EX-99.1 2 p72633exv99w1.htm EXHIBIT 99.1 exv99w1
 

EXHIBIT 99.1
(INSIGHT LOGO)
FOR IMMEDIATE RELEASE   Nasdaq: NSIT
INSIGHT ENTERPRISES, INC. REPORTS SECOND QUARTER RESULTS
Net Sales — $837 Million; GAAP Diluted EPS — $0.53; Non-GAAP Diluted EPS — $0.39
TEMPE, Ariz. – July 20, 2006 – Insight Enterprises, Inc. (Nasdaq: NSIT) (the “Company”) today reported results of operations for the three and six months ended June 30, 2006.
Second Quarter Highlights:
  •   Quarterly net sales growth of 6.4% from $786.7 million in Q2 2005 to $837.1 million in Q2 2006.
 
  •   26% year over year growth in non-GAAP* diluted EPS from $0.31 in Q2 2005 to $0.39 in Q2 2006 (104% year over year growth in GAAP diluted EPS from $0.26 in Q2 2005 to $0.53 in Q2 2006.)
 
  •   Quarterly non-GAAP* operating margin of 3.2%, excluding Direct Alliance Corporation (“Direct Alliance”), which is recorded as a discontinued operation (GAAP operating margin of 2.8%.)
 
  •   Insight North America quarterly net sales and non-GAAP* earnings from operations growth of 7.9% and 25%, respectively, over prior year (GAAP earnings from operations grew 38%).
 
  •   Insight UK quarterly net sales declined 2.0% while non-GAAP* earnings from operations grew 5% over prior year (GAAP earnings from operations grew 11%). In British pounds sterling, quarterly net sales were basically flat while non-GAAP* earnings from operations grew 6% over prior year.
 
  •   Sold non-core subsidiary, Direct Alliance, and recorded gain on sale of $15.1 million ($9.1 million, net of taxes).
Financial Summary Table
(in thousands, except per share data)
                                                 
    Three Months Ended   Six Months Ended
    June 30,   June 30,
    2006   2005   % change   2006   2005   % change
Insight Enterprises, Inc.
                                                
Net sales
   $ 837,104     $ 786,743       6.4 %   $ 1,626,007     $ 1,548,034       5.0 %
Net earnings – GAAP
   $ 25,887     $ 12,685       104 %   $ 40,101     $ 28,197       42 %
Net earnings – non-GAAP*
   $ 19,192     $ 15,279       26 %   $ 36,139     $ 30,558       18 %
Diluted earnings per share – GAAP
   $ 0.53     $ 0.26       104 %   $ 0.82     $ 0.57       44 %
Diluted earnings per share – non-GAAP*
   $ 0.39     $ 0.31       26 %   $ 0.74     $ 0.62       19 %
 
                                                
Insight North America
                                                
Net sales
   $ 721,781     $ 669,061       7.9 %   $ 1,390,739     $ 1,311,737       6.0 %
Earnings from operations – GAAP
   $ 20,562     $ 14,904       38 %   $ 37,578     $ 33,399       13 %
Earnings from operations – non-GAAP*
   $ 23,361     $ 18,722       25 %   $ 44,264     $ 37,338       19 %
 
                                                
Insight UK
                                                
Net sales
   $ 115,323     $ 117,682       (2.0 %)   $ 235,268     $ 236,297       (0.4 %)
Earnings from operations – GAAP
   $ 2,916     $ 2,638       11 %   $ 6,464     $ 6,366       2 %
Earnings from operations – non-GAAP*
   $ 3,199     $ 3,052       5 %   $ 7,032     $ 6,116       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

 

 

