What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-04 compared with 2021-08-05 · 90 added, 76 removed, 408 unchanged (29% 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;

34,845 shares at June 30, 2021 and 35,103 shares at

34,885 shares at September 30, 2021 and 35,103 shares at

December 31, 2020 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

Other comprehensive income (loss), net of tax:

September 30,

Nine Months Ended

September 30,

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustments

7 unchanged sentences

Stockholders'

Balances at March 31, 2020

Balances at June 30, 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 September 30, 2020

Balances at June 30, 2021

Balances at March 31, 2021

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, 2021

Balances at September 30, 2021

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

Balances at December 31, 2020

4 unchanged sentences

Foreign currency translation adjustments, net of tax

Balances at June 30, 2021

Balances at September 30, 2021

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:

Adjustments to reconcile net earnings to net cash provided by

operating activities:

Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:

Depreciation and amortization

5 unchanged sentences

Changes in assets and liabilities:

Increase in accounts receivable

Increase in inventories

(Increase) decrease in accounts receivable

(Increase) decrease in inventories

(Increase) decrease in other assets

Increase in accounts payable

Decrease in accounts payable

Decrease in accrued expenses and other liabilities

Net cash provided by operating activities

Net cash (used in) provided by operating activities

Cash flows from investing activities:

Proceeds from sale of assets held for sale

Proceeds from sale of assets

Purchases of property and equipment

4 unchanged sentences

Repayments on ABL revolving credit facility

Net (repayments) borrowings under inventory financing facilities

Net borrowings under inventory financing facilities

Repurchases of common stock

Other payments

Net cash used in financing activities

Net cash provided by (used in) financing activities

Foreign currency exchange effect on cash, cash equivalents and

restricted cash balances

(Decrease) increase 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 are largely software and certain software-related services and cloud solutions.

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, 2021 and our results of operations for the three and six months ended June 30, 2021 and 2020 and cash flows for the six months ended June 30, 2021 and 2020.

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, 2021 and our results of operations for the three and nine months ended September 30, 2021 and 2020 and cash flows for the nine months ended September 30, 2021 and 2020.

The consolidated balance sheet as of December 31, 2020 was derived from the audited consolidated balance sheet at such date.

27 unchanged sentences

Receivables, Contract Liabilities and Performance Obligations

The following table provides information about receivables and contract liabilities as of June 30, 2021 and December 31, 2020 (in thousands):

The following table provides information about receivables and contract liabilities as of September 30, 2021 and December 31, 2020 (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, 2021 are as follows (in thousands):

C hanges in the contract liabilities balances during the nine months ended September 30, 2021 are as follows (in thousands):

Increase (Decrease)

3 unchanged sentences

Cash received in advance and not recognized as revenue

Balances at June 30, 2021

Balances at September 30, 2021

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

During the six months ended June 30, 2020, the Company recognized revenue of $ 32,682,000 related to its contract liabilities.

The following table includes estimated net sales related to performance obligations that are unsatisfied (or partially unsatisfied) as of June 30, 2021 that are expected to be recognized in the future (in thousands):

During the nine months ended September 30, 2020, the Company recognized revenue of $ 53,454,000 related to its contract liabilities.

The following table includes estimated net sales related to performance obligations that are unsatisfied (or partially unsatisfied) as of September 30, 2021 that are expected to be recognized in the future (in thousands):

Remainder of 2021

3 unchanged sentences

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 June 30, 2021 and do not disclose information about related remaining performance obligations in the table above.

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, 2021 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 22 months.

2 unchanged sentences

Assets Held for Sale

During the first half of 2021, we completed the sale of our three properties in Tempe, Arizona and the sale of our property in Woodbridge, Illinois for total net proceeds of approximately $ 27,211,000 .

During the nine months ended September 30, 2021, we completed the sale of our three properties in Tempe, Arizona and the sale of our property in Woodbridge, Illinois for total net proceeds of approximately $ 27,211,000 .

We intend to use the proceeds from the sales to ready our property in Chandler, Arizona to be used as our global corporate headquarters.

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

During the nine months ended September 30, 2020, we completed the sale of our property in Irvine, California for approximately $ 14,218,000 .

INSIGHT ENTERPRISES, INC.

6 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Weighted average shares used to

5 unchanged sentences

Net earnings per share:

For the three and six months ended June 30, 2021, 200 and 100 , respectively, of our RSUs were excluded from the diluted EPS calculations.

For the three and nine months ended September 30, 2021, 900 and 400 , respectively, of our RSUs were excluded from the diluted EPS calculations.

