EX-99.1 2 p71792exv99w1.htm EXHIBIT 99.1 exv99w1
 

(INSIGHT LOGO)
FOR IMMEDIATE RELEASE   Nasdaq: NSIT
INSIGHT ENTERPRISES, INC. REPORTS FOURTH QUARTER RESULTS
Net Sales — $833 Million; GAAP Diluted EPS — $0.23; Non-GAAP Diluted EPS — $0.35
TEMPE, Ariz. — January 26, 2006 — Insight Enterprises, Inc. (Nasdaq: NSIT) (the “Company”) today reported results of operations for the three months and year ended December 31, 2005.
Fourth Quarter Highlights:
  •   Quarterly net sales growth of 3.4% from $805.7 million in Q4 2004 to $832.9 million in Q4 2005.
 
  •   Non-GAAP* net earnings growth of 9% from $15.4 million in Q4 2004 to $16.8 million in Q4 2005. (GAAP net earnings decline of 64%.)
 
  •   13% year over year growth in non-GAAP* diluted EPS from $0.31 in Q4 2004 to $0.35 in Q4 2005. (GAAP diluted EPS decline from $0.62 in Q4 2004 to $0.23 in Q4 2005.)
 
  •   Quarterly non-GAAP* operating margin of 3.3%. (GAAP operating margin of 2.4%.)
 
  •   Quarterly net sales and non-GAAP* earnings from operations growth for Insight North America of 3.8% and 19%, respectively, over prior year.
 
  •   Quarterly non-GAAP* earnings from operations growth for Insight UK of 14% over prior year.
“I am pleased to announce that Insight Enterprises, Inc. had another solid quarter, obtaining year over year growth in net sales, non-GAAP net earnings, and non-GAAP diluted earnings per share while reaching our highest non-GAAP operating margin since Q1 2002,” said Rich Fennessy, chief executive officer.
Financial Summary Table
(in thousands, except per share data)
(unaudited)
                                                 
    Three Months Ended December 31,     Year Ended December 31,  
    2005     2004     % change     2005     2004     % change  
Insight Enterprises, Inc.
                                                
Net sales
   $ 832,851     $ 805,684       3.4 %   $ 3,261,150     $ 3,082,725       5.8 %
Net earnings — GAAP
   $ 11,116     $ 30,991       (64 %)   $ 54,695     $ 80,528       (32 %)
Net earnings — non-GAAP*
   $ 16,841     $ 15,446       9 %   $ 63,490     $ 57,652       10 %
Diluted earnings per share — GAAP
   $ 0.23     $ 0.62       (63 %)   $ 1.12     $ 1.64       (32 %)
Diluted earnings per share — non-GAAP*
   $ 0.35     $ 0.31       13 %   $ 1.29     $ 1.17       10 %
Insight North America
                                                
Net sales
   $ 702,437     $ 676,542       3.8 %   $ 2,713,468     $ 2,557,402       6.1 %
Earnings from operations — GAAP
   $ 21,893     $ 17,211       27 %   $ 75,309     $ 61,673       22 %
Earnings from operations — non-GAAP*
   $ 21,893     $ 18,454       19 %   $ 78,959     $ 64,891       22 %
Insight UK
                                                
Net sales
   $ 109,637     $ 110,327       (0.6 %)   $ 470,239     $ 451,202       4.2 %
(Loss) earnings from operations — GAAP
   $ (4,650 )   $ 207       (2,346 %)   $ 4,996     $ 11,380       (56 %)
Earnings from operations — non-GAAP*
   $ 2,870     $ 2,525       14 %   $ 12,644     $ 11,387       11 %
Direct Alliance Corporation
                                                
Net sales
   $ 20,777     $ 18,815       10.4 %   $ 77,443     $ 74,121       4.5 %
Earnings from operations — GAAP
   $ 3,087     $ 3,132       (1 %)   $ 10,053     $ 12,818       (22 %)
Earnings from operations — non-GAAP*
   $ 3,087     $ 3,197       (3 %)   $ 11,058     $ 12,966       (15 %)
 
*   A tabular reconciliation of financial measures prepared in accordance with United States generally accepted accounting principles (“GAAP”) to non-GAAP financial measures is included at the end of this press release.
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Insight Enterprises, Inc.      1305 West Auto Drive     Tempe, Arizona 85284     480-902-1001     FAX 480-760-8958

 

 