Insight Q2 2006 Results, Page 2   July 20, 2006
“The second quarter of 2006 has been a very exciting and successful quarter for Insight,” said Rich Fennessy, chief executive officer. “We posted strong financial results, divested a non-core part of our business and are announcing today an acquisition that will solidify our value proposition as a trusted advisor to our clients.”
Use of Non-GAAP Financial Measures: The non-GAAP financial measures in the 2006 and/or 2005 periods exclude the gain on the sale of Direct Alliance, stock-based compensation expense, settlement expense, severance and restructuring expenses, income resulting from reductions in liabilities assumed in a previous acquisition, and the tax effects of these items. We exclude these items when internally evaluating gross profit, selling and administrative expenses, earnings from operations, tax expense, net earnings and diluted earnings per share for the Company and when evaluating gross profit, 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 June 30, 2006 was 35.0% compared to 38.6% for the three months ended June 30, 2005. The non-GAAP effective tax rate for the three months ended June 30, 2006 was 35.0% compared to 38.7% for the three months ended June 30, 2005. The decrease in the effective tax rate was due primarily to internal initiatives implemented during the quarter that reduced certain state income taxes, both historically and prospectively.
Cash flows from operations for the six months ended June 30, 2006 and 2005 were $125.4 million and $67.3 million, respectively. Cash flows from operations for the six months ended June 30, 2006 resulted primarily from net earnings from continuing operations before depreciation, decreases in accounts receivable and inventory and increases in accounts payable. Accounts receivable decreased due to improvements in the aging of accounts receivable. Inventory decreased due primarily to improvements in our supply chain activities and fewer opportunistic purchases during the period. Accounts payable increased due to timing of payments at period end. Cash flows from operations for the six months ended June 30, 2006 resulted primarily from net earnings from continuing operations before depreciation, decreases in accounts receivable and increases in client payments received in advance of shipment. We had no outstanding balances under our line of credit and accounts receivable securitization facility at June 30, 2006. At June 30, 2006, we had $138.3 million in cash, including $46.5 million received from the sale of Direct Alliance.
Stock-Based Compensation Expense
On January 1, 2006, we adopted Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123R”), which requires stock-based compensation to be measured based on the grant-date fair value of the award and recognized over the period during which an employee is required to provide service in exchange for the award. We adopted SFAS No. 123R using the modified prospective transition method. Under this method, the provisions of SFAS No. 123R apply to all awards granted or modified after the adoption date and compensation expense must be recognized for any unvested stock option awards outstanding as of the date of adoption. Prior periods have not been restated. However, we recorded stock-based compensation expense in prior periods related to the amortization of the fair value of restricted stock shares and units over their vesting period. Stock-based compensation expense is classified in the same line item of the consolidated financial statements as other payroll-related expenses for the specific employee.
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Insight Enterprises, Inc.       1305 West Auto Drive       Tempe, Arizona 85284       480-902-1001       FAX 480-760-8958

 

 

Insight Q2 2006 Results, Page 3   July 20, 2006
Stock-based compensation expense for the three and six months ended June 30, 2006 and 2005 was recorded in continuing operations in the financial statements as follows (in thousands):
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2006     2005     2006     2005  
Insight North America
                                
Selling and administrative expenses
   $ 2,799     $ 168     $ 5,686     $ 289  
 
                        
 
                                
Insight UK
                                
Selling and administrative expenses
   $ 283     $ —     $ 568     $ —  
 
                        
 
                                
Consolidated
                                
Selling and administrative expenses
   $ 3,082     $ 168     $ 6,254     $ 289  
 
                        
Stock-based compensation expense disclosed only in the footnotes to the consolidated financial statements for the three and six months ended June 30, 2005 was $3.2 million and $6.6 million, respectively.
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 and IT services. Following the disposition of Direct Alliance on June 30, 2006, we are organized in the following operating segments:
  •   Provider of IT products and services – North America (“Insight North America”); and
 
  •   Provider of IT products and services – United Kingdom (“Insight UK”).
The operations of Direct Alliance are shown in the consolidated financial statements as a discontinued operation.
Insight North America
Insight North America’s net sales for the three months ended June 30, 2006 increased 7.9% to $721.8 million, compared to net sales of $669.1 million for the three months ended June 30, 2005. “We saw growth among sales to all of our client segments,” said Fennessy. “Sales to small- to medium-sized business customers continue to show improvements. As we stated at the end of the last two quarters, several of our large clients had deferred some of their IT projects and we benefited from the deployment of some large projects during this quarter.”
Insight North America’s gross profit as a percentage of net sales was 12.0% for the three months ended June 30, 2006, compared to 11.7% for the three months ended June 30, 2005. “The increase from the second quarter of 2005 was due primarily to decreases in the reserve for vendor receivables, increases in sales of services, increases in product margin, increases in supplier reimbursements and increases in referral fees for Microsoft enterprise software agreement renewals. These increases were offset partially by decreases in freight margins and increases in the write-downs of inventories,” said Stanley Laybourne, chief financial officer.
Insight North America’s selling and administrative expenses were 8.8% (non-GAAP) of net sales for the three months ended June 30, 2006, compared to 8.9% (non-GAAP) for the three months ended June 30, 2005. The non-GAAP selling and administrative expenses excludes stock-based compensation expense of $2.8 million and $168,000 for the three months ended June 30, 2006 and 2005, respectively. Selling and administrative expenses in the second quarter of 2006 also include approximately $720,000 of accelerated depreciation related to portions of our current operating system that will not be utilized after we upgrade to mySAP. “Compared to the second quarter of 2005, we have benefited from increases in net sales, decreases in marketing expenses and increases in efficiencies due to operational improvements and restructuring activities that were implemented at the end of Q2 2005. These savings have been offset by increases in sales incentive plans, increases in bonus expenses due to increased financial performance, accelerated depreciation and other IT expenses related to the mySAP upgrade,” Laybourne said.
Insight North America’s earnings from operations as a percentage of net sales for the three months ended June 30, 2006 were 3.2% (non-GAAP) compared to 2.8% (non-GAAP) for the three months ended June 30, 2005. The non-GAAP earnings from operations for the three months ended June 30, 2006 excludes stock-based compensation expense of $2.8 million. The non-GAAP earnings from operations for the three months ended June 30, 2005 excludes severance and restructuring expenses of $3.7 million and stock-based compensation of $168,000.
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Insight Enterprises, Inc.       1305 West Auto Drive       Tempe, Arizona 85284       480-902-1001       FAX 480-760-8958

