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Insight Enterprises Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 3, 2011 06:09AM

Insight Enterprises Inc. (NSIT) filed Quarterly Report for the period ended 2011-09-30. Insight Enterprises Inc. has a market cap of $774.1 million; its shares were traded at around $17.09 with a P/E ratio of 9 and P/S ratio of 0.2.



Highlight of Business Operations:

Solid sales performance combined with significant operating leverage drove double-digit growth in earnings from operations and operating margin expansion during the third quarter of 2011. Consolidated net sales increased 6% to $1.24 billion in the three months ended September 30, 2011 compared to $1.17 billion for three months ended September 30, 2010. Gross profit for the three months ended September 30, 2011 also increased 6% year over year to $163.5 million, and gross margin remained steady at 13.2%. On a consolidated basis, we reported earnings from operations of $27.9 million, net earnings of $17.2 million and diluted earnings per share of $0.38 for the third quarter of 2011. This compares to earnings from operations of $24.8 million, net earnings of $14.4 million and diluted earnings per share of $0.31 for the third quarter of 2010. While the market for IT products moderated somewhat from the double-digit sales growth we experienced in recent quarters coming out of the recession, our sales performance and disciplined cost management drove financial performance ahead of our expectations.

Net sales in EMEA increased 8%, or $21.3 million, in U.S. dollars, for the three months ended September 30, 2011 compared to the three months ended September 30, 2010. Excluding the effects of foreign currency movements, net sales increased 2% compared to the third quarter of last year. EMEA’s growth rate lags our growth rate in North America and APAC as the European economy has recovered more slowly post-recession than our other markets. Net sales of hardware were up 4% year over year in U.S. dollars but were flat excluding the effects of foreign currency movements, as growth in the middle market client space more than offset reduced spending in the public sector market. Software net sales increased 10% year over year in U.S. dollars, 3% excluding the effects of foreign currency movements, due primarily to new client engagements in the middle market client space. Net sales of services increased 22% year over year in U.S. dollars, 15% excluding the effects of foreign currency movements, due primarily to higher volume and new client engagements.

Net sales in EMEA increased 9%, or $84.7 million, in U.S. dollars, for the nine months ended September 30, 2011 compared to the nine months ended September 30, 2010. Excluding the effects of foreign currency movements, net sales were up 2% compared to the first nine months of last year. On a year to date basis, hardware and software sales increased 3% and 12%, respectively, while sales of services improved 30% year over year, in U.S. dollars. Excluding the effects of foreign currency movements, hardware sales declined 2% year to year, while net sales of software and services increased 3% and 22%, respectively, year over year. The year to date decrease in hardware sales primarily resulted from a decrease in spending in the public sector market, while the increases in software and services sales primarily resulted from higher volume and new client engagements.

North America’s selling and administrative expenses increased 1%, or $527,000, for the three months ended September 30, 2011 compared to the three months ended September 30, 2010. A year over year increase of $1.1 million related to salaries and benefits, including stock-based compensation, associated with investments in headcount and related benefits and a year over year increase of $700,000 in variable compensation linked with increasing net sales were offset by declines in marketing, facilities and other general and administrative expenses resulting from tight expense management. Although selling and administrative expenses were relatively flat year over year, selling and administrative expenses as a percentage of net sales declined approximately 40 basis points to 9.8% of net sales for the three months ended September 30, 2011 compared to the three months ended September 30, 2010. The decline is primarily attributable to the benefits of ongoing expense management efforts. For the nine months ended September 30, 2011, selling and administrative expenses in North America increased 6%, or $16.9 million compared to the nine months ended September 30, 2010. During the nine months ended September 30, 2011, as expected, we incurred incremental selling and administrative expenses associated with the North America IT systems integration project. In addition, we incurred a non-cash charge of approximately $1.4 million during the period to write-off certain computer software development costs that will not be placed into service as a result of the North America IT systems integration project. The year over year comparison was also affected by the prior year’s selling and administrative expenses being reduced by $2.9 million upon the collection of a single account receivable which we had previously specifically reserved as doubtful.

Our primary uses of cash during the nine months ended September 30, 2011 were to fund working capital requirements, including repayments under our inventory financing facility, to repurchase shares of our common stock and to fund capital expenditures. Operating activities in the nine months ended September 30, 2011 provided $10.1 million in cash, compared to $37.5 million during the nine months ended September 30, 2010, reflecting higher working capital needs on higher sales during the nine months ended September 30, 2011. We had net borrowings on our long-term debt under our revolving credit facility of $65.5 million, made net repayments under our inventory financing facility of $33.2 million and funded $50.0 million of repurchases of our common stock during the nine months ended September 2011. Capital expenditures were $16.9 million for the nine months ended September 30, 2011, a 34% increase over the nine months ended September 30, 2010, primarily related to investments in our IT systems. Cash flows for the nine months ended September 30, 2011 benefited $1.1 million from the foreign currency exchange effect on cash flows while cash flows for the nine months ended September 30, 2010 were negatively affected by $134,000 as a result of foreign currency exchange rates.

Read the The complete Report



Stocks Discussed: NSIT,
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