What changed in this filing

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Item 1. Financial Statements

2020-08-06 compared with 2020-05-07 · 174 added, 119 removed, 466 unchanged (39% of the section changed)

28 unchanged sentences

Common stock, $ 0.01 par value, 100,000 shares authorized;

35,049 shares at March 31, 2020 and 35,263 shares at

35,070 shares at June 30, 2020 and 35,263 shares at

December 31, 2019 issued and outstanding

9 unchanged sentences

Three Months Ended

Six Months Ended

Total net sales

3 unchanged sentences

Selling and administrative expenses

Severance and restructuring expenses, net

Severance and restructuring expenses

Acquisition and integration related expenses

12 unchanged sentences

Three Months Ended

Six Months Ended

Other comprehensive income (loss), net of tax:

8 unchanged sentences

Stockholders'

Balances at December 31, 2019

Balances at March 31, 2019

Issuance of common stock under employee stock plans, net of shares withheld for payroll taxes

Stock-based compensation expense

Repurchase of treasury stock

Retirement of treasury stock

Foreign currency translation adjustments, net of tax

Balances at June 30, 2019

Balances at March 31, 2020

Issuance of common stock under employee stock plans, net of shares withheld for payroll taxes

Stock-based compensation expense

Foreign currency translation adjustments, net of tax

Balances at June 30, 2020

Treasury Stock

5 unchanged sentences

Foreign currency translation adjustments, net of tax

Balances at March 31, 2019

Balances at June 30, 2019

Balances at December 31, 2019

Issuance of common stock under employee stock plans, net of shares withheld for payroll taxes

Stock-based compensation expense

Repurchase of treasury stock

Retirement of treasury stock

Foreign currency translation adjustments, net of tax

Balances at June 30, 2020

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(in thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

5 unchanged sentences

Deferred income taxes

Amortization of debt discount

Other adjustments

Changes in assets and liabilities:

Decrease in accounts receivable

Increase in accounts receivable

Increase in inventories

Decrease (increase) in other assets

Increase (decrease) in accounts payable

Increase in accounts payable

(Decrease) increase in accrued expenses and other liabilities

4 unchanged sentences

Acquisitions, net of cash and cash equivalents acquired

Net cash provided by (used in) investing activities

Net cash used in investing activities

Cash flows from financing activities:

5 unchanged sentences

Repayments on accounts receivable securitization financing facility

Net repayments under inventory financing facilities

Net borrowings (repayments) under inventory financing facilities

Repurchases of common stock

3 unchanged sentences

restricted cash balances

Decrease in cash, cash equivalents and restricted cash

Increase (decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

15 unchanged sentences

Our offerings in the remainder of our EMEA and APAC segments consist of largely software and certain software-related services.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly our financial position as of March 31, 2020 and our results of operations for the three months ended March 31, 2020 and 2019 and cash flows for the three months ended March 31, 2020 and 2019.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly our financial position as of June 30, 2020 and our results of operations for the three and six months ended June 30, 2020 and 2019 and cash flows for the six months ended June 30, 2020 and 2019.

The consolidated balance sheet as of December 31, 2019 was derived from the audited consolidated balance sheet at such date.

14 unchanged sentences

Recently Issued Accounting Standards

In December 2019, the Financial Accounting Standards Board’s (“FASB”) issued Accounting Standard Update (“ASU”) No.

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No.

2019-12, “Simplifying the Accounting for Income Taxes.” The new standard is intended to simplify various aspects of accounting for income taxes by removing specific exceptions and amending certain requirements.

3 unchanged sentences

2016-13, “Financial Instruments – Credit Losses.” The new standard is intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held at each reporting date.

The new standard is effective for interim and annual periods beginning after December 15, 2019, and early adoption is permitted.

We adopted the new standard as of January 1, 2020.

The adoption of this new standard did not have a material effect on our consolidated financial statements.