 

 

Insight Q2 2006 Results, Page 4   July 20, 2006
Insight UK
Insight UK’s net sales for the three months ended June 30, 2006 decreased by 2.0% to $115.3 million, compared to net sales of $117.7 million for the three months ended June 30, 2005. In British pounds sterling, net sales were basically flat compared to the three months ended June 30, 2005. In British pounds sterling, sales per day actually increased by 2.7%, as Insight UK had only 61 shipping days in the second quarter of 2006 compared to 63 days in the second quarter of 2005. “We continue to be very pleased with the results of our UK operation given the overall challenging UK market,” said Fennessy.
Insight UK’s gross profit as a percentage of net sales was 15.1% for the three months ended June 30, 2006, compared to 13.7% for the three months ended June 30, 2005. “The increase in gross margin from the second quarter of 2005 was due primarily to increases in product margin, increases in referral fees from Microsoft enterprise software agreement renewals and increases in supplier discounts, partially offset by decreases in supplier reimbursements as a percentage of sales,” said Laybourne.
For the three months ended June 30, 2006, Insight UK’s selling and administrative expenses were 12.3% (non-GAAP) of net sales compared with 11.1% (GAAP and non-GAAP) in the same quarter of 2005. “The increase in selling and administrative expenses as a percentage of net sales was due primarily to increases in sales compensation plans and facility costs related to our new London office, offset partially by a property tax rebate received during the quarter,” said Laybourne. The non-GAAP selling and administrative expenses exclude stock-based compensation expense of $283,000 for the three months ended June 30, 2006.
Insight UK’s earnings from operations as a percentage of net sales in the three months ended June 30, 2006 were 2.8% (non-GAAP), compared to 2.6% (non-GAAP) in the three months ended June 30, 2005. The non-GAAP earnings from operations exclude stock-based compensation expense of $283,000 for the three months ended June 30, 2006 and severance and restructuring expenses of $414,000 for the three months ended June 30, 2005.
Discontinued Operation
On June 30, 2006, the Company completed the sale of 100% of the outstanding stock of Direct Alliance to TeleTech Holdings, Inc. (“TeleTech”) for a purchase price of $46.5 million, subject to a working capital adjustment. The purchase price did not include real estate and intercompany receivables, which had an estimated fair value of $49.4 million and were distributed to the Company immediately prior to closing. In addition to payment of the purchase price, TeleTech will be obligated under the agreement to make a one-time bonus payment to the Company if Direct Alliance achieves certain gross profit levels for the year ending December 31, 2006 (“Earn Out”). Additionally, TeleTech will be entitled to a claw back of the purchase price of up to $5.0 million if certain Direct Alliance client contracts are not renewed on terms prescribed in the agreement. Also, the Company paid $2.7 million to the holders of 1,997,500 exercised Direct Alliance stock options, this amount will be further adjusted for the above described working capital adjustment, Earn Out and claw back. Adjustments for the above described working capital adjustment, Earn Out, clawback and payments to holders of exercised Direct Alliance stock options will also adjust the gain recorded on the sale. The operations of Direct Alliance are shown in the consolidated financial statements as a discontinued operation.
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Insight Enterprises, Inc.       1305 West Auto Drive       Tempe, Arizona 85284       480-902-1001       FAX 480-760-8958

 

 

Insight Q2 2006 Results, Page 5   July 20, 2006
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.
FORWARD-LOOKING INFORMATION
Certain statements in this release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. 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:
  •   our integration and operation of acquired businesses;
 
  •   changes in the information technology industry and/or the economic environment;
 
  •   our reliance on suppliers for product availability, marketing funds, purchasing incentives and competitive products to sell;
 
  •   disruptions in our information technology and voice and data networks;
 
  •   actions of our competitors, including manufacturers of products we sell;
 
  •   failure to comply with the terms and conditions of public sector contracts;
 
  •   the risks associated with international operations;
 
  •   our dependence on key personnel;
 
  •   rapid changes in product standards;
 
  •   our ability to renew or replace short-term financing facilities;
 
  •   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 “Risk Factors” in Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 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
 
  Chief Financial Officer,   Senior Vice President-
 
  Secretary and Treasurer   Finance
 
  Tel. 480-350-1142   Tel. 480-333-3074
 
  Email slaybour@insight.com   Email kmcginni@insight.com
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Insight Enterprises, Inc.       1305 West Auto Drive       Tempe, Arizona 85284       480-902-1001       FAX 480-760-8958