Certain potential outstanding shares from the warrants relating to the Call Spread Transactions were excluded from 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 and certain potential outstanding shares from the Notes and warrants were excluded from 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 and certain potential outstanding shares from the Notes and warrants were excluded from the diluted EPS calculations because their inclusion would have been anti-dilutive.

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

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

September 30,

ABL revolving credit facility

12 unchanged sentences

The ABL facility matures on August 30, 2024 .

As of June 30, 2021, eligible accounts receivable and inventory were sufficient to permit access to the full $ 1,200,000,000 facility amount, of which $ 180,000,000 was outstanding.

As of September 30, 2021, eligible accounts receivable and inventory were sufficient to permit access to the full $ 1,200,000,000 facility amount, of which $ 222,000,000 was outstanding.

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

18 unchanged sentences

increase for a holder who elects to convert their N otes in connection with those event s or during the related redemption period in certain circumstances.

Our convertible notes exceeded the market price trigger of $ 88.82 in the second quarter of 2021 making the notes convertible at the option of the holders at any time through the maturity date.

Our convertible notes exceeded the market price trigger of $ 88.82 in the third quarter of 2021 making the notes convertible at the option of the holders through December 31, 2021.

No ne of the note holders have exercised their rights at this time.

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, 2021 , none of the criteria for a fundamental change or a conversion rate adjustment had been met.

As of September 30, 2021 , 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 .

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

As of June 30, 2021, no such events have occurred.

As of September 30, 2021, no such events have occurred.

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

3 unchanged sentences

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

Interest expense resulting from the Notes reported within the consolidated statement of operations for the three and six months ended June 30, 2021 and 2020 is made up of contractual coupon interest, amortization of debt discount and amortization of debt issuance costs.

Interest expense resulting from the Notes reported within the consolidated statement of operations for the three and nine months ended September 30, 2021 and 2020 is made up of contractual coupon interest, amortization of debt discount and amortization of debt issuance costs.

Convertible Note Hedge and Warrant Transaction

14 unchanged sentences

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

Additionally, we have a $ 250,000,000 unsecured inventory financing facility with each of MUFG Bank Ltd (“MUFG”) and PNC Bank, N.A.

(“PNC”) and a $ 40,000,000 unsecured inventory financing facility in EMEA.

As of June 30, 2021, our combined inventory financing facilities had a total maximum capacity of $ 565,000,000 , of which $ 309,316,000 was outstanding.

On August 6, 2021, we increased our maximum availability for vendor purchases under our unsecured inventory financing facility with MUFG Bank Ltd (“MUFG”) from $ 250,000,000 to $ 280,000,000 .

Additionally, we increased our maximum availability under our unsecured inventory financing facility with PNC Bank, N.A.

(“PNC”) to $ 300,000,000 , including the $ 25,000,000 facility in Canada.

In addition, we have a $ 40,000,000 unsecured inventory financing facility in EMEA.

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

2 unchanged sentences

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.

Our effective tax rate for the three and six months ended June 30, 2021 was 25.4 % and 24.8 %, respectively.

For the three months ended June 30, 2021, our effective tax rate was higher than the United States federal statutory rate of 21.0 % due primarily to state income taxes and higher taxes on earnings in foreign jurisdictions, partially offset by tax benefits related to research and development activities.

For the six months ended June 30, 2021, our effective tax rate was higher than the United States federal statutory rate of 21.0 % due primarily to state income taxes 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.

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 and higher taxes on earnings in foreign jurisdictions, partially offset by 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 and higher taxes on earnings in foreign jurisdictions, partially offset by the remeasurement of acquired net operating losses under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and the recognition of tax benefits related to research and development activities.

As of June 30, 2021, and December 31, 2020, we had approximately $ 11,486,000 and $ 10,546,000 , respectively, of unrecognized tax benefits.

Of these amounts, approximately $ 870,000 and $ 749,000 , respectively, related to accrued interest.

In the future, if recognized, the liability associated with uncertain tax positions would affect our effective tax rate.

We do not believe there will be any changes to our unrecognized tax benefits over the next 12 months that would have a material effect on our effective tax rate.

As of September 30, 2021, our combined inventory financing facilities had a total maximum capacity of $ 620,000,000 , of which $ 403,094,000 was outstanding.

Our effective tax rate for the three and nine months ended September 30, 2021 was 25.4 % and 25.0 %, respectively.

For the three months ended September 30, 2021, our effective tax rate was higher than the United States federal statutory rate of 21.0 % due primarily to state income taxes and higher taxes on earnings in foreign jurisdictions, partially offset by tax benefits related to research and development activities.