In November 2019, the FASB issued ASU No.

2019-11, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses.” The new standard provides amendments to the reporting of expected recoveries.

The new standard is effective with the adoption of ASU No.

We adopted the new standard as of January 1, 2020.

The adoption of this new standard did not have a material effect on our consolidated financial statements.

In April 2019, the FASB issued ASU No.

2019-04, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.” The new standard provides changes for how a company considers expected recoveries and contractual extensions or renewal options when estimating expected credit losses.

The new standard is effective with the adoption of ASU No.

We adopted the new standard as of January 1, 2020.

The adoption of this new standard did not have a material effect on our consolidated financial statements.

2019-04, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.” The new standard update provides changes for how a company considers expected recoveries and contractual extensions or renewal options when estimating expected credit losses.

In November 2019, the FASB issued ASU No.

2019-11, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses.” The new standard update provides amendments to the reporting of expected recoveries.

We adopted these new standards as of January 1, 2020.

The adoption of these new standards did not have a material effect on our consolidated financial statements.

There have been no other material changes in or additions to the recently issued accounting standards as previously reported in Note 1 to our Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2019 that affect or may affect our current financial statements.

Sales Recognition

In the following table, revenue is disaggregated by our reportable operating segments, which are primarily defined by their related geographies, as well as by major product offering, by major client group and by recognition on either a gross basis as a principal in the arrangement, or on a net basis as an agent, for the three and six months ended June 30, 2020 and 2019 (in thousands):

Three Months Ended June 30, 2020

North America

Major Offerings

Major Client Groups

Large Enterprise / Corporate

Small and Medium-Sized Businesses

Public Sector

Revenue Recognition based on acting as

Principal or Agent in the Transaction

Gross revenue recognition (Principal)

Net revenue recognition (Agent)

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Sales Recognition

In the following table, revenue is disaggregated by our reportable operating segments, which are primarily defined by their related geographies, as well as by major product offering, by major client group and by recognition on either a gross basis as a principal in the arrangement, or on a net basis as an agent, for the three months ended March 31, 2020 and 2019 (in thousands):

Three Months Ended March 31, 2020

Three Months Ended June 30, 2019

North America

8 unchanged sentences

Net revenue recognition (Agent)

Three Months Ended March 31, 2019

Six Months Ended June 30, 2020

North America

8 unchanged sentences

Net revenue recognition (Agent)

The following table provides information about receivables and contract liabilities as of March 31, 2020 and December 31, 2019 (in thousands):

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Six Months Ended June 30, 2019

North America

Major Offerings

Major Client Groups

Large Enterprise / Corporate

Small and Medium-Sized Businesses

Public Sector

Revenue Recognition based on acting as

Principal or Agent in the Transaction

Gross revenue recognition (Principal)

Net revenue recognition (Agent)

The following table provides information about receivables and contract liabilities as of June 30, 2020 and December 31, 2019 (in thousands):

Current receivables, which are included in “Accounts

3 unchanged sentences

and other current liabilities” and “Other liabilities”

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

C hanges in the contract liabilities balances during the three months ended March 31, 2020 are as follows (in thousands):

C hanges in the contract liabilities balances during the six months ended June 30, 2020 are as follows (in thousands):

Increase (Decrease)

3 unchanged sentences

Cash received in advance and not recognized as revenue

Balances at March 31, 2020

The following table includes estimated net sales related to performance obligations that are unsatisfied (or partially unsatisfied) as of March 31, 2020 that are expected to be recognized in the future (in thousands):

Balances at June 30, 2020

The following table includes estimated net sales related to performance obligations that are unsatisfied (or partially unsatisfied) as of June 30, 2020 that are expected to be recognized in the future (in thousands):

Remainder of 2020

1 unchanged sentence

Total remaining performance obligations

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

With the exception of remaining performance obligations associated with our OneCall Support Services contracts which are included in the table above regardless of original duration, r emaining performance obligations that have original expected durations of one year or less are not included in the table above.