 

 

Insight Q2 2006 Results, Page 6   July 20, 2006
INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
(In thousands, except per share data)
(Unaudited)
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2006     2005     2006     2005  
Net sales
   $ 837,104     $ 786,743     $ 1,626,007     $ 1,548,034  
Costs of goods sold
     732,851       692,162       1,422,702       1,362,054  
 
                        
Gross profit
     104,253       94,581       203,305       185,980  
Operating expenses:
                                
Selling and administrative expenses
     80,775       72,975       159,263       142,815  
Severance and restructuring expenses
     —       4,064       —       4,064  
Reductions in liabilities assumed in a previous acquisition
     —       —       —       (664 )
 
                        
Earnings from operations
     23,478       17,542       44,042       39,765  
Non-operating (income) expense:
                                
Interest income
     (340 )     (804 )     (1,262 )     (1,605 )
Interest expense
     195       233       992       526  
Other expense, net
     (518 )     254       (325 )     413  
 
                        
Earnings from continuing operations before income taxes
     24,141       17,859       44,637       40,431  
Income tax expense
     8,450       6,898       15,773       15,633  
 
                        
Net earnings from continuing operations
     15,691       10,961       28,864       24,798  
Earnings from discontinued operation, net of taxes of $660, $1,068, $1,258 and $2,102, respectively
     1,052       1,724       2,093       3,399  
Gain on sale of discontinued operation, net of taxes of $5,978, $0, $5,978 and $0, respectively
     9,144       —       9,144       —  
 
                        
Net earnings from discontinued operation
     10,196       1,724       11,237       3,399  
 
                        
Net earnings
   $ 25,887     $ 12,685     $ 40,101     $ 28,197  
 
                        
 
                                
Net earnings per share - Basic:
                                
Net earnings from continuing operations
   $ 0.33     $ 0.22     $ 0.60     $ 0.50  
Net earnings from discontinued operation
     0.21       0.04       0.23       0.07  
 
                        
Net earnings per share
   $ 0.54     $ 0.26     $ 0.83     $ 0.57  
 
                        
 
                                
Net earnings per share - Diluted:
                                
Net earnings from continuing operations
   $ 0.32     $ 0.22     $ 0.59     $ 0.50  
Net earnings from discontinued operation
     0.21       0.04       0.23       0.07  
 
                        
Net earnings per share
   $ 0.53     $ 0.26     $ 0.82     $ 0.57  
 
                        
 
                                
Shares used in per share calculations:
                                
Basic
     48,277       48,601       48,140       49,087  
 
                        
Diluted
     48,735       49,084       48,710       49,608  
 
                        
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Insight Q2 2006 Results, Page 7   July 20, 2006
INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
                 
    June 30,     December 31,  
    2006     2005  
    (unaudited)          
ASSETS
                
Current assets:
                
Cash and cash equivalents
   $ 138,252     $ 35,145  
Accounts receivable, net
     429,978       480,458  
Inventories
     91,549       121,223  
Inventories not available for sale
     21,800       35,528  
Deferred income taxes and other current assets
     31,289       29,624  
 
            
Total current assets
     712,868       701,978  
 
                
Property and equipment, net
     129,773       133,017  
Goodwill
     87,404       87,124  
Other assets
     32       221  
 
            
 
   $ 930,077     $ 922,340  
 
            
 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
Current liabilities:
                
Accounts payable
   $ 185,718     $ 183,501  
Accrued expenses and other current liabilities
     71,694       54,926  
Client payments in advance of shipment
     23,887       24,747  
Inventories financing facility
     —       4,281  
Short-term financing facility
     —       45,000  
Line of credit
     —       21,309  
 
            
Total current liabilities
     281,299       333,764  
 
                
Deferred income taxes and other long-term liabilities
     16,826       22,552  
 
                
Stockholders’ equity:
                
Preferred stock
     —       —  
Common stock
     483       477  
Additional paid-in capital
     314,301       299,043  
Retained earnings
     292,414       252,318  
Accumulated other comprehensive income – foreign currency translation adjustment
     24,754       14,186  
 
            
Total stockholders’ equity
     631,952       566,024  
 
            
 
   $ 930,077     $ 922,340  
 
            
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Insight Q2 2006 Results, Page 8   July 20, 2006
INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
                 
    Six Months Ended  
    June 30,  
    2006     2005  
Cash flows from operating activities:
                
Net earnings from continuing operations
     28,864       24,798  
Plus: net earnings from discontinued operation
     11,237       3,399  
 
            
Net earnings
     40,101       28,197  
Adjustments to reconcile net earnings to net cash provided by operating activities:
                
