May 8, 2008

Insight Enterprises, Inc. Reports First Quarter 2008 Results

Q1 2008 Net Sales - $1.11 Billion; Diluted EPS - $0.22

TEMPE, Ariz.--(BUSINESS WIRE)--May 8, 2008--Insight Enterprises, Inc. (Nasdaq: NSIT) (the "Company") today reported results of operations for the quarter ended March 31, 2008.

First Quarter Highlights



-- Net sales for the first quarter of 2008 decreased 1% to $1.11 billion.



-- Gross profit for the first quarter remained flat at $153.2 million.



-- Net earnings from continuing operations for the first quarter decreased 14% to $10.5 million.



-- Diluted EPS from continuing operations for the first quarter decreased 12% to $0.22.



-- First quarter 2008 results from continuing operations include $1.9 million, $1.1 million net of tax, for severance and restructuring expenses. First quarter 2007 results include expenses of $5.7 million, $3.5 million net of tax, for professional fees and costs associated with our stock option review.

"The first quarter of 2008 was a very challenging quarter for our business. While overall our EMEA and APAC segments performed as expected, our North America segment did not meet our internal expectations for profitability during the quarter," stated Rich Fennessy, President and Chief Executive Officer. "As a result, we implemented a number of critical actions across our business focused on increasing net sales and gross profit and reducing our expense base to improve our overall earnings performance for the balance of the year in this challenging market environment," added Fennessy.

Segment Overview

Net sales in North America decreased 1% to $766.4 million primarily due to a softer U.S. IT market and a double digit year-over-year decrease in our net sales to SMB clients, as the Company continued to address certain integration issues with the IT system upgrade that commenced in the second half of 2007. Gross margin in North America decreased by approximately 80 basis points from the first quarter of 2007 primarily due to lower net sales to SMB clients, which are generally conducted at higher gross margins, and decreases in product margins, including vendor funding, primarily driven by market pricing pressures. Earnings from operations in North America were $5.4 million lower than the first quarter of 2007. These 2008 results include $1.0 million in severance and restructuring expenses, while the first quarter 2007 results include $5.2 million in professional fees and costs associated with our stock option review. Thus, excluding the effects of the stock option review, our North American results were substantially lower in the first quarter of 2008 compared to the first quarter of 2007.

Net sales in EMEA decreased 3%, or $9.2 million, to $318.2 million reflecting a decline in sales in the United Kingdom and a continued shift toward fee-based enterprise agreements where only the referral fee is recognized as net sales with no costs of goods sold. This decline was partially offset by the foreign currency benefit of the weak U.S. dollar compared to the various European currencies of the countries in which the Company does business. The United Kingdom-based hardware business accounted for $4.6 million of the overall decline; however it should be noted that in the United Kingdom, there were two less shipping days in the quarter compared to the first quarter of last year. Within the United Kingdom, while the market conditions are challenging and show signs of continued weakness going into the second quarter, we believe that the majority of the net sales decline in the first quarter was related to internal sales execution issues early in the quarter. The Company addressed these issues immediately, and, as a result, saw stronger results in March compared to the first two months of the quarter. Gross margin in EMEA increased to 14.3% from 11.8% in the first quarter of last year resulting from strong software category performance and the continued migration to fee-based enterprise agreements. Earnings from operations in the EMEA segment increased 8% compared to the first quarter of 2007 to $7.0 million reflecting higher gross profit partially offset by increases in selling and administrative expenses from increased headcount and severance expenses of $869,000.

Net sales in APAC increased 19% to $23.1 million with gross margin on these sales of 16.3%. The loss from operations in this segment during the three months ended March 31, 2008 of $440,000 reflected the typical seasonality of this business and the hiring of experienced software sales and support teammates during the quarter.

UPDATED GUIDANCE

Given the challenges that the Company faced during the first quarter and the uncertain macro-economic outlook for 2008, the Company now expects full-year diluted earnings per share to be between $1.50 and $1.60 with approximately 50% coming in the first half of the year. This estimate includes no severance, restructuring or other one-time charges. This guidance reflects management's expectations for the balance of 2008, but the factors that could affect performance, as noted below, are numerous, and short-term results in this difficult economy could be more volatile and unpredictable than usual.

CONFERENCE CALL AND WEBCAST

We will host a conference call and live Web cast today at 5:00 p.m. ET to discuss first quarter results of operations. A live Web cast of the conference call (in listen-only mode) will be available on our corporate Web site at www.insight.com and a replay of the Web cast will be available on our corporate Web site for a limited time. To listen to the live Web cast by telephone, call 1-866-270-6057 and enter the access code 62449561.