Amounts not included in the table above have an average original expected duration of nine months.

Additionally, for our time and material services contracts, whereby we have the right to consideration from a client in an amount that corresponds directly with the value to the client of our performance completed to date, we recognized revenue in the amount to which we have a right to invoice as of March 31, 2020 and do not disclose information about related remaining performance obligations in the table above.

Amounts not included in the table above have an average original expected duration of eight months.

Additionally, for our time and material services contracts, whereby we have the right to consideration from a client in an amount that corresponds directly with the value to the client of our performance completed to date, we recognized revenue in the amount to which we have a right to invoice as of June 30, 2020 and do not disclose information about related remaining performance obligations in the table above.

Our time and material contracts have an average expected duration of 20 months.

3 unchanged sentences

During 2019, we completed the purchase of real estate in Chandler, Arizona that we intend to use as our global corporate headquarters.

During the fourth quarter of 2019, properties in Tempe, Arizona, El Segundo and Santa Monica, California and Woodbridge, Illinois were classified as held for sale, for approximately $ 68,916,000 , which is included in other current assets in the accompanying consolidated balance sheet as of March 31, 2020, as we look to sell current properties in preparation for our move to Chandler.

During the fourth quarter of 2019, properties in Tempe, Arizona, El Segundo and Santa Monica, California and Woodbridge, Illinois were classified as held for sale, for approximately $ 68,916,000 , which is included in other current assets in the accompanying consolidated balance sheet as of June 30, 2020, as we look to sell current properties in preparation for our move to Chandler.

During the first quarter of 2020, we completed the sale of our property in Irvine, California for approximately $ 14,218,000 .

See note 13 for additional information regarding the sale of our Tempe, Arizona and El Segundo and Santa Monica, California properties.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Net Earnings Per Share (“EPS”)

4 unchanged sentences

Three Months Ended

Six Months Ended

Weighted average shares used to

4 unchanged sentences

Net earnings per share:

For the three months ended March 31, 2020, 86,000 of our RSUs were not included in the diluted EPS calculations because their inclusion would have been anti-dilutive.

For the three and six months ended June 30, 2020, 400,000 and 243,000 , respectively, of our RSUs were not included in the diluted EPS calculations because their inclusion would have been anti-dilutive.

These share-based awards could be dilutive in the future.

There were 164,000 anti-dilutive RSUs for the three months ended March 31, 2019.

There were 1,000 and 83,000 anti-dilutive RSUs for the three and six months ended June 30, 2019, respectively.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Debt, Inventory Financing Facilities, Finance Leases and Other Financing Obligations

8 unchanged sentences

While the ABL facility has a stated maximum amount, the actual availability under the ABL facility is limited by specified percentages of eligible accounts receivable and certain eligible inventory, in each case as set forth in the credit agreement.

From time to time and at our option, we may request to

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

increase the aggregate amount available for borrowing under the ABL facility by up to an aggregate of the U.S.

From time to time and at our option, we may request to increase the aggregate amount available for borrowing under the ABL facility by up to an aggregate of the U.S.

dollar equivalent of $ 500,000,000 , subject to customary conditions, including receipt of commitments from lenders.

2 unchanged sentences

The ABL facility matures on August 30, 2024 .

As of March 3 1 , 20 20 , eligible accounts receivable and inventory were sufficient to permit access to the full $ 1,200,000,000 facility amount, of which $ 460,141,000 was outstanding.

As of June 30, 2020, eligible accounts receivable and inventory were sufficient to permit access to the full $ 1,200,000,000 facility amount, of which $ 144,000,000 was outstanding.

The ABL facility contains customary affirmative and negative covenants and events of default.

