Insight Enterprises, Inc. Reports Fourth Quarter and Full Year 2012 Results TEMPE, Ariz., Feb. 14, 2013 (GLOBE NEWSWIRE) -- Insight Enterprises, Inc. (Nasdaq:NSIT) (the "Company") today reported results of operations for the quarter and year ended December 31, 2012. Fourth Quarter Highlights For the fourth quarter of 2012 compared to the fourth quarter of 2011: *Net sales decreased 1% to $1.3 billion. *Gross profit increased 1% to $180.4 million. *Gross margin increased approximately 20 basis points to 13.4%. *Earnings from operations decreased 13% to $36.6 million, or 2.7% of net sales. *The Company's effective tax rate was 40.3% compared to 15.8%. *Net earnings decreased 40% to $20.8 million. *Diluted earnings per share decreased 41% to $0.46. *Excluding severance and restructuring expenses, net earnings and diluted earnings per share on a non-GAAP basis were $22.1 million and $0.49, respectively, in the fourth quarter of 2012.* 2012 Full Year Highlights For the full year 2012 compared to the full year 2011: *Net sales remained flat at $5.3 billion. *Gross profit increased 1% to $719.7 million. *Gross margin increased approximately 20 basis points to 13.6%. *Earnings from operations increased 1% to $148.2 million, or 2.8% of net sales. *The Company's effective tax rate was 35.9% compared to 29.3%. *Net earnings decreased 7% to $92.8 million. *Diluted earnings per share decreased 5% to $2.07. *Excluding severance and restructuring expenses and the gain on bargain purchase of Inmac, net earnings and diluted earnings per share on a non-GAAP basis were $95.3 million and $2.13, respectively, in 2012.* During the fourth quarter of 2012, the Company's effective tax rate was higher than normal due to a lower mix of income earned in foreign jurisdictions, which have a lower statutory tax rate, and valuation allowances recorded in certain countries in EMEA. During the fourth quarter of the prior year, the Company recorded a tax benefit from a reorganization of certain of its foreign operations, primarily related to the recognition of foreign tax credits, which decreased the Company's effective tax rate. * 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. "Overall, 2012 was a productive year for our business. Market conditions were softer as macro-economic concerns globally led to lower capital spending for IT products, but we executed well in the environment; improving the overall profitability of our sales, investing strategically in sales and services resources, successfully integrating two acquisitions, and essentially completing our IT systems integration projects in Europe and North America," stated Ken Lamneck, President and Chief Executive Officer. "We believe these actions will position us well as we head through 2013," added Lamneck. SEGMENT OVERVIEW In North America, net sales were $908.3 million for the fourth quarter of 2012, down 2% compared to sales of $922.5 million for the fourth quarter of 2011. Net sales of software increased 8% year over year, while net sales of hardware and services decreased 5% and 21%, respectively. Gross profit of $117.6 million was also down 2% year to year, with gross margin decreasing to 12.9% from 13.1% in the fourth quarter of 2011. Selling and administrative expenses in North America in the fourth quarter of 2012 remained flat, decreasing $166,000, compared to the fourth quarter of 2011. During the fourth quarter of 2012, North America had $535,000, $336,000 net of tax, of severance and restructuring expenses compared to $464,000, $285,000 net of tax, during the fourth quarter of 2011. As a result, earnings from operations in North America decreased 10% year to year to $27.5 million, or 3.0% of net sales, in the fourth quarter of 2012, compared to $30.4 million, or 3.3% of net sales, in the fourth quarter of 2011. The Company's EMEA operating segment reported net sales of $378.4 million for the fourth quarter of 2012, an increase of 2% in U.S. dollars compared to the fourth quarter of 2011. Excluding the effects of foreign currency movements, net sales increased 3% year over year. Results for the fourth quarter of 2012 include Inmac, which the Company acquired effective February 1, 2012. Net sales of hardware and services were up 24% and 37%, respectively, year over year, while net sales of software declined 7% year to year, all in U.S. dollars. Excluding the effects of foreign currency