses
and liabilities; details of our business strategy and our strategic initiatives; projections of
capital expenditures; our intentions not to pay dividends; the availability of financing and our
needs or plans relating thereto; our plans relating to products and services; the effect of new
accounting principles or changes in accounting principles; the effect of indemnification
obligations and other off-balance sheet arrangements; projections about the outcome of ongoing tax
audits; our expectations relative to the benefits of a recently acquired business, Ensynch;
statements related to accounting estimates, including estimated stock-based compensation award
forfeitures and the realization of deferred tax assets; the timing of amortization of stock-based
compensation expense and the payment of accrued severance and restructuring costs; projections of
compliance with debt covenants; our intention to reinvest undistributed earnings of foreign
subsidiaries; our expectations regarding seasonality; our anticipated compliance with our debt
covenants; the sufficiency of our provisions for litigation losses; our positions and strategies
with respect to ongoing and threatened litigation, including those matters identified in Legal
Proceedings in Part II, Item 1 of this report; statements of belief; and statements of assumptions
underlying any of the foregoing. Forward-looking statements are identified by such words as
believe, anticipate, expect, estimate, intend, plan, project, will, may and
variations of such words and similar expressions and are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified. Future events and actual results
could differ materially from those set forth in, contemplated by, or underlying the forward-looking
statements. There can be no assurances that the results discussed in the forward-looking
statements will be achieved, and actual results could differ materially from those suggested by the
forward-looking statements. Some of the important factors that could cause our actual results to
differ materially from those projected in any forward-looking statements include, but are not
limited to, the following:
| our reliance on partners for product availability and competitive products to sell as well as competition with our partners; |
| our reliance on partners for marketing funds and purchasing incentives; |
| disruptions in our information technology (IT) systems and voice and data networks, including risks and costs associated with the integration and upgrade of our IT systems; |
| general economic conditions, including concerns regarding our ability to collect our accounts receivable and client credit constraints; |
| actions of our competitors, including manufacturers and publishers of products we sell; |
| changes in the IT industry and/or rapid changes in product standards; |
| failure to comply with the terms and conditions of our commercial and public sector contracts; |
| stockholder litigation and regulatory proceedings related to the restatement of our consolidated financial statements; |
| the availability of future financing and our ability to access and/or refinance our credit facilities; |
| the security of our electronic and other confidential information; |
| the variability of our net sales and gross profit; |
| the risks associated with our international operations; |
| exposure to changes in, interpretations of, or enforcement trends related to tax rules and regulations; |
| our dependence on key personnel; and |
| intellectual property infringement claims and challenges to our registered trademarks and trade names. |
Additionally, there may be other risks that are otherwise described from time to time in the
reports that we file with the Securities and Exchange Commission. Any forward-looking statements
in this report should be considered in light of various important factors, including the risks and
uncertainties listed above, as well as others. We assume no obligation to update, and do not
intend to update, any forward-looking statements. We do not endorse any projections regarding
future performance that may be made by third parties.
Table of Contents
PART I FINANCIAL INFORMATION
Item 1. | Financial Statements. |
INSIGHT ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
September 30, | December 31, | |||||||
2011 | 2010 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 98,680 | $ | 123,763 | ||||
Accounts receivable, net of allowances for doubtful accounts
of $18,810 and $17,540, respectively |
910,134 | 1,135,951 | ||||||
Inventories |
115,169 | 106,734 | ||||||
Inventories not available for sale |
33,827 | 50,677 | ||||||
Deferred income taxes |
20,094 | 23,283 | ||||||
Other current assets |
28,100 | 49,289 | ||||||
Total current assets |
1,206,004 | 1,489,697 | ||||||
Property and equipment, net of accumulated depreciation of
$203,342 and $183,809, respectively |
137,373 | 141,399 | ||||||
Goodwill |
16,474 | 16,474 | ||||||
Intangible assets, net of accumulated amortization of $62,382 and
$50,755, respectively |
60,108 | 69,081 | ||||||
Deferred income taxes |
65,262 | 73,796 | ||||||
Other assets |
15,350 | 12,836 | ||||||
$ | 1,500,571 | $ | 1,803,283 | |||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 576,920 | $ | 881,688 | ||||
Accrued expenses and other current liabilities |
141,094 | 187,457 | ||||||
Current portion of long-term debt |
1,012 | 997 | ||||||
Deferred revenue |
37,351 | 67,373 | ||||||
Total current liabilities |
756,377 | 1,137,515 | ||||||
Long-term debt |
156,358 | 91,619 | ||||||
Deferred income taxes |
1,830 | 5,011 | ||||||
Other liabilities |
23,745 | 24,167 | ||||||
938,310 | 1,258,312 | |||||||
Commitments and contingencies |
||||||||
Stockholders equity: |
||||||||
Preferred stock, $0.01 par value, 3,000 shares authorized;
no shares issued |
| | ||||||
Common stock, $0.01 par value, 100,000 shares authorized;
43,875 shares at September 30, 2011 and 46,325 shares at
December 31, 2010 issued and outstanding |
439 | 463 | ||||||
Additional paid-in capital |
358,107 | 377,277 | ||||||
Retained earnings |
188,471 | 149,349 | ||||||
Accumulated other comprehensive income foreign currency
translation adjustments |
15,244 | 17,882 | ||||||
Total stockholders equity |
562,261 | 544,971 | ||||||
$ | 1,500,571 | $ | 1,803,283 | |||||
See accompanying notes to consolidated financial statements.
1
Table of Contents
INSIGHT ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net sales |
$ | 1,238,019 | $ | 1,169,197 | $ | 3,926,875 | $ | 3,470,731 | ||||||||
Costs of goods sold |
1,074,504 | 1,014,552 | 3,396,701 | 2,997,236 | ||||||||||||
Gross profit |
163,515 | 154,645 | 530,174 | 473,495 | ||||||||||||
Operating expenses: |
||||||||||||||||
Selling and administrative expenses |
135,071 | 129,511 | 420,558 | 385,052 | ||||||||||||
Severance and restructuring expenses |
529 | 298 | 4,458 | 1,687 | ||||||||||||
Earnings from operations |
27,915 | 24,836 | 105,158 | 86,756 | ||||||||||||
Non-operating (income) expense: |
||||||||||||||||
Interest income |
(536 | ) | (161 | ) | (1,294 | ) | (467 | ) | ||||||||
Interest expense |
1,753 | 1,899 | 5,209 | 5,957 | ||||||||||||
Net foreign currency exchange loss (gain) |
633 | 130 | (531 | ) | 743 | |||||||||||
Other expense, net |
451 | 348 | 1,240 | 1,097 | ||||||||||||
Earnings before income taxes |
25,614 | 22,620 | 100,534 | 79,426 | ||||||||||||
Income tax expense |
8,448 | 8,188 | 34,953 | 28,915 | ||||||||||||
Net earnings |
$ | 17,166 | $ | 14,432 | $ | 65,581 | $ | 50,511 | ||||||||
Net earnings per share: |
||||||||||||||||
Basic |
$ | 0.38 | $ | 0.31 | $ | 1.43 | $ | 1.09 | ||||||||
Diluted |
$ | 0.38 | $ | 0.31 | $ | 1.41 | $ | 1.08 | ||||||||
Shares used in per share calculations: |
||||||||||||||||
Basic |
44,886 | 46,268 | 46,001 | 46,193 | ||||||||||||
Diluted |
45,417 | 46,865 | 46,550 | 46,749 | ||||||||||||
See accompanying notes to consolidated financial statements.
2
Table of Contents
INSIGHT ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended September 30, | ||||||||
2011 | 2010 | |||||||
Cash flows from operating activities: |
||||||||
Net earnings |
$ | 65,581 | $ | 50,511 | ||||
Adjustments to reconcile net earnings to net cash provided by
operating activities: |
||||||||
Depreciation and amortization |
29,033 | 28,515 | ||||||
Provision for losses on accounts receivable |
3,387 | 546 | ||||||
Write-downs of inventories |
6,319 | 4,875 | ||||||
Write-off of computer software development costs |
1,390 | | ||||||
Non-cash stock-based compensation |
5,579 | 5,139 | ||||||
Excess tax benefit from employee gains on stock-based compensation |
(1,569 | ) | (912 | ) | ||||
Deferred income taxes |
7,683 | 11,762 | ||||||
Changes in assets and liabilities: |
||||||||
Decrease in accounts receivable |
230,630 | 143,709 | ||||||
Decrease (increase) in inventories |
1,901 | (32,676 | ) | |||||
Decrease (increase) in other current assets |
21,021 | (6,558 | ) | |||||
Increase in other assets |
(2,169 | ) | (1,557 | ) | ||||
Decrease in accounts payable |
(281,221 | ) | (110,705 | ) | ||||
Decrease in deferred revenue |
(30,937 | ) | (11,414 | ) | ||||
Decrease in accrued expenses and other liabilities |
(46,566 | ) | (43,727 | ) | ||||
Net cash provided by operating activities |
10,062 | 37,508 | ||||||
Cash flows from investing activities: |
||||||||
Payment of additional purchase price consideration for Calence |
| (5,123 | ) | |||||
Purchases of property and equipment |
(16,883 | ) | (12,631 | ) | ||||
Net cash used in investing activities |
(16,883 | ) | (17,754 | ) | ||||
Cash flows from financing activities: |
||||||||
Borrowings on senior revolving credit facility |
971,000 | 910,136 | ||||||
Repayments on senior revolving credit facility |
(905,500 | ) | (892,636 | ) | ||||
Borrowings on accounts receivable securitization financing facility |
40,000 | 45,000 | ||||||
Repayments on accounts receivable securitization financing facility |
(40,000 | ) | (45,000 | ) | ||||
Payments on capital lease obligation |
(746 | ) | (681 | ) | ||||
Net repayments under inventory financing facility |
(33,214 | ) | (9,952 | ) | ||||
Payment of deferred financing fees |
| (490 | ) | |||||
Proceeds from sales of common stock under employee stock plans |
38 | 49 | ||||||
Excess tax benefit from employee gains on stock-based compensation |
1,569 | 912 | ||||||
Payment of
payroll taxes on stock-based compensation through shares withheld |
(2,544 | ) | (1,260 | ) | ||||
Repurchases of common stock |
(50,000 | ) | | |||||
Net cash (used in) provided by financing activities |
(19,397 | ) | 6,078 | |||||
Foreign currency exchange effect on cash flows |
1,135 | (134 | ) | |||||
(Decrease) increase in cash and cash equivalents |
(25,083 | ) | 25,698 | |||||
Cash and cash equivalents at beginning of period |
123,763 | 68,066 | ||||||
Cash and cash equivalents at end of period |
$ | 98,680 | $ | 93,764 | ||||
See accompanying notes to consolidated financial statements.