6 unchanged sentences

Holders of the notes may convert their notes at their option at any time prior to the close of business on the business day immediately preceding June 15, 2024, under the following circumstances:

(1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2019 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day;

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day;

(2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price of our common stock per $ 1,000 principal amount of notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of our common stock and the conversion rate on each such trading day;

6 unchanged sentences

In addition, following certain events that occur prior to the maturity date or following our issuance of a notice of redemption, the conversion rate is subject to an increase for a holder who elects to convert their notes in connection with those events or during the related redemption period in certain circumstances.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

If we undergo a fundamental change, the holders may require us to repurchase for cash all or any portion of their notes at a fundamental change repurchase price equal to 100 % of the principal amount of the notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

As of March 31, 2020, none of the criteria for a fundamental change or a conversion rate adjustment had been met.

As of June 30, 2020, none of the criteria for a fundamental change or a conversion rate adjustment had been met.

The maximum number of shares issuable upon conversion, including the effect of a fundamental change and subject to other conversion rate adjustments, would be 6,788,208 .

We may redeem for cash all or any portion of the notes, at our option, on or after August 20, 2022 if the last reported sale price of our common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100 % of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

We may redeem for cash all or any portion of the notes, at our option, on or after August 20, 2022 if the last reported sale price of our common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100 % of the then outstanding principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

No sinking fund is provided for the notes.

The notes are subject to certain customary events of default and acceleration clauses.

As of March 31, 2020, no such events have occurred.

The notes consist of the following balances reported within the consolidated balance sheet as of March 31, 2020 (in thousands):

As of June 30, 2020, no such events have occurred.

The notes consist of the following balances reported within the consolidated balance sheet as of June 30, 2020 (in thousands):

debt discount and issuance costs, net of accumulated accretion

1 unchanged sentence

Equity, net of deferred tax

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The remaining life of the debt discount and issuance cost accretion is approximately 4.625 years.

The effective interest rate on the liability component of the notes is 4.325 %.

I nterest expense resulting from the notes reported within the consolidated statement of operations for the three months ended March 31, 2020 is made up of contractual coupon interest, amortization of debt discount and amortization of debt issuance costs.

I nterest expense resulting from the notes reported within the consolidated statement of operations for the three and six months ended June 30, 2020 is made up of contractual coupon interest, amortization of debt discount and amortization of debt issuance costs.

Convertible Note Hedge and Warrant Transaction

6 unchanged sentences

The Company received aggregate proceeds of approximately $ 34,440,000 for the sale of the warrants.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The Call Spread Transactions have no effect on the terms of the notes and reduce potential dilution by effectively increasing the initial conversion price of the notes to $ 103.12 per share of the Company’s common stock.

2 unchanged sentences

We also have an unsecured inventory financing facility with Wells Fargo Capital Finance, LLC (“Wells Fargo”) with an aggregate availability for vendor purchases under the facility of $ 250,000,000 .

As of March 31, 2020, our combined inventory financing facilities had a total maximum capacity of $ 490,000,000 , of which $ 252,912,000 was outstanding.

As of June 30, 2020, our combined inventory financing facilities had a total maximum capacity of $ 490,000,000 , of which $ 261,133,000 was outstanding.

The inventory financing facilities will remain in effect until they are terminated by any of the parties.

If balances are not paid within stated vendor terms, they will accrue interest at prime plus 2.00 % or prime plus 1.25 % with respect to the MUFG facility and Wells Fargo facility, respectively.

Amounts outstanding under these facilities are classified separately as accounts payable – inventory financing facilities in the accompanying consolidated balance sheets.

Amounts outstanding under these facilities are classified separately as accounts payable – inventory financing facilities in the accompanying consolidated balance sheets and within cash flows from financing activities in the accompanying consolidated statements of cash flows.

On July 6, 2020, we entered into a new unsecured inventory financing facility with a subsidiary of PNC Bank, N.A.

(“PNC”), which replaced the Wells Fargo facility.

See Note 13 for additional information regarding our PNC facility.

