EX-99.1 2 d528959dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

 

FOR IMMEDIATE RELEASE    NASDAQ: NSIT

INSIGHT ENTERPRISES, INC. REPORTS FIRST QUARTER 2013 RESULTS

TEMPE, AZ – May 1, 2013 – Insight Enterprises, Inc. (NASDAQ: NSIT) (the “Company”) today reported results of operations for the quarter ended March 31, 2013.

First Quarter Highlights

For the first quarter of 2013 compared to the first quarter of 2012:

 

   

Net sales decreased 5% to $1.2 billion.

 

   

Gross profit declined 7% to $158.1 million, or 13.4% of net sales.

 

   

Earnings from operations were down 44% to $14.4 million, or 1.2% of net sales.

 

   

Net earnings and diluted earnings per share were $9.1 million and $0.20, respectively, in the first quarter of 2013, at an effective tax rate of 27.8%.

 

   

Excluding severance and restructuring expenses, net earnings and diluted earnings per share on a non-GAAP basis were $10.9 million and $0.24, respectively, in the first quarter of 2013.*

 

   

The Company generated $16.3 million of cash from operations in the first quarter of 2013, compared to using $20.4 million during the first quarter of 2012.

 

   

The Company paid down debt by $19.0 million during the first quarter of 2013, ending the quarter with $61.0 million of long-term debt outstanding.

 

   

The Company repurchased approximately 345,000 shares of its common stock for $6.9 million.

 

* 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.

“In the first quarter, we saw additional weakness in demand for IT products by large enterprise clients in North America, which was partially offset by strong top-line growth in our EMEA and APAC segments. Additionally, we saw lower than expected gross margin performance in EMEA due to changes in business and client sales mix in the quarter and to changes in partner programs. We controlled our selling and administrative expenses; however, these expense savings did not offset the effect of lower sales volumes and gross margins, which led to earnings from operations performance below our expectations,” stated Ken Lamneck, President and Chief Executive Officer. “As we move forward in 2013, we will continue to invest in sales and technical resources in key markets in North America and EMEA, as we believe this is critical to our long-term success. We will also remain focused on managing controllable costs and expect improved operating leverage in the back half of 2013,” added Lamneck.

 

- MORE -

 

Insight Enterprises, Inc.

   6820 South Harl Avenue    Tempe, Arizona 85283    800.467.4448    FAX 480-760-8958


Insight Q1 2013 Results, Page 2

   May 1, 2013

 

SEGMENT OVERVIEW

In North America, net sales were $747.0 million for the first quarter of 2013, down 13% compared to net sales of $856.3 million for the first quarter of 2012. Net sales of hardware, software and services decreased 12%, 17% and 1%, respectively, year to year. Gross profit of $102.5 million was down 10% year to year, with gross margin increasing to 13.7% from 13.3% in the first quarter of 2012. Selling and administrative expenses in North America in the first quarter of 2013 decreased 3%, or $2.8 million, compared to the first quarter of 2012. During the first quarter of 2013, North America had $1.1 million, $680,000 net of tax, of severance and restructuring expenses compared to $489,000, $301,000 net of tax, during the first quarter of 2012. As a result, earnings from operations in North America decreased 42% year to year to $12.3 million, or 1.6% of net sales, in the first quarter of 2013, compared to $21.2 million, or 2.5% of net sales, in the first quarter of 2012.