3
Table of Contents
INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation and Recently Issued Accounting Pronouncements
We are a leading provider of information technology (IT) hardware, software and services to
small, medium and large businesses and public sector institutions in North America, Europe, the
Middle East, Africa and Asia-Pacific. The Company is organized in the following three operating
segments, which are primarily defined by their related geographies:
Operating Segment | Geography | |
North America
|
United States and Canada | |
EMEA
|
Europe, Middle East and Africa | |
APAC
|
Asia-Pacific |
Currently, our offerings in North America and the United Kingdom include IT hardware, software
and services. Our offerings in the remainder of our EMEA segment and in APAC are almost entirely
software and software-related services.
In the opinion of management, the accompanying unaudited consolidated financial statements
contain all adjustments necessary to present fairly our financial position as of September 30,
2011, our results of operations for the three and nine months ended September 30, 2011 and 2010 and
our cash flows for the nine months ended September 30, 2011 and 2010. The consolidated balance
sheet as of December 31, 2010 was derived from the audited consolidated balance sheet at such date.
The accompanying unaudited consolidated financial statements and notes have been prepared in
accordance with the rules and regulations promulgated by the Securities and Exchange Commission
(SEC) and consequently do not include all of the disclosures normally required by United States
generally accepted accounting principles (GAAP).
The results of operations for such interim periods are not necessarily indicative of results
for the full year, due in part to the seasonal nature of the business. These unaudited
consolidated financial statements should be read in conjunction with the audited consolidated
financial statements, including the related notes thereto, in our Annual Report on Form 10-K for
the year ended December 31, 2010.
The preparation of consolidated financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the consolidated
financial statements. Additionally, these estimates and assumptions affect the reported amounts of
net sales and expenses during the reported period. Actual results could differ from those
estimates. On an ongoing basis, we evaluate our estimates, including those related to sales
recognition, anticipated achievement levels under partner funding programs, assumptions related to
stock-based compensation valuation, allowances for doubtful accounts, litigation-related
obligations, valuation allowances for deferred tax assets and impairment of long-lived assets,
including purchased intangibles and goodwill, if indicators of potential impairment exist.
The consolidated financial statements include the accounts of Insight Enterprises, Inc. and
its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in
consolidation. References to the Company, we, us, our and other similar words refer to
Insight Enterprises, Inc. and its consolidated subsidiaries, unless the context suggests otherwise.
Recently Issued Accounting Pronouncements
There have been no material changes or additions to the recently issued accounting
pronouncements as previously reported in Note 1 to our Consolidated Financial Statements in Part
II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2010 that affect or
may affect our financial statements.
4
Table of Contents
INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
2. Net Earnings Per Share (EPS)
Basic EPS is computed by dividing net earnings available to common stockholders by the
weighted average number of common shares outstanding during each period. Diluted EPS is computed
on the basis of the weighted average number of shares of common stock plus the effect of dilutive
potential common shares outstanding during the period using the treasury stock method. Dilutive
potential common shares include outstanding stock options and restricted stock units. A
reconciliation of the denominators of the basic and diluted EPS calculations follows (in thousands,
except per share data):
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Numerator: |
||||||||||||||||
Net earnings |
$ | 17,166 | $ | 14,432 | $ | 65,581 | $ | 50,511 | ||||||||
Denominator: |
||||||||||||||||
Weighted average shares used to compute basic EPS |
44,886 | 46,268 | 46,001 | 46,193 | ||||||||||||
Dilutive potential common shares due to dilutive
options and restricted stock units, net of tax effect |
531 | 597 | 549 | 556 | ||||||||||||
Weighted average shares used to compute diluted EPS |
45,417 | 46,865 | 46,550 | 46,749 | ||||||||||||
Net earnings per share: |
||||||||||||||||
Basic |
$ | 0.38 | $ | 0.31 | $ | 1.43 | $ | 1.09 | ||||||||
Diluted |
$ | 0.38 | $ | 0.31 | $ | 1.41 | $ | 1.08 | ||||||||
For the three months ended September 30, 2011 and 2010, 200,000 and 258,000,
respectively, of weighted average outstanding stock options were not included in the diluted EPS
calculations because the exercise prices of these options were greater than the average market
price of our common stock during the respective periods. For the nine months ended September 30,
2011 and 2010, the excluded weighted average outstanding stock options were 210,000 and 383,000,
respectively.
3. Debt, Capital Lease Obligation and Inventory Financing Facility
Debt
Our long-term debt consists of the following (in thousands):
September 30, | December 31, | |||||||
2011 | 2010 | |||||||
Senior revolving credit facility |
$ | 155,500 | $ | 90,000 | ||||
Accounts receivable securitization financing facility |
| | ||||||
Capital lease obligation |
1,870 | 2,616 | ||||||
Total |
157,370 | 92,616 | ||||||
Less: current portion of obligation under capital lease |
(1,012 | ) | (997 | ) | ||||
Less: current portion of revolving credit facilities |
| | ||||||
Long-term debt |
$ | 156,358 | $ | 91,619 | ||||
Our senior revolving credit facility has a maximum borrowing capacity of $300,000,000 and
matures April 1, 2013.
Our accounts receivable securitization financing facility (the ABS facility) has a maximum
borrowing capacity of $150,000,000 and matures on April 1, 2013. While the ABS facility has a
stated maximum amount, the actual availability under the ABS facility is limited by the quantity
and quality of the underlying accounts receivable. As of September 30, 2011, availability under
the ABS facility was $150,000,000.
5
Table of Contents
INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Our consolidated debt balance that can be outstanding at the end of any fiscal quarter under
our senior revolving credit facility and our ABS facility is limited by certain financial
covenants, particularly a maximum leverage ratio. The maximum leverage ratio is calculated as
aggregate debt outstanding divided by the sum of the Companys trailing twelve month net earnings
(loss) plus (i) interest expense, less non-cash imputed interest on our inventory financing
facility, (ii) income tax expense (benefit), (iii) depreciation and amortization and (iv) non-cash
stock-based compensation (referred to herein as adjusted earnings). The maximum leverage ratio
permitted under the agreements is 2.50 times trailing twelve-month adjusted earnings. A
significant drop in the Companys adjusted earnings would limit the amount of indebtedness that
could be outstanding at the end of any fiscal quarter to a level that would be below the Companys
consolidated maximum debt capacity. As of September 30, 2011, the Companys debt balance that
could have been outstanding was equal to the maximum available under the facilities of
$450,000,000.
Our financing facilities contain various covenants, including the requirement that we comply
with maximum leverage, minimum fixed charge and minimum asset coverage ratio requirements and meet
monthly, quarterly and annual reporting requirements. If we fail to comply with these covenants,
the lenders would be able to demand payment within a specified period of time. At September 30,
2011, we were in compliance with all such covenants.
Capital Lease Obligation
The present value of minimum lease payments under our capital lease and the current portion
thereof are included in our debt balances as summarized in the table above. The value of the IT
equipment held under the capital lease of $3,867,000 is included in property and equipment, with
accumulated amortization on the capital lease assets of $2,036,000 and $1,283,000 as of September
30, 2011 and December 31, 2010, respectively.
Inventory Financing Facility
As of September 30, 2011 and December 31, 2010, $101,898,000 and $135,112,000, respectively,
were included in accounts payable within our consolidated balance sheets related to our inventory
financing facility.
4. Income Taxes
Our effective tax rate for the three and nine months ended September 30, 2011 was 33.0% and
34.8%, respectively. For the three months ended September 30, 2011, our effective tax rate was
lower than the United States federal statutory rate of 35.0% due primarily to lower taxes on
earnings in foreign jurisdictions and to the recognition of tax benefits relating to the
re-measurement or settlement of specific uncertain tax positions during the quarter, partially
offset by state income taxes, net of federal income tax benefit. For the nine months ended
September 30, 2011, our effective tax rate was slightly lower than the United States federal
statutory rate of 35.0% due primarily to lower taxes on earnings in foreign jurisdictions, the
recognition of tax benefits relating to the re-measurement or settlement of specific uncertain tax
positions and the release of a valuation allowance in the United Kingdom, offset by state income
taxes, net of federal income tax benefit.
Our effective tax rate for the three and nine months ended September 30, 2010 was 36.2% and
36.4%, respectively. For the three and nine months ended September 30, 2010, our effective tax
rate was higher than the United States federal statutory rate of 35.0% due primarily to state
income taxes, net of federal income tax benefit, partially offset by lower taxes on earnings in
foreign jurisdictions.
6
Table of Contents
INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
As of September 30, 2011 and December 31, 2010, we had $4,733,000 and $6,013,000,
respectively, of unrecognized tax benefits. Of these amounts, approximately $470,000 and $425,000
relate to accrued interest as of September 30, 2011 and December 31, 2010, respectively.
Several of our subsidiaries are currently under audit for the 2002 through 2009 tax years. It
is reasonably possible that the examination phase of these audits may conclude in the next 12
months and that the related unrecognized tax benefits for uncertain tax positions may change,
potentially having a material effect on our effective tax rate. However, based on the status of
the various examinations in multiple jurisdictions, an estimate of the range of reasonably possible
outcomes cannot be made at this time.
5. Severance and Restructuring Activities
Severance Costs Expensed for 2011 Resource Actions
During the three months ended September 30, 2011, North America and EMEA recorded severance
expense totaling $476,000 and $53,000, respectively, and during the nine months ended September 30,
2011, North America and EMEA recorded severance expense totaling $1,961,000 and $2,578,000,
respectively, related to 2011 resource actions. The charges were associated with severance for the
elimination of certain positions based on a re-alignment of roles and responsibilities. The
remaining outstanding obligations as of September 30, 2011 of $619,000 and $1,738,000 for North
America and EMEA, respectively, are expected to be paid during the next twelve months and are
therefore included in accrued expenses and other current liabilities.
Severance Costs Expensed for 2010 Resource Actions
During the year ended December 31, 2010, North America and EMEA recorded severance expense
totaling $2,003,000 and $1,476,000, respectively, relating to 2010 resource actions. The North
America charge was part of the roll-out of our new sales engagement model and plans to add new
leadership in key areas, and the EMEA charge was associated with severance for the elimination of
certain positions based on a re-alignment of roles and responsibilities.
The following table details the 2011 activity and the outstanding obligation related to the
2010 resource actions as of September 30, 2011 (in thousands):
North America | EMEA | Consolidated | ||||||||||
Balance at December 31, 2010 |
$ | 1,166 | $ | 575 | $ | 1,741 | ||||||
Foreign currency translation adjustments |
| 70 | 70 | |||||||||
Adjustments |
(45 | ) | (36 | ) | (81 | ) | ||||||
Cash payments |
(1,029 | ) | (281 | ) | (1,310 | ) | ||||||
Balance at September 30, 2011 |
$ | 92 | $ | 328 | $ | 420 | ||||||
In North America and EMEA, adjustments totaling $45,000 and $36,000, respectively, were
recorded as a reduction to severance and restructuring expense during the nine months ended
September 30, 2011 and a reduction of the related severance accrual due to changes in estimates as
cash payments were made. All remaining outstanding obligations are expected to be paid during the
next twelve months and are therefore included in accrued expenses and other current liabilities.
