<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
FOR THE QUARTERLY PERIOD ENDED: MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from __________ to __________
Commission File Number: 0-25092
INSIGHT ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 86-0766246
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
1305 WEST AUTO DRIVE, TEMPE, ARIZONA 85284
(Address of principal executive offices) (Zip Code)
(480) 902-1001
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
The number of shares outstanding of the issuer's common stock as of May 5, 2000
was 26,564,078.
<PAGE> 2
INSIGHT ENTERPRISES, INC.
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements:
Condensed Consolidated Balance Sheets -
March 31, 2000 and December 31, 1999.................................. 3
Condensed Consolidated Statements of Earnings -
Three Months Ended March 31, 2000 and 1999............................ 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 2000 and 1999............................ 5
Notes to Condensed Consolidated Financial Statements.................. 6
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................ 8
Item 3 - Quantitative and Qualitative Disclosures about Market Risk...... 13
PART II - OTHER INFORMATION.............................................. 13
Item 6 - Exhibits and Reports on Form 8-K................................ 13
SIGNATURES............................................................... 14
2
<PAGE> 3
INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
--------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................. $ 50,420 $ 66,675
Accounts receivable, net .................................. 236,253 200,910
Inventories, net .......................................... 20,335 18,928
Prepaid expenses and other current assets ................. 6,293 6,800
--------- ---------
Total current assets ............................. 313,301 293,313
Property and equipment, net .................................... 59,608 56,436
Goodwill, net .................................................. 25,896 25,285
Other assets ................................................... 337 348
--------- ---------
$ 399,142 $ 375,382
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .......................................... $ 156,527 $ 135,201
Accrued expenses and other current liabilities ............ 14,690 16,585
--------- ---------
Total current liabilities ........................ 171,217 151,786
Line of credit ................................................. 1,725 --
Long-term debt, less current portion ........................... 15,007 14,832
Stockholders' equity:
Preferred stock, $.01 par value, 3,000,000 shares
authorized, no shares issued ............................ -- --
Common stock, $.01 par value, 30,000,000 shares authorized,
26,501,460 at March 31, 2000 and 26,801,675 at
December 31, 1999 shares issued and outstanding ......... 269 268
Additional paid-in capital ................................ 128,436 125,923
Retained earnings ......................................... 96,055 83,729
Accumulated other comprehensive income - foreign
currency translation .................................... (1,818) (1,156)
Treasury stock, 412,450 shares at cost .................... (11,749) --
--------- ---------
Total stockholders' equity ....................... 211,193 208,764
--------- ---------
$ 399,142 $ 375,382
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Net sales .................................. $ 467,303 $ 338,136
Costs of goods sold ........................ 411,907 298,270
------------ ------------
Gross profit ...................... 55,396 39,866
Selling, general and administrative expenses 34,734 28,002
Amortization of goodwill ................... 340 306
------------ ------------
Earnings from operations .......... 20,322 11,558
Non-operating (income) expense, net ........ (121) 275
------------ ------------
Earnings before income taxes ...... 20,443 11,283
Income tax expense ......................... 8,117 4,476
------------ ------------
Net earnings ...................... $ 12,326 $ 6,807
============ ============
Earnings per share:
Basic ............................. $ 0.46 $ 0.27
Diluted ........................... $ 0.45 $ 0.26
Shares used in per share calculation:
Basic ............................. 26,732,822 25,482,096
============ ============
Diluted ........................... 27,553,713 26,672,280
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings .......................................................... $ 12,326 $ 6,807
Adjustments to reconcile net earnings to net cash (used in) provided by
operating activities:
Depreciation and amortization ..................................... 2,709 1,702
Tax benefit from stock options exercised .......................... 529 164
Provision for losses on accounts receivable ....................... 2,018 628
Provision for obsolete and slow moving inventories ................ 1,352 978
Deferred income tax (benefit) expense ............................. (480) 493
Change in operating assets and liabilities, net of acquisitions:
Increase in accounts receivable .............................. (37,566) (16,524)
(Increase) decrease in inventories ........................... (2,829) 12,621
Decrease in prepaid expenses and other current assets ........ 970 1,025
Decrease in other assets and goodwill ........................ 167 4
Increase in accounts payable ................................. 21,516 8,687
Decrease in accrued expenses and other
current liabilities ...................................... (1,712) (533)
-------- --------
Net cash (used in) provided by operating activities ...... (1,000) 16,052
-------- --------
Cash flows from investing activities:
Purchases of property and equipment ................................... (5,787) (4,363)
Purchase of additional interest in Plusnet Technologies, Ltd. ......... (1,809) --
-------- --------
Net cash used in investing activities .................... (7,596) (4,363)
-------- --------
Cash flows from financing activities:
Net borrowings on line of credit ...................................... 1,726 --
Net borrowings (repayments) of long-term debt, less current portion ... 137 (133)
Issuance of common stock .............................................. 1,985 1,111
Purchase of treasury stock ............................................ (11,749) --
-------- --------
Net cash (used in) provided by financing activities ..... (7,901) 978
-------- --------
Effect of exchange rate on cash and cash equivalents ....................... 242 (244)
-------- --------
(Decrease) increase in cash and cash equivalents ........................... (16,255) 12,423
Cash and cash equivalents at beginning of period ........................... 66,675 12,974
-------- --------
Cash and cash equivalents at end of period ................................. $ 50,420 $ 25,397
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
INSIGHT ENTERPRISES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. DESCRIPTION OF BUSINESS
Insight Enterprises, Inc. (the "Company") is a holding company with two
major subsidiaries: Insight Direct Worldwide, Inc. ("Insight") and Direct
Alliance Corporation ("DAC").
Insight is a leading global direct marketer of computers, hardware and
software, with locations in the United States, Canada, the United Kingdom and
Germany. We market primarily to small- and medium-sized businesses of 50 to
1,000 employees, through a combination of proactive outbound telephone-based
sales and electronic commerce and marketing. One of Insight's subsidiaries,
Plusnet Technologies, Ltd. ("Plusnet"), is an Internet service provider ("ISP")
providing Internet access and value-added Internet services within the United
Kingdom to residential, small- and medium-sized businesses and corporate
customers.
DAC is a global outsourcing provider of web marketing, sales and
transactional management services for traditional and e-commerce companies.
2. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
and notes have been prepared in accordance with the requirements of Form 10-Q
and consequently do not include all of the disclosures normally required by
generally accepted accounting principles. In the opinion of management, the
accompanying unaudited condensed consolidated financial statements contain all
adjustments necessary to present fairly the financial position of the Company as
of March 31, 2000, the results of operations for the three months ended March
31, 2000 and 1999, and the cash flows for the three months ended March 31, 2000
and 1999. The condensed consolidated balance sheet as of December 31, 1999 was
derived from the audited consolidated financial statements at such date. Certain
amounts in the condensed consolidated financial statements have been
reclassified to conform to the current presentation. The results of operations
for such interim periods are not necessarily indicative of results for the full
year. It is suggested that these condensed consolidated financial statements be
read in conjunction with the consolidated financial statements, including the
related notes thereto, in the Company's Annual Report on Form 10-K for the year
ended December 31, 1999.
The condensed consolidated financial statements include the accounts of
Insight Enterprises, Inc. and its subsidiaries, which are primarily
wholly-owned. Intercompany accounts and transactions have been eliminated in
consolidation.
3. LINE OF CREDIT
The Company has a $100,000,000 credit facility with a finance company.
The agreement provides for cash advances outstanding at any one time up to a
maximum of $100,000,000 on the line of credit, subject to limitations based upon
the Company's eligible accounts receivable and inventories. Cash advances bear
interest at the London Interbank Offered Rate (LIBOR) plus 0.80% (6.93% at March
31, 2000) payable monthly. The credit facility can be used to facilitate the
purchases of inventories from certain suppliers and that portion is classified
on the balance sheet as accounts payable. As of March 31, 2000, the balance of
this portion of the credit facility was $44,999,000. As of March 31, 2000, an
additional $55,001,000 was available under the line of credit.
