Insight Enterprises Reports First Quarter 2009 Results

May 20, 2009 (Close-Up Media via COMTEX) -- NSIT | Quote | Chart | News | PowerRating -- Insight Enterprises, Inc. has reported results of operations for the quarter ended March 31.

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"Our business achieved what we consider to be solid financial results in the first quarter given the challenging demand environment for IT spend globally," said Rich Fennessy, President and CEO. "We are very pleased to have the restatement process and investigation behind us, and while we expect the balance of 2009 to continue to be challenging, we believe we have the right business model, the right teammates and a strong balance sheet that will position us well throughout the balance of 2009 and into 2010."

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In a release on May 12, the company noted tht net sales in North America declined 13 percent to $660.1 million. Hardware sales declined 25 percent as incremental sales from the company's acquisition of Calence were more than offset by declines across other hardware product categories. Software sales were flat year over year, and sales of services were up over 90 percent reflecting both the acquisition of Calence and overall strength in the company's services business. Gross profit declined 8 percent to $93.0 million, but gross margin increased to 14.1 percent, up 80 basis points year over year, reflecting improved margins in the services category partially offset by a decreased margin generated by freight. North America's selling and administrative expenses in the first quarter included an aggregate of $8.2 million of charges related to the North America portion of the termination of an equity incentive compensation plan and professional fees and costs associated with the trade credits restatement issue. Excluding the effect of these items, selling and administrative expenses were down $4.9 million compared to last year, or 5 percent, reflecting the cost reduction initiatives the company has implemented over the last several quarters and lower variable costs partially offset by $13.5 million in incremental expenses from the acquisition of Calence, which were not included in the 2008 first quarter results. The North America segment also recorded $5.9 million in severance and restructuring charges during the first quarter, compared to $1.0 million recorded last year. As a result, the North America segment reported a loss from operations of $7.9 million. Excluding the effect of one-time items, this segment generated earnings from operations of $6.1 million.

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Net sales in EMEA were $270.7 million in the first quarter, down 15 percent in U.S. dollars. In constant currency terms, net sales were up 8 percent over the first quarter of last year. The segment's United Kingdom operations performed well during the first quarter with hardware sales down only 2 percent in local currency year over year, while the United Kingdom-based software and services businesses grew 51 percent and 186 percent, respectively, in local currency. Across the rest of the EMEA region, net sales were up 2 percent in local currency. Gross profit was down 23 percent in U.S. dollars, and down 3 percent in constant currency terms. Gross margin declined 140 basis points to 13.3 percent due primarily to decreases in product margin, including vendor funding, partially offset by an increase in gross margin from sales of services. Selling and administrative expenses in EMEA in the first quarter included $1.4 million of charges related to the EMEA portion of the termination of an equity incentive equity-based compensation plan. Excluding the effect of this item, selling and administrative expenses in EMEA were down $5.9 million year over year in U.S. dollar terms, and in constant currency terms, selling and administrative expenses in EMEA increased by $1.5 million year over year. The increase is primarily due to increased salaries, wages and facility related expenses due to increases in employee headcount. EMEA also recorded $417,000 in severance and restructuring expenses in the quarter. As a result, the EMEA segment reported earnings from operations of approximately $581,000. Excluding the effect of one-time items, this segment generated earnings from operations of $2.4 million.

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In APAC, net sales were $20.3 million, down 12 percent from the prior year. Gross profit of $2.8 million was down approximately $940,000 year over year, while gross margin of 13.9 percent was down from 16.3 percent for the same period. These declines are primarily related to lower fees from enterprise software agreement renewals and to the increased mix of public sector business, which is typically transacted at lower margins.

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The company reported that with current demand levels and with the resource and other actions it has taken over the last several quarters, diluted earnings per share will be between $0.80 and $0.87 for the full year of 2009 with more of the earnings coming in the second half of the year compared to the first half. This outlook does not include the effect of any severance and restructuring expenses, expenses associated with the restatement investigation and administration or related litigation, or other one-time charges.

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