Prior Resource Actions
In prior years, as a result of ongoing restructuring efforts to reduce operating expenses,
certain severance costs were recorded in each of our operating segments. The only remaining
outstanding obligations related to these prior resource actions as of December 31, 2010 were in our
EMEA segment. As of September 30, 2011 and December 31, 2010, the total liability remaining for
unpaid severance costs associated with resource actions prior to 2010 in our EMEA segment was
approximately $417,000 and $1,113,000, respectively. The decrease in this total liability during
the nine months ended September 30, 2011 was primarily attributable to cash payments totaling
approximately $728,000 and foreign currency translation adjustments. All remaining outstanding
obligations are expected to be paid during the next twelve months and are therefore included in
accrued expenses and other current liabilities.
7
Table of Contents
INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
6. Stock-Based Compensation
We recorded the following pre-tax amounts for stock-based compensation, by operating segment,
in our consolidated financial statements (in thousands):
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
North America |
$ | 1,233 | $ | 1,712 | $ | 4,054 | $ | 3,901 | ||||||||
EMEA |
464 | 508 | 1,356 | 1,105 | ||||||||||||
APAC |
59 | 57 | 169 | 133 | ||||||||||||
Total |
$ | 1,756 | $ | 2,277 | $ | 5,579 | $ | 5,139 | ||||||||
Stock Options
The following table summarizes our stock option activity during the nine months ended
September 30, 2011:
Weighted | ||||||||||||||||
Aggregate | Average | |||||||||||||||
Weighted | Intrinsic Value | Remaining | ||||||||||||||
Number | Average | (in-the-money | Contractual | |||||||||||||
Outstanding | Exercise Price | options) | Life (in years) | |||||||||||||
Outstanding at January 1, 2011 |
243,452 | $ | 17.99 | |||||||||||||
Granted |
| | ||||||||||||||
Exercised |
(2,666 | ) | 14.12 | $ | 10,442 | |||||||||||
Forfeited or expired |
(39,503 | ) | 19.47 | |||||||||||||
Outstanding at September 30, 2011 |
201,283 | 17.75 | $ | 1,292 | 1.20 | |||||||||||
Exercisable at September 30, 2011 |
201,283 | 17.75 | $ | 1,292 | 1.20 | |||||||||||
Vested and expected to vest |
201,283 | 17.75 | $ | 1,292 | 1.20 | |||||||||||
The aggregate intrinsic value in the preceding table represents the total pre-tax
intrinsic value, based on our closing stock price of $15.14 as of September 30, 2011, which would
have been received by the option holders had all option holders exercised options and sold the
underlying shares on that date.
As of September 30, 2011, all outstanding options are exercisable, including 200,000 options
with an exercise price of $17.77 and a remaining contractual life of 1.21 years. The remaining
1,283 outstanding options have exercise prices ranging from $14.00 to $19.10 and a weighted average
remaining contractual life of 0.02 years.
As of December 31, 2010, all stock options had vested and total compensation cost related to
all previously granted stock options had been recognized. For the three and nine months ended
September 30, 2010, we recorded stock-based compensation expense related to stock options, net of
an estimate of forfeitures, of $93,000 and $276,000, respectively.
8
Table of Contents
INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Restricted Stock
For the three months ended September 30, 2011 and 2010, we recorded stock-based
compensation expense, net of estimated forfeitures, related to restricted stock units (RSUs) of
$1,756,000 and $2,184,000, respectively. For the nine months ended September 30, 2011 and 2010, we
recorded stock-based compensation expense, net of an estimate of forfeitures, related to RSUs of
$5,579,000 and $4,863,000, respectively. As of September 30, 2011, total compensation cost not yet
recognized related to nonvested RSUs is $12,053,000, which is expected to be recognized over the
next 1.18 years on a weighted-average basis.
The following table summarizes our RSU activity during the nine months ended September 30,
2011:
Weighted Average | ||||||||||||
Number | Grant Date Fair Value | Fair Value | ||||||||||
Nonvested at January 1, 2011 |
1,599,376 | $ | 9.99 | |||||||||
Granted |
532,332 | 18.12 | ||||||||||
Vested, including shares withheld to
cover taxes |
(588,521 | ) | 9.37 | $ | 10,410,316 | (a) | ||||||
Forfeited |
(171,351 | ) | 11.12 | |||||||||
Nonvested at September 30, 2011 |
1,371,836 | 13.28 | $ | 20,769,597 | (b) | |||||||
Expected to vest |
1,286,549 | $ | 19,478,352 | (b) | ||||||||
(a) | The fair value of vested RSUs represents the total pre-tax fair value, based on the closing stock price on the day of vesting, which would have been received by holders of RSUs had all such holders sold their underlying shares on that date. | |
(b) | The aggregate fair value represents the total pre-tax fair value, based on our closing stock price of $15.14 as of September 30, 2011, which would have been received by holders of RSUs had all such holders sold their underlying shares on that date. |
During the nine months ended September 30, 2011 and 2010, the RSUs that vested for
teammates in the United States were net-share settled such that we withheld shares with value
equivalent to the teammates minimum statutory United States tax obligations for the applicable
income and other employment taxes and remitted the corresponding cash amount to the appropriate
taxing authorities. The total shares withheld during the nine months ended September 30, 2011 and
2010 of 143,773 and 94,353, respectively, were based on the value of the RSUs on their vesting
date as determined by our closing stock price on such vesting date. For the nine months ended
September 30, 2011 and 2010, total payments for the employees tax obligations to the taxing
authorities were $2,544,000 and $1,260,000, respectively, and are reflected as a financing
activity within the consolidated statements of cash flows. These net-share settlements had the
economic effect of repurchases of common stock as they reduced the number of shares that would
have otherwise been issued as a result of the vesting and did not represent a repurchase of shares
or an expense to us.
7. Derivative Financial Instruments
We use derivatives to partially offset our exposure to fluctuations in certain foreign
currencies. We do not enter into derivatives for speculative or trading purposes. Derivatives are
recorded at fair value on the balance sheet and gains or losses resulting from changes in fair
value of the derivative are recorded currently in income. The Company does not designate its
foreign currency derivatives as hedges for hedge accounting.
9
Table of Contents
INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The following table summarizes our derivative financial instruments as of September 30, 2011
and December 31, 2010 (in thousands):
September 30, 2011 | December 31, 2010 | |||||||||||||||||
Asset | Liability | Asset | Liability | |||||||||||||||
Derivatives | Derivatives | Derivatives | Derivatives | |||||||||||||||
Balance Sheet Location | Fair Value | Fair Value | Fair Value | Fair Value | ||||||||||||||
Derivatives not designated as hedging instruments: |
||||||||||||||||||
Foreign exchange forward contracts |
Other current assets | $ | 222 | $ | | $ | 28 | $ | | |||||||||
Foreign exchange forward contracts |
Accrued expenses and other current liabilities | | 273 | | 91 | |||||||||||||
Total derivatives not designated as hedging instruments |
$ | 222 | $ | 273 | $ | 28 | $ | 91 | ||||||||||
The following table summarizes the effect of our derivative financial instruments on our
results of operations during the three and nine months ended September 30, 2011 and 2010 (in
thousands):
Location of (Gain) Loss | ||||||||||||||||||||
Derivatives Not Designated as | Recognized in | Amount of (Gain) Loss Recognized in | ||||||||||||||||||
Hedging Instruments | Earnings on Derivatives | Earnings on Derivatives | ||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||||||
Foreign exchange forward contracts |
Net foreign currency exchange (gain) loss | $ | (281 | ) | $ | 314 | $ | (881 | ) | $ | (1,147 | ) | ||||||||
Total |
$ | (281 | ) | $ | 314 | $ | (881 | ) | $ | (1,147 | ) | |||||||||
10
Table of Contents
INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
8. Fair Value Measurements
The following table summarizes the valuation of our financial instruments by the following
three categories as of September 30, 2011 and December 31, 2010 (in thousands):
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market
data.
Level 3: Unobservable inputs that are not corroborated by market data.
September 30, 2011 | December 31, 2010 | |||||||||||||||||
Non-qualified | Non-qualified | |||||||||||||||||
Deferred | Deferred | |||||||||||||||||
Foreign | Compensation | Foreign | Compensation | |||||||||||||||
Exchange | Plan | Exchange | Plan | |||||||||||||||
Balance Sheet Classification | Derivatives | Investments | Derivatives | Investments | ||||||||||||||
Other current assets |
Level 1 | $ | | $ | | $ | | $ | | |||||||||
Level 2 | 222 | | 28 | | ||||||||||||||
Level 3 | | | | |||||||||||||||
$ | 222 | $ | | $ | 28 | $ | | |||||||||||
Other assets |
Level 1 | $ | | $ | 1,185 | $ | | $ | 1,245 | |||||||||
Level 2 | | | | | ||||||||||||||
Level 3 | | | | | ||||||||||||||
$ | | $ | 1,185 | $ | | $ | 1,245 | |||||||||||
Accrued expenses and other current
liabilities |
Level 1 | $ | | $ | | $ | | $ | | |||||||||
Level 2 | 273 | | 91 | | ||||||||||||||
Level 3 | | | | | ||||||||||||||
$ | 273 | $ | | $ | 91 | $ | | |||||||||||
9. Comprehensive Income
Comprehensive income for the three and nine months ended September 30, 2011 and 2010 includes
the following component (in thousands):
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net earnings |
$ | 17,166 | $ | 14,432 | $ | 65,581 | $ | 50,511 | ||||||||
Other comprehensive income (loss), net of tax: |
||||||||||||||||
Foreign currency translation adjustments |
(12,622 | ) | 13,097 | (2,638 | ) | (2,066 | ) | |||||||||
Total comprehensive income |
$ | 4,544 | $ | 27,529 | $ | 62,943 | $ | 48,445 | ||||||||
10. Share Repurchase Program
On May 26, 2011, we announced that our Board of Directors had authorized the repurchase of up
to $50,000,000 of our common stock. During the nine months ended September 30, 2011, we purchased
2,897,493 shares of our common stock on the open market at an average price of $17.26 per share,
which represented the full amount authorized under the repurchase program. All shares repurchased
were retired.
11
Table of Contents
INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
11. Commitments and Contingencies
Contractual
In the ordinary course of business, we issue performance bonds to secure our performance under
certain contracts or state tax requirements. As of September 30, 2011, we had approximately
$21,819,000 of performance bonds outstanding. These bonds are issued on our behalf by a surety
company on an unsecured basis; however, if the surety company is ever required to pay out under the
bonds, we have contractually agreed to reimburse them.
Employment Contracts and Severance Plans
We have employment contracts with, and plans covering, certain officers and management
teammates under which severance payments would become payable in the event of specified
terminations without cause or terminations under certain circumstances after a change in control.
In addition, vesting of stock-based compensation would accelerate following a change in control.
If severance payments under the current employment agreements or plan payments were to become
payable, the severance payments would generally range from three to twenty-four months of salary.
Indemnifications
From time to time, in the ordinary course of business, we enter into contractual arrangements
under which we agree to indemnify either our clients or third-party service providers from certain
losses incurred relating to services performed on our behalf or for losses arising from defined
events, which may include litigation or claims relating to past performance. These arrangements
include, but are not limited to, the indemnification of our clients for certain claims arising out
of our performance under our sales contracts, the indemnification of our landlords for certain
claims arising from our use of leased facilities and the indemnification of the lenders that
provide our credit facilities for certain claims arising from their extension of credit to us.