6
<PAGE> 7
INSIGHT ENTERPRISES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The credit facility expires in February 2002 at which time the
outstanding balance is due. The line is secured by substantially all of the
assets of the Company. The line of credit contains various covenants, including
the requirement that the Company maintain a specific dollar amount of tangible
net worth and restrictions on payment of cash dividends.
4. INCOME TAXES
Income tax expense as provided for the three months ended March 31,
2000 and 1999 is based upon the estimated annual income tax rate of the Company.
7
<PAGE> 8
INSIGHT ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial
Condition and Results of Operations contains forward-looking statements that are
inherently subject to risk and uncertainties. Forward-looking statements can be
identified by the use of forward-looking terminology such as "expects,"
"should," "believes," or "anticipates" or the negative thereof or comparable
terminology, or by discussions of Company goals and strategy. The Company's
actual results could differ materially from those anticipated in these
forward-looking statements as a result of many factors, including but not
limited to the following: fluctuations in operating results, intense
competition, reliance on outsourcing arrangements, mix of outsourcing
arrangements, past and future acquisitions, international operations, risk of
business interruption, management of rapid growth, need for additional
financing, changing methods of distribution, reliance on suppliers, changes in
vendor rebate programs, rapid change in product standards, inventory
obsolescence, dependence on key personnel, sales and income tax uncertainty,
increasing marketing, postage and shipping cost and Year 2000 issues. These
factors are discussed in greater detail under "Factors That May Affect Future
Results and Financial Condition" in the Company's Annual Report on Form 10-K for
the year ended December 31, 1999, as filed with the Securities and Exchange
Commission.
OVERVIEW
Insight Enterprises, Inc. (the "Company") is a holding company with two major
subsidiaries: Insight Direct Worldwide, Inc. ("Insight") and Direct Alliance
Corporation ("DAC").
INSIGHT
Insight commenced operations in 1988 as a direct marketer of hard disk
drives and other mass storage products. We have expanded our product line to
include name brand computers, a full line of hardware and software products. Net
sales include direct marketing sales to businesses, educational institutions,
government organizations, consumers and computer resellers. Initially, we
focused our marketing effort primarily on advertising in computer magazines and
the use of inbound toll-free telemarketing. We have shifted our marketing
strategy to the use of outbound account executives, complimented by the use of
electronic commerce and marketing, focused primarily on the business, education
and government markets. We have hired a number of account executives, and plan
to continue to actively increase our account executive base by approximately 150
to 250, net, per quarter through 2000.
In the fourth quarter of 1997, we began expanding internationally by
initiating operations in Canada. During 1998, we entered the United Kingdom
market in the second quarter and the German market in the fourth quarter, both
through acquisitions.
Plusnet, a 95% owned subsidiary of Insight, was also acquired during
the second quarter of 1998. Plusnet is an Internet service provider (ISP)
providing Internet access and value-added Internet services within the United
Kingdom to residential, small- and medium-sized businesses and corporate
customers.
8
<PAGE> 9
INSIGHT ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
DAC
In 1992, we began providing direct marketing services to third-party
original equipment manufacturers to leverage our infrastructure and increase our
net earnings. Presently, most of our outsourcing arrangements are service-based,
whereby we derive revenue based on a percentage of the sales price from products
sold. Revenues from service-based sales and the direct costs that relate to the
generation of those revenues are included in the Company's net sales and cost of
goods sold, respectively. Under certain other outsourcing arrangements, we take
title to the products and assume the risk of collection of accounts receivable
in addition to sales functions. Revenue and related costs derived from the sales
of such products are included in the Company's net sales and cost of goods sold,
respectively. The rate of our net sales growth in future periods may be affected
by the mix of type of outsourcing arrangements which are in place from time to
time. Additionally, some of the programs may be seasonal in nature, as the
manufacturers' target customers can have cyclical buying patterns.