movements, hardware and services net sales increased 21% and 38%, respectively, while net sales of software declined 6% compared to the fourth quarter of 2011. Gross profit of $50.9 million was up 4% in U.S. dollars, also 4% excluding the effects of foreign currency movements, with gross margin increasing to 13.4% for the fourth quarter of 2012 from 13.2% in the fourth quarter of 2011. Selling and administrative expenses in EMEA in the fourth quarter of 2012 were up 13%, or $5.3 million, compared to the fourth quarter of 2011 in U.S. dollars and, excluding the effects of foreign currency movements, were up 14% year over year. During the fourth quarter of 2012, EMEA recorded severance and restructuring expenses of $1.3 million, $991,000 net of tax, compared to $163,000, $114,000 net of tax, reported for the fourth quarter of 2011. As a result, earnings from operations in EMEA decreased 53% year to year to $4.0 million, or 1.1% of net sales, in the fourth quarter of 2012 compared to $8.5 million, or 2.3% of net sales, in the fourth quarter of 2011. The Company's APAC operating segment reported net sales of $59.9 million for the fourth quarter of 2012, a decrease of 12% compared to the fourth quarter of 2011 in U.S. dollars, 15% excluding the effects of foreign currency movements. Gross profit was $12.0 million, an increase of 25% year over year in U.S. dollars, 21% excluding the effects of foreign currency movements, with gross margin increasing to 20.0% for the fourth quarter of 2012, an improvement of approximately 600 basis points compared to 14.0% in the fourth quarter of 2011. Selling and administrative expenses in APAC increased $653,000, or 11%, year over year in U.S. dollars, 8% excluding the effects of foreign currency movements. As a result, earnings from operations in APAC increased 52% year over year to $5.1 million, or 8.5% of net sales, in the fourth quarter of 2012 compared to $3.4 million, or 4.9% of net sales, in the fourth quarter of 2011. 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. 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 For the full year of 2013, the Company expects the global IT market to grow in the low single digit range, with trends improving throughout the year. The Company expects its business to grow slightly faster than the market as it continues to invest in its sales force and expand its capabilities into key markets. For the full year of 2013, the Company expects diluted earnings per share to be between $2.22 and $2.32. 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; *an effective tax rate of 36% to 38%; *the completion of a share repurchase program of up to $50 million in the first half of the year; and *capital expenditures of $18 to $22 million. This outlook excludes severance and restructuring expenses. CONFERENCE CALL AND WEBCAST The Company will host a conference call and live web cast today at 5:00 p.m. ET to discuss fourth quarter and full year 2012 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 www.insight.com, 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 92525863. USE OF NON-GAAP FINANCIAL MEASURES The non-GAAP financial measures exclude severance and restructuring expenses in 2012 and 2011, a gain on bargain purchase in 2012, and the tax effect of these items, as well as a tax benefit from a reorganization of certain foreign operations in 2011. 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. FINANCIAL SUMMARY TABLE (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) Three Months Ended December 31, Years Ended December 31, Insight % % Enterprises, 2012 2011 change 2012 2011 change Inc. Net sales $1,346,675 $1,360,353 (1%) $5,301,441 $5,287,228 -- Gross profit $180,393 $178,983 1% $719,676 $709,157 1% Earnings from $36,580 $42,225 (13%) $148,153 $147,383 1% operations Net earnings $20,767 $34,654 (40%) $92,763 $100,235 (7%) Diluted EPS $0.46 $0.78 (41%) $2.07 $2.18 (5%) North America Net sales $908,295 $922,537 (2%) $3,626,357 $3,672,492 (1%) Gross profit $117,554 $120,539 (2%) $478,522 $476,776 -- Earnings from $27,490 $30,378 (10%) $116,054 $107,585 8% operations EMEA Net sales $378,438 $369,435 2% $1,463,607 $1,398,421 5% Gross profit $50,874 $48,882 4% $203,845 $198,073 3% Earnings from $3,981 $8,487 (53%) $20,383 $30,106 (32%) operations APAC Net sales $59,942 $68,381 (12%) $211,477 $216,315 (2%) Gross profit $11,965 $9,562 25% $37,309 $34,308 9% Earnings from $5,109 $3,360 52% $11,716 $9,692 21% operations North America EMEA APAC Three Months Ended Three Months Ended Three Months Ended December 31, December 31, December 31, Sales Mix 2012 2011 % % 2011 % change* 2012 2011 change* 2012 change* Hardware 60% 62% (5%) 34% 28% 24% 2% 1% 416% Software 35% 32% 8% 64% 70% (7%) 94% 97% (15%) Services 5% 6% (21%) 2% 2% 37% 4% 2% 42% 100% 100% (2%) 100% 100% 2% 100% 100% (12%) North America EMEA APAC Years Ended Years Ended Years Ended December 31, December 31, December 31, % % % Sales Mix 2012 2011 change* 2012 2011 change* 2012 2011 change* Hardware 62% 64% (4%) 37% 31% 23% 2% 1% 193% Software 32% 30% 7% 61% 67% (4%) 94% 96% (4%) Services 6% 6% (13%) 2% 2% 17% 4% 3% 15% 100% 100% (1%) 100% 100% 5% 100% 100% (2%) * Represents growth/decline in category net sales on a U.S. dollar basis. 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 expectations for growth in the global information technology ("IT") market and the Company's business and the Company's expected 2013 diluted earnings per share, and the assumptions relating thereto, 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, 2011: othe Company's reliance on partners for product availability and competitive products to sell as well as the Company's competition with its partners; othe Company's reliance on partners for marketing funds and purchasing incentives; odisruptions 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; ogeneral economic conditions; othe security of the Company's electronic and other confidential information; oactions of the Company's competitors, including manufacturers and publishers of products the Company sells; othe integration and operation of acquired businesses, including the Company's ability to achieve expected benefits of the acquisitions; ochanges in the IT industry and/or rapid changes in product standards; ofailure to comply with the terms and conditions of the Company's commercial and public sector contracts; othe variability of the Company's net sales and gross profit; othe risks associated with the Company's international operations; oexposure to changes in, interpretations of, or enforcement trends related to tax rules and regulations; othe Company's dependence on key personnel; and ointellectual 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. NSIT-F The Insight Enterprises, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=13985 INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) Three Months Ended Years Ended December 31, December 31, 2012 2011 2012 2011 Net sales $ 1,346,675 $ 1,360,353 $ 5,301,441 $ 5,287,228 Costs of goods sold 1,166,282 1,181,370 4,581,765 4,578,071 Gross profit 180,393 178,983 719,676 709,157 Operating expenses: Selling and administrative 141,952 136,131 565,206 556,689 expenses Severance and 1,861 627 6,317 5,085 restructuring expenses Earnings from operations 36,580 42,225 148,153 147,383 Non-operating (income) expense: Interest income (340) (392) (1,468) (1,686) Interest expense 1,351 1,718 6,101 6,927 Gain on bargain purchase -- -- (2,022) -- Net foreign currency 409 (605) (463) (1,136) exchange loss (gain) Other expense, net 385 349 1,337 1,589 Earnings before income 34,775 41,155 144,668 141,689 taxes Income tax expense 14,008 6,501 51,905 41,454 Net earnings $20,767 $34,654 $92,763 $100,235 Net earnings per share: Basic $0.47 $0.79 $2.09 $2.20 Diluted $0.46 $0.78 $2.07 $2.18 Shares used in per share calculations: Basic 44,571 43,891 44,413 45,474 Diluted 45,003 44,434 44,834 46,021 INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) (UNAUDITED) December 31, 2012 2011 ASSETS Current assets: Cash and cash equivalents $152,119 $128,336 Accounts receivable, net 1,371,356 1,208,276 Inventories 100,896 114,763 Inventories not available for sale 31,249 43,816 Deferred income taxes 16,387 17,344 Other current assets 29,543 23,144 Total current assets 1,701,550 1,535,679 Property and equipment, net 143,513 140,705 Goodwill 26,257 26,257 Intangible assets, net 47,405 59,021 Deferred income taxes 64,013 70,771 Other assets 18,765 25,178 $2,001,503 $1,857,611 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $982,611 $882,384 Accrued expenses and other current liabilities 158,621 178,749 Current portion of long-term debt 602 1,017 Deferred revenue 40,287 47,012 Total current liabilities 1,182,121 1,109,162 Long-term debt 80,000 