Such indemnification obligations may not be subject to maximum loss clauses.
Management believes that payments, if any, related to these indemnifications are not probable
at September 30, 2011. Accordingly, we have not accrued any liabilities related to such
indemnifications in our consolidated financial statements.
We have entered into separate indemnification agreements with our executive officers and with
each of our directors. These agreements require us, among other requirements, to indemnify such
officers and directors against expenses (including attorneys fees), judgments and settlements paid
by such individual in connection with any action arising out of such individuals status or service
as our executive officer or director (subject to exceptions such as where the individual failed to
act in good faith or in a manner the individual reasonably believed to be in or not opposed to the
best interests of the Company) and to advance expenses incurred by such individual with respect to
which such individual may be entitled to indemnification by us. Other than the pending purported
class action litigation and the Federal derivative action discussed under the caption Legal
Proceedings below, there are no pending legal proceedings that involve the indemnification of any
of the Companys directors or officers.
Contingencies Related to Third-Party Review
From time to time, we are subject to potential claims and assessments from third parties. We
are also subject to various governmental, client and vendor audits. We continually assess whether
or not such claims have merit and warrant accrual. Where appropriate, we accrue estimates of
anticipated liabilities in the consolidated financial statements. Such estimates are subject to
change and may affect our results of operations and our cash flows.
12
Table of Contents
INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Legal Proceedings
We are party to various legal proceedings arising in the ordinary course of business,
including preference payment claims asserted in client bankruptcy proceedings, claims of alleged
infringement of patents, trademarks, copyrights and other intellectual property rights, claims of
alleged non-compliance with contract provisions and claims related to alleged violations of laws
and regulations.
We make a provision for a liability when it is both probable that a liability has been
incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at
least quarterly and are adjusted to reflect the effects of negotiations, settlements, rulings,
advice of legal counsel and other information and events pertaining to a particular claim or
proceeding. Although litigation is inherently unpredictable, we believe that we have adequate
provisions for any probable and estimable losses. It is possible, nevertheless, that our
consolidated financial position, results of operations or liquidity could be materially and
adversely affected in any particular period by the resolution of a legal proceeding. Legal
expenses related to defense, negotiations, settlements, rulings and advice of outside legal counsel
are expensed as incurred.
Beginning in March 2009, three purported class action lawsuits were filed in the U.S. District
Court for the District of Arizona against us and certain of our current and former directors and
officers on behalf of purchasers of our securities during the period April 22, 2004 to February 6,
2009. As amended, the complaint sought damages and asserted claims under the federal securities
laws relating to our February 2009 announcement of a restatement of certain financial statements
and contained allegations regarding other purported accounting, revenue recognition and financial
reporting issues during the April 2004 February 2009 period. In November 2010, the second
amended complaint (the only remaining complaint then on file) of the lead plaintiff was dismissed
with prejudice, and another purported class member plaintiff has appealed the order of dismissal
with prejudice to the U.S. Court of Appeals for the Ninth Circuit. That appeal is currently
pending. In June 2009, a shareholder derivative lawsuit was filed in the U.S. District Court for
the District of Arizona by a person identifying himself as an Insight shareholder and purporting to
act on behalf of Insight, naming Insight as a nominal defendant and current and former officers and
directors as defendants. The derivative action was
dismissed with prejudice in July 2010, and the plaintiff in that action appealed the order of
dismissal to the U.S. Court of Appeals for the Ninth Circuit. That appeal is currently pending.
We have tendered a claim to our D&O liability insurance carriers, and our carriers have
acknowledged their obligations under these policies subject to a reservation of rights. Based on
the information available at this time, the Company is not able to estimate the possible loss or
range of loss for the purported class action or the Federal derivative action, if any, at this
time.
In August 2010, in connection with an investigation being conducted by the United States
Department of Justice (the DOJ), our subsidiary, Calence, LLC, received a subpoena from the
Office of the Inspector General of the Federal Communications Commission (the FCC OIG) requesting
documents and information related to the expenditure, by the Universal Service Administration
Company, of funds under the E-Rate program. The E-Rate program provides schools and libraries with
discounts to obtain affordable telecommunications and internet access and related hardware and
software. We are cooperating with the DOJ and FCC OIG and have responded to the subpoena, and,
based on the information available at this time, the Company is not able to estimate what the
possible loss or range of loss might be, if any, at this time. The Company is pursuing its rights
under the Calence acquisition agreements to indemnification for losses that may arise out of or
result from this matter, including our fees and expenses for responding to the subpoena.
In September 2011, Insight Public Sector, Inc. learned that it had been named as a defendant
in a qui tam lawsuit alleging violations of the Trade Agreements Act and the False Claims Act.
This case, designated United States ex rel. Sandager v. Hewlett-Packard et al., was originally
filed under seal in the United States District Court for the District of Minnesota in July 2008.
In September 2009, the United States declined to intervene in the matter on behalf of the private
qui tam plaintiff (the relator) and take the lead in the litigation, but that decision should not
be viewed as a final assessment by the United States of the merits of this qui tam action. The
amended complaint was filed in September 2011 and was served on Insight Public Sector, Inc. on
September 26, 2011. Insight Public Sector, Inc. is one of twenty-one named defendants in the
amended complaint. The plaintiff dropped 13 of the original 34 defendants in filing the amended
complaint. The amended complaint seeks various remedies including damages, statutory penalties and
an award to the relator under the False Claims Act. The Company intends to defend vigorously
against this lawsuit. Based on the information available at this time, the Company is not able to
estimate the possible loss or range of loss, if any, at this time.
13
Table of Contents
INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Aside from the matters discussed above, the Company is not involved in any pending or
threatened legal proceedings that it believes could reasonably be expected to have a material
adverse effect on its financial condition, results of operations or liquidity.
12. Segment Information
We operate in three reportable geographic operating segments: North America; EMEA; and APAC.
Currently, our offerings in North America and the United Kingdom include IT hardware, software and
services. Our offerings in the remainder of our EMEA segment and in APAC are almost entirely
software and select software-related services. Net sales by product or service type for North
America, EMEA and APAC were as follows for the three and nine months ended September 30, 2011 and
2010 (in thousands):
North America | EMEA | APAC | ||||||||||||||||||||||
Three Months Ended | Three Months Ended | Three Months Ended | ||||||||||||||||||||||
September 30, | September 30, | September 30, | ||||||||||||||||||||||
Sales Mix | 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | ||||||||||||||||||
Hardware |
$ | 610,073 | $ | 572,427 | $ | 107,086 | $ | 103,326 | $ | 772 | $ | 408 | ||||||||||||
Software |
242,518 | 245,563 | 176,376 | 159,854 | 32,703 | 29,112 | ||||||||||||||||||
Services |
61,002 | 53,214 | 5,668 | 4,633 | 1,821 | 660 | ||||||||||||||||||
$ | 913,593 | $ | 871,204 | $ | 289,130 | $ | 267,813 | $ | 35,296 | $ | 30,180 | |||||||||||||
North America | EMEA | APAC | ||||||||||||||||||||||
Nine Months Ended | Nine Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | September 30, | ||||||||||||||||||||||
Sales Mix | 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | ||||||||||||||||||
Hardware |
$ | 1,767,418 | $ | 1,555,173 | $ | 333,021 | $ | 322,888 | $ | 1,404 | $ | 818 | ||||||||||||
Software |
798,905 | 716,528 | 678,468 | 607,978 | 141,674 | 98,012 | ||||||||||||||||||
Services |
183,632 | 153,298 | 17,497 | 13,450 | 4,856 | 2,586 | ||||||||||||||||||
$ | 2,749,955 | $ | 2,424,999 | $ | 1,028,986 | $ | 944,316 | $ | 147,934 | $ | 101,416 | |||||||||||||
All intercompany transactions are eliminated upon consolidation, and there are no differences
between the accounting policies used to measure profit and loss for our segments and on a
consolidated basis. Net sales are defined as net sales to external clients. None of our clients
exceeded ten percent of consolidated net sales for the three or nine months ended September 30,
2011.
A portion of our operating segments selling and administrative expenses arise from shared
services and infrastructure that we provide to them in order to realize economies of scale. These
expenses, collectively identified as corporate charges, include senior management expenses,
internal audit, legal, tax, insurance services, treasury and other corporate infrastructure
expenses. Charges are allocated to our operating segments, and the allocations have been
determined on a basis that we considered to be a reasonable reflection of the utilization of
services provided to or benefits received by the operating segments.