The Company’s EMEA operating segment reported net sales of $386.9 million for the first quarter of 2013, an increase of 11% in U.S. dollars compared to the first quarter of 2012. Excluding the effects of foreign currency movements, net sales increased 12% year over year. Net sales of software and services were up 22% and 32%, respectively, year over year, while net sales of hardware declined 4% year to year, all in U.S. dollars. Excluding the effects of foreign currency movements, software and services net sales increased 22% and 33%, respectively, while net sales of hardware declined 3% compared to the first quarter of 2012. Gross profit of $48.6 million was down 4% year to year in U.S. dollars, 3% excluding the effects of foreign currency movements, with gross margin decreasing to 12.6% for the first quarter of 2013 from 14.5% in the first quarter of 2012. Selling and administrative expenses in EMEA in the first quarter of 2013 remained relatively flat, increasing $364,000, compared to the first quarter of 2012 in U.S. dollars and, excluding the effects of foreign currency movements, were up 1% compared to the prior year period. During the first quarter of 2013, EMEA recorded severance and restructuring expenses of $1.7 million, $1.2 million net of tax, compared to $885,000, $620,000 net of tax, during the first quarter of 2012. As a result, earnings from operations in EMEA decreased 72% year to year to $1.2 million, or 0.3% of net sales, in the first quarter of 2013 compared to $4.1 million, or 1.2% of net sales, in the first quarter of 2012.

The Company’s APAC operating segment reported net sales of $47.7 million for the first quarter of 2013, an increase of 22% compared to the first quarter of 2012 in U.S. dollars, 24% excluding the effects of foreign currency movements. Gross profit was $7.0 million, an increase of 11% year over year in U.S. dollars, 12% excluding the effects of foreign currency movements, with gross margin decreasing to 14.7% for the first quarter of 2013 from 16.2% in the first quarter of 2012. Selling and administrative expenses in APAC remained flat at $6.0 million during both the first quarter of 2013 and 2012. As a result, earnings from operations in APAC increased 217% year over year to $964,000, or 2.0% of net sales, in the first quarter of 2013 compared to $304,000, or 0.8% of net sales, in the first quarter of 2012.

Throughout this “Segment Overview” section, the Company refers to changes in net sales, gross profit and selling and administrative expenses in EMEA and APAC excluding the effects of foreign currency movements. In computing these changes and percentages, the Company compares the current year amount as translated into U.S. dollars under the applicable accounting standards to the prior year amount in local currency translated into U.S. dollars utilizing the average translation rate for the current period.

 

- MORE -

 

Insight Enterprises, Inc.

   6820 South Harl Avenue    Tempe, Arizona 85283    800.467.4448    FAX 480-760-8958


Insight Q1 2013 Results, Page 3

   May 1, 2013

 

Net of tax amounts referenced above were computed using the statutory tax rate for the taxing jurisdictions in the operating segment in which the related expenses were recorded.

UPDATED GUIDANCE

The Company currently expects that net sales for the full year 2013 will decline slightly from 2012 due primarily to lower spending by large enterprise clients in North America. The Company also currently expects its second quarter financial results will exhibit similar year to year trends as in the first quarter but that the Company will see improved earnings performance in the back half of 2013 as it begins to realize the benefits of its sales and cost control initiatives. As a result, the Company now expects diluted earnings per share for the full year of 2013 to be between $1.70 and $1.90.

This outlook includes:

 

   

The adverse effect on gross profit of previously announced partner program changes in the Company’s software category, which is estimated to be between $8 and $12 million; and

 

   

an effective tax rate of 36% to 38% for the balance of 2013.

This outlook excludes severance and restructuring expenses incurred during 2013.

CONFERENCE CALL AND WEBCAST

The Company will host a conference call and live web cast today at 5:00 p.m. ET to discuss first quarter 2013 results of operations. A live web cast of the conference call (in listen-only mode) will be accessible online through the investor relations section of the Company’s web site, insight.com, at http://nsit.client.shareholder.com/events.cfm, and a replay of the web cast will be available on the Company’s web site for a limited time following the call. To listen to the live web cast by telephone, call 1-877-402-8904 if located in the U.S., 678-809-1029 for international callers, and enter the access code 30463884.

USE OF NON-GAAP FINANCIAL MEASURES

The non-GAAP financial measures exclude severance and restructuring expenses in 2013 and 2012, a gain on bargain purchase in 2012 and the tax effect of these items. The Company excludes these charges when internally evaluating earnings from operations, tax expense, net earnings and diluted earnings per share for the Company and earnings from operations for each of the Company’s 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 the Company’s results to those of the Company’s competitors. The Company believes that these non-GAAP financial measures are useful to investors because they allow for greater transparency, facilitate comparisons to prior periods and the Company’s competitors’ results and assist in forecasting performance for future periods. 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.

