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8-K - FORM 8-K - INSIGHT ENTERPRISES INCd342333d8k.htm

Exhibit 99.1

 

LOGO

 

 

FOR IMMEDIATE RELEASE    NASDAQ: NSIT

INSIGHT ENTERPRISES, INC. REPORTS FIRST QUARTER 2012 RESULTS

TEMPE, AZ – May 2, 2012 – Insight Enterprises, Inc. (NASDAQ: NSIT) (the “Company”) today reported results of operations for the quarter ended March 31, 2012.

First Quarter Highlights

For the first quarter of 2012 compared to the first quarter of 2011:

 

   

Net sales increased 2% to $1.24 billion.

 

   

Gross profit increased 5% to $170.4 million.

 

   

Earnings from operations increased 12% to $25.6 million, or 2.1% of net sales.

 

   

Net earnings increased 33% to $17.4 million.

 

   

Diluted earnings per share increased 39% to $0.39.

“During the first quarter, we focused on integrating recent acquisitions and improving the profitability of our business through gross margin expansion and continued cost control,” stated Ken Lamneck, President and Chief Executive Officer. “These efforts led to double digit growth in earnings from operations ahead of our expectations for the quarter.”

SEGMENT OVERVIEW

In North America, net sales were $856.3 million for the first quarter of 2012, up 1% from the first quarter of 2011. Net sales of software increased 9% year over year, while net sales of hardware and services decreased 1% and 10%, respectively, year to year. Results for the first quarter of 2012 include Ensynch, which the Company acquired effective October 1, 2011. Gross profit of $113.6 million was up 4% year over year, with gross margin increasing to 13.3% from 12.9% reported in the first quarter of 2011. Selling and administrative expenses in North America in the first quarter of 2012 decreased 1%, or $597,000, compared to the first quarter of 2011. During the first quarter of 2012, the North America segment had $489,000, $301,000 net of tax, of severance and restructuring expenses, net of adjustments, compared to $321,000, $197,000 net of tax, during the first quarter of 2011. As a result, earnings from operations in North America increased 28% year over year to $21.2 million, or 2.5% of net sales, in the first quarter of 2012, compared to $16.6 million, or 2.0% of net sales, in the first quarter of 2011.

 

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Insight Enterprises, Inc.    6820 South Harl Avenue    Tempe, Arizona 85283    480-902-1001    FAX 480-760-8958


Insight Q1 2012 Results, Page 2    May 2, 2012

 

The Company’s EMEA operating segment reported net sales of $348.8 million for the first quarter of 2012, up 4% in U.S. dollars compared to the first quarter of 2011. Excluding the effects of foreign currency movements, net sales increased 7% year over year. Results for the first quarter of 2012 include Inmac, which the Company acquired effective February 1, 2012. Net sales of hardware and services were up 22% and 17%, respectively, year over year, while sales of software declined 8% year to year, all in U.S. dollars. Excluding the effects of foreign currency movements, hardware and services sales increased 25% and 22%, respectively, and software sales declined 4% compared to the first quarter of 2011. Gross profit of $50.4 million was up 7% in U.S. dollars, 10% excluding the effects of foreign currency movements, while gross margin increased to 14.5% for the first quarter of 2012 from 14.0% in the first quarter of 2011. Selling and administrative expenses in EMEA in the first quarter of 2012 were up 11%, or $4.3 million, compared to the first quarter of 2011 in U.S. dollars and, excluding the effects of foreign currency movements, were up 14% year over year. During the first quarter of 2012, EMEA recorded $885,000, $620,000 net of tax, of severance and restructuring expenses, net of adjustments, compared to $203,000, $142,000 net of tax, for the first quarter of 2011. As a result, earnings from operations in EMEA were $4.1 million, or 1.2% of net sales, in the first quarter of 2012 compared to $6.0 million, or 1.8% of net sales, in the first quarter of 2011. The Company’s EMEA operating segment also reported a non-operating gain on bargain purchase of $2.0 million, $1.7 million net of tax, during the first quarter of 2012 as the fair value of the net assets acquired exceeded the purchase price paid by the Company for Inmac.

