What changed in this filing

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Item 1. Financial Statements

2020-11-03 compared with 2020-08-06 · 161 added, 128 removed, 512 unchanged (36% of the section changed)

3 unchanged sentences

(in thousands, except per share data)

September 30,

Current assets:

23 unchanged sentences

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

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

35,090 shares at September 30, 2020 and 35,263 shares at

December 31, 2019 issued and outstanding

9 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Total net sales

18 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Other comprehensive income (loss), net of tax:

8 unchanged sentences

Stockholders'

Balances at March 31, 2019

Balances at June 30, 2019

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

Stock-based compensation expense

Equity component of convertible senior notes, net of deferred tax of $ 14,819 and issuance costs of $ 1,700

Issuance of warrants related to convertible senior notes

Purchase of note hedge related to convertible senior notes, net of deferred tax of $ 16,047

Repurchase of treasury stock

Retirement of treasury stock

Foreign currency translation adjustments, net of tax

Balances at September 30, 2019

Balances at June 30, 2020

Balances at March 31, 2020

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

1 unchanged sentence

Foreign currency translation adjustments, net of tax

Balances at June 30, 2020

Balances at September 30, 2020

Treasury Stock

4 unchanged sentences

Stock-based compensation expense

Equity component of convertible senior notes, net of deferred tax of $ 14,819 and issuance costs of $ 1,700

Issuance of warrants related to convertible senior notes

Purchase of note hedge related to convertible senior notes, net of deferred tax of $ 16,047

Repurchase of treasury stock

Retirement of treasury stock

Foreign currency translation adjustments, net of tax

Balances at June 30, 2019

Balances at September 30, 2019

Balances at December 31, 2019

4 unchanged sentences

Foreign currency translation adjustments, net of tax

Balances at June 30, 2020

Balances at September 30, 2020

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(in thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

8 unchanged sentences

Changes in assets and liabilities:

Increase in accounts receivable

Increase in inventories

Decrease in accounts receivable

Decrease (increase) in inventories

Decrease (increase) in other assets

Increase in accounts payable

Decrease in accounts payable

(Decrease) increase in accrued expenses and other liabilities

13 unchanged sentences

Net borrowings (repayments) under inventory financing facilities

Proceeds from issuance of convertible senior notes

Proceeds from issuance of warrants

Purchase of note hedge related to convertible senior notes

Repurchases of common stock

Other payments

Net cash used in financing activities

Net cash (used in) provided by financing activities

Foreign currency exchange effect on cash, cash equivalents and

restricted cash balances

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

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 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.

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

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

28 unchanged sentences

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

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 nine months ended September 30, 2020 and 2019 (in thousands):

Three Months Ended September 30, 2020

North America

10 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Three Months Ended June 30, 2019

Three Months Ended September 30, 2019

North America

8 unchanged sentences

Net revenue recognition (Agent)

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

North America

8 unchanged sentences

Net revenue recognition (Agent)

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2019

North America

8 unchanged sentences

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):

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

September 30,

Current receivables, which are included in “Accounts

3 unchanged sentences

and other current liabilities” and “Other liabilities”

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

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

Increase (Decrease)

3 unchanged sentences

Cash received in advance and not recognized as revenue

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):

Balances at September 30, 2020

The following table includes estimated net sales related to performance obligations that are unsatisfied (or partially unsatisfied) as of September 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 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.

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 September 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.

1 unchanged sentence

We do not believe that backlog as of any particular date is predictive of future results, therefore we do not include performance obligations under open cancelable purchase orders, which do not qualify for revenue recognition, in the table above.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Assets Held for Sale

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 June 30, 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 September 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 .

5 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Weighted average shares used to

4 unchanged sentences

Net earnings per share:

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.

For the three and nine months ended September 30, 2020, 3,000 and 163,000 , 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 1,000 and 83,000 anti-dilutive RSUs for the three and six months ended June 30, 2019, respectively.

There were 3,000 and 56,000 anti-dilutive RSUs for the three and nine months ended September 30, 2019, respectively.

INSIGHT ENTERPRISES, INC.

2 unchanged sentences

Our long-term debt consists of the following (in thousands):

September 30,

ABL revolving credit facility

8 unchanged sentences

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

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.