14
Table of Contents
INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The tables below present information about our reportable operating segments as of and for the
three months ended September 30, 2011 and 2010 (in thousands):
Three Months Ended September 30, 2011 | ||||||||||||||||
North America | EMEA | APAC | Consolidated | |||||||||||||
Net sales |
$ | 913,593 | $ | 289,130 | $ | 35,296 | $ | 1,238,019 | ||||||||
Costs of goods sold |
798,955 | 247,012 | 28,537 | 1,074,504 | ||||||||||||
Gross profit |
114,638 | 42,118 | 6,759 | 163,515 | ||||||||||||
Operating expenses: |
||||||||||||||||
Selling and administrative expenses |
89,539 | 39,372 | 6,160 | 135,071 | ||||||||||||
Severance and restructuring expenses |
476 | 53 | | 529 | ||||||||||||
Earnings from operations |
$ | 24,623 | $ | 2,693 | $ | 599 | 27,915 | |||||||||
Non-operating expense, net |
2,301 | |||||||||||||||
Earnings before income taxes |
25,614 | |||||||||||||||
Income tax expense |
8,448 | |||||||||||||||
Net earnings |
$ | 17,166 | ||||||||||||||
Total assets at period end |
$ | 1,373,333 | $ | 382,984 | $ | 57,671 | $ | 1,813,988 | * | |||||||
* | Consolidated total assets do not reflect the net effect of corporate assets and intercompany eliminations of $313,417,000. |
Three Months Ended September 30, 2010 | ||||||||||||||||
North America | EMEA | APAC | Consolidated | |||||||||||||
Net sales |
$ | 871,204 | $ | 267,813 | $ | 30,180 | $ | 1,169,197 | ||||||||
Costs of goods sold |
760,668 | 229,681 | 24,203 | 1,014,552 | ||||||||||||
Gross profit |
110,536 | 38,132 | 5,977 | 154,645 | ||||||||||||
Operating expenses: |
||||||||||||||||
Selling and administrative expenses |
89,012 | 35,808 | 4,691 | 129,511 | ||||||||||||
Severance and restructuring expenses |
199 | 99 | | 298 | ||||||||||||
Earnings from operations |
$ | 21,325 | $ | 2,225 | $ | 1,286 | 24,836 | |||||||||
Non-operating expense, net |
2,216 | |||||||||||||||
Earnings before income taxes |
22,620 | |||||||||||||||
Income tax expense |
8,188 | |||||||||||||||
Net earnings |
$ | 14,432 | ||||||||||||||
Total assets at period end |
$ | 1,329,004 | $ | 362,576 | $ | 46,743 | $ | 1,738,323 | ** | |||||||
** | Consolidated total assets do not reflect the net effect of corporate assets and intercompany eliminations of $261,124,000. |
15
Table of Contents
INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The tables below present information about our reportable operating segments as of and
for the nine months ended September 30, 2011 and 2010 (in thousands):
Nine Months Ended September 30, 2011 | ||||||||||||||||
North America | EMEA | APAC | Consolidated | |||||||||||||
Net sales |
$ | 2,749,955 | $ | 1,028,986 | $ | 147,934 | $ | 3,926,875 | ||||||||
Costs of goods sold |
2,393,718 | 879,795 | 123,188 | 3,396,701 | ||||||||||||
Gross profit |
356,237 | 149,191 | 24,746 | 530,174 | ||||||||||||
Operating expenses: |
||||||||||||||||
Selling and administrative expenses |
277,114 | 125,030 | 18,414 | 420,558 | ||||||||||||
Severance and restructuring expenses |
1,916 | 2,542 | | 4,458 | ||||||||||||
Earnings from operations |
$ | 77,207 | $ | 21,619 | $ | 6,332 | 105,158 | |||||||||
Non-operating expense, net |
4,624 | |||||||||||||||
Earnings before income taxes |
100,534 | |||||||||||||||
Income tax expense |
34,953 | |||||||||||||||
Net earnings |
$ | 65,581 | ||||||||||||||
Total assets at period end |
$ | 1,373,333 | $ | 382,984 | $ | 57,671 | $ | 1,813,988 | * | |||||||
* | Consolidated total assets do not reflect the net effect of corporate assets and intercompany eliminations of $313,417,000. |
Nine Months Ended September 30, 2010 | ||||||||||||||||
North America | EMEA | APAC | Consolidated | |||||||||||||
Net sales |
$ | 2,424,999 | $ | 944,316 | $ | 101,416 | $ | 3,470,731 | ||||||||
Costs of goods sold |
2,095,892 | 818,440 | 82,904 | 2,997,236 | ||||||||||||
Gross profit |
329,107 | 125,876 | 18,512 | 473,495 | ||||||||||||
Operating expenses: |
||||||||||||||||
Selling and administrative expenses |
260,241 | 110,698 | 14,113 | 385,052 | ||||||||||||
Severance and restructuring expenses |
1,142 | 545 | | 1,687 | ||||||||||||
Earnings from operations |
$ | 67,724 | $ | 14,633 | $ | 4,399 | 86,756 | |||||||||
Non-operating expense, net |
7,330 | |||||||||||||||
Earnings before income taxes |
79,426 | |||||||||||||||
Income tax expense |
28,915 | |||||||||||||||
Net earnings |
$ | 50,511 | ||||||||||||||
Total assets at period end |
$ | 1,329,004 | $ | 362,576 | $ | 46,743 | $ | 1,738,323 | ** | |||||||
** | Consolidated total assets do not reflect the net effect of corporate assets and intercompany eliminations of $261,124,000. |
We recorded the following pre-tax amounts, by operating segment, for depreciation and
amortization, in the accompanying consolidated financial statements (in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
North America |
$ | 7,922 | $ | 7,696 | $ | 23,156 | $ | 23,179 | ||||||||
EMEA |
1,775 | 1,613 | 5,242 | 4,809 | ||||||||||||
APAC |
211 | 186 | 635 | 527 | ||||||||||||
Total |
$ | 9,908 | $ | 9,495 | $ | 29,033 | $ | 28,515 | ||||||||
16
Table of Contents
INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
13. Subsequent Event
Effective October 1, 2011, we acquired Tempe, Arizona-based Ensynch, Incorporated, a leading
professional services firm with multiple Microsoft Gold competencies across the complete Microsoft
solution set, including cloud migration and management. Ensynchs 2010 services revenue was $16.2
million. We believe
this acquisition brings a depth of knowledge and expertise that will enhance our professional
services capabilities. We believe that combining Ensynchs technical skills with Insights sales
engine will elevate our ability to provide clients with complete software solutions to drive their
success.
We are in the process of determining the fair value of net assets acquired, including
identifiable intangible assets, which will be recorded in our North America operating segment. We
will consolidate the results of operations for Ensynch beginning on October 1, 2011, the effective
date of the acquisition. We do not believe that our historical results would have been materially
affected by the acquisition of Ensynch.
17
Table of Contents
INSIGHT ENTERPRISES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations. |
The following discussion should be read in conjunction with the consolidated financial
statements and the related notes that appear elsewhere in this Quarterly Report on Form 10-Q.
Quarterly Overview
We are a leading provider of information technology (IT) hardware, software and
services to small, medium and large businesses and public sector institutions in North America,
Europe, the Middle East, Africa and Asia-Pacific. Currently, our offerings in North America and
the United Kingdom include IT hardware, software and services. Our offerings in the remainder of
our EMEA segment and in APAC are almost entirely software and software-related services.
Solid sales performance combined with significant operating leverage drove double-digit growth
in earnings from operations and operating margin expansion during the third quarter of 2011.
Consolidated net sales increased 6% to $1.24 billion in the three months ended September 30, 2011
compared to $1.17 billion for three months ended September 30, 2010. Gross profit for the three
months ended September 30, 2011 also increased 6% year over year to $163.5 million, and gross
margin remained steady at 13.2%. On a consolidated basis, we reported earnings from operations of
$27.9 million, net earnings of $17.2 million and diluted earnings per share of $0.38 for the third
quarter of 2011. This compares to earnings from operations of $24.8 million, net earnings of $14.4
million and diluted earnings per share of $0.31 for the third quarter of 2010. While the market
for IT products moderated somewhat from the double-digit sales growth we experienced in recent
quarters coming out of the recession, our sales performance and disciplined cost management drove
financial performance ahead of our expectations.
Our consolidated results of operations for the third quarter of 2011 include $529,000,
$330,000 net of tax, of severance expense, compared to $298,000, $192,000 net of tax, recorded
during the third quarter of 2010. Net of tax amounts were computed using the statutory tax rate
for the taxing jurisdictions in the operating segment in which the related expenses were recorded.
Details about segment results of operations can be found in Note 12 to the Consolidated
Financial Statements in Part I, Item 1 of this report.
Our discussion and analysis of financial condition and results of operations is intended to
assist in the understanding of our consolidated financial statements, the changes in certain key
items in those consolidated financial statements from period to period and the primary factors that
contributed to those changes, as well as how certain critical accounting estimates affect our
consolidated financial statements.
Critical Accounting Estimates
General
Our consolidated financial statements have been prepared in accordance with United States
generally accepted accounting principles (GAAP). For a summary of significant accounting
policies, see Note 1 to the Consolidated Financial Statements in Part II, Item 8 of our Annual
Report on Form 10-K for the year ended December 31, 2010. The preparation of these consolidated
financial statements requires us to make estimates and assumptions that affect the reported amounts
of assets, liabilities, net sales and expenses. We base our estimates
on historical experience and on various other assumptions that we believe to be reasonable
under the circumstances, the results of which form the basis for making judgments about the
carrying values of assets and liabilities that are not readily apparent from other sources. Actual
results, however, may differ from estimates we have made. Members of our senior management have
discussed the critical accounting estimates and related disclosures with the Audit Committee of our
Board of Directors.
18
Table of Contents
INSIGHT ENTERPRISES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
There have been no changes to the items disclosed as critical accounting estimates in
Managements Discussion and Analysis of Financial Condition and Results of Operations in Part II,
Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2010.
Results of Operations
The following table sets forth for the periods presented certain financial data as a
percentage of net sales for the three and nine months ended September 30, 2011 and 2010:
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net sales |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Costs of goods sold |
86.8 | 86.8 | 86.5 | 86.4 | ||||||||||||
Gross profit |
13.2 | 13.2 | 13.5 | 13.6 | ||||||||||||
Selling and administrative expenses |
10.9 | 11.1 | 10.7 | 11.1 | ||||||||||||
Severance and restructuring expenses |
0.0 | 0.0 | 0.1 | 0.0 | ||||||||||||
Earnings from operations |
2.3 | 2.1 | 2.7 | 2.5 | ||||||||||||
Non-operating expense, net |
0.2 | 0.2 | 0.1 | 0.2 | ||||||||||||
Earnings before income taxes |
2.1 | 1.9 | 2.6 | 2.3 | ||||||||||||
Income tax expense |
0.7 | 0.7 | 0.9 | 0.8 | ||||||||||||
Net earnings |
1.4 | % | 1.2 | % | 1.7 | % | 1.5 | % | ||||||||
We experience some seasonal trends in our sales of IT hardware, software and services.
Software sales are typically seasonally higher in our second and fourth quarters, particularly the
second quarter; business clients, particularly larger enterprise businesses in the U.S., tend to
spend more in our fourth quarter as they utilize their remaining capital budget authorizations and
less in the first quarter; sales to the federal government in the U.S. are often stronger in our
third quarter; and sales to public sector clients in the United Kingdom are often stronger in our
first quarter. These trends create overall seasonality in our consolidated results such that sales
and profitability are expected to be higher in the second and fourth quarters of the year.
Throughout this Results of Operations section of Managements Discussion and Analysis of
Financial Condition and Results of Operations, we refer to changes in net sales, gross profit and
selling and administrative expenses in EMEA and APAC excluding the effects of foreign currency
movements. In computing these change amounts and percentages, we compare the current year amount
as translated into U.S. dollars under the applicable accounting standards to the prior year amount
in local currency translated into U.S. dollars utilizing the average translation rate for the
current quarter.
Net Sales. Net sales for the three months ended September 30, 2011 increased 6% compared to
the three months ended September 30, 2010. Net sales for the nine months ended September 30, 2011
increased 13% compared to the nine months ended September 30, 2010. Our net sales by operating
segment were as follows (dollars in thousands):
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
September 30, | % | September 30, | % | |||||||||||||||||||||
2011 | 2010 | Change | 2011 | 2010 | Change | |||||||||||||||||||
North America |
$ | 913,593 | $ | 871,204 | 5 | % | $ | 2,749,955 | $ | 2,424,999 | 13 | % | ||||||||||||
EMEA |
289,130 | 267,813 | 8 | % | 1,028,986 | 944,316 | 9 | % | ||||||||||||||||
APAC |
35,296 | 30,180 | 17 | % | 147,934 | 101,416 | 46 | % | ||||||||||||||||
Consolidated |
$ | 1,238,019 | $ | 1,169,197 | 6 | % | $ | 3,926,875 | $ | 3,470,731 | 13 | % | ||||||||||||
19
Table of Contents
INSIGHT ENTERPRISES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Net sales in North America increased 5%, or $42.4 million, for the three months ended
September 30, 2011 compared to the three months ended September 30, 2010. Net sales of hardware
and services increased 7% and 15%, respectively, year over year, while net sales of software
decreased 1% year to year. Sales growth moderated somewhat in the third quarter compared to the
year over year double-digit growth experienced in previous quarters post-recession. Overall, the
increases in the hardware category resulted from higher volume with the year over year improvement
in the demand environment for IT products, although at a more moderate pace than in previous
quarters. The increase in services sales related to a higher volume of professional services and
managed services projects. The decrease in the software category resulted from declines in public
sector spending.