Generally, pricing in the computer and related products industry is very
aggressive and declining. Therefore, to increase sales we seek to expand our
customer base, increase our penetration of existing customers, expand into new
markets and expand our product offerings. We expect pricing pressures to
continue, and we may be required to reduce our prices to remain competitive. The
continued acceptance of electronic commerce might place additional pricing
pressure on the Company. Such pricing pressures could have a material adverse
effect on the Company's financial condition and results of operations. We expect
overall gross margins to continue to decline by approximately one to two tenths
of one percent per quarter on average in 2000 and thereafter, primarily due to
industry-wide pricing pressures and pricing strategies.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain
financial data of the Company as a percentage of net sales:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
2000 1999
------ ------
<S> <C> <C>
Net sales .......................................... 100.0% 100.0%
Costs of goods sold ................................ 88.1 88.2
------ ------
Gross profit .............................. 11.9 11.8
Selling, general and administrative expenses ....... 7.5 8.3
Amortization of goodwill ........................... .1 .1
------ ------
Earnings from operations .................. 4.3 3.4
Non-operating expense, net ......................... 0.0 0.1
------ ------
Earnings before income taxes .............. 4.3 3.3
Income tax expense ................................. 1.7 1.3
------ ------
Net earnings .............................. 2.6% 2.0%
====== ======
</TABLE>
9
<PAGE> 10
INSIGHT ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
Net Sales. Net sales increased $129.2 million, or 38.2%, to $467.3
million for the three months ended March 31, 2000 from $338.1 million for the
three months ended March 31, 1999. The Company had 1,682 and 1,062 account
executives at March 31, 2000 and 1999, respectively.
Net sales derived from Insight, the direct marketing business,
increased $130.5 million, or 41.2%, to $447.5 million for the three months ended
March 31, 2000 from $317.0 million for the three months ended March 31, 1999.
Net sales for Insight's United States core direct business increased 53% for the
three months ended March 31, 2000 compared to the three months ended March 31,
1999. The increase in net sales resulted primarily from deeper account
penetration, increased market share, an expanded customer base (both domestic
and international), expanded product offerings and Internet enhancements that
increased unassisted transactions. Insight's average order size increased to
$1,124 for the three months ended March 31, 2000 from $824 for the three months
ended March 31, 1999. North American sales represented 91% and 87% of Insight's
net sales for the three months ended March 31, 2000 and 1999, respectively.
Average order size for our sales in North America increased from $1,129 for the
three months ended March 31, 1999 to $1,380 for the three months ended March 31,
2000. European sales represented 9% and 13% of its net sales for the three
months ended March 31, 2000 and 1999, respectively. Average order size for our
sales in Europe increased from $289 for the three months ended March 31, 1999 to
$376 for the three months ended March 31, 2000. Our target market, small- and
medium-sized business (including education and government), increased from 87%
of net sales for the three months ended March 31, 1999 to 94% for the three
months ended March 31, 2000. Insight had 1,437 account executives at March 31,
2000, with 1,274 in North America and 163 in Europe, an increase from 943, 793
and 150, respectively at March 31, 1999.
Net sales for Plusnet, whose numbers are included in Insight's numbers,
increased $700,000, or 41.2%, to $2.4 million for the three months ended March
31, 2000 from $1.7 million for the three months ended March 31, 1999.