Depreciation and amortization
     9,086       7,244  
Provision for losses on accounts receivable
     1,483       3,037  
Write-downs of inventories
     4,748       3,936  
Non-cash stock-based compensation
     6,254       289  
Gain on sale of discontinued operation
     (15,122 )     —  
Tax benefit from employee gains on stock-based compensation
     —       1,495  
Excess tax benefit from employee gains on stock-based compensation
     (2,232 )     —  
Deferred income taxes
     (6,724 )     3,012  
Changes in assets and liabilities:
                
Decrease in accounts receivable
     20,048       22,183  
Decrease in inventories
     39,379       5,104  
(Increase) decrease in other current assets
     (2,120 )     1,620  
Increase in other assets
     (14,625 )     (209 )
Increase (decrease) in accounts payable
     55,459       (15,350 )
Decrease in inventories financing facility
     (4,281 )     (13,055 )
(Decrease) increase in client payments in advance of shipment
     (6,521 )     20,805  
Increase (decrease) in accrued expenses and other current liabilities liabilities
     515       (961 )
 
            
Net cash provided by operating activities
     125,448       67,347  
 
            
Cash flows from investing activities:
               
Proceeds from sale of discontinued operation
     46,500       —  
Purchases of property and equipment
     (17,187 )     (16,438 )
Cash receipt of underwriter receivable, net
     —       27,363  
 
            
Net cash provided by investing activities
     29,313       10,925  
 
            
Cash flows from financing activities:
               
Repayments on short-term financing facility
     (45,000 )     (40,000 )
Borrowings on short-term financing facility
     —       15,000  
Net (repayments) borrowings on line of credit
     (21,309 )     2,491  
Proceeds from sales of common stock under employee stock plans
     7,391       3,782  
Excess tax benefit from employee gains on stock-based compensation
     2,232       —  
Repurchase of common stock
     —       (24,998 )
 
            
Net cash used in financing activities
     (56,686 )     (43,725 )
 
            
Cash flows from discontinued operation:
                
Net cash used in operating activities
     (8,885 )     (1,532 )
Net cash provided by (used in) investing activities
     11,710       (1,864 )
Net cash used in financing activities
     (2,696 )     (84 )
 
            
Net cash provided by (used in) discontinued operation
     129       (3,480 )
Foreign currency exchange effect on cash flow
     4,903       (3,772 )
 
            
Increase in cash and cash equivalents
     103,107       27,295  
 
            
Cash and cash equivalents at beginning of period
     35,145       38,443  
 
            
 
                
Cash and cash equivalents at end of period
   $ 138,252     $ 65,738  
 
            
- MORE -
Insight Enterprises, Inc.       1305 West Auto Drive       Tempe, Arizona 85284       480-902-1001       FAX 480-760-8958

 

 

Insight Q2 2006 Results, Page 9   July 20, 2006
Insight Enterprises, Inc. and Subsidiaries
Quarterly Operating Statistics Table
(unaudited)
                         
    Three Months Ended
    June 30,
    2006   2005   Change
Insight Enterprises, Inc.
                        
Working capital (in thousands)
   $ 431,569     $ 368,456       17 %
Days sales outstanding in ending accounts receivable (“DSOs”)
     46       47     (1 day)
Annualized inventory turns (a)
     32       32       —  
Days costs of goods sold outstanding in ending accounts payable (“DPOs”)
     24       23     1 day
Effective tax rate (GAAP)
     35.0 %     38.6 %     (3.6 %)
Effective tax rate (Non-GAAP)
     35.0 %     38.7 %     (3.7 %)
 
                        
Insight North America
                        
Number of shipping days
     64       64       —  
Number of account executives
     1,069       1,054       1 %
Average account executive tenure (years)
     4.1       3.8     0.3 years
Percentage of account executives with tenure of:
                        
<1 year
     25 %     22 %     3 %
1-2 years
     12 %     17 %     (5 %)
2-3 years
     10 %     9 %     1 %
>3 years
     53 %     52 %     1 %
Net sales per average account executive
   $ 673,617     $ 618,642       9 %
Gross profit per average account executive
   $ 81,036     $ 72,513       12 %
Direct shipments %
     58 %     64 %     (5 %) (b)
Electronic net sales %
     20 %     n/a  (c)     n/a  (c)
Electronic transactions %
     30 %     n/a  (c)     n/a  (c)
Product mix (as a % of net product sales):
                        
Notebooks and PDA’s
     16 %     18 %     (4 %) (d)
Desktops and servers
     15 %     16 %     1 % (d)
Software
     11 %     12 %     2 % (d)
Storage devices
     7 %     8 %     (5 %) (d)
Networking and connectivity
     18 %     13 %     53 % (d)
Printers
     7 %     7 %     6 % (d)
Monitors and video
     6 %     6 %     4 % (d)
Memory and processors
     5 %     5 %     18 % (d)
Supplies and accessories
     7 %     7 %     (1 %) (d)
Miscellaneous
     8 %     8 %     6 % (d)
 
(a)   Excluding inventories not available for sale.
 