The Company’s APAC operating segment reported net sales of $39.0 million for the first quarter of 2012, up 9% from the first quarter of 2011 in U.S. dollars, 5% excluding the effects of foreign currency movements. Gross profit was $6.3 million, also an increase of 9% year over year in U.S. dollars and 5% excluding the effects of foreign currency movements, while gross margin remained flat at 16.2% for the first quarter of 2012 and 2011. Selling and administrative expenses in APAC increased $550,000, or 10% year over year in U.S. dollars. Excluding the effects of foreign currency movements, selling and administrative expenses increased by 5% year over year. As a result, earnings from operations in APAC were $304,000, or 0.8% of net sales, in the first quarter of 2012, compared to $337,000, or 0.9% of net sales, in the first quarter of 2011.

Throughout this “Segment Overview” section, the Company refers 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 changes and percentages, the Company compares 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 of tax amounts referenced above were computed using the statutory tax rate for the taxing jurisdictions in the operating segment in which the related expenses were recorded.

UPDATED GUIDANCE

For the full year 2012, the Company expects net sales to grow in the mid-single digit range and continues to expect diluted earnings per share for the full year of 2012 to be between $2.20 and $2.30.

This outlook:

 

   

Reflects an effective tax rate of 36% to 38% for the balance of 2012; and

 

   

Excludes severance and restructuring expenses incurred during the year and the non-operating gain on an acquisition recorded in the first quarter.

 

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Insight Enterprises, Inc.   6820 South Harl Avenue   Tempe, Arizona 85283   480-902-1001   FAX 480-760-8958


Insight Q1 2012 Results, Page 3    May 2, 2012

 

CONFERENCE CALL AND WEBCAST

The Company will host a conference call and live web cast today at 5:00 p.m. ET to discuss first quarter 2012 results of operations. A live web cast of the conference call (in listen-only mode) will be available on the Company’s web site at www.insight.com, and a replay of the web cast will be available on the Company’s web site for a limited time following the call. To listen to the live web cast by telephone, call 1-866-783-2142 if located in the U.S., 857-350-1601 for international callers, and enter the access code 87809399.

 

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Insight Enterprises, Inc.   6820 South Harl Avenue   Tempe, Arizona 85283   480-902-1001   FAX 480-760-8958


Insight Q1 2012 Results, Page 4    May 2, 2012

 

FINANCIAL SUMMARY TABLE

(IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)

 

     Three Months Ended March 31,  

Insight Enterprises, Inc.

     2012         2011         % change   

Net sales

   $ 1,244,182       $ 1,219,896         2

Gross profit

   $ 170,372       $ 162,480         5

Earnings from operations

   $ 25,604       $ 22,855         12

Net earnings

   $ 17,392       $ 13,067         33

Diluted EPS

   $ 0.39       $ 0.28         39

North America

        

Net sales

   $ 856,327       $ 847,039         1

Gross profit

   $ 113,636       $ 109,460         4

Earnings from operations

   $ 21,163       $ 16,558         28

EMEA

        

Net sales

   $ 348,834       $ 336,977         4

Gross profit

   $ 50,414       $ 47,215         7

Earnings from operations

   $ 4,137       $ 5,960         (31 %) 

APAC

        

Net sales

   $ 39,021       $ 35,880         9

Gross profit

   $ 6,322       $ 5,805         9

Earnings from operations

   $ 304       $ 337         (10 %) 

 

     North America
Three Months Ended
March 31,
    EMEA
Three Months Ended
March 31,
    APAC
Three Months Ended
March 31,
 

Sales Mix

   2012     2011     % change*     2012     2011     % change*     2012     2011     % change*  

Hardware

     63     64     (1 %)      42     36     22     3     1     584

Software

     31     29     9     56     62     (8 %)      93     95     6

Services

     6     7     (10 %)      2     2     17     4     4     (2 %) 
  

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   
     100     100     1     100     100     4     100     100     9
  

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

 

* Represents growth/decline in category net sales on a U.S. dollar basis.

