NSIT Insight Enterprises Inc

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

 

 

Date of Report: October 28, 2015

INSIGHT ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)

 

Delaware		0-25092		86-0766246
(State or other jurisdiction of incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)

 

6820 South Harl Avenue, Tempe, Arizona		85283
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (480) 333-3000

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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Item 2.02.

Results of Operations and Financial Condition.

On October 28, 2015, Insight Enterprises, Inc. announced by press release its results of operations for the third quarter ended September 30, 2015. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated by reference herein. The information disclosed under this Item 2.02, including Exhibit 99.1 hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

Item 9.01.

Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit Number		Description
99.1		Press release dated October 28, 2015.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

				Insight Enterprises, Inc.
Date: October 28, 2015				By:		/s/ Glynis A. Bryan
						Glynis A. Bryan
						Chief Financial Officer

Exhibit 99.1

 

 

FOR IMMEDIATE RELEASE		NASDAQ: NSIT

INSIGHT ENTERPRISES, INC. REPORTS THIRD QUARTER 2015 RESULTS

TEMPE, AZ – October 28, 2015 – Insight Enterprises, Inc. (NASDAQ: NSIT) (the “Company”) today reported results of operations for the quarter ended September 30, 2015.

 

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Consolidated net sales of $1.34 billion for the third quarter of 2015 increased 8% compared to the third quarter of 2014, up 13% year over year excluding the effects of foreign currency movements.

 

•

Net sales in North America of $1.0 billion increased 15%;

 

•

Net sales in EMEA of $293.6 million decreased 6%, but increased 6% excluding the effects of foreign currency movements; and

 

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Net sales in APAC of $26.1 million decreased 20%, down 7% excluding the effects of foreign currency movements.

 

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Consolidated gross profit of $182.3 million increased 6% compared to the third quarter of 2014, up 11% year over year excluding the effects of foreign currency movements. Consolidated gross margin decreased approximately 30 basis points to 13.6% of net sales.

 

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Gross profit in North America of $136.0 million (13.3% gross margin) increased 13% year over year;

 

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Gross profit in EMEA of $40.9 million (13.9% gross margin) was down 9% year to year, but increased 3% year over year excluding the effects of foreign currency movements; and

 

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Gross profit in APAC of $5.3 million (20.3% gross margin) was down 21% year to year, down 5% excluding the effects of foreign currency movements.

 

•

Consolidated earnings from operations increased 15% compared to the third quarter of 2014 to $32.6 million, or 2.4% of net sales. Excluding the effects of foreign currency movements, the increase in consolidated earnings from operations was 17% year over year.

 

•

Earnings from operations in North America increased 23% year over year to $31.6 million, or 3.1% of net sales;

 

•

Earnings from operations in EMEA decreased 49% year to year to $1.0 million, or 0.4% of net sales, down 46% excluding the effects of foreign currency movements; and

 

•

Earnings from operations in APAC decreased 97% year to year to $22,000, or 0.1% of net sales. Excluding the effects of foreign currency movements, the decrease in APAC’s earnings from operations was 96% year to year.

 

•

Non-GAAP consolidated earnings from operations for the third quarter of 2015, which exclude severance and restructuring expenses in both periods and a non-cash real estate impairment charge of $800,000 in the 2015 period, increased 19% year over year to $34.3 million, or 2.6% of net sales.*

 

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Insight Enterprises, Inc.         6820 South Harl Avenue         Tempe, Arizona 85283         800.467.4448         FAX 480.760.8958

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Insight Q3 2015 Results, Page 2		October 28, 2015

 

•

Consolidated net earnings and diluted earnings per share for the third quarter of 2015 were $20.8 million and $0.56, respectively, at an effective tax rate of 35.0%.

 

•

Non-GAAP consolidated net earnings and diluted earnings per share for the third quarter of 2015, which exclude severance and restructuring expenses and a non-cash real estate impairment charge and the tax effect of these charges, were $21.9 million and $0.59, respectively.*

 

•

During the three months ended September 30, 2015, the Company repurchased approximately 194,000 shares of its common stock, which represented the remaining $5.9 million authorized under previously approved repurchase programs.

“In the third quarter, our team delivered double digit sales and gross profit growth in constant currency and controlled discretionary expenses, which resulted in strong earnings growth year over year,” stated Ken Lamneck, President and Chief Executive Officer. “We are pleased with our sales and operational execution in the first nine months of 2015. Despite currency headwinds, we have delivered solid financial results this year while growing our sales force globally, and most recently we enhanced our services expertise with the acquisition of BlueMetal on October 1^st. We believe our actions so far this year will serve us well as we close out 2015 and head into 2016,” added Lamneck.

The Company refers to changes in net sales, gross profit and earnings from operations on a consolidated basis and 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 weighted average translation rate for the current period.