(b)   Represents percentage decline in number of direct shipments.
 
(c)   No prior year information is available as we changed our methodology in the second quarter of 2006 for capturing electronic net sales and transactions.
 
(d)   Represents percentage of net sales growth/decline in product category.
- MORE -
Insight Enterprises, Inc.       1305 West Auto Drive       Tempe, Arizona 85284       480-902-1001       FAX 480-760-8958

 

 

Insight Q2 2006 Results, Page 10   July 20, 2006
Insight Enterprises, Inc. and Subsidiaries
Quarterly Operating Statistics Table (continued)
(unaudited)
                         
    Three Months Ended
    June 30,
    2006   2005   Change
Insight UK
                        
Number of shipping days
     61       63     (2 days)
Number of account executives
     276       303       (9 %)
Average account executive tenure (years)
     2.3       2.0     0.3 years
Percentage of account executives with tenure of:
                        
<1 year
     41 %     47 %     (6 %)
1-2 years
     20 %     22 %     (2 %)
2-3 years
     14 %     10 %     4 %
>3 years
     25 %     21 %     4 %
Net sales per average account executive
   $ 425,548     $ 392,925       8 %
Gross profit per average account executive
   $ 64,292     $ 53,947       19 %
Direct shipments %
     48 %     46 %     1 % (a)
Electronic net sales %
     22 %     n/a  (b)     n/a  (b)
Electronic transactions %
     39 %     n/a  (b)     n/a  (b)
Product mix (as a % of net product sales):
                        
Notebooks and PDA’s
     17 %     18 %     (7 %) (c)
Desktops and servers
     14 %     15 %     (9 %) (c)
Software
     16 %     15 %     8 % (c)
Storage devices
     8 %     9 %     (4 %) (c)
Networking and connectivity
     10 %     8 %     15 % (c)
Printers
     8 %     8 %     (7 %) (c)
Monitors and video
     9 %     9 %     (11 %) (c)
Memory and processors
     4 %     4 %     4 % (c)
Supplies and accessories
     8 %     8 %     2 % (c)
Miscellaneous
     6 %     6 %     (4 %) (c)
 
(a)   Represents percentage growth/decline in number of direct shipments.
 
(b)   No prior year information is available as we changed our methodology in the second quarter of 2006 for capturing electronic net sales and transactions.
 
(c)   Represents percentage net sales growth/decline in product category.
- MORE -
Insight Enterprises, Inc.       1305 West Auto Drive       Tempe, Arizona 85284       480-902-1001       FAX 480-760-8958

 

 

Insight Q2 2006 Results, Page 11   July 20, 2006
INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
Operating Segment Statement of Earnings Information
(In thousands)
(unaudited)
                         
    Three Months Ended June 30, 2006  
    Insight              
    North America     Insight UK     Consolidated  
Net sales
   $ 721,781     $ 115,323     $ 837,104  
Costs of goods sold
     634,951       97,900       732,851  
 
                  
Gross profit
     86,830       17,423       104,253  
Operating expenses:
                        
Selling and administrative expenses
     66,268       14,507       80,775  
 
                  
Earnings from operations
   $ 20,562     $ 2,916       23,478  
 
                    
Non-operating income, net
                     (663 )
 
                      
Earnings from continuing operations before income taxes
                     24,141  
Income tax expense
                     8,450  
 
                      
Net earnings from continuing operations
                     15,691  
Net earnings from discontinued operation
                     10,196  
 
                      
Net earnings
                   $ 25,887  
 
                      
 
                        
Total assets
   $ 1,184,765     $ 123,913     $ 930,077 *
 
                  
 
*   Consolidated total assets include net intercompany eliminations and corporate assets of $378,601.
                         
    Six Months Ended June 30, 2006  
    Insight              
    North America     Insight UK     Consolidated  
Net sales
   $ 1,390,739     $ 235,268     $ 1,626,007  
Costs of goods sold
     1,222,455       200,247       1,422,702  
 
                  
Gross profit
     168,284       35,021       203,305  
Operating expenses:
                        
Selling and administrative expenses
     130,706       28,557       159,263  
 
                  
Earnings from operations
   $ 37,578     $ 6,464       44,042  
 
                    
Non-operating income, net
                     (595 )
 
                      
Earnings from continuing operations before income taxes
                     44,637  
Income tax expense
                     15,773  
 
                      
Net earnings from continuing operations
                     28,864  
Net earnings from discontinued operation
                     11,237  
 
                      
Net earnings
                   $ 40,101  
 
                      
 
                        
Total assets
   $ 1,184,765     $ 123,913     $ 930,077 *
 
                  
 
*   Consolidated total assets include net intercompany eliminations and corporate assets of $378,601.
- MORE -
Insight Enterprises, Inc.       1305 West Auto Drive       Tempe, Arizona 85284       480-902-1001       FAX 480-760-8958

 

 

Insight Q2 2006 Results, Page 12   July 20, 2006
INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
Operating Segment Statement of Earnings Information
(In thousands)
(unaudited)
                         
    Three Months Ended June 30, 2005  
    Insight              
    North America     Insight UK     Consolidated  
Net sales
   $ 669,061     $ 117,682     $ 786,743  
Costs of goods sold
     590,638       101,524       692,162  
 
                  
Gross profit
     78,423       16,158       94,581  
Operating expenses:
                        
Selling and administrative expenses
     59,869       13,106       72,975  
Severance and restructuring expenses
     3,650       414       4,064  
 
                  
Earnings from operations
   $ 14,904     $ 2,638       17,542  
 
                    
Non-operating income, net
                     (318 )
 
                      
Earnings from continuing operations before income taxes
                     17,859  
Income tax expense
                     6,898  
 
                      
Net earnings from continuing operations
                     10,961  
Net earnings from discontinued operation
                     1,724  
 
                      
Net earnings
                   $ 12,685  
 
                      
 
                        
Total assets
   $ 919,706     $ 156,784     $ 852,537 *
 
                  
 
*   Consolidated total assets include net intercompany eliminations, assets of a discontinued operation and corporate assets of $223,953.
                         
    Six Months Ended June 30, 2005  
    Insight              
    North America     Insight UK     Consolidated  
Net sales
   $ 1,311,737     $ 236,297     $ 1,548,034  
Costs of goods sold
     1,157,570       204,484       1,362,054  
 
                  
Gross profit
     154,167       31,813       185,980  
Operating expenses:
                        
Selling and administrative expenses
     117,118       25,697       142,815  
Severance and restructuring expenses
     3,650       414       4,064  
Reductions in liabilities assumed in a previous acquisition
     —       (664 )     (664 )
 
                  
Earnings from operations
   $ 33,399     $ 6,366       39,765  
 
                    
Non-operating income, net
                     (666 )
 
                      
Earnings from continuing operations before income taxes
                     40,431  
Income tax expense
                     15,633  
 
                      
Net earnings from continuing operations
                     24,798  
Net earnings from discontinued operation
                     3,399  
 
                      
Net earnings
                   $ 28,197  
 
                      
Total assets
   $ 919,706     $ 156,784     $ 852,537 *
 
                  
 
*   Consolidated total assets include net intercompany eliminations, assets of a discontinued operation and corporate assets of $223,953.
- MORE -
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Insight Q2 2006 Results, Page 13   July 20, 2006
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     Six Months Ended  
    June 30,     June 30,  
    2006     2005     2006     2005  
Selling and Administrative Expenses:
                                
GAAP
   $ 80,775     $ 72,975     $ 159,263     $ 142,815  
Settlement expense
     —       —       (1,000 )     —  
Stock-based compensation expense
     (3,082 )     (168 )     (6,254 )     (289 )
 
                        
Non-GAAP
   $ 77,693     $ 72,807     $ 152,009     $ 142,526  
 
                        
Non-GAAP selling and administrative expenses as a percentage of net sales
     9.3 %     9.3 %     9.3 %     9.2 %
 
                                
Earnings from Operations:
                                
GAAP
   $ 23,478     $ 17,542     $ 44,042     $ 39,765  
Settlement expense
     —       —       1,000       —  
Stock-based compensation expense
     3,082       168       6,254       289  
Severance and restructuring expense
     —       4,064       —       4,064  
Reductions in liabilities assumed in a previous acquisition
     —       —       —       (664 )
 
                        
Non-GAAP
   $ 26,560     $ 21,774     $ 51,296     $ 43,454  
 
                        
Non-GAAP earnings from operations as a percentage of net sales (“Operating Margin”)
     3.2 %     2.8 %     3.2 %     2.8 %
 
                                
Effective Tax Rate:
                                
GAAP
     35.0 %     38.6 %     35.3 %     38.7 %
Tax rate effect of adjustments
     0.0 %     0.1 %     0.3 %     (0.3 %)
 
                        
Non-GAAP
     35.0 %     38.7 %     35.6 %     38.4 %
 
                        
 
                                
Net Earnings from Continuing Operations:
                                
GAAP
   $ 15,691     $ 10,961     $ 28,864     $ 24,798  
Settlement expense, net of tax
     —       —       605       —  
Severance and restructuring expense
     —       2,491       —       2,491  
Stock-based compensation expense, net of tax
     2,008       100       3,949       173  
Reductions in liabilities assumed in a previous acquisition, net of tax
     —       —       —       (306 )
 