The ABL facility is guaranteed by certain of our material subsidiaries and is secured by a lien on certain of our assets and certain of each other borrower’s and each guarantor’s assets.

1 unchanged sentence

The ABL facility matures on August 30, 2024 .

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.

As of September 30, 2020, eligible accounts receivable and inventory were sufficient to permit access to the full $ 1,200,000,000 facility amount, none of which was outstanding.

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

5 unchanged sentences

The notes are general unsecured obligations of Insight and are guaranteed on a senior unsecured basis by Insight Direct USA, Inc., a wholly owned subsidiary of Insight.

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:

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;

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;

(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;

7 unchanged sentences

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

As of September 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 .

2 unchanged sentences

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

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):

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

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The notes consist of the following balances reported within the consolidated balance sheets (in thousands):

September 30,

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 4.375 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 and six months ended June 30, 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 nine months ended September 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

8 unchanged sentences

Inventory Financing Facilities

During the first quarter of 2020, we increased our maximum availability for vendor purchases under our unsecured inventory financing facility with MUFG Bank Ltd (“MUFG”) from $ 200,000,000 to $ 240,000,000 .

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 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 and within cash flows from financing activities in the accompanying consolidated statements of cash flows.

During 2020, we increased our maximum availability for vendor purchases under our unsecured inventory financing facility with MUFG Bank Ltd (“MUFG”) from $ 200,000,000 to $ 250,000,000 .

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.

(“PNC”), which replaced our previous facility with Wells Fargo Capital Finance, LLC.

The aggregate availability for vendor purchases under the PNC facility is $ 250,000,000 .

As of September 30, 2020, our combined inventory financing facilities had a total maximum capacity of $ 500,000,000 , of which $ 367,997,000 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 % and LIBOR plus 4.50 % on the MUFG and PNC facilities, respectively.

The PNC facility allows for an alternative rate to be identified if LIBOR is no longer available.

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

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

consolidated balance sheets and within cash flows from financing activities in the accompanying consolidated statements of cash flows .

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 June 30, 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.

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):

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

Classification

September 30,

December 31, 2019

12 unchanged sentences

Total lease liabilities

Recorded net of accumulated amortization of $ 1,509,000 and $ 861,000 as of June 30, 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 and six months ended June 30, 2020 (in thousands):

Recorded net of accumulated amortization of $ 1,833,000 and $ 861,000 as of September 30, 2020 and December 31, 2019, respectively.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Classification

Three Months Ended

June 30, 2020

Six Months Ended

June 30, 2020

September 30, 2020

Nine Months Ended

September 30, 2020

Operating lease cost (a) (b)

6 unchanged sentences

Total lease cost

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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):

Future minimum lease payments under non-cancelable leases as of September 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 June 30, 2020:

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

September 30,

Weighted average remaining lease term (years)

4 unchanged sentences

Finance leases

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

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

Three Months Ended September 30, 2020

Nine Months Ended September 30, 2020

Cash paid for amounts included in the measurement of lease

1 unchanged sentence

Leased assets obtained in exchange for new operating lease liabilities

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Stock-Based Compensation

1 unchanged sentence

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

North America

Total Consolidated

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:

As of September 30, 2020, total compensation cost related to nonvested RSUs not yet recognized is $ 25,871,000 , which is expected to be recognized over the next 1.33 years on a weighted-average basis.

The following table summarizes our RSU activity during the nine months ended September 30, 2020:

Nonvested at January 1, 2020

Vested, including shares withheld to cover taxes

Nonvested at June 30, 2020 (a)

Nonvested at September 30, 2020 (a)

Includes 83,661 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.

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

We currently estimate that these RSUs will be awarded at 90 % this annual period based on achievement towards 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 $ 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.

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 $ 56.58 as of September 30, 2020, which would have been received by holders of RSUs had all such holders sold their underlying shares on that date.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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.

Our effective tax rate was 23.8 % for the three and nine months ended September 30, 2020.

For the three months ended September 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 and the beneficial impact of certain income tax regulations issued during the quarter.

For the nine months ended September 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.

Our effective tax rate for the three and nine months ended September 30, 2019 was 27.2 % and 25.4 %, respectively.

For the three months ended September 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 the recognition of tax benefits related to research and development activities .

For the nine months ended September 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 September 30, 2020, and December 31, 2019, we had approximately $ 10,659,000 and $ 9,736,000 , respectively, of unrecognized tax benefits.