Use of Non-GAAP Financial Measures: The non-GAAP financial measures in the 2005 and/or 2004 periods exclude severance and restructuring expenses, cumulative effect of change in accounting principle, income resulting from reductions in liabilities assumed in a previous acquisition, gain and bonus expenses associated with a discontinued operation, the tax benefit associated with the reduction in the deferred tax valuation allowance, expenses related to the hiring of our chief executive officer, the tax effects of these items and other tax adjustments. We exclude these items when internally evaluating selling and administrative expenses, earnings from operations, tax expense, net earnings and diluted earnings per share for the Company and when evaluating selling and administrative expenses and earnings from operations for the individual operating segments. These non-GAAP measures are used to evaluate financial performance against budgeted amounts, to calculate incentive compensation, to assist in forecasting future performance and to compare our results to competitors’ financial results. We believe that these non-GAAP financial measures are useful to investors because they allow for greater transparency, facilitate comparisons to prior periods and competitors and assist in forecasting performance for future periods because they exclude items we believe to be outside of normal operating results. These non-GAAP financial measures are not prepared in accordance with GAAP and may be different from non-GAAP financial measures presented by other companies. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.
Our effective tax rate for the three months ended December 31, 2005 was 41.5% compared to 14.8% for the three months ended December 31, 2004. The increase in the effective tax rate was due primarily to a $5.5 million tax benefit recorded in the three months ended December 31, 2004 as a result of a decrease in the deferred tax asset valuation allowance for our United Kingdom operations and to an increase in the percentage of taxable income in the United States, which is taxed at higher rates than in the United Kingdom. The non-GAAP effective tax rate for the three months ended December 31, 2005 was 39.0% compared to 37.9% for the three months ended December 31, 2004. The increase in the non-GAAP effective tax rate is due primarily to an increase in the percentage of taxable income in the United States, which is taxed at higher rates than in the United Kingdom and Canada.
Working capital as of December 31, 2005 was $389.5 million compared to $371.3 million as of December 31, 2004. Annualized inventory turns, excluding inventories not available for sale, were 28 times for the fourth quarter of 2005 compared to 31 times for the fourth quarter of 2004. The increase in inventories is due primarily to increases in opportunistic purchases and a decision to carry additional inventory for our integration labs and upcoming projects with large enterprise and public sector clients. The $35.5 million of inventories not available for sale at December 31, 2005 represents inventories segregated pursuant to binding client contracts, which will be recorded as net sales when the criteria for sales recognition are met. Client payments in advance of shipment of $24.7 million at December 31, 2005 primarily represent payments received from clients pursuant to these contracts. Days’ sales outstanding in ending accounts receivable (DSOs) were 52 for the fourth quarter of 2005 compared to 50 for the fourth quarter of 2004. This increase is due primarily to an increase in net sales with terms longer than net 30, primarily related to our large enterprise and public sector clients. Cash flows from operations for the year ended December 31, 2005 and 2004 were $12.7 million and $13.2 million, respectively. Cash flows from operations for the year ended December 31, 2005 resulted primarily from net earnings before depreciation, offset by increases in accounts receivable and inventories, explained above. Additionally, we decreased the outstanding balance on our inventories financing facility. Cash flows from operations for the year ended December 31, 2004 resulted primarily from net earnings before depreciation and the gain on the sale of our investment in a discontinued operation, offset by an increase in accounts receivable and inventories due to increased sales compared to the prior year. We had $66.3 million outstanding under our line of credit and accounts receivable securitization facility at December 31, 2005, compared to $25.0 million outstanding at December 31, 2004. At December 31, 2005, we had $35.1 million in cash, although a large portion of our cash balance remains in the United Kingdom.
Severance and Restructuring Expenses
At the end of December 2005, Insight UK moved to a new facility in London. Accordingly, Insight UK recorded restructuring costs of $7.5 million representing the remaining lease obligations on the old lease and duplicate rent expense for the new facility during the three months ended December 31, 2005.
Cumulative Effect of Change in Accounting Principle
During the three months ended December 31, 2005, we recorded $979,000, $649,000 net of taxes, for the cumulative effect of a change in accounting principle for the adoption of FASB Interpretation No. 47 “Accounting for Conditional Asset Retirement Obligations.” FIN 47 states that companies must recognize a liability for the fair value of a legal obligation to perform asset-retirement activities that are conditional on a future event if the amount can be reasonably estimated. This interpretation applies to certain provisions in our facility lease agreements in the United States and the United Kingdom. Some of our leases stipulate that any leasehold improvements performed by the tenant with landlord approval become the landlord’s property upon expiration of the lease. However, some landlords further reserve the right to make the determination as to whether the premises must be returned to their original condition, normal wear and tear excepted, at our
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Insight Enterprises, Inc.      1305 West Auto Drive     Tempe, Arizona 85284     480-902-1001     FAX 480-760-8958

 

 