Net sales in North America increased 13%, or $325.0 million for the nine months ended
September 30, 2011 compared to the nine months ended September 30, 2010, primarily as a result of
generally higher demand for IT products. On a year to date basis, net sales of hardware, software
and services increased 14%, 12% and 20%, respectively, year over year.
Net sales in EMEA increased 8%, or $21.3 million, in U.S. dollars, for the three months ended
September 30, 2011 compared to the three months ended September 30, 2010. Excluding the effects of
foreign currency movements, net sales increased 2% compared to the third quarter of last year.
EMEAs growth rate lags our growth rate in North America and APAC as the European economy has
recovered more slowly post-recession than our other markets. Net sales of hardware were up 4% year
over year in U.S. dollars but were flat excluding the effects of foreign currency movements, as
growth in the middle market client space more than offset reduced spending in the public sector
market. Software net sales increased 10% year over year in U.S. dollars, 3% excluding the effects
of foreign currency movements, due primarily to new client engagements in the middle market client
space. Net sales of services increased 22% year over year in U.S. dollars, 15% excluding the
effects of foreign currency movements, due primarily to higher volume and new client engagements.
Net sales in EMEA increased 9%, or $84.7 million, in U.S. dollars, for the nine months ended
September 30, 2011 compared to the nine months ended September 30, 2010. Excluding the effects of
foreign currency movements, net sales were up 2% compared to the first nine months of last year.
On a year to date basis, hardware and software sales increased 3% and 12%, respectively, while
sales of services improved 30% year over year, in U.S. dollars. Excluding the effects of foreign
currency movements, hardware sales declined 2% year to year, while net sales of software and
services increased 3% and 22%, respectively, year over year. The year to date decrease in hardware
sales primarily resulted from a decrease in spending in the public sector market, while the
increases in software and services sales primarily resulted from higher volume and new client
engagements.
Our APAC segment recognized net sales of $35.3 million for the three months ended September
30, 2011, a year over year increase of 17% from the three months ended September 30, 2010 in U.S.
dollars, 3% excluding the effects of foreign currency movements. The increase primarily resulted
from increased sales in the middle market.
Net sales in APAC increased 46%, or $46.5 million, in U.S. dollars, for the nine months ended
September 30, 2011 compared to the nine months ended September 30, 2010, 28% excluding the effects
of foreign currency movements. The year to date increase primarily resulted from higher volume and
new client engagements, particularly with public sector clients.
20
Table of Contents
INSIGHT ENTERPRISES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
The percentage of net sales by category for North America, EMEA and APAC were as follows for
the three months ended September 30, 2011 and 2010:
North America | EMEA | APAC | ||||||||||||||||||||||
Three Months Ended | Three Months Ended | Three Months Ended | ||||||||||||||||||||||
September 30, | September 30, | September 30, | ||||||||||||||||||||||
Sales Mix | 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | ||||||||||||||||||
Hardware |
67 | % | 66 | % | 37 | % | 38 | % | 2 | % | 1 | % | ||||||||||||
Software |
26 | % | 28 | % | 61 | % | 60 | % | 93 | % | 97 | % | ||||||||||||
Services |
7 | % | 6 | % | 2 | % | 2 | % | 5 | % | 2 | % | ||||||||||||
100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||
The percentage of net sales by category for North America, EMEA and APAC were as follows
for the nine months ended September 30, 2011 and 2010:
North America | EMEA | APAC | ||||||||||||||||||||||
Nine Months Ended | Nine Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | September 30, | ||||||||||||||||||||||
Sales Mix | 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | ||||||||||||||||||
Hardware |
64 | % | 64 | % | 32 | % | 34 | % | 1 | % | 1 | % | ||||||||||||
Software |
29 | % | 30 | % | 66 | % | 64 | % | 96 | % | 97 | % | ||||||||||||
Services |
7 | % | 6 | % | 2 | % | 2 | % | 3 | % | 2 | % | ||||||||||||
100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||
Currently, our offerings in North America and the United Kingdom include IT hardware,
software and services. Our offerings in the remainder of our EMEA segment and in APAC are almost
entirely software and software-related services.
Gross Profit. Gross profit for the three months ended September 30, 2011 increased 6%
compared to the three months ended September 30, 2010, with gross margin remaining flat at 13.2%.
For the nine months ended September 30, 2011, gross profit increased 12% compared to the nine
months ended September 30, 2010, with a 10 basis point decrease in gross margin. Our gross profit
and gross profit as a percentage of net sales by operating segment were as follows (dollars in
thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||
% of | % of | % of | % of | |||||||||||||||||||||||||||||
2011 | Net Sales | 2010 | Net Sales | 2011 | Net Sales | 2010 | Net Sales | |||||||||||||||||||||||||
North America |
$ | 114,638 | 12.5 | % | $ | 110,536 | 12.7 | % | $ | 356,237 | 13.0 | % | $ | 329,107 | 13.6 | % | ||||||||||||||||
EMEA |
42,118 | 14.6 | % | 38,132 | 14.2 | % | 149,191 | 14.5 | % | 125,876 | 13.3 | % | ||||||||||||||||||||
APAC |
6,759 | 19.1 | % | 5,977 | 19.8 | % | 24,746 | 16.7 | % | 18,512 | 18.3 | % | ||||||||||||||||||||
Consolidated |
$ | 163,515 | 13.2 | % | $ | 154,645 | 13.2 | % | $ | 530,174 | 13.5 | % | $ | 473,495 | 13.6 | % | ||||||||||||||||
North Americas gross profit for the three months ended September 30, 2011 increased 4%
compared to the three months ended September 30, 2010, but, as a percentage of net sales, gross
margin decreased year to year, due primarily to a decrease in margin related to a lower mix of
agency fees for enterprise software agreements of 23 basis points, offset partially by an increase
in product margin, which includes vendor funding and freight, of 11 basis points. For the nine
months ended September 30, 2011, gross profit increased 8% compared to the nine months ended
September 30, 2010. However, as a percentage of net sales, gross margin for the nine months ended
September 30, 2011 decreased compared to the nine months ended September 30, 2010, reflecting a
year to date decrease in margin related to agency fees for enterprise software agreements of 26
basis points and a year to date decrease on margin related to sales of services of 20 basis points
as well as a decrease in product margin, which includes vendor funding and freight, of
approximately 9 basis points, primarily related to freight.
21
Table of Contents
INSIGHT ENTERPRISES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
EMEAs gross profit increased 10% in U.S. dollars for the three months ended September 30,
2011 compared to the three months ended September 30, 2010. Excluding the effects of foreign
currency movements, gross profit was up 4% compared to the third quarter of last year. As a
percentage of net sales, gross margin increased year over year, due primarily to an increase in
margin contributed by services sales of 27 basis points and an increase in agency fees for
enterprise software agreement renewals contributing an increase in margin of 13 basis points.
These increases in margin were primarily the result of a change in the mix of business year over
year to a higher mix of commercial business in the three months ended September 30, 2011 compared
to more lower margin public sector business in the three months ended September 30, 2010. For the
nine months ended September 30, 2011, gross profit increased 19% compared to the nine months ended
September 30, 2010. Excluding the effects of foreign currency movements, gross profit increased
11% compared to the first nine months of last year. As a percentage of net sales, gross margin for
the nine months ended September 30, 2011 increased year over year, primarily due to an increase in
product margin, which includes vendor funding and freight, of 63 basis points, an increase in
agency fees for enterprise software agreements contributing an increase in margin of 35 basis
points and an increase in margin contributed by services sales of 17 basis points.
APACs gross profit increased 13% for the three months ended September 30, 2011 compared to
the three months ended September 30, 2010. Excluding the effects of foreign currency movements,
gross profit increased 1% compared to the third quarter of last year. As a percentage of net
sales, gross margin declined by approximately 70 basis points, primarily due to the effect of a
lower mix of agency fees for enterprise software agreements. For the nine months ended September
30, 2011, gross profit increased 34% compared to the nine months ended September 30, 2010.
Excluding the effects of foreign currency movements, gross profit increased 18% compared to the
first nine months of last year. As a percentage of net sales, gross margin declined by
approximately 160 basis points, primarily due to the effect of an increase in the mix of public
sector business, which is typically transacted at lower margins, as well as the effects of the
prior year release of a sales tax reserve of approximately $480,000 upon settlement with the local
taxing authorities in the first quarter of 2010.
Operating Expenses.
Selling and Administrative Expenses. Selling and administrative expenses increased $5.6
million, or 4%, for the three months ended September 30, 2011 compared to the three months ended
September 30, 2010. For the nine months ended September 30, 2011, selling and administrative
expenses increased $35.5 million, or 9%, compared to the nine months ended September 30, 2010.
Selling and administrative expenses as a percent of net sales by operating segment for the three
and nine months ended September 30, 2011 and 2010 were as follows (dollars in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||
% of | % of | % of | % of | |||||||||||||||||||||||||||||
2011 | Net Sales | 2010 | Net Sales | 2011 | Net Sales | 2010 | Net Sales | |||||||||||||||||||||||||
North America |
$ | 89,539 | 9.8 | % | $ | 89,012 | 10.2 | % | $ | 277,114 | 10.1 | % | $ | 260,241 | 10.7 | % | ||||||||||||||||
EMEA |
39,372 | 13.6 | % | 35,808 | 13.4 | % | 125,030 | 12.2 | % | 110,698 | 11.7 | % | ||||||||||||||||||||
APAC |
6,160 | 17.5 | % | 4,691 | 15.5 | % | 18,414 | 12.4 | % | 14,113 | 13.9 | % | ||||||||||||||||||||
Consolidated |
$ | 135,071 | 10.9 | % | $ | 129,511 | 11.1 | % | $ | 420,558 | 10.7 | % | $ | 385,052 | 11.1 | % | ||||||||||||||||
22
Table of Contents
INSIGHT ENTERPRISES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
North Americas selling and administrative expenses increased 1%, or $527,000, for the
three months ended September 30, 2011 compared to the three months ended September 30, 2010. A
year over year increase of $1.1 million related to salaries and benefits, including stock-based
compensation, associated with investments in headcount and related benefits and a year over year
increase of $700,000 in variable compensation linked with increasing net sales were offset by
declines in marketing, facilities and other general and administrative expenses resulting from
tight expense management. Although selling and administrative expenses were relatively flat year
over year, selling and administrative expenses as a percentage of net sales declined approximately
40 basis points to 9.8% of net sales for the three months ended September 30, 2011 compared to the
three months ended
September 30, 2010. The decline is primarily attributable to the benefits of ongoing expense
management efforts. For the nine months ended September 30, 2011, selling and administrative
expenses in North America increased 6%, or $16.9 million compared to the nine months ended
September 30, 2010. During the nine months ended September 30, 2011, as expected, we incurred
incremental selling and administrative expenses associated with the North America IT systems
integration project. In addition, we incurred a non-cash charge of approximately $1.4 million
during the period to write-off certain computer software development costs that will not be placed
into service as a result of the North America IT systems integration project. The year over year
comparison was also affected by the prior years selling and administrative expenses being reduced
by $2.9 million upon the collection of a single account receivable which we had previously
specifically reserved as doubtful.