 

- MORE -

 

Insight Enterprises, Inc.

   6820 South Harl Avenue    Tempe, Arizona 85283    800.467.4448    FAX 480-760-8958


Insight Q1 2013 Results, Page 4

   May 1, 2013

 

FINANCIAL SUMMARY TABLE

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

 

     Three Months Ended March 31,  
     2013      2012      % change  

Insight Enterprises, Inc.

        

Net sales

   $ 1,181,622       $ 1,244,182         (5 %) 

Gross profit

   $ 158,137       $ 170,372         (7 %) 

Earnings from operations

   $ 14,417       $ 25,604         (44 %) 

Net earnings

   $ 9,076       $ 17,392         (48 %) 

Diluted EPS

   $ 0.20       $ 0.39         (49 %) 

North America

        

Net sales

   $ 747,004       $ 856,327         (13 %) 

Gross profit

   $ 102,527       $ 113,636         (10 %) 

Earnings from operations

   $ 12,274       $ 21,163         (42 %) 

EMEA

        

Net sales

   $ 386,911       $ 348,834         11

Gross profit

   $ 48,610       $ 50,414         (4 %) 

Earnings from operations

   $ 1,179       $ 4,137         (72 %) 

APAC

        

Net sales

   $ 47,707       $ 39,021         22

Gross profit

   $ 7,000       $ 6,322         11

Earnings from operations

   $ 964       $ 304         217

 

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

Sales Mix

   2013     2012     %
change*
    2013     2012     %
change*
    2013     2012     %
change*
 

Hardware

     63     63     (12 %)      37     42     (4 %)      2     3     (32 %) 

Software

     30     31     (17 %)      61     56     22     95     93     25

Services

     7     6     (1 %)      2     2     32     3     4     8
  

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   
     100     100     (13 %)      100     100     11     100     100     22
  

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

 

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

 

- MORE -

 

Insight Enterprises, Inc.

   6820 South Harl Avenue    Tempe, Arizona 85283    800.467.4448    FAX 480-760-8958


Insight Q1 2013 Results, Page 5

   May 1, 2013

 

FORWARD-LOOKING INFORMATION

Certain statements in this release and the related conference call and web cast are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements, including the Company’s expected 2013 net sales and diluted earnings per share, and the assumptions relating thereto, including the gross profit effect of partner program changes and the effective tax rate, are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. There can be no assurances that the results discussed by the forward-looking statements will be achieved, and actual results may differ materially from those set forth in the forward-looking statements. Some of the important factors that could cause the Company’s actual results to differ materially from those projected in any forward-looking statements, include, but are not limited to, the following, which are discussed in “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2012:

 

   

the Company’s reliance on partners for product availability and competitive products to sell as well as the Company’s competition with its partners;

 

   

the Company’s reliance on partners for marketing funds and purchasing incentives;

 

   

changes in the IT industry and/or rapid changes in technology;

 

   

disruptions in the Company’s IT systems and voice and data networks, including risks and costs associated with the integration and upgrade of the Company’s IT systems;

 

   

actions of the Company’s competitors, including manufacturers and publishers of products the Company sells;

 

   

general economic conditions;

 

   

failure to comply with the terms and conditions of the Company’s commercial and public sector contracts;

 

   

the security of the Company’s electronic and other confidential information;

 

   

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

 

   

the Company’s dependence on certain personnel;

 

   

the variability of the Company’s net sales and gross profit;

 

   

the risks associated with the Company’s international operations;

 

   

exposure to changes in, interpretations of, or enforcement trends related to tax rules and regulations; and

 

   

intellectual property infringement claims and challenges to the Company’s registered trademarks and trade names.

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

 

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

 

- MORE -

 

Insight Enterprises, Inc.