Finance Lease and Other Financing Obligations

From time to time, we enter into finance leases and other financing agreements with financial intermediaries to facilitate the purchase of products from certain vendors .

The current and long-term portions of our finance leases and other financing obligations are included in the current and long-term portions of long-term debt in the table above and in our consolidated balance sheets as of March 31, 2020 and December 31, 2019.

See Note 6 for additional information.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

We lease office space, distribution centers, land, vehicles and equipment.

7 unchanged sentences

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table provides information about the financial statement classification of our lease balances reported within the consolidated balance sheets as of March 31, 2020 and December 31, 2019 (in thousands):

The following table provides information about the financial statement classification of our lease balances reported within the consolidated balance sheets as of June 30, 2020 and December 31, 2019 (in thousands):

Classification

March 31, 2020

December 31, 2019

12 unchanged sentences

Total lease liabilities

Recorded net of accumulated amortization of $ 1,185,000 and $ 861,000 as of March 31, 2020 and December 31, 2019, respectively.

The following table provides information about the financial statement classification of our lease expenses reported within the consolidated statement of operations for the three months ended March 31, 2020 and 2019 (in thousands):

Recorded net of accumulated amortization of $ 1,509,000 and $ 861,000 as of June 30, 2020 and December 31, 2019, respectively.

Classification

Three Months Ended

March 31, 2020

Three months ended

March 31, 2019

June 30, 2020

Six Months Ended

June 30, 2020

Operating lease cost (a) (b)

6 unchanged sentences

Total lease cost

Includes immaterial amounts recorded to cost of goods sold.

Excludes short-term and variable lease costs, which are immaterial.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Future minimum lease payments under non-cancelable leases as of March 31, 2020 are as follows (in thousands):

Includes immaterial amounts recorded to cost of goods sold.

Excludes short-term and variable lease costs, which are immaterial.

Future minimum lease payments under non-cancelable leases as of June 30, 2020 are as follows (in thousands):

Operating leases

4 unchanged sentences

Operating lease payments include $ 13.4 million related to options to extend lease terms that are reasonably certain of being exercised .

The following table provides information about the remaining lease terms and discount rates applied as of March 31, 2020:

March 31, 2020

March 31, 2019

The following table provides information about the remaining lease terms and discount rates applied as of June 30, 2020:

Weighted average remaining lease term (years)

4 unchanged sentences

Finance leases

The following table provides other information related to leases for the three months ended March 31, 2020 and 2019 (in thousands):

Three months ended

March 31, 2020

Three months ended

March 31, 2019

The following table provides other information related to leases for the three and six months ended June 30, 2020 (in thousands):

Three Months Ended June 30, 2020

Six Months Ended June 30, 2020

Cash paid for amounts included in the measurement of lease

6 unchanged sentences

Three Months Ended

Six Months Ended

North America

Total Consolidated

As of March 31, 2020, total compensation cost related to nonvested RSUs not yet recognized is $ 37,650,000 , which is expected to be recognized over the next 1.44 years on a weighted-average basis.

The following table summarizes our RSU activity during the three months ended March 31, 2020:

As of June 30, 2020, total compensation cost related to nonvested RSUs not yet recognized is $ 28,105,491 , which is expected to be recognized over the next 1.43 years on a weighted-average basis.

The following table summarizes our RSU activity during the six months ended June 30, 2020:

Nonvested at January 1, 2020

Vested, including shares withheld to cover taxes

Nonvested at March 31, 2020 (a)

Nonvested at June 30, 2020 (a)

Includes 92,315 RSUs subject to remaining performance conditions.

The number of RSUs subject to performance conditions are based on the Company achieving 100% of its 2020 targeted financial results.

These RSUs will be awarded at 100 % this annual period due to the completion of a significant acquisition in the period.

We currently estimate that these RSUs will be awarded at 0 % this annual period based on not meeting the 2020 performance targets.