EMEAs selling and administrative expenses increased 10%, or $3.6 million in U.S. dollars, for
the three months ended September 30, 2011 compared to the three months ended September 30, 2010,
increasing approximately 20 basis points year over year as a percent of net sales to 13.6%.
Excluding the effects of foreign currency movements, selling and administrative expenses increased
4% compared to the third quarter of last year. The remaining increase year over year, after
excluding the effects of foreign currency movements, related to increases in salaries and benefits
due to investments in headcount and related benefits. Additionally, we
incurred incremental selling and administrative expenses associated with investments in our IT
systems in EMEA during the quarter. For the nine months ended September 30, 2011, selling and
administrative expenses increased 13%, or $14.3 million in U.S. dollars, compared to the nine
months ended September 30, 2010. Excluding the effects of foreign currency movements, selling and
administrative expenses increased 6% compared to the first nine months of last year. The increase
in selling and administrative expenses is primarily attributable to increases in salaries and
benefits due to investments in headcount and related benefits and increases in variable
compensation on increased gross profit.
APACs selling and administrative expenses increased 31% or $1.5 million in U.S. dollars, for
the three months ended September 30, 2011 compared to the three months ended September 30, 2010,
increasing year over year as a percent of net sales by approximately 200 basis points to 17.5%.
Excluding the effects of foreign currency movements, selling and administrative expenses increased
15% compared to the third quarter of last year. The increase year over year was primarily driven
by increases in salaries and benefits due to investments in headcount. For the nine months ended
September 30, 2011, selling and administrative expenses increased 30%, or $4.3 million in U.S.
dollars compared to the nine months ended September 30, 2010. Excluding the effects of foreign
currency movements, selling and administrative expenses increased 14% compared to the first nine
months of last year. The year over year increase in selling and administrative expenses in the
nine month periods was primarily attributable to increases in salaries and benefits due to
investments in headcount and increases in variable compensation on increased gross profit.
Severance and Restructuring Expenses. During the three months ended September 30, 2011, North
America and EMEA recorded severance expense of $476,000 and $53,000, respectively, related to
certain restructuring activities. During the nine months ended September 30, 2011, North America
and EMEA recorded severance expense totaling $1.9 million, net of adjustments, and $2.5 million,
net of adjustments, respectively, related to certain restructuring activities. Comparatively,
during the three months ended September 30, 2010, North America and EMEA recorded severance expense
of $199,000 and $99,000, respectively, and, during the nine months ended September 30, 2010, North
America and EMEA recorded severance expense of $1.1 million and $545,000, respectively.
Non-Operating (Income) Expense.
Interest Income. Interest income for the three and nine months ended September 30, 2011 and
2010 was generated through cash equivalent short-term investments. The increase in interest income
year over year is primarily due to increases in average cash balances outstanding.
23
Table of Contents
INSIGHT ENTERPRISES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Interest Expense. Interest expense for the three and nine months ended September 30, 2011 and
2010 primarily relates to borrowings under our financing facilities and capital lease obligation
and imputed interest under our inventory financing facility. Interest expense for the three months
ended September 30, 2011 declined 8%, or $146,000, compared to the three months ended September 30,
2010. For the nine months ended September 30, 2011 compared to the nine months ended September 30,
2010, interest expense declined 13% due primarily to lower average borrowing rates year to year and
a change in estimate in the prior year period described below. Imputed interest under our
inventory financing facility was $463,000 and $1.5 million for the three and nine months ended
September 30, 2011, respectively, compared to $536,000 and $1.7 million for the three and nine
months ended September 30, 2010. These decreases were due to decreased weighted average interest
rates, partially offset by higher average balances outstanding under the facility. During the nine
months ended September 30, 2010, we reduced interest expense by $553,000 for a change in estimate
of accrued interest related to two state unclaimed property settlements.
Net Foreign Currency Exchange Gains/Losses. These gains/losses result from foreign currency
transactions, including gains/losses on foreign currency derivative contracts and intercompany
balances that are not considered long-term in nature. The change in net foreign currency exchange
gains/losses is due primarily to the underlying changes in the applicable exchange rates, as
mitigated by our use of foreign exchange forward contracts to hedge certain non-functional currency
assets and liabilities against changes in exchange rate movements.
Other Expense, Net. Other expense, net, consists primarily of bank fees associated with our
cash management activities.
Income Tax Expense. Our effective tax rate for the three months ended September 30, 2011 was
33.0% compared to 36.2% for the three months ended September 30, 2010. Our effective tax rate for
the nine months ended September 30, 2011 and 2010 was 34.8% and 36.4%, respectively. The decrease
in our effective tax rate for the three months ended September 30, 2011 was primarily due to the
recognition of tax benefits relating to the re-measurement or settlement of specific uncertain tax
positions during the quarter. The decrease in effective tax rates for the nine month periods was
primarily due to the recognition of tax benefits relating to the re-measurement or settlement of
specific uncertain tax positions and a release of a valuation allowance in the United Kingdom,
partially offset by a revaluation of our deferred tax assets to reflect changes to certain
statutory tax rates.
Liquidity and Capital Resources
The following table sets forth certain consolidated cash flow information for the nine
months ended September 30, 2011 and 2010 (in thousands):
Nine Months Ended | ||||||||
September 30, | ||||||||
2011 | 2010 | |||||||
Net cash provided by operating activities |
$ | 10,062 | $ | 37,508 | ||||
Net cash used in investing activities |
(16,883 | ) | (17,754 | ) | ||||
Net cash (used in) provided by financing activities |
(19,397 | ) | 6,078 | |||||
Foreign currency exchange effect on cash flow |
1,135 | (134 | ) | |||||
(Decrease) increase in cash and cash equivalents |
(25,083 | ) | 25,698 | |||||
Cash and cash equivalents at beginning of period |
123,763 | 68,066 | ||||||
Cash and cash equivalents at end of period |
$ | 98,680 | $ | 93,764 | ||||
24
Table of Contents
INSIGHT ENTERPRISES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Cash and Cash Flow
Our primary uses of cash during the nine months ended September 30, 2011 were to fund working
capital requirements, including repayments under our inventory financing facility, to repurchase
shares of our common stock and to fund capital expenditures. Operating activities in the nine
months ended September 30, 2011 provided $10.1 million in cash, compared to $37.5 million during
the nine months ended September 30, 2010, reflecting higher working capital needs on higher sales
during the nine months ended September 30, 2011. We had net borrowings on our long-term debt under
our revolving credit facility of $65.5 million, made net repayments under our inventory financing
facility of $33.2 million and funded $50.0 million of repurchases of our common stock during the
nine months ended September 2011. Capital expenditures were $16.9 million for the nine months
ended September 30, 2011, a 34% increase over the nine months ended September 30, 2010, primarily
related to investments in our IT systems. Cash flows for the nine months ended September 30, 2011
benefited $1.1 million from the foreign currency exchange effect on cash flows while cash flows for
the nine months ended September 30, 2010 were negatively affected by $134,000 as a result of
foreign currency exchange rates.
Net cash provided by operating activities. Cash flows from operations for the nine
months ended September 30, 2011 and 2010 reflect our net earnings, adjusted for non-cash items such
as depreciation, amortization, stock-based compensation expense and write-offs and write-downs of
assets, as well as changes in accounts receivable, other current assets, accounts payable, deferred
revenue and accrued expenses and other liabilities. In both periods, the decreases in accounts
receivable and accounts payable can be primarily attributed to the seasonal decrease in net sales,
resulting in lower accounts receivable and accounts payable balances as of September 30, compared
to December 31. For the 2011 period, the decrease in accrued expenses and other liabilities was
primarily due to VAT and sales tax payments, payments made to settle certain state unclaimed
property liabilities or other legal release of the recorded liabilities and a reduction in the
payroll accrual at period end. The decreases in other current assets and deferred revenue in the
nine months ended September 30, 2011 were primarily due to a large project for which we deferred
revenue recognition and the related costs as of December 31, 2010 until we received client
acceptance of the work performed throughout the first three quarters of 2011. For the 2010 period,
the decrease in accrued expenses and other liabilities was primarily due to payments made to settle
certain state unclaimed property liabilities and reduce income taxes payable. The increase in
inventories in the nine months ended September 30, 2010 was primarily attributable to
client-specific inventory purchased in North America during the third quarter of 2010 as a result
of new client engagements and overall higher demand for hardware.
Our consolidated cash flow operating metrics for the quarter ended September 30, 2011 and 2010
are as follows:
2011 | 2010 | |||||||
Days sales outstanding in ending accounts receivable (DSOs) (a) |
68 | 66 | ||||||
Days inventory outstanding (DIOs) (b) |
10 | 10 | ||||||
Days purchases outstanding in ending accounts payable (DPOs) (c) |
(50 | ) | (51 | ) | ||||
Cash conversion cycle (days) (d) |
28 | 25 | ||||||
(a) | Calculated as the balance of accounts receivable, net at the end of the period divided by daily net sales. Daily net sales is calculated as net sales for the quarter divided by 92 days. | |
(b) | Calculated as average inventories divided by daily costs of goods sold. Average inventories is calculated as the sum of the balances of inventories at the beginning of the quarter plus inventories at the end of the quarter divided by two. Daily costs of goods sold is calculated as costs of goods sold for the quarter divided by 92 days. | |
(c) | Calculated as the balances of accounts payable, which includes the inventory financing facility, at the end of the period divided by daily costs of goods sold. Daily costs of goods sold is calculated as costs of goods sold for the quarter divided by 92 days. | |
(d) | Calculated as DSOs plus DIOs, less DPOs. |
Our cash conversion cycle was 28 days in the quarter ended September 30, 2011 compared to 25
days in the quarter ended September 30, 2010. These results were primarily due to year to year
variances in the timing of supplier payments and higher sales recorded late in this years third
quarter compared to last year, primarily in our foreign operations.
25
Table of Contents
INSIGHT ENTERPRISES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
We expect that cash flow from operations will be used, at least partially, to fund working
capital as we typically pay our partners on average terms that are shorter than the average terms
granted to our clients in order to take advantage of supplier discounts. We intend to use cash
generated in the remainder of 2011 in excess of working capital needs to pay down our outstanding
debt balances and support our capital expenditures.
Net cash used in investing activities. Capital expenditures of $16.9 million and $12.6
million for the nine months ended September 30, 2011 and 2010, respectively, primarily related to
investments in our IT systems. We expect capital expenditures for the full year 2011 between $22.0
million and $27.0 million, primarily for the integration of our IT systems in North America onto a
single platform over the next two years, the IT systems upgrade in our EMEA operations and other
facility and technology related maintenance and upgrade projects. During the nine months ended
September 30, 2010, we made an earnout payment of $5.1 million to the former owners of Calence.