                       FINANCIAL SUMMARY TABLE
        (IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)

                                       Three Months Ended March 31,
----------------------------------------------------------------------
Insight Enterprises, Inc.              2008        2007     % change
----------------------------------------------- ----------- ----------
Net sales                           $1,107,789  $1,123,975        (1%)
Gross profit                        $  153,155  $  153,175         -
Earnings from operations            $   18,301  $   23,417       (22%)
Operating margin                           1.7%        2.1%
Net earnings from continuing
 operations                         $   10,520  $   12,296       (14%)
Diluted EPS from continuing
 operations                         $     0.22  $     0.25       (12%)
Net earnings                        $   10,520  $   17,268       (39%)
Diluted EPS                         $     0.22  $     0.35       (37%)

North America
------------------------------------
Net sales                           $  766,424  $  777,201        (1%)
Gross profit                        $  104,015  $  111,916        (7%)
Earnings from operations            $   11,787  $   17,146       (31%)

EMEA
------------------------------------
Net sales                           $  318,222  $  327,376        (3%)
Gross profit                        $   45,375  $   38,471        18%
Earnings from operations            $    6,954  $    6,460         8%

APAC
------------------------------------
Net sales                           $   23,143  $   19,398        19%
Gross profit                        $    3,765  $    2,788        35%
Loss from operations                $     (440) $     (189)     (133%)
                      FORWARD-LOOKING INFORMATION

Certain statements in this release and the related conference call and Web cast are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements, including our estimated diluted earnings per share for 2008, 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, which are discussed in "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2007:

-- changes in the information technology industry and/or the economic environment;



-- our reliance on partners for product availability, marketing funds, purchasing incentives and competitive products to sell;



-- disruptions in our information technology systems and voice and data networks, including the system upgrade and the migration of acquired businesses to our information technology systems and voice and data networks;



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



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



-- the informal inquiry from the Securities and Exchange Commission ("SEC") and stockholder litigation related to our historical stock option granting practices and the related restatement of our consolidated financial statements;



-- the risks associated with international operations;



-- seasonal changes in demand for sales of software licenses;



-- increased debt and interest expense and lower availability on our financing facilities and changes in the overall capital markets that could increase our borrowing costs or reduce future availability of financing;



-- exposure to currency exchange risks and volatility in the U.S. dollar exchange rate;



-- our dependence on key personnel;



-- risk that purchased goodwill or amortizable intangible assets become impaired;



-- failure to comply with the terms and conditions of our public sector contracts;



-- rapid changes in product standards; and



-- intellectual property infringement claims and challenges to our registered trademarks and trade names.

Additionally, there may be other risks that are otherwise described from time to time in the reports that we file with the SEC. Any forward-looking statements in this release should be considered in light of various important factors, including the risks and uncertainties listed above, as well as others. We assume no obligation to update, and do not intend to update, any forward-looking statements. We do not endorse any projections regarding future performance made by third parties.

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

                                                 Three Months Ended
                                                      March 31,
                                               -----------------------
                                                  2008        2007
                                               ----------- -----------
Net sales                                      $1,107,789  $1,123,975
Costs of goods sold                               954,634     970,800
                                               ----------- -----------
   Gross profit                                   153,155     153,175
Operating expenses:
  Selling and administrative expenses             132,954     129,758
  Severance and restructuring expenses              1,900           -
                                               ----------- -----------
   Earnings from operations                        18,301      23,417
Non-operating (income) expense:
  Interest income                                    (601)       (658)
  Interest expense                                  2,716       4,305
  Net foreign currency exchange gain                 (937)       (654)
  Other expense, net                                  319         217
                                               ----------- -----------
   Earnings from continuing operations before
    income taxes
                                                   16,804      20,207
Income tax expense                                  6,284       7,911
                                               ----------- -----------
   Net earnings from continuing operations         10,520      12,296
   Net earnings from a discontinued operation           -       4,972
                                               ----------- -----------
   Net earnings                                $   10,520  $   17,268
                                               =========== ===========


Net earnings per share - Basic:
   Net earnings from continuing operations     $     0.22  $     0.25
   Net earnings from a discontinued operation           -        0.10
                                               ----------- -----------
   Net earnings per share                      $     0.22  $     0.35
                                               =========== ===========