expense. Because of these provisions, FIN 47 now requires us to record a liability for the estimated fair value of this legal obligation to return the premises to the original condition with the offset recorded as an increase to the cost of the leasehold improvements. The cumulative effect of this change in accounting principle of $979,000 represents the accumulated amortization of the increase in leasehold improvements and the accretion of the present value of the liability since the lease inception dates. The effect on future periods is estimated to be an increase of approximately $170,000 per year in amortization expense and $100,000 — $140,000 per year in interest expense. These amounts, as they relate to provisions in our United Kingdom leases, will fluctuate with changes in the exchange rates.
OPERATING SEGMENTS
We are a leading provider of information technology (“IT”) products and services to businesses in the United States, Canada and the United Kingdom. Our offerings include brand name computing products, IT services and outsourcing of business processes. During the three months ended December 31, 2005, we were organized in the following three operating segments:
  •   Single-source provider of IT products and services — North America (“Insight North America”);
  •   Single-source provider of IT products and services — United Kingdom (“Insight UK”); and
  •   Business process outsourcing provider (“Direct Alliance”).
Insight North America
Insight North America’s net sales in the fourth quarter of 2005 increased 3.8% to $702.4 million, compared to net sales of $676.5 million in the fourth quarter of 2004. “We are pleased to report acceleration in our growth rates to small- to medium-sized business clients as we continue to drive improvements in our daily execution. However, as we looked to improve profitability in the fourth quarter, the growth rates in our large enterprise business were clearly affected by a very competitive pricing environment,” said Fennessy.
Insight North America’s gross profit as a percentage of net sales was 11.2% in the fourth quarter of 2005, compared to 11.1% in the fourth quarter of 2004. “The increase from Q4 2004 was due primarily to increases in supplier reimbursements as a percentage of net sales, increases in freight margin and increases in referral fees from Microsoft enterprise software agreement renewals, offset partially by decreases in product margin and increases in the write-down of inventories,” said Stanley Laybourne, chief financial officer.
Insight North America’s selling and administrative expenses were 8.1% (GAAP and non-GAAP) of net sales for the three months ended December 31, 2005, compared to 8.4% (non-GAAP) for the three months ended December 31, 2004. “We have benefited from increases in net sales and increases in efficiencies due to operational improvements and restructuring activities. Additionally, we had a very concerted effort across all departments to control operating expenses in Q4 2005 which resulted in decreases in expenses in the majority of our departments,” Laybourne said. “We are committed to managing our expense structure, as necessary, to establish a cost structure that is in line with our profitability goals.”
Insight North America’s earnings from operations as a percentage of net sales in the fourth quarter of 2005 were 3.1% (GAAP and non-GAAP) compared to 2.7% (non-GAAP) in the fourth quarter of 2004.
Insight UK
Insight UK’s net sales in the fourth quarter of 2005 decreased slightly to $109.6 million, compared to net sales of $110.3 million in the fourth quarter of 2004. In British pound sterling, net sales increased 5.9% from the fourth quarter of 2004. “Insight UK continues to post sales growth rates in British pound sterling which we believe to be faster than the market is growing,” said Fennessy.
Insight UK’s gross profit as a percentage of net sales was 13.8% in the fourth quarter of 2005 compared to 13.2% in the fourth quarter a year ago. “The increase in Insight UK’s gross margin over the prior year was due primarily to the decrease in write-downs of inventories. These increases were offset partially by decreases in product margin due to an aggressive pricing environment as well as some product mix shift to lower margin products and a decrease in services margin as a percentage of net sales,” said Laybourne.
For the fourth quarter of 2005, Insight UK’s selling and administrative expenses were 11.2% (GAAP and non-GAAP) of net sales compared with 10.9% (non-GAAP) in the same quarter of 2004 due primarily to investments in marketing, sales support and sales compensation plans for 2005.
Insight UK’s earnings from operations as a percentage of net sales in the fourth quarter of 2005 were 2.6% (non-GAAP) compared to 2.3% (non-GAAP) in the fourth quarter of 2004.
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Insight Enterprises, Inc.      1305 West Auto Drive     Tempe, Arizona 85284     480-902-1001     FAX 480-760-8958

 

 

Direct Alliance
Direct Alliance posted overall net sales of $20.8 million in the quarter ended December 31, 2005, up 10.4% from $18.8 million in the fourth quarter of 2004. For the three months ended December 31, 2005, Direct Alliance’s largest client accounted for approximately 36% of Direct Alliance’s net sales, and the top three clients represented 76% of net sales. For the three months ended December 31, 2004, Direct Alliance’s largest client accounted for approximately 61% of Direct Alliance’s net sales, and the top three clients represented 87% of net sales. The decline in concentration with Direct Alliance’s largest client and top three clients reflects the fact that the historical contract with Direct Alliance’s largest client, IBM, was replaced with separate contracts with IBM and Lenovo starting in May 2005.
Direct Alliance’s gross profit decreased 3% to $4.6 million for the fourth quarter of 2005, compared to $4.8 million for the fourth quarter of 2004. “The decrease in gross profit was due primarily to renegotiated fee structures as part of multi-year contract renewals with some of Direct Alliance’s largest clients. These decreases were offset partially by increases in gross profit contributed by other clients,” said Laybourne.
Selling and administrative expenses at Direct Alliance decreased 3% to $1.5 million (GAAP and non-GAAP) for the fourth quarter of 2005, compared to $1.6 million (non-GAAP) for the fourth quarter of 2004. Selling and administrative expenses as a percentage of net sales were 7.3% (GAAP and non-GAAP) in the fourth quarter of 2005, compared to 8.3% (non-GAAP) in the fourth quarter of 2004. The decrease is related primarily to cost saving initiatives across various departments.
Direct Alliance posted earnings from operations of $3.1 million (GAAP and non-GAAP) for the fourth quarter of 2005, a 3% decrease, compared to $3.2 million (non-GAAP) for the fourth quarter of 2004.
CONFERENCE CALL AND WEBCAST
We will host a conference call and live webcast today at 5:00 p.m. ET to discuss the quarterly results of operations. A live webcast of the conference call (in listen-only mode) will be available on our corporate website at www.insight.com and a replay of the webcast will be available on our corporate website for a limited time.
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Insight Enterprises, Inc.      1305 West Auto Drive     Tempe, Arizona 85284     480-902-1001     FAX 480-760-8958

 

 

FORWARD-LOOKING INFORMATION
Certain statements in this release 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 or net earnings; projections of capital expenditures and growth; hiring plans; plans for future operations; the availability of financing and our needs or plans relating thereto; plans relating to our products and services; the effect of new accounting principles; benefits and expenses relating to restructuring activities and employee terminations; the effect of guaranty and indemnification obligations; the actual or expected outcome of legal proceedings against the Company; statements of belief; and statements of assumptions underlying any of the foregoing. Forward-looking statements 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 statement. 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:
  •   changes in the economic environment and/or the information technology industry;
 
  •   our reliance on suppliers for product availability, marketing funds, purchasing incentives and competitive products to sell;
 
  •   actions of our competitors, including manufacturers of products we sell;
 
  •   disruptions in our information technology and voice and data networks;
 
  •   our failure to comply with the terms and conditions of our public sector contracts;
 
  •   our reliance on a limited number of outsourcing clients;
 
  •   the risks associated with international operations;
 
  •   the decreased effectiveness of equity compensation resulting from changes in accounting for equity compensation;
 
  •   our integration and operation of future acquired businesses;
 
  •   our dependence on key personnel;
 
  •   rapid changes in product standards;
 
  •   our ability to renew or replace short-term financing facilities;
 
  •   recently enacted and proposed changes in securities laws and regulations;
 
  •   intellectual property infringement claims; and
 
  •   risks that are otherwise described from time to time in our Securities and Exchange Commission reports, including but not limited to the items discussed in “Factors that Could Affect Future Results” set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part 1, Item 2 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, as filed with the Securities and Exchange Commission.
We assume no obligation to update, and do not intend to update, any forward-looking statements.
         
Contacts:
  Stanley Laybourne   Karen McGinnis
 
  Executive Vice President,   Senior Vice President-
 
  Chief Financial Officer,   Finance
 
  Secretary and Treasurer   Tel. 480-333-3074
 
  Tel. 480-350-1142   Email kmcginni@insight.com
 
  Email slaybour@insight.com    
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Insight Enterprises, Inc.      1305 West Auto Drive     Tempe, Arizona 85284     480-902-1001     FAX 480-760-8958

 

 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(In thousands, except per share data)
                                 
    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2005     2004     2005     2004  
    (unaudited)     (unaudited)     (unaudited)          
Net sales
   $ 832,851     $ 805,684     $ 3,261,150     $ 3,082,725  
Costs of goods sold
     734,352       710,885       2,869,239       2,712,294  
 
                        
Gross profit
     98,499       94,799       391,911       370,431  
Operating expenses:
                                
Selling and administrative expenses
     70,649       74,249       289,250       285,742  
Severance and restructuring expenses
     7,520       —       12,967       2,435  
Reductions in liabilities assumed in a previous acquisition
     —       —       (664 )     (3,617 )
 
                        
Earnings from operations
     20,330       20,550       90,358       85,871  
Non-operating (income) expense:
                                
Interest income
     (834 )     (662 )     (3,394 )     (1,849 )
Interest expense
     888       556       1,914       2,011  
Other expense, net
     174       422       853       893  
 
                        
Earnings from continuing operations before income taxes
     20,102       20,234       90,985       84,816  
Income tax expense
     8,337       2,996       35,641       24,729  
 
                        
Net earnings from continuing operations
     11,765       17,238       55,344       60,087  
Earnings from discontinued operation, net of taxes of $0, $3,950, $0 and $6,753, respectively
     —       13,753       —       20,441  
 
                        
Net earnings before cumulative effect of change in accounting principle
     11,765       30,991       55,344       80,528  
Cumulative effect of change in accounting principle, net of taxes of $330 in 2005
     (649 )     —       (649 )     —  
 
                        
Net earnings
   $ 11,116     $ 30,991     $ 54,695     $ 80,528  
 
                        
 
Net earnings per share — Basic:
                                
Net earnings from continuing operations
   $ 0.25     $ 0.35     $ 1.14     $ 1.24  
Net earnings from discontinued operation
     —       0.28       —       0.42  
Cumulative effect of change in accounting principle
     (0.02 )     —       (0.01 )     —  
 
                        
Net earnings per share
   $ 0.23     $ 0.63     $ 1.13     $ 1.66  
 
                        
 
Net earnings per share — Diluted:
                                
Net earnings from continuing operations
   $ 0.24     $ 0.35     $ 1.13     $ 1.22  
Net earnings from discontinued operation
     —       0.27       —       0.42  
Cumulative effect of change in accounting principle
     (0.01 )     —       (0.01 )     —  
 
                        
Net earnings per share
   $ 0.23     $ 0.62     $ 1.12     $ 1.64  
 
                        
 
Shares used in per share calculation:
                                