Net cash used in financing activities. During the nine months ended September 30, 2011, we
had net borrowings on our debt facilities that increased our outstanding debt balances under our
revolving credit facilities by $65.5 million, and we used $33.2 million to pay down our inventory
financing facility in accordance with its payment terms. During the nine months ended September
30, 2011, we also funded repurchases of 2.9 million shares of our common stock in open market
transactions at a total cost of $50.0 million (an average price of $17.26 per share). These
repurchases were completed under a program approved by our Board of Directors in May 2011
authorizing the purchase of up to $50.0 million of our common stock. All shares repurchased have
been retired as of September 30, 2011.
During the nine months ended September 30, 2010, we had net borrowings under our debt
facilities that increased our outstanding debt balances under our revolving credit facilities by
$17.5 million and made net repayments under our inventory financing facility of $10.0 million.
Our consolidated debt balance that can be outstanding at the end of any fiscal quarter under
our senior revolving credit facility and our ABS facility is limited by certain financial
covenants, particularly a maximum leverage ratio. The maximum leverage ratio is calculated as
aggregate debt outstanding divided by the sum of the Companys trailing twelve month net earnings
(loss) plus (i) interest expense, less non-cash imputed interest on our inventory financing
facility, (ii) income tax expense (benefit), (iii) depreciation and amortization and (iv) non-cash
stock-based compensation (referred to herein as adjusted earnings). The maximum leverage ratio
permitted under the agreements is 2.50 times trailing twelve-month adjusted earnings. We
anticipate that we will be in compliance with our maximum leverage ratio requirements over the next
four quarters. However, a significant drop in the Companys adjusted earnings would limit the
amount of indebtedness that could be outstanding at the end of any fiscal quarter to a level that
would be below the Companys consolidated maximum debt capacity. As of September 30, 2011, the
Companys debt balance that could have been outstanding was equal to the maximum available under
the facilities of $450.0 million. Our debt balance as of September 30, 2011 was $157.4 million,
including our capital lease obligation for certain IT equipment. As of September 30, 2011, the
current portion of our long-term debt relates solely to our capital lease obligation.
We anticipate that cash flows from operations, together with the funds available under our
financing facilities, will be adequate to support our presently anticipated cash and working
capital requirements for operations over the next 12 months.
Cash and cash equivalents held by foreign subsidiaries are generally subject to U.S. income
taxation upon repatriation to the U.S. For foreign entities not treated as branches for U.S. tax
purposes, we do not provide for
U.S. income taxes on the undistributed earnings of these subsidiaries as earnings are
reinvested and, in the opinion of management, will continue to be reinvested indefinitely outside
of the U.S. As of September 30, 2011, we had approximately $83.2 million in cash and cash
equivalents in certain of our foreign subsidiaries where we consider undistributed earnings of
these foreign subsidiaries to be permanently reinvested. As of September 30, 2011, the majority of
our foreign cash resides in the Netherlands, the United Kingdom and Australia. Certain of these
cash balances could be, and we expect that they will be, remitted to the U.S. by paying down
intercompany payables generated in the ordinary course of business. This repayment would not
change our policy to indefinitely reinvest earnings of our foreign subsidiaries. Our intention is
that undistributed earnings will be used for general business purposes in the foreign jurisdictions
as well as to fund our EMEA IT systems, various facility upgrades and the expansion of our sales of
hardware and services, in addition to software, to clients in EMEA countries.
26
Table of Contents
INSIGHT ENTERPRISES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Off Balance Sheet Arrangements
We have entered into off-balance sheet arrangements, which include guaranties and
indemnifications. The guaranties and indemnifications are discussed in Note 11 to our Consolidated
Financial Statements in Part I, Item 1 of this report. We believe that none of our off-balance
sheet arrangements has, or is reasonably likely to have, a material current or future effect on our
financial condition, results of operations, liquidity, capital expenditures or capital resources.
Recently Issued Accounting Pronouncements
See Note 1 to our Consolidated Financial Statements in Part I, Item 1 of this report for a
discussion of recently issued accounting pronouncements which affect or may affect our financial
statements.
Contractual Obligations
There have been no material changes in our reported contractual obligations, as described
under Contractual Obligations in Managements Discussion and Analysis of Financial Condition and
Results of Operations Liquidity and Capital Resources in Part II, Item 7 of our Annual Report
on Form 10-K for the year ended December 31, 2010.
27
Table of Contents
INSIGHT ENTERPRISES, INC.
Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
Other than the change in our open foreign currency forward contracts reflected below, there
have been no material changes in our reported market risks, as described in Quantitative and
Qualitative Disclosures About Market Risk in Part II, Item 7A of our Annual Report on Form 10-K
for the year ended December 31, 2010.
The following table summarizes our open foreign currency forward contracts held at September
30, 2011. All U.S. dollar and foreign currency amounts (Canadian Dollars, British Pounds Sterling
and Euros) are presented in thousands.
Buy | Buy | Buy | ||||
Foreign Currency |
CAD | GBP | EUR | |||
Foreign Amount |
18,000 | 11,000 | 3,697 | |||
Exchange Rate |
1.0200 | 1.5450 | 1.3525 | |||
USD Equivalent |
$17,647 | $16,995 | $5,000 | |||
Weighted Average Maturity |
Less than 1 month | Less than 1 month | Less than 1 month |
Item 4. | Controls and Procedures. |
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer, as of the end of the period covered
by this report, evaluated the effectiveness of our disclosure controls and procedures (as such term
is defined under Rules 13a-15(e) and 15d-15(e) of the Exchange Act) and determined that as of
September 30, 2011, our disclosure controls and procedures were effective to ensure that
information required to be disclosed by us in reports that we file or submit under the Exchange Act
is recorded, processed, summarized and reported within the time periods specified in the SECs
rules and forms and that such information is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions
regarding required disclosure.
Change in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting (as such term is defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30,
2011 that has materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
Inherent Limitations of Internal Control Over Financial Reporting
Because of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods
are subject to risks that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
Part II OTHER INFORMATION
Item 1. | Legal Proceedings. |
For a discussion of legal proceedings, see Note 11 to the Consolidated Financial Statements in
Part I, Item 1 of this report. For an additional discussion of certain risks associated with legal
proceedings, see Risk Factors We are subject to stockholder litigation and regulatory
proceedings related to the restatement of our consolidated financial statements, in Part I, Item
1A of our Annual Report on Form 10-K for the year ended December 31, 2010.
28
Table of Contents
INSIGHT ENTERPRISES, INC.
Item 1A. | Risk Factors. |
In addition to the other information set forth in this report, you should carefully consider
the factors discussed in Part I, Item 1A, Risk Factors, in our Annual Report on Form 10-K for the
year ended December 31, 2010, which could materially affect our business, financial condition or
future results. The risks described in our Annual Report on Form 10-K are not the only risks
facing our company. Additional risks and uncertainties not currently known to us or that we
currently deem to be immaterial may also materially adversely affect our business, financial
condition or operating results.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
There were no unregistered sales of equity securities during the three months ended September
30, 2011.
We have never paid a cash dividend on our common stock, and our senior revolving credit
facility contains restrictions on the payment of cash dividends. We currently intend to reinvest
all of our earnings into our business and do not intend to pay any cash dividends in the
foreseeable future.
Issuer Purchases of Equity Securities
(c) | (d) | |||||||||||||||
(a) | Total Number of Shares | Approximate Dollar | ||||||||||||||
Total Number | (b) | Purchased as Part of | Value of Shares That May | |||||||||||||
of Shares | Average Price | Publicly Announced | Yet be Purchased Under | |||||||||||||
Period | Purchased | Paid per Share | Plans or Programs | the Plans or Programs | ||||||||||||
July 1, 2011 through
July 31, 2011 |
592,969 | $ | 18.30 | 592,969 | $ | 25,000,000 | ||||||||||
August 1, 2011 through
August 31, 2011 |
894,366 | 16.82 | 894,366 | 9,953,000 | ||||||||||||
September 1, 2011
through September 30,
2011 |
536,897 | 18.54 | 536,897 | | ||||||||||||
Total |
2,024,232 | $ | 17.71 | 2,024,232 | ||||||||||||
On May 26, 2011, we announced that our Board of Directors had authorized the repurchase
of up to $50,000,000 of our common stock. During the nine months ended September 30, 2011, we
purchased 2,897,493 shares of our common stock on the open market at an average price of $17.26 per
share, which represented the full amount authorized under the repurchase program. All shares
repurchased were retired.
Item 3. | Defaults Upon Senior Securities. |
None.
Item 4. | (Removed and Reserved). |
Item 5. | Other Information. |
None.
29
Table of Contents
INSIGHT ENTERPRISES, INC.
Item 6. | Exhibits. |
(a) Exhibits (unless otherwise noted, exhibits are filed herewith).
Exhibit No. | Description | |||
3.1 | Composite Certificate
of Incorporation of
Insight Enterprises,
Inc. (incorporated by
reference to Exhibit
3.1 of our Annual
Report on Form 10-K for
the year ended December
31, 2005). |
|||
3.2 | Amended and Restated
Bylaws of Insight
Enterprises, Inc.
(incorporated by
reference to Exhibit
3.1 of our current
report on Form 8-K
filed on January 14,
2008). |
|||
4.1 | Specimen Common Stock
Certificate
(incorporated by
reference to Exhibit
4.1 of our Registration
Statement on Form S-1
(No. 33-86142) declared
effective January 24,
1995). |
|||
10.1 | (1) | Release and Severance
Agreement by and
between Insight
Enterprises, Inc. and
Stephen A. Speidel
dated as of September
1, 2011. |
||
31.1 | Certification of Chief
Executive Officer
Pursuant to Securities
Exchange Act Rule
13a-14. |
|||
31.2 | Certification of Chief
Financial Officer
Pursuant to Securities
Exchange Act Rule
13a-14. |
|||
32.1 | Certification of Chief
Executive Officer and
Chief Financial Officer
Pursuant to 18 U.S.C.
Section 1350, as
adopted pursuant to
Section 906 of the
Sarbanes-Oxley Act of
2002. |
|||
101 | Interactive data files
pursuant to Rule 405 of
Regulation S-T. In
accordance with Rule
406T of Regulation S-T,
the information in this
exhibit shall not be
deemed to be filed
for purposes of Section
18 of the Exchange Act,
or otherwise subject to
liability under that
section, and shall not
be incorporated by
reference into any
registration statement
or other document filed
under the Securities
Act of 1933, as
amended, except as
expressly set forth by
specific reference in
such filing. |
(1) | Management contract or compensatory plan or arrangement. |
30
Table of Contents
INSIGHT ENTERPRISES, INC.
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.
Date: November 2, 2011 | INSIGHT ENTERPRISES, INC. | |||||
By: | /s/ Kenneth T. Lamneck | |||||
President and Chief Executive Officer (Duly Authorized Officer) |
||||||
By: | /s/ Glynis A. Bryan | |||||
Chief Financial Officer (Principal Financial Officer) |
||||||
By: | /s/ David C. Olsen | |||||
Corporate Controller (Principal Accounting Officer) |
31