 

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Insight Enterprises, Inc.   6820 South Harl Avenue   Tempe, Arizona 85283   480-902-1001   FAX 480-760-8958


Insight Q1 2012 Results, Page 5    May 2, 2012

 

FORWARD-LOOKING INFORMATION

Certain statements in this release and the related conference call and web cast are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements, including the Company’s growth in net sales in 2012 and its expected 2012 diluted earnings per share and the assumptions relating thereto, 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. Some of the important factors that could cause the Company’s actual results to differ materially from those projected in any forward-looking statements, include, but are not limited to, the following, which are discussed in “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2011:

 

   

our reliance on partners for product availability and competitive products to sell as well as our competition with our partners;

 

   

our reliance on partners for marketing funds and purchasing incentives;

 

   

disruptions in our information technology systems and voice and data networks, including risks and costs associated with the integration and upgrade of our IT systems;

 

   

general economic conditions;

 

   

the security of our electronic and other confidential information;

 

   

actions of our competitors, including manufacturers and publishers of products we sell;

 

   

the integration and operation of acquired businesses, including our ability to achieve expected benefits of the acquisitions;

 

   

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;

 

   

the availability of future financing and our ability to access and/or refinance our credit facilities;

 

   

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 the Company files with the Securities and Exchange Commission. Any forward-looking statements in this release should be considered in light of various important factors, including the risks and uncertainties listed above, as well as others. The Company assumes no obligation to update, and does not intend to update, any forward-looking statements. The Company does not endorse any projections regarding future performance made by third parties.

 

CONTACTS:    GLYNIS BRYAN    HELEN JOHNSON
   CHIEF FINANCIAL OFFICER    SENIOR VP, TREASURER
   TEL. 480-333-3390    TEL. 480-333-3234
   EMAIL glynis.bryan@insight.com    EMAIL helen.johnson@insight.com

 

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Insight Enterprises, Inc.   6820 South Harl Avenue   Tempe, Arizona 85283   480-902-1001   FAX 480-760-8958


Insight Q1 2012 Results, Page 6    May 2, 2012

 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

 

     Three Months Ended
March 31,
 
     2012     2011  

Net sales

   $ 1,244,182      $ 1,219,896   

Costs of goods sold

     1,073,810        1,057,416   
  

 

 

   

 

 

 

Gross profit

     170,372        162,480   

Operating expenses:

    

Selling and administrative expenses

     143,394        139,101   

Severance and restructuring expenses

     1,374        524   
  

 

 

   

 

 

 

Earnings from operations

     25,604        22,855   

Non-operating (income) expense:

    

Interest income

     (351     (358

Interest expense

     1,558        1,812   

Gain on bargain purchase

     (2,022     —     

Net foreign currency exchange gain

     (828     (478

Other expense, net

     244        406   
  

 

 

   

 

 

 

Earnings before income taxes

     27,003        21,473   

Income tax expense

     9,611        8,406   
  

 

 

   

 

 

 

Net earnings

   $ 17,392      $ 13,067   
  

 

 

   

 

 

 

Net earnings per share:

    

Basic

   $ 0.39      $ 0.28   
  

 

 

   

 

 

 

Diluted

   $ 0.39      $ 0.28   
  

 

 

   

 

 

 

Shares used in per share calculations:

    

Basic

     44,150        46,508   
  

 

 

   

 

 

 

Diluted

     44,754        47,182   
  

 

 

   

 

 

 

 

- MORE -
Insight Enterprises, Inc.   6820 South Harl Avenue   Tempe, Arizona 85283   480-902-1001   FAX 480-760-8958


Insight Q1 2012 Results, Page 7    May 2, 2012

 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

(UNAUDITED)

 

     March 31,
2012
     December 31,
2011
 

ASSETS

     

Current assets:

     

Cash and cash equivalents

   $ 132,609       $ 128,336   

Accounts receivable, net

     1,092,851         1,208,276   

Inventories

     117,021         114,763   

Inventories not available for sale

     46,203         43,816   

Deferred income taxes

     17,052         17,344   

Other current assets

     25,375         23,144   
  

 

 

    

 

 

 

Total current assets

     1,431,111         1,535,679   

Property and equipment, net

     142,923         140,705   

Goodwill

     26,257         26,257   

Intangible assets, net

     57,271         59,021   

Deferred income taxes

     68,799         70,771   

Other assets

     24,343         25,178   
  

 

 

    

 

 

 
   $ 1,750,704       $ 1,857,611   
  

 

 

    

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Current liabilities:

     

Accounts payable

   $ 753,269       $ 882,384   

Accrued expenses and other current liabilities

     142,277         178,749   

Current portion of long-term debt

     1,021         1,017   

Deferred revenue

     56,961         47,012   
  

 

 

    

 

 

 

Total current liabilities

     953,528         1,109,162   

Long-term debt

     138,845         115,602   

Deferred income taxes

     1,091         1,186   

Other liabilities

     35,172         34,829   
  

 

 

    

 

 

 
     1,128,636         1,260,779   
  

 

 

    

 

 

 

Stockholders’ equity:

     

Preferred stock

     —           —     

Common stock

     444         439   

Additional paid-in capital

     361,973         360,370   

Retained earnings

     240,517         223,125   

Accumulated other comprehensive income – foreign currency translation adjustments

     19,134         12,898   
  

 

 

    

 

 

 

Total stockholders’ equity

     622,068         596,832   
  

 

 

    

 

 

 
   $ 1,750,704       $ 1,857,611   
  

 

 

    

 

 

 

 

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Insight Enterprises, Inc.   6820 South Harl Avenue   Tempe, Arizona 85283   480-902-1001   FAX 480-760-8958


Insight Q1 2012 Results, Page 8    May 2, 2012

 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

(UNAUDITED)

 

     Three Months Ended
March 31,
 
     2012     2011  

Cash flows from operating activities:

    

Net earnings

   $ 17,392      $ 13,067   

Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:

    
    

Depreciation and amortization

     10,182        9,618   

Provision for losses on accounts receivable

     717        973   

Write-downs of inventories

     857        2,274   

Write-off of computer software development costs

     —          1,390   

Non-cash stock-based compensation

     2,141        1,895   

Gain on bargain purchase

     (2,022     —     

Excess tax benefit from employee gains on stock-based compensation

     (1,893     (1,566

Deferred income taxes

     2,762        1,822   

Changes in assets and liabilities:

    

Decrease in accounts receivable

     138,608        144,054   

Increase in inventories

     (1,436     (29,607

(Increase) decrease in other current assets

     (1,637     17,995   

Decrease (increase) in other assets

     925        (2,239

Decrease in accounts payable

     (157,051     (21,901

Increase (decrease) in deferred revenue

     8,644        (20,501

Decrease in accrued expenses and other liabilities

     (38,629     (33,648
  

 

 

   

 

 

 

Net cash (used in) provided by operating activities

     (20,440     83,626   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Acquisition, net of cash acquired

     (3,831     —     

Purchases of property and equipment

     (7,823     (5,044
  

 

 

   

 

 

 

Net cash used in investing activities

     (11,654     (5,044
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Borrowings on senior revolving credit facility

     418,000        283,000   

Repayments on senior revolving credit facility

     (394,500     (303,000

Borrowings on accounts receivable securitization financing facility

     50,000        —     

Repayments on accounts receivable securitization financing facility

     (50,000     —     

Payments on capital lease obligation

     (253     (248

Net borrowings (repayments) under inventory financing facility

     9,316        (46,906

Proceeds from sales of common stock under employee stock plans

     889        16   

Excess tax benefit from employee gains on stock-based compensation

     1,893        1,566   

Payment of payroll taxes on stock-based compensation through shares withheld

     (3,000     (2,448
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     32,345        (68,020
  

 

 

   

 

 

 

Foreign currency exchange effect on cash flows

     4,022        6,262   
  

 

 

   

 

 

 

Increase in cash and cash equivalents

     4,273        16,824   

Cash and cash equivalents at beginning of period

     128,336        123,763   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 132,609      $ 140,587   
  

 

 

   

 

 

 

 

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Insight Enterprises, Inc.   6820 South Harl Avenue   Tempe, Arizona 85283   480-902-1001   FAX 480-760-8958