                        
Non-GAAP
   $ 17,699     $ 13,552     $ 33,418     $ 27,156  
 
                        
- MORE -
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Insight Q2 2006 Results, Page 14   July 20, 2006
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     Six Months Ended  
    June 30,     June 30,  
    2006     2005     2006     2005  
Net Earnings from Discontinued Operation:
                                
GAAP
   $ 10,196     $ 1,724     $ 11,237     $ 3,399  
Gain on sale of discontinued operation, net of tax
     (9,144 )     —       (9,144 )     —  
Stock-based compensation expense, net of tax
     441       3       628       3  
 
                        
Non-GAAP
   $ 1,493     $ 1,727     $ 2,721     $ 3,402  
 
                        
 
                                
Net Earnings:
                                
GAAP
   $ 25,887     $ 12,685     $ 40,101     $ 28,197  
Settlement expense, net of tax
     —       —       605       —  
Stock-based compensation expense, net of tax
     2,449       103       4,577       176  
Severance and restructuring expenses, net of tax
     —       2,491       —       2,491  
Reductions in liabilities assumed in a previous acquisition, net of tax
     —       —       —       (306 )
Gain on sale of discontinued operation, net of tax
     (9,144 )     —       (9,144 )     —  
 
                        
Non-GAAP
   $ 19,192     $ 15,279     $ 36,139     $ 30,558  
 
                        
 
                                
Diluted Earnings Per Share:
                                
GAAP
   $ 0.53     $ 0.26     $ 0.82     $ 0.57  
Settlement expense, net of tax
     —       —       0.01       —  
Stock-based compensation expense, net of tax
     0.05       —       0.10       —  
Severance and restructuring expenses, net of tax
     —       0.05       —       0.06  
Reductions in liabilities assumed in a previous acquisition, net of tax
     —       —       —       —  
Gain on sale of discontinued operation, net of tax
     (0.19 )     —       (0.19 )     —  
 
                        
Non-GAAP
   $ 0.39     $ 0.31     $ 0.74     $ 0.62  
 
                        
- MORE -
Insight Enterprises, Inc.       1305 West Auto Drive       Tempe, Arizona 85284       480-902-1001       FAX 480-760-8958

 

 

Insight Q2 2006 Results, Page 15   July 20, 2006
INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
Reconciliation of Operating Segment GAAP to Non-GAAP Financial Measures
(In thousands, except percentages)
(unaudited)
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2006     2005     2006     2005  
Insight North America:
                                
Selling and Administrative Expenses:
                                
GAAP
   $ 66,268     $ 59,869     $ 130,706     $ 117,118  
Stock-based compensation expense
     (2,799 )     (168 )     (5,686 )     (289 )
Settlement expense
     —       —       (1,000 )     —  
 
                        
Non-GAAP
   $ 63,469     $ 59,701     $ 124,020     $ 116,829  
 
                        
Non-GAAP selling and administrative expenses as a percentage of net sales
     8.8 %     8.9 %     8.9 %     8.9 %
 
                                
Earnings from Operations:
                                
GAAP
   $ 20,562     $ 14,904     $ 37,578     $ 33,399  
Stock-based compensation expense
     2,799       168       5,686       289  
Settlement expense
     —       —       1,000       —  
Severance and restructuring expenses
     —       3,650       —       3,650  
 
                        
Non-GAAP
   $ 23,361     $ 18,722     $ 44,264     $ 37,338  
 
                        
Non-GAAP earnings from operations as a percentage of net sales (“Operating Margin”)
     3.2 %     2.8 %     3.2 %     2.8 %
 
                                
Insight UK:
                                
Selling and Administrative Expenses:
                                
GAAP
   $ 14,507     $ 13,106     $ 28,557     $ 25,697  
Stock-based compensation expense
     (283 )     —       (568 )     —  
 
                        
Non-GAAP
   $ 14,224     $ 13,106     $ 27,989     $ 25,697  
 
                        
Non-GAAP selling and administrative expenses as a percentage of net sales
     12.3 %     11.1 %     11.9 %     10.9 %
 
                                
Earnings from Operations:
                                
GAAP
   $ 2,916     $ 2,638     $ 6,464     $ 6,366  
Stock-based compensation expense
     283       —       568       —  
Severance and restructuring expenses
     —       414       —       414  
Reductions in liabilities assumed in a previous acquisition
     —       —       —       (664 )
 
                        
Non-GAAP
   $ 3,199     $ 3,052     $ 7,032     $ 6,116  
 
                        
Non-GAAP earnings from operations as a percentage of net sales (“Operating Margin”)
     2.8 %     2.6 %     3.0 %     2.6 %
- #### -
Insight Enterprises, Inc.       1305 West Auto Drive       Tempe, Arizona 85284       480-902-1001       FAX 480-760-8958