Net earnings per share - Diluted:
   Net earnings from continuing operations     $     0.22  $     0.25
   Net earnings from a discontinued operation           -        0.10
                                               ----------- -----------
   Net earnings per share                      $     0.22  $     0.35
                                               =========== ===========


Shares used in per share calculations:
   Basic                                           48,540      49,010
                                               =========== ===========
   Diluted                                         48,905      49,291
                                               =========== ===========
              INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS
                            (IN THOUSANDS)
                             (UNAUDITED)

                                             March 31,   December 31,
                                               2008          2007
                                           ------------- -------------
ASSETS
Current assets:
  Cash and cash equivalents                $     105,696 $      56,718
  Accounts receivable, net                       812,371     1,072,612
  Inventories                                     88,869        98,863
  Inventories not available for sale              27,251        21,450
  Deferred income taxes                           21,792        22,020
  Other current assets                            36,975        38,916
                                          -------------- -------------
       Total current assets                    1,092,954     1,310,579

Property and equipment, net                      158,541       158,467
Goodwill                                         311,995       306,742
Intangible assets, net                            79,329        80,922
Deferred income taxes                                181           392
Other assets                                      13,189        10,076
                                           ------------- -------------
                                           $   1,656,189 $   1,867,178
                                           ============= =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                         $     465,736 $     685,578
  Accrued expenses and other current
   liabilities                                   113,057       113,891
  Current portion of long-term debt                    -        15,000
  Deferred revenue                                40,004        42,885
                                           ------------- -------------
       Total current liabilities                 618,797       857,354

Long-term debt                                   203,500       187,250
Deferred income taxes                             31,272        27,305
Other liabilities                                 20,339        20,075
                                           ------------- -------------
                                                 873,908     1,091,984
                                           ------------- -------------
Stockholders' equity:
  Preferred stock                                      -             -
  Common stock                                       482           485
  Additional paid-in capital                     384,386       386,139
  Retained earnings                              343,086       340,641
  Accumulated other comprehensive income -
   foreign currency translation
   adjustments                                    54,327        47,929
                                           ------------- -------------
       Total stockholders' equity                782,281       775,194
                                           ------------- -------------
                                           $   1,656,189 $   1,867,178
                                           ============= =============
              INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (IN THOUSANDS)
                             (UNAUDITED)

                                                  Three Months Ended
                                                       March 31,
                                                 ---------------------
                                                    2008       2007
                                                 ---------- ----------
Cash flows from operating activities:
  Net earnings from continuing operations        $  10,520  $  12,296
  Plus: net earnings from a discontinued
   operation                                             -      4,972
                                                 ---------- ----------
      Net earnings                                  10,520     17,268
  Adjustments to reconcile net earnings to net
   cash provided by operating activities:
    Depreciation and amortization                    8,464      8,913
    Provision for losses on accounts receivable        668        884
    Write-downs of inventories                       1,697      1,654
    Non-cash stock-based compensation                2,439      2,265
    Gain on sale of discontinued operation               -     (7,937)
    Excess tax benefit from employee gains on
     stock-based compensation                         (108)       (41)
    Deferred income taxes                            4,441     (2,676)
  Changes in assets and liabilities:
     Decrease in accounts receivable               275,543    182,155
     Decrease (increase) in inventories              2,554     (3,989)
     Decrease in other current assets                2,691      2,360
     Increase in other assets                         (195)    (5,993)
     Decrease in accounts payable                 (238,788)  (135,422)
     Decrease in deferred revenue                   (3,927)   (12,768)
     Increase (decrease) in accrued expenses and
      other liabilities                              1,160     (7,294)
                                                 ---------- ----------
       Net cash provided by operating activities    67,159     39,379
                                                 ---------- ----------
Cash flows from investing activities:
    Proceeds from sale of a discontinued
     operation, net of direct expenses                (900)    28,694
    Purchases of property and equipment             (6,441)    (8,376)
                                                 ---------- ----------
       Net cash (used in) provided by investing
        activities                                  (7,341)    20,318
                                                 ---------- ----------
Cash flows from financing activities:
    Borrowings on long-term financing facility     122,000    121,000
    Repayments on long-term financing facility    (117,000)  (163,000)
    Repayments on term loan                         (3,750)    (3,750)
    Net repayments on line of credit                     -     (7,000)
    Proceeds from sales of common stock under
     employee stock plans                            2,976      2,363
    Excess tax benefit from employee gains on
     stock-based compensation                          108         41
    Payment of payroll taxes on stock-based
     compensation through shares withheld           (1,943)         -
    Repurchases of common stock                    (14,999)         -
    Increase (decrease) in book overdrafts             458    (31,456)
                                                 ---------- ----------
       Net cash used in financing activities       (12,150)   (81,802)
                                                 ---------- ----------
Foreign currency exchange effect on cash flows       1,310       (432)
                                                 ---------- ----------
Increase (decrease) in cash and cash equivalents    48,978    (22,537)
Cash and cash equivalents at beginning of period    56,718     54,697
                                                 ---------- ----------
Cash and cash equivalents at end of period       $ 105,696  $  32,160
                                                 ========== ==========
            INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
           QUARTERLY SELECT OPERATING SEGMENT STATISTICS
                            (UNAUDITED)