Basic
     47,628       48,943       48,553       48,389  
 
                        
Diluted
     48,054       49,727       49,042       49,231  
 
                        
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Insight Enterprises, Inc.      1305 West Auto Drive     Tempe, Arizona 85284     480-902-1001     FAX 480-760-8958

 

 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
                 
    December 31,     December 31,  
    2005     2004  
    (unaudited)          
ASSETS
                
Current assets:
                
Cash and cash equivalents
   $ 35,145     $ 38,443  
Accounts receivable, net
     480,458       447,907  
Receivable from underwriter on sale of discontinued operation
     —       28,024  
Inventories, net
     121,223       95,903  
Inventories not available for sale
     35,528       41,791  
Deferred income taxes and other current assets
     29,624       35,455  
 
            
Total current assets
     701,978       687,523  
 
                
Property and equipment, net
     133,017       113,079  
Goodwill
     87,124       86,907  
Other assets
     221       132  
 
            
 
   $ 922,340     $ 887,641  
 
            
 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
Current liabilities:
                
Accounts payable
   $ 183,014     $ 198,322  
Inventories financing facility
     4,281       17,554  
Accrued expenses and other current liabilities
     55,413       59,110  
Client payments in advance of shipment
     24,747       16,270  
Short-term financing facility
     45,000       25,000  
 
            
Total current liabilities
     312,455       316,256  
 
                
Line of credit
     21,309       —  
Deferred income taxes and other long-term liabilities
     22,552       11,826  
 
                
Stockholders’ equity:
                
Preferred stock
     —       —  
Common stock
     477       494  
Additional paid-in capital
     299,043       301,580  
Retained earnings
     252,318       230,879  
Accumulated other comprehensive income — foreign currency translation adjustment
     14,186       26,606  
 
            
Total stockholders’ equity
     566,024       559,559  
 
            
 
   $ 922,340     $ 887,641  
 
            
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Insight Enterprises, Inc.      1305 West Auto Drive     Tempe, Arizona 85284     480-902-1001     FAX 480-760-8958

 

 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
                 
    Year Ended  
    December 31,  
    2005     2004  
    (unaudited)          
Cash flows from operating activities:
                
Net earnings from continuing operations
   $ 54,695     $ 60,087  
Plus: net earnings from discontinued operation
     —       20,441  
 
            
Net earnings
     54,695       80,528  
Adjustments to reconcile net earnings to net cash provided by operating activities:
                
Depreciation and amortization
     18,204       20,357  
Provision for losses on accounts receivable
     5,292       5,606  
Write-downs of inventories
     7,625       7,070  
Non-cash stock compensation expense
     766       —  
Tax benefit from employee gains on stock based compensation
     2,638       7,093  
Cumulative effect of change in accounting principle, net
     649       —  
Gain on sale of building
     —       (328 )
Gain on sale of discontinued operation
     —       (23,725 )
Equity in loss of investee
     —       400  
Deferred income taxes
     4,537       (2,390 )
Changes in assets and liabilities:
                
Increase in accounts receivable
     (42,928 )     (65,666 )
Increase in receivables from equity method investee
     —       (3,098 )
Increase in inventories
     (27,583 )     (32,842 )
Decrease (increase) in other current assets
     6,879       (668 )
Increase in other assets
     (1,802 )     (496 )
(Decrease) increase in accounts payable
     (9,308 )     1,813  
(Decrease) increase in inventories financing facility
     (13,256 )     11,957  
Increase in client payments in advance of shipment
     8,555       2,486  
(Decrease) increase in accrued expenses and other current liabilities
     (2,237 )     5,150  
 
            
Net cash provided by operating activities
     12,726       13,247  
 
            
Cash flows from investing activities:
                
Cash receipt of underwriter receivable
     26,540       —  
Purchases of property and equipment
     (38,809 )     (20,705 )
Proceeds from sale of discontinued operation, net of direct expenses
     —       18,629  
Proceeds from sale of building
     —       1,378  
Investment in equity method investee
     —       (400 )
 
            
Net cash used in investing activities
     (12,269 )     (1,098 )
 
            
Cash flows from financing activities:
                
Repayments on short-term financing facility
     (55,000 )     (125,000 )
Borrowings on short-term financing facility
     75,000       95,000  
Net borrowings (repayments) on line of credit
     21,309       (10,004 )
Repurchase of common stock
     (49,998 )     —  
(Repayment of) borrowing on long-term liabilities
     (155 )     155  
Proceeds from sales of common stock through employee stock plans
     10,783       27,707  
 
            
Net cash provided by (used in) financing activities
     1,939       (12,142 )
 
            
Foreign currency exchange impact on cash flow
     (5,694 )     (3,461 )
 
            
Decrease in cash and cash equivalents
     (3,298 )     (3,454 )
Cash and cash equivalents at beginning of period
     38,443       41,897  
 
            
Cash and cash equivalents at end of period
   $ 35,145     $ 38,443  
 
            
- MORE -
Insight Enterprises, Inc.      1305 West Auto Drive     Tempe, Arizona 85284     480-902-1001     FAX 480-760-8958

 

 