The aggregate fair value of vested RSUs represents the total pre-tax fair value, based on the closing stock price on the day of vesting, which would have been received by holders of RSUs had all such holders sold their underlying shares on that date.

The aggregate fair value of the nonvested RSUs and the RSUs expected to vest represents the total pre-tax fair value, based on our closing stock price of $ 42.13 as of March 31, 2020, which would have been received by holders of RSUs had all such holders sold their underlying shares on that date.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law in the U.S.

to provide certain relief as a result of the coronavirus (“COVID-19”) pandemic, which includes, among other things, provisions relating to net operating loss carrybacks and other tax-related matters.

In addition, governments around the world have enacted or implemented various forms of tax relief measures in response to the economic conditions in the wake of COVID-19.

As of March 31, 2020, we had recorded a discrete tax benefit of approximately $ 1,712,000 related to the CARES Act.

Our effective tax rate for the three months ended March 31, 2020 was 20.3 %.

For the three months ended March 31, 2020, our effective tax rate was lower than the United States federal statutory rate of 21.0 % due primarily to the remeasurement of acquired net operating

The aggregate fair value of the nonvested RSUs and the RSUs expected to vest represents the total pre-tax fair value, based on our closing stock price of $ 49.20 as of June 30, 2020, which would have been received by holders of RSUs had all such holders sold their underlying shares on that date.

Our effective tax rate for the three and six months ended June 30, 2020 was 26.2 % and 23.8 %, respectively.

For the three months ended June 30, 2020, our effective tax rate was higher than the United States federal statutory rate of 21.0 % due primarily to state income taxes, net of federal benefit, and higher taxes on earnings in foreign jurisdictions partially offset by the recognition of tax benefits related to research and development activities.

For the six months ended June 30, 2020, our effective tax rate was higher than the United States federal statutory rate of 21.0 % due primarily to state income taxes, net of federal benefit, and higher taxes on earnings in foreign jurisdictions, partially offset by the remeasurement of acquired net operating losses under the CARES Act and the recognition of tax benefits related to research and development activities.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

losses to be carried back to higher tax rate years under the CARES Act, excess tax benefits on the settlement of share-based compensation and tax benefits related to research and development activities.

These benefits were partially offset by state income taxes, net of federal benefit and higher taxes on earnings in foreign jurisdictions .

Our effective tax rate for the three months ended March 31, 2019 was 23.5 %.

For the three months ended March 31, 2019, our effective tax rate was higher than the United States federal statutory rate of 21.0 % due primarily to state income taxes, net of federal benefit and higher taxes on earnings in foreign jurisdictions partially offset by excess tax benefits on the settlement of employee share-based compensation and tax benefits related to research and development activities .

As of March 31, 2020 and December 31, 2019, we had approximately $ 10,180,000 and $ 9,736,000 , respectively, of unrecognized tax benefits.

Our effective tax rate for the three and six months ended June 30, 2019 was 25.9 % and 24.9 %, respectively.

For the three months ended June 30, 2019, our effective tax rate was higher than the United States federal statutory rate of 21.0 % due primarily to state income taxes, net of federal benefit, higher taxes on earnings in foreign jurisdictions, and the effect of non-deductible acquisition-related expenses partially offset by excess tax benefits on the settlement of employee share-based compensation and tax benefits related to research and development activities .

For the six months ended June 30, 2019, our effective tax rate was higher than the United States federal statutory rate of 21.0 % due primarily to state income taxes, net of federal benefit, and higher taxes on earnings in foreign jurisdictions partially offset by tax benefits on the settlement of employee share-based awards and the recognition of tax benefits related to research and development activities.

As of June 30, 2020, and December 31, 2019, we had approximately $ 10,682,000 and $ 9,736,000 , respectively, of unrecognized tax benefits.

Of these amounts, approximately $ 601,000 and $ 442,000 , respectively, related to accrued interest.