   6820 South Harl Avenue    Tempe, Arizona 85283    800.467.4448    FAX 480-760-8958


Insight Q1 2013 Results, Page 6

   May 1, 2013

 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

 

     Three Months Ended
March 31,
 
     2013     2012  

Net sales

   $ 1,181,622      $ 1,244,182   

Costs of goods sold

     1,023,485        1,073,810   
  

 

 

   

 

 

 

Gross profit

     158,137        170,372   

Operating expenses:

    

Selling and administrative expenses

     140,988        143,394   

Severance and restructuring expenses

     2,732        1,374   
  

 

 

   

 

 

 

Earnings from operations

     14,417        25,604   

Non-operating (income) expense:

    

Interest income

     (312     (351

Interest expense

     1,618        1,558   

Gain on bargain purchase

     —          (2,022

Net foreign currency exchange loss (gain)

     161        (828

Other expense, net

     374        244   
  

 

 

   

 

 

 

Earnings before income taxes

     12,576        27,003   

Income tax expense

     3,500        9,611   
  

 

 

   

 

 

 

Net earnings

   $ 9,076      $ 17,392   
  

 

 

   

 

 

 

Net earnings per share:

    

Basic

   $ 0.20      $ 0.39   
  

 

 

   

 

 

 

Diluted

   $ 0.20      $ 0.39   
  

 

 

   

 

 

 

Shares used in per share calculations:

    

Basic

     44,670        44,150   
  

 

 

   

 

 

 

Diluted

     45,063        44,754   
  

 

 

   

 

 

 

 

- MORE -

 

Insight Enterprises, Inc.

   6820 South Harl Avenue    Tempe, Arizona 85283    800.467.4448    FAX 480-760-8958


Insight Q1 2013 Results, Page 7

   May 1, 2013

 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

(UNAUDITED)

 

     March 31,
2013
     December 31,
2012
 

ASSETS

     

Current assets:

     

Cash and cash equivalents

   $ 152,326       $ 152,119   

Accounts receivable, net

     1,081,979         1,371,356   

Inventories

     97,820         100,896   

Inventories not available for sale

     29,307         31,249   

Deferred income taxes

     16,343         16,387   

Other current assets

     46,319         29,543   
  

 

 

    

 

 

 

Total current assets

     1,424,094         1,701,550   

Property and equipment, net

     139,846         143,513   

Goodwill

     26,257         26,257   

Intangible assets, net

     44,069         47,405   

Deferred income taxes

     62,415         64,013   

Other assets

     24,419         18,765   
  

 

 

    

 

 

 
   $ 1,721,100       $ 2,001,503   
  

 

 

    

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Current liabilities:

     

Accounts payable

   $ 744,899       $ 982,611   

Accrued expenses and other current liabilities

     142,086         158,621   

Current portion of long-term debt

     345         602   

Deferred revenue

     35,838         40,287   
  

 

 

    

 

 

 

Total current liabilities

     923,168         1,182,121   

Long-term debt

     61,000         80,000   

Deferred income taxes

     1,988         2,312   

Other liabilities

     35,904         31,779   
  

 

 

    

 

 

 
     1,022,060         1,296,212   
  

 

 

    

 

 

 

Stockholders’ equity:

     

Preferred stock

     —           —     

Common stock

     446         446   

Additional paid-in capital

     366,281         369,300   

Retained earnings

     320,968         315,888   

Accumulated other comprehensive income – foreign currency translation adjustments

     11,345         19,657   
  

 

 

    

 

 

 

Total stockholders’ equity

     699,040         705,291   
  

 

 

    

 

 

 
   $ 1,721,100       $ 2,001,503   
  

 

 

    

 

 

 

 

- MORE -

 

Insight Enterprises, Inc.

   6820 South Harl Avenue    Tempe, Arizona 85283    800.467.4448    FAX 480-760-8958


Insight Q1 2013 Results, Page 8

   May 1, 2013

 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

(UNAUDITED)

 

     Three Months Ended March 31,  
     2013     2012  

Cash flows from operating activities:

    

Net earnings

   $ 9,076      $ 17,392   

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

    

Depreciation and amortization

     10,454        10,182   

Provision for losses on accounts receivable

     1,292        717   

Write-downs of inventories

     1,039        857   

Write-off of property and equipment

     51        —     

Non-cash stock-based compensation

     2,090        2,141   

Gain on bargain purchase

     —          (2,022

Excess tax benefit from employee gains on stock-based compensation

     (717     (1,893

Deferred income taxes

     1,304        2,762   

Changes in assets and liabilities:

    

Decrease in accounts receivable

     272,163        138,608   

Decrease (increase) in inventories

     2,941        (1,436

Increase in other current assets

     (17,137     (1,637

(Increase) decrease in other assets

     (5,742     925   

Decrease in accounts payable

     (247,725     (157,051

(Decrease) increase in deferred revenue

     (4,575     8,644   

Decrease in accrued expenses and other liabilities

     (8,231     (38,629
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     16,283        (20,440
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Acquisition, net of cash acquired

     —          (3,831

Purchases of property and equipment

     (5,670     (7,823
  

 

 

   

 

 

 

Net cash used in investing activities

     (5,670     (11,654
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Borrowings on senior revolving credit facility

     326,535        418,000   

Repayments on senior revolving credit facility

     (330,535     (394,500

Borrowings on accounts receivable securitization financing facility

     213,000        50,000   

Repayments on accounts receivable securitization financing facility

     (228,000     (50,000

Payments on capital lease obligation

     (257     (253

Net borrowings under inventory financing facility

     21,277        9,316   

Proceeds from sales of common stock under employee stock plans

     —          889   

Excess tax benefit from employee gains on stock-based compensation

     717        1,893   

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

     (2,814     (3,000

Repurchases of common stock

     (6,856     —     
  

 

 

   

 

 

 

Net cash (used in) provided by financing activities

     (6,933     32,345   
  

 

 

   

 

 

 

Foreign currency exchange effect on cash flows

     (3,473     4,022   
  

 

 

   

 

 

 

Increase in cash and cash equivalents

     207        4,273   

Cash and cash equivalents at beginning of period

     152,119        128,336   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 152,326      $ 132,609   
  

 

 

   

 

 

 

 

- MORE -

 

Insight Enterprises, Inc.

   6820 South Harl Avenue    Tempe, Arizona 85283    800.467.4448    FAX 480-760-8958


Insight Q1 2013 Results, Page 9

   May 1, 2013

 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

 

     Three Months Ended
March 31,
 
     2013      2012  

Consolidated Earnings from Operations:

     

GAAP

   $ 14,417       $ 25,604   

Severance and restructuring expenses

     2,732         1,374   
  

 

 

    

 

 

 

Non-GAAP

   $ 17,149       $ 26,978   
  

 

 

    

 

 

 

Consolidated Net Earnings:

     

GAAP

   $ 9,076       $ 17,392   

Severance and restructuring expenses, net of tax

     1,868         921   

Gain on bargain purchase, net of tax

     —           (1,699
  

 

 

    

 

 

 

Non-GAAP

   $ 10,944       $ 16,614   
  

 

 

    

 

 

 

Consolidated Diluted EPS:

     

GAAP

   $ 0.20       $ 0.39   

Severance and restructuring expenses, net of tax

     0.04         0.02   

Gain on bargain purchase, net of tax

     —           (0.04
  

 

 

    

 

 

 

Non-GAAP

   $ 0.24       $ 0.37   
  

 

 

    

 

 

 

North America Earnings from Operations:

     

GAAP

   $ 12,274       $ 21,163   

Severance and restructuring expenses

     1,057         489   
  

 

 

    

 

 

 

Non-GAAP

   $ 13,331       $ 21,652   
  

 

 

    

 

 

 

EMEA Earnings from Operations:

     

GAAP

   $ 1,179       $ 4,137   

Severance and restructuring expenses

     1,675         885   
  

 

 

    

 

 

 

Non-GAAP

   $ 2,854       $ 5,022   
  

 

 

    

 

 

 

 

- MORE -

 

Insight Enterprises, Inc.

   6820 South Harl Avenue    Tempe, Arizona 85283    800.467.4448    FAX 480-760-8958