UNITED STATES
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

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

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)

(480) 902-1001
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 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 issuer’s 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

TABLE OF CONTENTS

		Page
PART I — Financial Information
Item 1 — Financial Statements:
Consolidated Balance Sheets (unaudited) — September 30, 2011 and December 31, 2010			1
Consolidated Statements of Operations (unaudited) — Three and Nine Months Ended September 30, 2011 and 2010			2
Consolidated Statements of Cash Flows (unaudited) — Nine Months Ended September 30, 2011 and 2010			3
Notes to Consolidated Financial Statements (unaudited)			4
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations			18
Item 3 — Quantitative and Qualitative Disclosures About Market Risk			28
Item 4 — Controls and Procedures			28
PART II — Other Information
Item 1 — Legal Proceedings			28
Item 1A — Risk Factors			29
Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds			29
Item 3 — Defaults Upon Senior Securities			29
Item 4 — (Removed and Reserved)			29
Item 5 — Other Information			29
Item 6 — Exhibits			30
Signatures			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

INSIGHT ENTERPRISES, INC.

FORWARD-LOOKING INFORMATION

Certain statements in this Quarterly Report on Form 10-Q, including statements in “Management’s 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.

PART I — FINANCIAL INFORMATION

Item 1.		Financial Statements.

INSIGHT ENTERPRISES, INC.

		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.

INSIGHT ENTERPRISES, INC.

		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.

INSIGHT ENTERPRISES, INC.

		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.

INSIGHT ENTERPRISES, INC.

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.

INSIGHT ENTERPRISES, INC.
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.

INSIGHT ENTERPRISES, INC.
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 Company’s 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 Company’s 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 Company’s consolidated maximum debt capacity. As of September 30, 2011, the Company’s 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.

INSIGHT ENTERPRISES, INC.
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.

INSIGHT ENTERPRISES, INC.
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.

INSIGHT ENTERPRISES, INC.
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)

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.

INSIGHT ENTERPRISES, INC.
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	)

INSIGHT ENTERPRISES, INC.
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.

INSIGHT ENTERPRISES, INC.
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 individual’s 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 Company’s 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.

INSIGHT ENTERPRISES, INC.
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.

INSIGHT ENTERPRISES, INC.
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.

INSIGHT ENTERPRISES, INC.
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	*

		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	**

INSIGHT ENTERPRISES, INC.
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	*

		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	**

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

INSIGHT ENTERPRISES, INC.
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. Ensynch’s 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 Ensynch’s technical skills with Insight’s 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.

INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Item 2.		Management’s 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.

INSIGHT ENTERPRISES, INC.
MANAGEMENT’S 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 “Management’s 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 “Management’s 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	%