9 unchanged sentences

We intend to retire the repurchased shares.

During the three months ended March 31, 2020, we repurchased 444,813 shares of our common stock on the open market at a total cost of approximately $ 24,999,996 (an average price of $ 56.20 per share).

During the six months ended June 30, 2020, we repurchased 444,813 shares of our common stock on the open market at a total cost of approximately $ 24,999,996 (an average price of $ 56.20 per share).

All shares repurchased were retired.

During the comparative three months ended March 31, 2019, we did no t repurchase any shares of our common stock .

During the comparative six months ended June 30, 2019, we did no t repurchase any shares of our common stock .

Commitments and Contingencies

2 unchanged sentences

however, if the surety company is ever required to pay out under the bonds, we have contractually agreed to reimburse the surety company.

Management believes that payments, if any, related to these performance bonds are not probable at March 31, 2020.

Management believes that payments, if any, related to these performance bonds are not probable at June 30, 2020.

Accordingly, we have not accrued any liabilities related to such performance bonds in our consolidated financial statements.

9 unchanged sentences

Such indemnification obligations may not be subject to maximum loss clauses.

Management believes that payments, if any, related to these indemnifications are not probable at March 31, 2020.

Management believes that payments, if any, related to these indemnifications are not probable at June 30, 2020.

Accordingly, we have not accrued any liabilities related to such indemnifications in our consolidated financial statements.

10 unchanged sentences

From time to time, we are party to various legal proceedings incidental to the business, including preference payment claims asserted in client bankruptcy proceedings, indemnification claims, claims of alleged infringement of patents, trademarks, copyrights and other intellectual property rights, employment claims, claims of alleged non-compliance with contract provisions and claims related to alleged violations of laws and regulations.

We regularly evaluate the status of the legal proceedings in which we are involved to assess whether a loss is probable or there is a reasonable possibility that a loss, or an additional loss, may have been incurred and determine if accruals are required.

If accruals are not required, we further evaluate each legal proceeding to

We regularly evaluate the status of the legal proceedings in which we are involved to assess whether a loss is probable or there is a

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

assess whether an estimate of possible loss or range of possible loss can be made.

reasonable possibility that a loss, or an additional loss, may have been incurred and determine if accruals are required .

If accruals are not required , we further evaluate each legal proceeding to assess whether an estimate of possible loss or range of possible loss can be made.

Although litigation is inherently unpredictable, we believe that we have adequate provisions for any probable and estimable losses.

10 unchanged sentences

North America;

and APAC with PCM being included in our North America and EMEA segments for the three months ended March 31, 2020.

and APAC with PCM being included in our North America and EMEA segments for the three and six months ended June 30, 2020.

Our offerings in North America and certain countries in EMEA and APAC include IT hardware, software and services.

Our offerings in the remainder of our EMEA and APAC segments are largely software and certain software-related services.

The following table summarizes net sales by offering for North America, EMEA and APAC for the three months ended March 31, 2020 and 2019 (in thousands):

The following table summarizes net sales by offering for North America, EMEA and APAC for the three and six months ended June 30, 2020 and 2019 (in thousands):

North America

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Three Months Ended

North America

Six Months Ended

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

All significant intercompany transactions are eliminated upon consolidation, and there are no differences between the accounting policies used to measure profit and loss for our segments or on a consolidated basis.

Net sales are defined as net sales to external clients.

None of our clients exceeded ten percent of consolidated net sales for the three months ended March 31, 2020 or 2019.

None of our clients exceeded ten percent of consolidated net sales for the three and six months ended June 30, 2020 or 2019.

A portion of our operating segments’ selling and administrative expenses arise from shared services and infrastructure that we have historically provided to them in order to realize economies of scale and to use resources efficiently.

These expenses, collectively identified as corporate charges, include senior management expenses, internal audit, legal, tax, insurance services, treasury and other corporate infrastructure expenses.

