Insight Enterprises Inc. Reports Operating Results (10-Q)
Insight is a global direct marketer of brand name computers hardware and software. The company markets to small-and-medium-sized businesses through a combination of a strong outbound telemarketing sales force electronic commerce electronic marketing and direct mail catalogs. The company offers an extensive assortment of computer hardware and software. The company\'s sales force aggressive marketing strategies and streamlined distribution together with its advanced proprietary information system have resulted in high customer loyalty and strong profitable growth. Insight Enterprises Inc. has a market cap of $479.6 million; its shares were traded at around $10.46 with a P/E ratio of 6.9 and P/S ratio of 0.1. Insight Enterprises Inc. had an annual average earning growth of 17% over the past 5 years. Highlight of Business Operations:Consolidated net sales were $1.04 billion in the second quarter of 2009, down 26% from the $1.40 billion reported in the second quarter of 2008. Gross profit also declined 26% to $147.8 million, while gross margin remained relatively constant, declining just 10 basis points to 14.3%.
On a consolidated basis, we reported net earnings from continuing operations of $12.9 million and diluted earnings per share from continuing operations of $0.28 for the second quarter.
Earnings from a discontinued operation were $4.5 million, $2.8 million net of tax, or $0.06 per diluted share, bringing our consolidated diluted net earnings per share to $0.34 for the second quarter. The net earnings from a discontinued operation result from the favorable settlement of an arbitrated claim related to the 2006 sale of a former subsidiary of Insight.
Our focus on cash flow initiatives continued to yield benefits in the second quarter and as a result, we ended the quarter with outstanding long-term debt of $119.5 million, down $108.5 million from December 31, 2008, including a $51.5 million reduction during the second quarter.
Net sales in EMEA decreased 26%, or $101.0 million, in U.S. dollars, for the three months ended June 30, 2009 compared to the three months ended June 30, 2008. Excluding the effects of foreign currency movements, net sales were down 12% compared to the second quarter of last year. In U.S. dollars, hardware and software sales declined 27% and 26%, respectively, while sales of services improved 11% year over year. The global IT demand environment continues to be challenging, with year over year decreases in hardware and software product categories. In addition, part of the decline in software sales year over year relates to the previously announced changes in programs with our largest software partner. The year over year improvement in sales of services primarily resulted from the contribution from our acquisition of MINX in July 2008. EMEA had 706 account executives at June 30, 2009, an increase from 646 at June 30, 2008. Net sales per average number of account executives in EMEA decreased 34% to approximately $405,000 for the three months ended June 30, 2009 compared to approximately $611,000 for the three months ended June 30, 2008.
EMEAs gross profit declined 26% for the three months ended June 30, 2009 compared to the three months ended June 30, 2008. Excluding the effects of foreign currency movements, gross profit was down 12% compared to the second quarter of last year. As a percentage of net sales, gross margin remained relatively consistent with the prior year at 14.9%, reflecting an increased percentage of gross margin contributed by agency fees for enterprise software agreement renewals of approximately 20 basis points and improved margins in the services business of over 10 basis points, offset by declines in margin due to an increase in client rebates, and a decrease in supplier discounts of approximately 30 basis points. Gross profit per average number of account executives decreased 34% to approximately $60,000 for the three months ended June 30, 2009 compared to approximately $91,000 for the three months ended June 30, 2008. For the six months ended June 30, 2009, gross profit declined 25% compared to the six months ended June 30, 2008. Excluding the effects of foreign currency movements, gross profit was down 8% compared to the six months ended June 30, 2008. As a percentage of net sales, gross margin declined 70 basis points, primarily due to decreases in product margin, including vendor funding.
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