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Insight Enterprises, Inc. Reports Second Quarter 2012 Results

FORWARD-LOOKING INFORMATION

Certain statements in this release and the related conference call and webcast 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 (“IT”) 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.

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
           

Three Months Ended June 30,

Six Months Ended June 30,
2012   2011 2012   2011
Net sales $ 1,529,175 $ 1,468,960 $ 2,773,357 $ 2,688,856
Costs of goods sold   1,327,889     1,264,781     2,401,699     2,322,197  
Gross profit 201,286 204,179 371,658 366,659
Operating expenses:
Selling and administrative expenses 143,601 146,386 286,995 285,487
Severance and restructuring expenses   2,377     3,405     3,751     3,929  
Earnings from operations 55,308 54,388 80,912 77,243
Non-operating (income) expense:
Interest income (288 ) (400 ) (639 ) (758 )
Interest expense 1,490 1,644 3,048 3,456
Gain on bargain purchase - - (2,022 ) -
Net foreign currency exchange gain (470 ) (686 ) (1,298 ) (1,164 )
Other expense, net   389     383     633     789  
Earnings before income taxes 54,187 53,447 81,190 74,920
Income tax expense   18,937     18,099     28,548     26,505  
Net earnings $ 35,250   $ 35,348   $ 52,642   $ 48,415  
 
 
Net earnings per share:
Basic $ 0.79   $ 0.76   $ 1.19   $ 1.04  
Diluted $ 0.79   $ 0.75   $ 1.18   $ 1.03  
 
 
Shares used in per share calculations:
Basic   44,420     46,609     44,285     46,559  
Diluted   44,708     47,052     44,731     47,117  
 
 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) (UNAUDITED)
           

June 30, 2012

December 31, 2011
ASSETS
Current assets:
Cash and cash equivalents $ 129,013 $ 128,336
Accounts receivable, net 1,354,952 1,208,276
Inventories 119,701 114,763
Inventories not available for sale 38,373 43,816
Deferred income taxes 17,032 17,344
Other current assets   28,538   23,144
Total current assets 1,687,609 1,535,679
 
Property and equipment, net 143,070 140,705
Goodwill 26,257 26,257
Intangible assets, net 53,297 59,021
Deferred income taxes 67,020 70,771
Other assets   25,103   25,178
$ 2,002,356 $ 1,857,611
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 978,787 $ 882,384
Accrued expenses and other current liabilities 174,495 178,749
Current portion of long-term debt 1,026 1,017
Deferred revenue   40,232   47,012
Total current liabilities 1,194,540 1,109,162
 
Long-term debt 120,086 115,602
Deferred income taxes 853 1,186
Other liabilities   34,217   34,829
  1,349,696   1,260,779
Stockholders’ equity:
Preferred stock - -
Common stock 445 439
Additional paid-in capital 363,979 360,370
Retained earnings 275,767 223,125

Accumulated other comprehensive income – foreign currency translation adjustments
 

12,469
 

12,898
Total stockholders’ equity   652,660   596,832
$ 2,002,356 $ 1,857,611
 
 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
       
Six Months Ended June 30,
2012     2011
Cash flows from operating activities:
Net earnings $ 52,642 $ 48,415
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization 20,497 19,125
Provision for losses on accounts receivable 2,159 2,254
Write-downs of inventories 2,035 4,432
Write-off of computer software development costs 34 1,390
Non-cash stock-based compensation 4,449 3,823
Gain on bargain purchase (2,022 ) -
Excess tax benefit from employee gains on stock-based compensation (1,939 ) (1,541 )
Deferred income taxes 4,334 3,768

Changes in assets and liabilities:
Increase in accounts receivable (142,125 ) (93,498 )
Decrease (increase) in inventories 1,916 (4,002 )
(Increase) decrease in other current assets (5,100 ) 17,691
Decrease (increase) in other assets 2,529 (1,832 )
Increase in accounts payable 84,383 18,556
Decrease in deferred revenue (8,333 ) (14,779 )
Decrease in accrued expenses and other liabilities   (4,293 )   (7,220 )
Net cash provided by (used in) operating activities   11,166     (3,418 )
Cash flows from investing activities:
Acquisition, net of cash acquired (3,831 ) -
Purchases of property and equipment   (15,943 )   (10,395 )
Net cash used in investing activities   (19,774 )   (10,395 )
Cash flows from financing activities:
Borrowings on senior revolving credit facility 520,603 661,000
Repayments on senior revolving credit facility (635,603 ) (610,000 )
Borrowings on accounts receivable securitization financing facility 355,000 -
Repayments on accounts receivable securitization financing facility (235,000 ) -
Payments on capital lease obligation (507 ) (496 )
Net borrowings (repayments) under inventory financing facility 6,465 (37,975 )
Payment of deferred financing fees (2,554 ) -
Proceeds from sales of common stock under employee stock plans 889 23
Excess tax benefit from employee gains on stock-based compensation 1,939 1,541
Payment of payroll taxes on stock-based compensation through shares withheld

 

(3,027

 

)

(2,522

)
Repurchases of common stock   -     (14,149 )
Net cash provided by (used in) financing activities   8,205     (2,578 )
Foreign currency exchange effect on cash flows   1,080     7,831  
Increase (decrease) in cash and cash equivalents 677 (8,560 )
Cash and cash equivalents at beginning of period   128,336     123,763  
Cash and cash equivalents at end of period $ 129,013   $ 115,203  

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