Net of tax amounts referenced herein were computed using the statutory tax rate for the taxing jurisdictions in the operating segment in which the related expenses were recorded, adjusted for the effects of valuation allowances on net operating losses in certain jurisdictions.

* 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.         6820 South Harl Avenue         Tempe, Arizona 85283         800.467.4448         FAX 480.760.8958

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Insight Q3 2015 Results, Page 3		October 28, 2015

 

GUIDANCE

For the full year 2015, the Company continues to expect top line growth in the low single digits in U.S. dollar terms. In the fourth quarter, the Company expects diluted earnings per share to be between $0.56 and $0.61 and, for the full year, diluted earnings per share is expected to be between $2.10 and $2.15.

This outlook reflects:

 

•

the adverse effect on gross profit of previously announced partner program changes in the software category, which the Company expects to be approximately $8 million for the full year 2015;

 

•

an effective tax rate of 38% for the fourth quarter; and

 

•

average common shares outstanding of approximately 38.3 million for the full year 2015.

This outlook excludes severance and restructuring expenses incurred during the year and the non-cash real estate impairment charge recorded in the third quarter.

CONFERENCE CALL AND WEBCAST

The Company will host a conference call and live web cast today at 5:00 p.m. ET to discuss third quarter 2015 results of operations. A live web cast of the conference call (in listen-only mode) will be available on the Company’s web site 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 61039037.

USE OF NON-GAAP FINANCIAL MEASURES

The non-GAAP financial measures exclude severance and restructuring expenses, non-cash real estate impairment and accelerated depreciation charges and the tax effect of these charges. 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.

 

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Insight Enterprises, Inc.         6820 South Harl Avenue         Tempe, Arizona 85283         800.467.4448         FAX 480.760.8958

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Insight Q3 2015 Results, Page 4		October 28, 2015

 

FINANCIAL SUMMARY TABLE

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

 

		Three Months Ended September 30,												Nine Months Ended September 30,
		2015				2014				change				2015				2014				change
Insight Enterprises, Inc.
Net sales		$	1,342,195			$	1,237,668				8	%		$	3,985,905			$	3,870,095				3	%
Gross profit		$	182,251			$	171,820				6	%		$	535,479			$	530,164				1	%
Gross margin			13.6	%			13.9	%			(30	bps)			13.4	%			13.7	%			(30	bps)
Selling and administrative expenses		$	148,796			$	143,134				4	%		$	437,596			$	433,373				1	%
Severance and restructuring expenses		$	817			$	308				165	%		$	1,912			$	955				100	%
Earnings from operations		$	32,638			$	28,378				15	%		$	95,971			$	95,836				—
Net earnings		$	20,825			$	17,402				20	%		$	57,275			$	56,201				2	%
Diluted earnings per share		$	0.56			$	0.42				33	%		$	1.49			$	1.36				10	%
North America
Net sales		$	1,022,432			$	891,345				15	%		$	2,823,791			$	2,561,279				10	%
Gross profit		$	135,998			$	120,214				13	%		$	375,730			$	352,665				7	%
Gross margin			13.3	%			13.5	%			(20	bps)			13.3	%			13.8	%			(50	bps)
Selling and administrative expenses		$	103,793			$	94,382				10	%		$	295,228			$	278,121				6	%
Severance and restructuring expenses		$	618			$	102				506	%		$	873			$	165				429	%
Earnings from operations		$	31,587			$	25,730				23	%		$	79,629			$	74,379				7	%
EMEA
Net sales		$	293,635			$	313,644				(6	%)		$	1,029,103			$	1,148,444				(10	%)
Gross profit		$	40,949			$	44,895				(9	%)		$	138,575			$	150,302				(8	%)
Gross margin			13.9	%			14.3	%			(40	bps)			13.5	%			13.1	%			40	bps
Selling and administrative expenses		$	39,721			$	42,684				(7	%)		$	125,232			$	135,819				(8	%)
Severance and restructuring expenses		$	199			$	209				(5	%)		$	1,039			$	684				52	%
Earnings from operations		$	1,029			$	2,002				(49	%)		$	12,304			$	13,799				(11	%)
APAC
Net sales		$	26,128			$	32,679				(20	%)		$	133,011			$	160,372				(17	%)
Gross profit		$	5,304			$	6,711				(21	%)		$	21,174			$	27,197				(22	%)
Gross margin			20.3	%			20.5	%			(20	bps)			15.9	%			17.0	%			(110	bps)
Selling and administrative expenses		$	5,282			$	6,068				(13	%)		$	17,136			$	19,433				(12	%)
Severance and restructuring expenses		$	—			$	(3	)				**		$	—			$	106					**
Earnings from operations		$	22			$	646				(97	%)		$	4,038			$	7,658				(47	%)

 

		North America												EMEA												APAC
		Three Months Ended September 30,												Three Months Ended September 30,												Three Months Ended September 30,
Sales Mix		2015				2014				% change*				2015				2014				% change*				2015				2014				% change*
Hardware			63	%			63	%			14	%			46	%			45	%			(5	%)			13	%			10	%			11	%
Software			30	%			31	%			15	%			51	%			52	%			(8	%)			82	%			86	%			(24	%)
Services			7	%			6	%			24	%			3	%			3	%			1	%			5	%			4	%			(10	%)
			100	%			100	%			15	%			100	%			100	%			(6	%)			100	%			100	%			(20	%)

 

*	Represents growth/decline in category net sales on a U.S. dollar basis and does not exclude the effects of foreign currency movements.