Of these amounts, approximately $ 610,000 and $ 442,000 , respectively, related to accrued interest.

9 unchanged sentences

We intend to retire the repurchased shares.

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).

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

During the comparative nine months ended September 30, 2019, we repurchased 541,117 shares of our common stock on the open market at a total cost of approximately $ 27,899,000 (an average price of $ 51.56 per share).

All shares repurchased were retired .

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 June 30, 2020.

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

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

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Employment Contracts and Severance Plans

6 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 June 30, 2020.

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

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

2 unchanged sentences

There are no pending legal proceedings that involve the indemnification of any of the Company’s directors or officers.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Contingencies Related to Third-Party Review

6 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

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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

8 unchanged sentences

However, the Company is not involved in any pending or threatened legal proceedings, including the PCM litigation matters, that it believes would reasonably be expected to have a material adverse effect on its business, financial condition or results of operations.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Segment Information

1 unchanged sentence

North America;

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

and APAC with PCM being included in our North America and EMEA segments for the three and nine months ended September 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 and six months ended June 30, 2020 and 2019 (in thousands):

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

North America

Three Months Ended

September 30,

Three Months Ended

September 30,

Three Months Ended

September 30,

North America

Six Months Ended

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Nine Months Ended

September 30,

Nine Months Ended

September 30,

Nine Months Ended

September 30,

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 and six months ended June 30, 2020 or 2019.

None of our clients exceeded ten percent of consolidated net sales for the three and nine months ended September 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.

1 unchanged sentence

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.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

Three Months Ended June 30, 2020

Three Months Ended September 30,

North America

7 unchanged sentences

Earnings from operations

Three Months Ended June 30, 2019

Three Months Ended September 30, 2019

North America

7 unchanged sentences

Earnings from operations

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

North America

7 unchanged sentences

Earnings from operations

Six Months Ended June 30, 2019

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Nine Months Ended September 30, 2019

North America

8 unchanged sentences

The following is a summary of our total assets by reportable operating segment (in thousands):

September 30,

North America

Corporate assets and intercompany eliminations, net

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

We recorded the following pre-tax amounts, by reportable operating segment, for depreciation and amortization in the accompanying consolidated financial statements (in thousands):

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Depreciation and amortization of property and

2 unchanged sentences

North America

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

On August 30, 2019, we completed our acquisition of PCM, acquiring 100 percent of the issued and outstanding shares of PCM for a cash purchase price of $ 745,562,000 , which included cash and cash equivalents acquired of $ 84,637,000 and the payment of PCM’s outstanding debt.

13 unchanged sentences

Excess purchase price over fair value of net assets acquired ("goodwill")

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Under the acquisition method of accounting, the total purchase price as shown in the table above was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values.

3 unchanged sentences

The estimated fair values of the majority of property and equipment, excluding acquired real estate, are also based upon historical costs net of depreciation, as they approximated fair value.

Certain long-term assets, including PCM’s IT systems, were written down to the estimated fair value.

The preliminary estimated fair value of net assets acquired was approximately $ 414,596,000 , including $ 191,370,000 of identified intangible assets, consisting primarily of customer relationships of $ 178,900,000 .

Certain long-term assets, including PCM’s IT systems, were written down to their estimated fair value.

The estimated fair value of net assets acquired was approximately $ 407,031,000 , including $ 191,370,000 of identified intangible assets, consisting primarily of customer relationships of $ 178,900,000 .

The fair value of the customer relationships were determined using the multiple-period excess earnings method.

3 unchanged sentences

non-compete agreements – 2 - 3 years .

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Goodwill of $ 253,894,000 , which was recorded in our North America and EMEA operating segments, represents the excess of the purchase price over the estimated fair value assigned to tangible and identifiable intangible assets acquired and liabilities assumed from PCM.

2 unchanged sentences

No ne of the goodwill is tax deductible.

The purchase price allocation is preliminary and was allocated using information currently available.

Further information related to legal accruals, taxes and other statutory assessments may lead to an adjustment of the purchase price allocation.

The purchase price allocation was finalized during the third quarter of 2020.

We have consolidated the results of operations for PCM since its acquisition on August 30, 2019.

1 unchanged sentence

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Diluted earnings per share

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 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.

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 September 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.

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