EX-99.1 2 c73281exv99w1.htm EXHIBIT 99.1 Filed by Bowne Pure Compliance
 

Exhibit 99.1
(LOGO)
FOR IMMEDIATE RELEASE   Nasdaq: NSIT
INSIGHT ENTERPRISES, INC. REPORTS FIRST QUARTER
2008 RESULTS
Q1 2008 Net Sales — $1.11 Billion; Diluted EPS — $0.22
TEMPE, Ariz. — 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.
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Insight Enterprises, Inc.   1305 West Auto Drive   Tempe, Arizona 85284   480-902-1001   FAX 480-760-8958

 

 


 

     
Insight Q1 2008 Results, Page 2   May 8, 2008
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.
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Insight Enterprises, Inc.   1305 West Auto Drive   Tempe, Arizona 85284   480-902-1001   FAX 480-760-8958

 

 


 

     
Insight Q1 2008 Results, Page 3   May 8, 2008
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 %)
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Insight Enterprises, Inc.   1305 West Auto Drive   Tempe, Arizona 85284   480-902-1001   FAX 480-760-8958

 

 


 

     
Insight Q1 2008 Results, Page 4   May 8, 2008
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.
         
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
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Insight Enterprises, Inc.   1305 West Auto Drive   Tempe, Arizona 85284   480-902-1001   FAX 480-760-8958

 

 


 

     
Insight Q1 2008 Results, Page 5   May 8, 2008
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  
 
           
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Insight Enterprises, Inc.   1305 West Auto Drive   Tempe, Arizona 85284   480-902-1001   FAX 480-760-8958

 

 


 

     
Insight Q1 2008 Results, Page 6   May 8, 2008
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  
 
           
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Insight Q1 2008 Results, Page 7   May 8, 2008
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  
 
           
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Insight Q1 2008 Results, Page 8   May 8, 2008
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 PDA’s
    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 PDA’s
    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.
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Insight Enterprises, Inc.   1305 West Auto Drive   Tempe, Arizona 85284   480-902-1001   FAX 480-760-8958