                                    Three Months Ended
                                         March 31,
                                    -------------------
North America                         2008      2007        Change
----------------------------------- --------- ---------    --------
Number of shipping days                   64        64          -
Number of account executives           1,292     1,274          1%
Net sales per account executive(a)  $580,405  $613,661         (5%)
Gross profit per account
 executive(b)                       $ 78,770  $ 88,366        (11%)
Sales mix (as a % of net sales):(c)
 Networking and connectivity              12%       11%        11% (d)
 Notebooks and PDAs                       11%       11%        (1%)(d)
 Servers and storage                      10%       12%       (16%)(d)
 Desktops                                  8%        7%        20% (d)
 Printers                                  4%        5%       (16%)(d)
 Memory and processors                     3%        4%       (27%)(d)
 Supplies and accessories                  4%        5%       (24%)(d)
 Monitors and video                        5%        5%        (4%)(d)
 Miscellaneous                             9%        8%         2% (d)
                                    --------- ---------
      Hardware                            66%       68%        (4%)(d)
      Software                            31%       29%         4% (d)
      Services                             3%        3%        11% (d)
                                    --------- ---------
                                         100%      100%
                                    ========= =========
EMEA
-----------------------------------
Number of shipping days(e)                62        64     (2 days)
Number of account executives             605       513 (f)     18%
Net sales per account executive(a)  $541,193  $662,034        (18%)
Gross profit per account
 executive(b)                       $ 77,169  $ 77,798          -
Sales mix (as a % of net sales):(c)
 Networking and connectivity               4%        4%        12% (d)
 Notebooks and PDAs                        9%        8%         2% (d)
 Servers and storage                       8%        8%        (3%)(d)
 Desktops                                  4%        4%       (12%)(d)
 Printers                                  3%        4%       (10%)(d)
 Memory and processors                     1%        2%       (36%)(d)
 Supplies and accessories                  4%        4%        (3%)(d)
 Monitors and video                        4%        4%         1% (d)
 Miscellaneous                             3%        3%       (14%)(d)
                                    --------- ---------
      Hardware                            40%       41%        (4%)(d)
      Software                            59%       58%        (2%)(d)
      Services                             1%        1%        (4%)(d)
                                    --------- ---------
                                         100%      100%
                                    ========= =========
(a) Calculated as net sales for the quarter divided by the average
     number of account executives. The average number of account
     executives is calculated as the number of account executives at
     the end of the quarter plus the number of account executives at
     the beginning of the quarter divided by two.
(b) Calculated as gross profit for the quarter divided by the average
     number of account executives. The average number of account
     executives is calculated as the number of account executives at
     the end of the quarter plus the number of account executives at
     the beginning of the quarter divided by two.
(c) Beginning in the three months ended March 31, 2008, we have
     combined servers with storage in reporting our sales mix and are
     reporting desktops separately to conform with how we internally
     analyze our results. All prior period information has been
     reclassified for comparative purposes.
(d) Represents growth/decline in category net sales.
(e) Represents shipping days for the United Kingdom as it makes up the
     largest percentage of net sales in our EMEA segment.
(f) Number of account executives for the three months ended March 31,
     2007 has been changed to conform to the current period
     presentation. This presentation also conforms to the definition
     of an account executive in our North America operating segment.



CONTACT: Insight Enterprises, Inc., Tempe
Glynis Bryan, 480-333-3390
glynis.bryan@insight.com
Helen Johnson, 480-333-3234
helen.johnson@insight.com


SOURCE: Insight Enterprises, Inc.


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