115,602 Deferred income taxes 2,312 1,186 Other liabilities 31,779 34,829 1,296,212 1,260,779 Stockholders' equity: Preferred stock -- -- Common stock 446 439 Additional paid-in capital 369,300 360,370 Retained earnings 315,888 223,125 Accumulated other comprehensive income – foreign 19,657 12,898 currency translation adjustments Total stockholders' equity 705,291 596,832 $2,001,503 $1,857,611 INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) Years Ended December 31, 2012 2011 Cash flows from operating activities: Net earnings $92,763 $100,235 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 41,177 39,139 Provision for losses on accounts receivable 4,195 4,267 Write-downs of inventories 3,089 6,830 Write-off of property and equipment 596 1,390 Non-cash stock-based compensation 8,548 7,919 Gain on bargain purchase (2,022) -- Excess tax benefit from employee gains on (1,966) (1,809) stock-based compensation Deferred income taxes 8,978 4,552 Changes in assets and liabilities: Increase in accounts receivable (141,182) (78,883) Decrease (increase) in inventories 27,477 (8,247) (Increase) decrease in other current assets (5,816) 25,895 Decrease (increase) in other assets 9,207 (12,107) Increase in accounts payable 56,442 45,205 Decrease in deferred revenue (11,196) (17,926) Decrease in accrued expenses and other liabilities (22,848) (735) Net cash provided by operating activities 67,442 115,725 Cash flows from investing activities: Acquisitions, net of cash acquired (3,831) (13,769) Purchases of property and equipment (30,152) (27,093) Net cash used in investing activities (33,983) (40,862) Cash flows from financing activities: Borrowings on senior revolving credit facility 803,953 1,314,500 Repayments on senior revolving credit facility (885,953) (1,289,500) Borrowings on accounts receivable securitization 581,000 90,000 financing facility Repayments on accounts receivable securitization (534,000) (90,000) financing facility Payments on capital lease obligation (1,017) (997) Net borrowings (repayments) under inventory 22,900 (41,179) financing facility Payment of deferred financing fees (2,777) -- Proceeds from sales of common stock under employee 2,641 37 stock plans Excess tax benefit from employee gains on 1,966 1,809 stock-based compensation Payment of payroll taxes on stock-based (3,288) (2,697) compensation through shares withheld Repurchases of common stock -- (50,000) Net cash used in financing activities (14,575) (68,027) Foreign currency exchange effect on cash flows 4,899 (2,263) Increase in cash and cash equivalents 23,783 4,573 Cash and cash equivalents at beginning of year 128,336 123,763 Cash and cash equivalents at end of year $152,119 $128,336 INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) Three Months Ended Years Ended December 31, December 31, 2012 2011 2012 2011 Consolidated Earnings from Operations: GAAP $ 36,580 $ 42,225 $ 148,153 $ 147,383 Severance and restructuring expenses 1,861 627 6,317 5,085 Non-GAAP $ 38,441 $ 42,852 $ 154,470 $ 152,468 Consolidated Net Earnings: GAAP $ 20,767 $ 34,654 $ 92,763 $ 100,235 Severance and restructuring expenses, 1,327 399 4,264 3,358 net of tax Gain on bargain purchase, net of tax -- -- (1,699) -- Tax benefits from the reorganization of -- (6,802) -- (6,802) certain foreign operations Non-GAAP $ 22,094 $ 28,251 $ 95,328 $ 96,791 Consolidated Diluted EPS: GAAP $ 0.46 $ 0.78 $ 2.07 $ 2.18 Severance and restructuring expenses, 0.03 0.01 0.10 0.07 net of tax Gain on bargain purchase, net of tax -- -- (0.04) -- Tax benefits from the reorganization of -- (0.15) -- (0.15) certain foreign operations Non-GAAP $ 0.49 $ 0.64 $ 2.13 $ 2.10 North America Earnings from Operations: GAAP $ 27,490 $ 30,378 $ 116,054 $ 107,585 Severance and restructuring expenses 535 464 2,834 2,380 Non-GAAP $ 28,025 $ 30,842 $ 118,888 $ 109,965 EMEA Earnings from Operations: GAAP $ 3,981 $ 8,487 $ 20,383 $ 30,106 Severance and restructuring expenses 1,326 163 3,483 2,705 Non-GAAP $ 5,307 $ 8,650 $ 23,866 $ 32,811 CONTACT: GLYNIS BRYAN CHIEF FINANCIAL OFFICER TEL. 480-333-3390 EMAIL email@example.com HELEN JOHNSON SENIOR VP, TREASURER TEL. 480-333-3234 MAIL firstname.lastname@example.org Insight Enterprises, Inc. 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Insight Enterprises, Inc. Reports Fourth Quarter and Full Year 2012 Results
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