Net sales derived from DAC, the outsourcing business, decreased $1.4
million, or 6.6%, to $19.8 million for the three months ended March 31, 2000
from $21.2 million for the three months ended March 31, 1999. Outsourcing sales
represented 4.2% and 6.3% of total Company net sales in the three months ended
March 31, 2000 and 1999, respectively. The decrease in sales from outsourcing
services resulted primarily from a shift to more service-based arrangements from
revenue-based arrangements. The growth rate of the outsourcing arrangements may
be affected by the mix of type of outsourcing arrangements - that is,
service-based versus revenue-based outsourcing programs. If net sales had been
recognized for all programs as if they were revenue-based programs, net sales
from DAC would have increased 127% for the three months ended March 31, 2000
compared to the three months ended March 31, 1999. DAC had 245 and 119 account
executives at March 31, 2000 and 1999, respectively
Gross Profit. Gross profit increased $15.5 million, or 38.8%, to $55.4
million for the three months ended March 31, 2000 from $39.9 million for the
three months ended March 31, 1999. As a percentage of net sales, gross profit
increased from 11.8% for the three months ended March 31, 1999 to 11.9% for the
three months ended March 31, 2000. Insight's gross profit, as a percentage of
net sales, decreased from 11.7% for the three months ended March 31, 1999 to
11.5% for the three months ended March 31, 2000. DAC's gross profit, as a
percentage of net sales, increased from 13.3% for the three
10
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INSIGHT ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
months ended March 31, 1999 to 19.5% for the three months ended March 31, 2000.
The fluctuations in gross profit percentage primarily resulted from the direct
operation's decreased product margin amidst pricing strategies and pressures,
increased gross profit provided by service-related outsourcing programs and
increased supplier reimbursements, payment discounts, rebates and purchasing
opportunities as a result of our increasing size of operations. We expect our
overall gross profit percentage to decline one to two tenths of one percent per
quarter on average through 2000 and thereafter, primarily due to pricing
strategies, industry-wide pricing pressures and our product and outsourcing
program mix.
Operating Expenses. Operating expenses increased $6.8 million, or
24.0%, to $35.1 million for the three months ended March 31, 2000 from $28.3
million for the three months ended March 31, 1999, but decreased as a percentage
of net sales to 7.6% for the three months ended March 31, 2000 from 8.4% for the
three months ended March 31, 1999. Operating expenses as a percentage of net
sales for Insight were 7.5% for the three months ended March 31, 2000 and 8.4%
for the three months ended March 31, 1999. The decline in the operating expense
percentage at Insight was attributable to increasing economies of scale, the
utilization of emerging technologies and continued cost-cutting measures. This
decline was partially offset by costs associated with the increase in the number
of account executives, the write-off of impaired assets and costs associated
with rapid growth. Operating expenses as a percentage of net sales for DAC were
6.7% for the three months ended March 31, 2000 and 8.8% for the three months
ended March 31, 1999. This decline was primarily due to the shift from
revenue-based to service-based outsourcing programs.
We increased our overall unassisted web sales to 10.7% of sales for the
three months ended March 31, 2000 from 8.2% from the three months ended March
31, 1999. We also increased the percentage of shipments made using our
electronic "direct ship" programs with our suppliers to 59.1% for the three
months ended March 31, 2000 from 48.5% from the three months ended March 31,
1999. Annualized inventory turnover for the Company for the three months ended
March 31, 2000 was 84 times compared to 43 times for the three months ended
March 31, 1999.
Non-Operating (Income) Expense, Net. Non-operating (income) expense,
net, which consists primarily of interest expense and interest income, increased
to $121,000 of income for the three months ended March 31, 2000 from $275,000 of
expense for the three months ended March 31, 1999. Interest expense primarily
relates to borrowings associated with the financing of Insight's sales facility
in Tempe, Arizona and the financing of inventory purchases under the Company's
line of credit. Interest income is generated by the Company through short-term
investments, some of which are investment grade tax-advantaged bonds.
Non-operating (income) expense, net is improving due to our increasingly strong
cash position.
Income Tax Expense. The Company's effective tax rate was consistent at
39.7% for the quarters ended March 31, 2000 and 1999, respectively.
Net Earnings. Net earnings increased $5.5 million, or 80.9%, to $12.3
million for the three months ended March 31, 1999 from $6.8 for the three months
ended March 31, 1999. Diluted earnings per share increased 73.1% to $0.45 for
the three months ended March 31, 2000 from $0.26 for the three months ended
March 31, 1999. Net earnings for Insight increased 72.6% to $10.7 million for
the three months ended March 31, 2000 from $6.2 million for the three months
ended March 31, 1999. Plusnet net earnings, included in the numbers for Insight,
increased 17.6% to $381,000 for the three months ended March 31, 2000 from
$324,000 for the three months ended March 31, 1999. Net earnings for
11
<PAGE> 12
INSIGHT ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
DAC increased 171.2% to $1.6 million for the three months ended March 31, 2000
from $590,000 for the three months ended March 31, 1999.