For the nine months ended September 30, 2021, our effective tax rate was higher than the United States federal statutory rate of 21.0 % due primarily to state income taxes 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.

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

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 and higher taxes on earnings in foreign jurisdictions, partially offset by 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 and higher taxes on earnings in foreign jurisdictions, partially offset by the remeasurement of acquired net operating losses under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and the recognition of tax benefits related to research and development activities.

As of September 30, 2021 and December 31, 2020, we had approximately $ 11,579,000 and $ 10,546,000 , respectively, of unrecognized tax benefits.

Of these amounts, approximately

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

$ 878,000 and $ 749,000 , respectively, relate d to accrued interest.

In the future, if recognized, the liability associated with uncertain tax positions would affect our effective tax rate.

We do not believe there will be any changes to our unrecognized tax benefits over the next 12 months that would have a material effect on our effective tax rate.

We are currently under audit in various jurisdictions for tax years 2013 through 2018 .

7 unchanged sentences

We intend to retire the repurchased shares.

During the six months ended June 30, 2021, we repurchased 497,243 shares of our common stock on the open market at a total cost of $ 49,999,979 (an average price of $ 100.55 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 $ 24,999,996 (an average price of $ 56.20 per share).

All shares repurchased during the six months ended June 30, 2021 and 2020 were retired .

During the nine months ended September 30, 2021, we repurchased 497,243 shares of our common stock on the open market at a total cost of $ 49,999,979 (an average price of $ 100.55 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 $ 24,999,996 (an average price of $ 56.20 per share).

All shares repurchased during the nine months ended September 30, 2021 and 2020 were retired .

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, 2021.

Management believes that payments, if any, related to these performance bonds are not probable at September 30, 2021.

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

3 unchanged sentences

If severance payments under the current employment agreements or plan payments were to become payable, the severance payments would generally range from three to twenty-four months of salary.

Indemnifications

From time to time, in the ordinary course of business, we enter into contractual arrangements under which we agree to indemnify either our clients or third-party service providers from certain losses incurred relating to services performed on our behalf or for losses arising from defined events, which may include litigation or claims relating to past performance.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

arrangements include, but are not limited to, the indemnification of our clients for certain claims arising out of our performance under our sales contracts, the indemnification of our landlords for certain claims arising from our use of leased facilities and the indemnification of the lenders that provide our credit facilities for certain claims arising from their extension of credit to us.

Indemnifications

These arrangements include, but are not limited to, the indemnification of our clients for certain claims arising out of our performance under our sales contracts, the indemnification of our landlords for certain claims arising from our use of leased facilities and the indemnification of the lenders that provide our credit facilities for certain claims arising from their extension of credit to us.

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, 2021.

Management believes that payments, if any, related to these indemnifications are not probable at September 30, 2021.

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

14 unchanged sentences

It is possible, nevertheless, that our consolidated financial position, results of operations or liquidity could be materially and adversely affected in any particular period by the work required pursuant to any legal proceedings or the resolution of any legal proceedings during such period.

Legal expenses related to defense of any legal proceeding or the negotiations, settlements, rulings and advice of outside legal counsel in connection with any legal proceedings are expensed as incurred.

Legal expenses related to defense of any legal proceeding or the negotiations,

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

settlements, rulings and advice of outside legal counsel in connection with any legal proceedings are expensed as incurred .

In connection with the acquisition of PCM, the Company has effectively assumed responsibility for PCM litigation matters, including various disputes related to PCM’s acquisition of certain assets of En Pointe Technologies in 2015.

1 unchanged sentence

PCM has rejected and vigorously responded to those claims and is pursuing various counterclaims.

The disputes are being heard by multiple

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

courts and arbitrators in several different jurisdictions including California, Delaware and Pakistan.

The disputes are being heard by multiple courts and arbitrators in several different jurisdictions including California, Delaware and Pakistan.

The Company cannot determine with certainty the costs or outcome of these matters.

5 unchanged sentences

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

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, 2021 and 2020 (in thousands):

Three Months Ended June 30, 2021

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, 2021 and 2020 (in thousands):

Three Months Ended September 30, 2021

North America

9 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

North America

7 unchanged sentences

Net revenue recognition (Agent)

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

North America

9 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

North America

9 unchanged sentences

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, 2021 or 2020.

None of our clients exceeded ten percent of consolidated net sales for the three and nine months ended September 30, 2021 or 2020.

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.

2 unchanged sentences

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

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

North America

8 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

North America

7 unchanged sentences

Earnings from operations

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

North America

6 unchanged sentences

Earnings from operations

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

North America

10 unchanged sentences

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

September 30,

North America

2 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Depreciation and amortization of property and

6 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