Insight Enterprises, Inc. and Subsidiaries
Quarterly Operating Segment Data Table
(unaudited)
                         
    Three Months Ended
    December 31,
Insight North America
   2005   2004   %change
Number of account executives
     1,074       1,106       (3 %)
Direct shipments %
     59 %     63 %     (2 %)**
Average order size
   $ 1,827     $ 1,913       (4 %)
Percent of electronic sales
     15 %     14 %     13 %*
Product Mix (as a % of product net sales):
                        
Notebooks and PDA’s
     16 %     16 %     5 %*
Desktops and servers
     16 %     19 %     (11 %)*
Software
     11 %     12 %     (6 %)*
Storage devices
     9 %     7 %     27 %*
Networking and connectivity
     13 %     10 %     30 %*
Printers
     8 %     9 %     (4 %)*
Monitors and video
     7 %     7 %     (4 %)*
Memory and processors
     6 %     6 %     (3 %)*
Supplies and accessories
     7 %     7 %     6 %*
Miscellaneous
     7 %     7 %     5 %*
Insight UK
                        
Number of account executives
     266       298       (11 %)
Direct shipments %
     48 %     47 %     10 %**
Average order size
   $ 1,040     $ 1,151       (10 %)
Percent of electronic sales
     23 %     18 %     30 %*
Product Mix (as a % of product net sales):
                        
Notebooks and PDA’s
     18 %     19 %     (4 %)*
Desktops and servers
     14 %     13 %     12 %*
Software
     15 %     18 %     (14 %)*
Storage devices
     9 %     7 %     29 %*
Networking and connectivity
     8 %     8 %     — %*
Printers
     9 %     9 %     (1 %)*
Monitors and video
     9 %     10 %     (14 %)*
Memory and processors
     4 %     4 %     6 %*
Supplies and accessories
     8 %     7 %     — %*
Miscellaneous
     6 %     5 %     7 %*
Direct Alliance
                        
Net sales mix:
                        
Service fees
     86 %     91 %     4 %*
Pass through product sales
     14 %     9 %     73 %*
 
*   Based on net sales dollars.
 
**   Based on number of direct shipments.
- MORE -
Insight Enterprises, Inc.      1305 West Auto Drive     Tempe, Arizona 85284     480-902-1001     FAX 480-760-8958

 

 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
Operating Segment Statement of Earnings Information
(In thousands)
                                 
    Three Months Ended December 31, 2005  
            (unaudited)        
    Insight                    
    North America     Insight UK     Direct Alliance     Consolidated  
Net sales
   $ 702,437     $ 109,637     $ 20,777     $ 832,851  
Costs of goods sold
     623,649       94,527       16,176       734,352  
 
                        
Gross profit
     78,788       15,110       4,601       98,499  
Operating expenses:
                                
Selling and administrative expenses
     56,895       12,240       1,514       70,649  
Severance and restructuring expenses
     —       7,520       —       7,520  
 
                        
Earnings (loss) from operations
   $ 21,893     $ (4,650 )   $ 3,087       20,330  
 
                          
Non-operating expense, net
                             228  
 
                              
Earnings from continuing operations before income taxes
                             20,102  
Income tax expense
                             8,337  
 
                              
Net earnings before cumulative effect of change in accounting principle
                             11,765  
Cumulative effect of change in accounting principle, net of tax
                             (649 )
 
                              
Net earnings
                           $ 11,116  
 
                              
 
                                
Total assets
   $ 1,114,325     $ 144,583     $ 71,215     $ 922,340 *
 
                        
 
*   Consolidated total assets include net intercompany eliminations and corporate assets of $407,783.
                                 
    Year Ended December 31, 2005  
            (unaudited)        
    Insight                    
    North America     Insight UK     Direct Alliance     Consolidated  
Net sales
   $ 2,713,468     $ 470,239     $ 77,443     $ 3,261,150  
Costs of goods sold
     2,402,343       406,824       60,072       2,869,239  
 
                        
Gross profit
     311,125       63,415       17,371       391,911  
Operating expenses:
                                
Selling and administrative expenses
     232,166       50,771       6,313       289,250  
Severance and restructuring expenses
     3,650       8,312       1,005       12,967  
Reductions in liabilities assumed in a previous acquisition
     —       (664 )     —       (664 )
 
                        
Earnings from operations
   $ 75,309     $ 4,996     $ 10,053       90,358  
 
                          
Non-operating income, net
                             (627 )
 
                              
Earnings from continuing operations before income taxes
                             90,985  
Income tax expense
                             35,641  
 
                              
Net earnings before cumulative effect of change in accounting principle
                             55,344  
Cumulative effect of change in accounting principle, net of tax
                             (649 )
 
                              
Net earnings
                           $ 54,695  
 
                              
 
                                
Total assets
   $ 1,114,325     $ 144,583     $ 71,215     $ 922,340 *
 
                        
 
*   Consolidated total assets include net intercompany eliminations and corporate assets of $407,783.
- MORE -
Insight Enterprises, Inc.      1305 West Auto Drive     Tempe, Arizona 85284     480-902-1001     FAX 480-760-8958

 

 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
Operating Segment Statement of Earnings Information
(In thousands)
                                 
    Three Months Ended December 31, 2004  
            (unaudited)        
    Insight                    
    North America     Insight UK     Direct Alliance     Consolidated  
Net sales
   $ 676,542     $ 110,327     $ 18,815     $ 805,684  
Costs of goods sold
     601,110       95,723       14,052       710,885  
 
                        
Gross profit
     75,432       14,604       4,763       94,799  
Operating expenses:
                                
Selling and administrative expenses
     58,221       14,397       1,631       74,249  
 
                        
Earnings from operations
   $ 17,211     $ 207     $ 3,132       20,550  
 
                          
Non-operating expense, net
                             316  
 
                              
Earnings from continuing operations before income taxes
                             20,234  
Income tax expense
                             2,996  
 
                              
Net earnings from continuing operations
                             17,238  
Net earnings from discontinued operation
                             13,753  
 
                              
Net earnings
                           $ 30,991  
 
                              
 
                                
Total assets
   $ 895,682     $ 148,308     $ 68,003     $ 887,641 *
 
                        
 
*   Consolidated total assets include net intercompany eliminations and corporate assets of $224,352.
                                 
    Year Ended December 31, 2004  
    Insight                    
    North America     Insight UK     Direct Alliance     Consolidated  
Net sales
   $ 2,557,402     $ 451,202     $ 74,121     $ 3,082,725  
Costs of goods sold
     2,267,798       389,608       54,888       2,712,294  
 
                        
Gross profit
     289,604       61,594       19,233       370,431  
Operating expenses:
                                
Selling and administrative expenses
     225,956       53,454       6,332       285,742  
Severance and restructuring expenses
     1,975       377       83       2,435  
Reductions in liabilities assumed in a previous acquisition
     —       (3,617 )     —       (3,617 )
 
                        
Earnings from operations
   $ 61,673     $ 11,380     $ 12,818       85,871  
 
                          
Non-operating expense, net
                             1,055  
 
                              
Earnings from continuing operations before income taxes
                             84,816  
Income tax expense
                             24,729  
 
                              
Net earnings from continuing operations
                             60,087  
Net earnings from discontinued operation
                             20,441  
 
                              
Net earnings
                           $ 80,528  
 
                              
 
                                
Total assets
   $ 895,682     $ 148,308     $ 68,003     $ 887,641 *
 
                        
 
*   Consolidated total assets include net intercompany eliminations and corporate assets of $224,352.
- MORE -
Insight Enterprises, Inc.      1305 West Auto Drive     Tempe, Arizona 85284     480-902-1001     FAX 480-760-8958

 

 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
Reconciliation of Consolidated GAAP to Non-GAAP Financial Measures
(In thousands, except per share data and percentages)
(Unaudited)
                                 
    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2005     2004     2005     2004  
Earnings from Operations:
                                
GAAP
   $ 20,330     $ 20,550     $ 90,358     $ 85,871  
Bonus expense related to management incentive plan with top executives at discontinued operation
     —       2,318       —       3,247  
Expenses associated with hiring of a new Chief Executive Officer
     —       1,308       —       1,308  
Severance and restructuring expenses
     7,520       —       12,967       2,435  
Reductions in liabilities assumed in previous acquisition
     —       —       (664 )     (3,617 )
 
                        
Non-GAAP
   $ 27,850     $ 24,176     $ 102,661     $ 89,244  
 
                        
 
                                
Non-GAAP Earnings from Operations as a percentage of sales
     3.3 %     3.0 %     3.1 %     2.9 %
 
                                
Effective Tax Rate:
                                
 
                                
GAAP
     41.5 %     14.8 %     39.2 %     29.2 %
Tax rate effect of adjustments
     (2.5 %)     (2.2 %)     (0.7 %)     (1.1 %)
Tax rate effect of valuation allowance releases
     —       25.3 %     —       9.0 %
 
                        
Non-GAAP
     39.0 %     37.9 %     38.5 %     37.1 %
 
                        
 
                                
Net Earnings:
                                
 
                                
GAAP
   $ 11,116     $ 30,991     $ 54,695     $ 80,528  
Bonus expense related to management incentive plan with top executives at discontinued operation, net of tax
     —       2,318       —       3,247  
Expenses associated with hiring of a new Chief Executive Officer, net of tax
     —       792       —       792  
Severance and restructuring expenses, net of tax
     5,076       —       8,452       1,509  
Reductions in liabilities assumed in previous acquisition, net of tax
     —       —       (306 )     (3,345 )
Gain on sale of discontinued operation, net of tax
    —       (13,121 )     —       (18,288 )
Tax adjustments related to valuation allowance releases
     —       (5,534 )     —       (6,791 )
Cumulative effect of change in accounting principle, net of tax
     649       —       649       —  
 
                        
Non-GAAP
   $ 16,841     $ 15,446     $ 63,490     $ 57,652  
 
                        
- MORE -
Insight Enterprises, Inc.      1305 West Auto Drive     Tempe, Arizona 85284     480-902-1001     FAX 480-760-8958

 

 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
Reconciliation of Consolidated GAAP to Non-GAAP Financial Measures (continued)
(In thousands, except per share data and percentages)
(Unaudited)
                                 
    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2005     2004     2005     2004  
Diluted earnings per share:
                                
 
                                
GAAP
   $ 0.23     $ 0.62     $ 1.12     $ 1.64  
Bonus expense related to management incentive plan with top executives at discontinued operation, net of tax
     —       0.05       —       0.07  
Expenses associated with hiring of a new Chief Executive Officer, net of tax
     —       0.02       —       0.02  
Severance and restructuring expenses, net of tax
     0.11       —       0.16       0.03  
Reductions in liabilities assumed in a previous acquisition, net of tax
     —       —       (0.01 )     (0.07 )
Gain on sale of discontinued Operation, net of tax
    —       (0.27 )     —       (0.38 )
Tax adjustments related to valuation allowance releases
     —       (0.11 )     —       (0.14 )
Cumulative effect of change in accounting principle, net of tax
     0.01       —       0.02       —  
 
                        
 
                                
Non-GAAP
   $ 0.35     $ 0.31     $ 1.29     $ 1.17  
 
                        
- MORE -
Insight Enterprises, Inc.      1305 West Auto Drive     Tempe, Arizona 85284     480-902-1001     FAX 480-760-8958

 

 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
Reconciliation of Operating Segment GAAP to Non-GAAP Financial Measures
(In thousands, except percentages)
(Unaudited)
                                 
    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2005     2004     2005     2004  
Insight North America:
                                
Selling and Administrative expense:
                                
GAAP
   $ 56,895     $ 58,221     $ 232,166     $ 225,956  
Expenses associated with hiring of a new Chief Executive Officer
     —       (1,243 )     —       (1,243 )
 
                        
Non-GAAP
   $ 56,895     $ 56,978     $ 232,166     $ 224,713  
 
                        
 
                                
Non-GAAP Percentage of Sales
     8.1 %     8.4 %     8.6 %     8.8 %
 
                                
Earnings from operations:
                                
GAAP
   $ 21,893     $ 17,211     $ 75,309     $ 61,673  
Severance and restructuring expenses
     —       —       3,650       1,975  
Expenses associated with hiring of a new Chief Executive Officer
     —       1,243       —       1,243  
 
                        
Non-GAAP
   $ 21,893     $ 18,454     $ 78,959     $ 64,891  
 
                        
 
                                
Non-GAAP Operating Margin
     3.1 %     2.7 %     2.9 %     2.5 %
 
                                
Insight UK:
                                
Selling and Administrative expense:
                                
GAAP
   $ 12,240     $ 14,397     $ 50,771     $ 53,454  
Bonus expense related to management incentive plan with top executives at discontinued operation
     —       (2,318 )     —       (3,247 )
 
                        
Non-GAAP
   $ 12,240     $ 12,079     $ 50,771     $ 50,207  
 
                        
 
                                
Non-GAAP Percentage of Sales
     11.2 %     10.9 %     10.8 %     11.1 %
 
                                
(Loss) earnings from operations:
                                
GAAP
   $ (4,650 )   $ 207     $ 4,996     $ 11,380  
Bonus expense related to management incentive plan with top executives at discontinued operation
     —       2,318       —       3,247  
Severance and restructuring expenses
     7,520       —       8,312       377  
Reductions in liabilities assumed in a previous acquisition
     —       —       (664 )     (3,617 )
 
                        
Non-GAAP
   $ 2,870     $ 2,525     $ 12,644     $ 11,387  
 
                        
 
                                
Non-GAAP Operating Margin
     2.6 %     2.3 %     2.7 %     2.5 %
- MORE -
Insight Enterprises, Inc.      1305 West Auto Drive     Tempe, Arizona 85284     480-902-1001     FAX 480-760-8958

 

 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
Reconciliation of Operating Segment GAAP to Non-GAAP Financial Measures (continued)
(In thousands, except percentages)
(Unaudited)
                                 
    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2005     2004     2005     2004  
Direct Alliance:
                                
Selling and Administrative expense:
                                
GAAP
   $ 1,514     $ 1,631     $ 6,313     $ 6,332  
Expenses associated with hiring of a new Chief Executive Officer
     —       (65 )     —       (65 )
 
                        
Non-GAAP
   $ 1,514     $ 1,566     $ 6,313     $ 6,267  
 
                        
 
                                
Non-GAAP Percentage of Sales
     7.3 %     8.3 %     8.2 %     8.5 %
 
                                
Earnings from operations:
                                
GAAP
   $ 3,087     $ 3,132     $ 10,053     $ 12,818  
Severance and restructuring expenses
     —       —       1,005       83  
Expenses associated with hiring of a new Chief Executive Officer
     —       65       —       65  
 
                        
Non-GAAP
   $ 3,087     $ 3,197     $ 11,058     $ 12,966  
 
                        
 
                                
Non-GAAP Operating Margin
     14.9 %     17.0 %     14.3 %     17.5 %
###
Insight Enterprises, Inc.      1305 West Auto Drive     Tempe, Arizona 85284     480-902-1001     FAX 480-760-8958