SEASONALITY
We have historically experienced seasonal fluctuations in our growth of
net sales, earnings from operations and net earnings. However, as we increase
our percentage of sales from business, education and government markets, our
quarterly net sales, earnings from operations and net earnings have been less
impacted by seasonality. Our net sales growth rate, earnings from operations and
net earnings as a percentage of net sales could be affected by the mix of types
of outsourcing arrangements, which are in place from time to time. Additionally,
some of the outsourcing programs can be seasonal in nature because the
manufacturers' target customers can have cyclical buying patterns.
LIQUIDITY AND CAPITAL RESOURCES
Our primary capital needs have been to fund the working capital
requirements and capital expenditures necessitated by our sales growth.
Until the last two years, cash flows from operations generally have
been negative due primarily to increases in accounts receivable and inventories
necessitated by sales growth and the continued shift from sales to the home
market to sales to the business, education and government markets. This trend
had been changing as the Company decreased its inventory levels and increased
the percentage of inventory shipments made directly by suppliers to the
Company's customers.
The Company's net cash used in operating activities was $1.0 million
for the three months ended March 31, 2000 compared to $16.1 million provided by
operating activities for the three months ended March 31, 1999. The negative
cash flow in the current period was primarily due to a $37.6 million increase in
accounts receivable and a $2.8 million increase in inventories as a result of
increased sales. These increases were funded primarily by net earnings of $12.3
million and an increase in accounts payable of $21.5 million.
Capital expenditures for the three months ended March 31, 2000 and 1999
were $5.8 million and $4.4 million, respectively. Capital expenditures for the
three months ended March 31, 2000 and the three months ended March 31, 1999
primarily relate to new software applications.
Our future capital requirements include financing the growth of working
capital items such as accounts receivable and inventories, the purchase of
software enhancements, the purchase of equipment, furniture and fixtures to
accommodate future growth and funds needed for future organic growth and/or
acquisitions. We anticipate that cash flow from operations together with the
funds available under our credit facility should be adequate to support the
Company's presently anticipated cash and working capital requirements through
2000. Our ability to continue funding planned growth beyond 2000 is dependent
upon our ability to generate sufficient cash flow or to obtain additional funds
through equity or debt financing, or from other sources of financing, as may be
required. See Note 3 of Notes to Condensed Consolidated Financial Statements for
a description of the Company's $100 million credit facility.
12
<PAGE> 13
INSIGHT ENTERPRISES, INC.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Reference is made to Part II, Item 7A, Quantitative and Qualitative
Disclosures about Market Risk, in the Company's Annual Report on Form 10-K for
the year ended December 31, 1999.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule for the three months
ended March 31, 2000.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which
the report is filed.
13
<PAGE> 14
INSIGHT ENTERPRISES, INC.
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 thereunto duly authorized.
DATE: MAY 10, 2000 INSIGHT ENTERPRISES, INC.
BY: /s/ ERIC CROWN
ERIC J. CROWN
CHIEF EXECUTIVE OFFICER
BY: /s/ STANLEY LAYBOURNE
STANLEY LAYBOURNE
CHIEF FINANCIAL OFFICER, SECRETARY
AND TREASURER
14
<PAGE> 15
EXHIBIT INDEX
Exhibit 27 - Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET OF INSIGHT ENTERPRISES, INC. AND
SUBSIDIARIES AS OF MARCH 31, 2000 AND THE RELATED CONDENSED CONSOLIDATED
STATEMENT OF EARNINGS FOR THE 3 MONTHS ENDED MARCH 31, 2000 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR THE QUARTERLY PERIOD ENDING
MARCH 31, 2000.
</LEGEND>
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<NAME> INSIGHT ENTERPRISES, INC.
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