**	Percentage change not considered meaningful.

 

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Insight Enterprises, Inc.         6820 South Harl Avenue         Tempe, Arizona 85283         800.467.4448         FAX 480.760.8958

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Insight Q3 2015 Results, Page 5		October 28, 2015

 

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 fourth quarter and full year 2015 financial results, including top line growth rates and diluted earnings per share, and the assumptions relating thereto, including the effect on gross profit of partner program changes, the Company’s effective tax rate, the expected average outstanding share count for 2015 and trends and opportunities relating to the IT industry, 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, 2014:

 

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

 

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

 

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

 

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

 

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

 

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disruptions in the Company’s IT systems and voice and data networks;

 

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

 

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general economic conditions;

 

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the Company’s reliance on commercial delivery services;

 

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the Company’s dependence on certain personnel;

 

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

 

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the risks associated with the Company’s international operations;

 

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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, except as may be required by law, does not intend to update, any forward-looking statements. The Company does not endorse any projections regarding future performance that may be made by third parties.

 

CONTACTS:		GLYNIS BRYAN		HELEN JOHNSON
		CHIEF FINANCIAL OFFICER		SENIOR VP, FINANCE
		TEL. 480.333.3390		TEL. 480.333.3234
		EMAIL glynis.bryan@insight.com		EMAIL helen.johnson@insight.com

 

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Insight Q3 2015 Results, Page 6		October 28, 2015

 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2015				2014				2015				2014
Net sales		$	1,342,195			$	1,237,668			$	3,985,905			$	3,870,095
Costs of goods sold			1,159,944				1,065,848				3,450,426				3,339,931
Gross profit			182,251				171,820				535,479				530,164
Operating expenses:
Selling and administrative expenses			148,796				143,134				437,596				433,373
Severance and restructuring expenses			817				308				1,912				955
Earnings from operations			32,638				28,378				95,971				95,836
Non-operating (income) expense:
Interest income			(265	)			(229	)			(611	)			(811	)
Interest expense			2,062				1,594				5,518				4,553
Net foreign currency exchange (gain) loss			(1,561	)			238				(928	)			1,195
Other expense, net			357				369				969				1,061
Earnings before income taxes			32,045				26,406				91,023				89,838
Income tax expense			11,220				9,004				33,748				33,637
Net earnings		$	20,825			$	17,402			$	57,275			$	56,201
Net earnings per share:
Basic		$	0.56			$	0.42			$	1.50			$	1.36
Diluted		$	0.56			$	0.42			$	1.49			$	1.36
Shares used in per share calculations:
Basic			37,095				40,972				38,279				41,185
Diluted			37,351				41,270				38,557				41,472

 

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Insight Enterprises, Inc.         6820 South Harl Avenue         Tempe, Arizona 85283         800.467.4448         FAX 480.760.8958

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Insight Q3 2015 Results, Page 7		October 28, 2015

 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

(UNAUDITED)

 

		September 30, 2015				December 31, 2014
ASSETS
Current assets:
Cash and cash equivalents		$	148,134			$	164,524
Accounts receivable, net			1,106,231				1,309,209
Inventories			131,459				122,573
Inventories not available for sale			46,180				45,261
Deferred income taxes			12,134				13,385
Other current assets			58,359				62,920
Total current assets			1,502,497				1,717,872
Property and equipment, net			92,864				104,181
Goodwill			26,257				26,257
Intangible assets, net			15,073				23,567
Deferred income taxes			57,141				58,620
Other assets			22,764				17,626
		$	1,716,596			$	1,948,123
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable – trade		$	587,130			$	819,916
Accounts payable – inventory financing facility			176,489				122,781
Accrued expenses and other current liabilities			122,049				144,561
Current portion of long-term debt			1,534				766
Deferred revenue			46,555				50,904
Total current liabilities			933,757				1,138,928
Long-term debt			85,057				62,535
Deferred income taxes			592				940
Other liabilities			27,906				24,489
			1,047,312				1,226,892
Stockholders’ equity:
Preferred stock			—				—
Common stock			371				401
Additional paid-in capital			314,533				337,167
Retained earnings			390,145				396,992
Accumulated other comprehensive loss – foreign currency translation adjustments			(35,765	)			(13,329	)
Total stockholders’ equity			669,284				721,231
		$	1,716,596			$	1,948,123

 

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Insight Q3 2015 Results, Page 8		October 28, 2015

 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

(UNAUDITED)

 

		Nine Months Ended September 30,
		2015				2014
Cash flows from operating activities:
Net earnings		$	57,275			$	56,201
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization			28,426				30,648
Non-cash real estate impairment			800				4,558
Provision for losses on accounts receivable			4,139				3,235
Write-downs of inventories			2,834				2,028
Write-off of property and equipment			72				531
Non-cash stock-based compensation			6,685				5,861
Excess tax benefit from employee gains on stock-based compensation			(544	)			(438	)
Deferred income taxes			2,463				447
Changes in assets and liabilities:
Decrease in accounts receivable			168,781				201,258
Increase in inventories			(13,508	)			(34,628	)
Decrease (increase) in other current assets			2,354				(9,056	)
(Increase) decrease in other assets			(5,431	)			3,203
Decrease in accounts payable			(212,289	)			(177,627	)
(Decrease) increase in deferred revenue			(4,181	)			8,986
Decrease in accrued expenses and other liabilities			(13,234	)			(47,411	)
Net cash provided by operating activities			24,642				47,796
Cash flows from investing activities:
Purchases of property and equipment			(10,804	)			(7,983	)
Net cash used in investing activities			(10,804	)			(7,983	)
Cash flows from financing activities:
Borrowings on senior revolving credit facility			511,410				399,492
Repayments on senior revolving credit facility			(511,410	)			(398,992	)
Borrowings on accounts receivable securitization financing facility			1,388,100				708,070
Repayments on accounts receivable securitization financing facility			(1,364,100	)			(723,070	)
Borrowings under other financing agreements			—				2,002
Repayments under other financing agreements			(543	)			—
Payments on capital lease obligation			(167	)			(163	)
Net borrowings under inventory financing facility			53,708				10,408
Payment of deferred financing fees			—				(277	)
Excess tax benefit from employee gains on stock-based compensation			544				438
Payment of payroll taxes on stock-based compensation through shares withheld			(2,137	)			(1,662	)
Repurchases of common stock			(91,843	)			(29,652	)
Net cash used in financing activities			(16,438	)			(33,406	)
Foreign currency exchange effect on cash and cash equivalent balances			(13,790	)			(6,122	)
(Decrease) increase in cash and cash equivalents			(16,390	)			285
Cash and cash equivalents at beginning of period			164,524				126,817
Cash and cash equivalents at end of period		$	148,134			$	127,102

 

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Insight Enterprises, Inc.         6820 South Harl Avenue         Tempe, Arizona 85283         800.467.4448         FAX 480.760.8958

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Insight Q3 2015 Results, Page 9		October 28, 2015

 

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2015				2014				2015				2014
Consolidated Earnings from Operations:
GAAP		$	32,638			$	28,378			$	95,971			$	95,836
Non-cash real estate impairment and accelerated depreciation			800				—				800				5,178
Severance and restructuring expenses			817				308				1,912				955
Non-GAAP		$	34,255			$	28,686			$	98,683			$	101,969
Consolidated Net Earnings:
GAAP		$	20,825			$	17,402			$	57,275			$	56,201
Non-cash real estate impairment and accelerated depreciation, net of tax			499				—				499				3,174
Severance and restructuring expenses, net of tax			559				195				1,523				598
Non-GAAP		$	21,883			$	17,597			$	59,297			$	59,973
Consolidated Diluted EPS:
GAAP		$	0.56			$	0.42			$	1.49			$	1.36
Non-cash real estate impairment and accelerated depreciation, net of tax			0.01				—				0.01				0.08
Severance and restructuring expenses, net of tax			0.02				0.01				0.04				0.01
Non-GAAP		$	0.59			$	0.43			$	1.54			$	1.45
North America Earnings from Operations:
GAAP		$	31,587			$	25,730			$	79,629			$	74,379
Non-cash real estate impairment and accelerated depreciation			800				—				800				5,178
Severance and restructuring expenses			618				102				873				165
Non-GAAP		$	33,005			$	25,832			$	81,302			$	79,722
EMEA Earnings from Operations:
GAAP		$	1,029			$	2,002			$	12,304			$	13,799
Severance and restructuring expenses			199				209				1,039				684
Non-GAAP		$	1,228			$	2,211			$	13,343			$	14,483
APAC Earnings from Operations:
GAAP		$	22			$	646			$	4,038			$	7,658
Severance and restructuring expenses			—				(3	)			—				106
Non-GAAP		$	22			$	643			$	4,038			$	7,764

 

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Insight Enterprises, Inc.         6820 South Harl Avenue         Tempe, Arizona 85283         800.467.4448         FAX 480.760.8958