Charges are allocated to our operating

Charges are allocated to our operating segments, and the allocations have been determined on a basis that we consider to be a reasonable reflection of the utilization of services provided to or benefits received by the operating segments.

The following tables present our results of operations by reportable operating segment for the periods indicated (in thousands):

Three Months Ended June 30, 2020

North America

Total net sales

Costs of goods sold:

Total costs of goods sold

Operating expenses:

Selling and administrative expenses

Severance and restructuring expenses

Acquisition and integration related expenses

Earnings from operations

Three Months Ended June 30, 2019

North America

Total net sales

Costs of goods sold:

Total costs of goods sold

Operating expenses:

Selling and administrative expenses

Severance and restructuring expenses

Acquisition and integration related expenses

Earnings from operations

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

segments, and the allocations have been determined on a basis that we consider to be a reasonable reflection of the utilization of services provided to or benefits received by the operating segments.

The following tables present our results of operations by reportable operating segment for the periods indicated (in thousands):

Three Months Ended March 31, 2020

Six Months Ended June 30, 2020

North America

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Earnings from operations

Three Months Ended March 31, 2019

Six Months Ended June 30, 2019

North America

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Severance and restructuring expenses

Acquisition-related expenses

Earnings from operations

6 unchanged sentences

Three Months Ended

Six Months Ended

Depreciation and amortization of property and

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PCM is a provider of multi-vendor technology offerings, including hardware, software and services to small, mid-sized and corporate/enterprise commercial clients, state, local and federal governments and educational institutions across the United States, Canada and the United Kingdom.

Based in El Segundo, California, PCM has 40 office locations globally and more than 4,000 teammates.

Based in El Segundo, California, PCM had 40 office locations globally and more than 4,000 teammates.

We believe that this acquisition allows us to help existing PCM clients in positioning their businesses for future growth, transforming and securing their data platforms, creating modern and mobile experiences for their workforce and optimizing the procurement of technology.

33 unchanged sentences

Three Months Ended

Six Months Ended

Diluted earnings per share

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Changes in Goodwill and Intangible Assets

Other than the goodwill and intangible assets recorded in conjunction with the acquisitions of vNext and PCM, the only other change in consolidated goodwill and intangible assets as of March 31, 2020 compared to the balance as of December 31, 2019 resulted from foreign currency translation adjustments associated with the balances in our North America, EMEA and APAC operating segments.

Subsequent Event

On April 23, 2020 we entered into an agreement for the group sale of our properties in Tempe, Arizona, and El Segundo and Santa Monica, California for approximately $ 86,000,000 .

The agreement provides for a due diligence period during which the buyer can terminate the contract for any reason.

If the sale is completed, we intend to use the proceeds to ready our property in Chandler, Arizona to be used as our global corporate headquarters.

Other than the goodwill and intangible assets recorded in conjunction with the acquisitions of vNext and PCM, the only other change in consolidated goodwill and intangible assets as of June 30, 2020 compared to the balance as of December 31, 2019 resulted from foreign currency translation adjustments associated with the balances in our North America, EMEA and APAC operating segments.

Subsequent Event s

On July 6, 2020, we entered into an unsecured inventory financing facility with a maximum borrowing capacity of $ 250,000,000 with a subsidiary of PNC Bank, N.A.

This agreement will stay in effect until it is terminated by any of the parties.

If balances are not paid within stated vendor terms, they will accrue interest at LIBOR plus 4.50 %.

Amounts outstanding under this facility will be classified as accounts payable – inventory financing facilities in the accompanying balance sheets.

This new facility replaced the unsecured inventory financing facility with Wells Fargo.

On July 31, 2020, we entered into the First Amendment to Credit Agreement (the “Amendment”) to the ABL facility.

The Amendment, among other things, amends the credit agreement to provide additional flexibility for certain asset sale transactions by the Company and its subsidiaries.

INSIGHT ENTERPRISES, INC.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements