What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-02-18 compared with 2021-02-17 · 427 added, 371 removed, 845 unchanged (49% of the section changed)

7 unchanged sentences

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 18, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 9 to the consolidated financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of the FASB’s Accounting Standards Codification (ASC) Topic 842, Leases.

Basis for Opinion

9 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgment.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of revenue recognition

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February 18, 2022

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

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(in thousands, except per share data)

ASSETS December 31,

Current assets:

1 unchanged sentence

Accounts receivable, net 2,936,732 2,685,448

Inventories 328,101 185,650

Other current assets 199,638 177,039

1 unchanged sentence

Property and equipment, net 176,263 146,016

Goodwill 428,346 429,368

Intangible assets, net 214,788 246,915

Other assets 301,372 311,983

$ 4,689,080 $ 4,310,732

LIABILITIES AND STOCKHOLDERS’ EQUITY

8 unchanged sentences

Other liabilities 255,953 270,049

3,179,853 2,968,303

Commitments and contingencies

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

35,103 and 35,263 shares issued and outstanding,

34,897 and 35,103 shares issued and outstanding in 2021 and 2020, respectively

Additional paid-in capital 368,282 364,288

Retained earnings 1,167,690 993,245

Accumulated other comprehensive loss – foreign currency

translation adjustments

Accumulated other comprehensive loss – foreign currency translation adjustments

( 27,094 ) ( 15,455 )

Total stockholders’ equity 1,509,227 1,342,429

$ 4,689,080 $ 4,310,732

See accompanying notes to consolidated financial statements.

3 unchanged sentences

Years Ended December 31,

2021 2020 2019

Products $ 8,120,127 $ 7,172,155 $ 6,732,121

Services 1,315,986 1,168,424 999,069

Total net sales 9,436,113 8,340,579 7,731,190

Costs of goods sold:

Products 7,380,908 6,497,001 6,125,360

Services 607,648 543,636 467,732

Total costs of goods sold 7,988,556 7,040,637 6,593,092

Gross profit 1,447,557 1,299,942 1,138,098

Operating expenses:

Selling and administrative expenses 1,117,130 1,013,765 880,737

Severance and restructuring expenses

Severance and restructuring expenses, net ( 1,634 ) 12,394 5,425

Acquisition-related expenses — 2,208 11,342

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Interest expense, net 40,516 41,594 28,478

Other expense (income), net

Other (income) expense, net ( 1,012 ) 1,529 400

Earnings before income taxes 292,557 228,452 211,716

Income tax expense 73,212 55,812 52,309

Net earnings $ 219,345 $ 172,640 $ 159,407

Net earnings per share:

Basic $ 6.27 $ 4.92 $ 4.49

Diluted $ 5.95 $ 4.87 $ 4.43

Shares used in per share calculations:

Basic 35,011 35,117 35,538

Diluted 36,863 35,444 35,959

See accompanying notes to consolidated financial statements.

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Years Ended December 31,

2021 2020 2019

Net earnings $ 219,345 $ 172,640 $ 159,407

Other comprehensive income (loss), net of tax:

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(in thousands)

Treasury Stock

Common Stock Treasury Stock Additional

Comprehensive

Earnings Total

Stockholders'

Shares Par Value Shares Amount

Balances at December 31, 2018 35,482 $ 355 — $ — $ 323,622 $ ( 41,653 ) $ 704,665 $ 986,989

Cumulative effect of accounting change

Issuance of common stock under employee

stock plans, net of shares withheld for payroll

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

322 3 — — ( 6,575 ) — — ( 6,572 )

Stock-based compensation expense — — — — 16,011 — — 16,011

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

— — — — 44,731 — — 44,731

Issuance of warrants related to convertible senior notes

— — — — 34,440 — — 34,440

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

— — — — ( 50,278 ) — — ( 50,278 )

Repurchase of treasury stock — — ( 541 ) ( 27,899 ) — — — ( 27,899 )

Retirement of treasury stock ( 541 ) ( 5 ) 541 27,899 ( 4,919 ) — ( 22,975 ) —

Foreign currency translation adjustments, net of

Foreign currency translation adjustments, net of tax

— — — — — 3,489 — 3,489

Net earnings — — — — — — 159,407 159,407

Balances at December 31, 2019 35,263 353 — — 357,032 ( 38,164 ) 841,097 1,160,318

Issuance of common stock under employee

stock plans, net of shares withheld for payroll

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

285 3 — — ( 5,967 ) — — ( 5,964 )

Stock-based compensation expense — — — — 17,727 — — 17,727

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

Purchase of note hedge related to convertible

senior notes, net of deferred tax of $ 16,047

Repurchase of treasury stock — — ( 445 ) ( 25,000 ) — — — ( 25,000 )

Retirement of treasury stock ( 445 ) ( 5 ) 445 25,000 ( 4,504 ) ( 1 ) ( 20,492 ) ( 2 )

Foreign currency translation adjustments, net of

Balances at December 31, 2019

INSIGHT ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)

(in thousands)

Treasury Stock

Comprehensive

Stockholders'

Foreign currency translation adjustments, net of tax

— — — — — 22,710 — 22,710

Net earnings — — — — — — 172,640 172,640

Balances at December 31, 2020 35,103 351 — — 364,288 ( 15,455 ) 993,245 1,342,429

Issuance of common stock under employee

stock plans, net of shares withheld for payroll

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

291 3 — — ( 9,112 ) — — ( 9,109 )

Stock-based compensation expense — — — — 18,201 — — 18,201

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Retirement of treasury stock ( 497 ) ( 5 ) 497 50,000 ( 5,095 ) — ( 44,900 ) —

Foreign currency translation adjustments, net of

Foreign currency translation adjustments, net of tax

— — — — — ( 11,639 ) — ( 11,639 )

Net earnings — — — — — — 219,345 219,345

Balances at December 31, 2021 34,897 $ 349 — $ — $ 368,282 $ ( 27,094 ) $ 1,167,690 $ 1,509,227

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Years Ended December 31,

2021 2020 2019

Cash flows from operating activities:

Adjustments to reconcile net earnings to net cash provided by

(used in) operating activities:

Net earnings $ 219,345 $ 172,640 $ 159,407

Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation and amortization 55,421 65,560 46,209

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Increase in accounts receivable ( 289,009 ) ( 132,599 ) ( 118,971 )

Decrease in inventories

Decrease (increase) in other assets

(Increase) decrease in inventories ( 148,941 ) 1,029 11,944

(Increase) decrease in other assets ( 18,100 ) 7,367 ( 129,745 )

Increase (decrease) in accounts payable 303,395 152,235 ( 612 )

Increase in accrued expenses and other

(Decrease) increase in accrued expenses and other liabilities

( 9,937 ) 52,217 119,590

Net cash provided by operating activities 163,711 355,582 127,876

Cash flows from investing activities:

Proceeds from sale of assets held for sale

Proceeds from sale of assets 31,005 40,295 —

Acquisitions, net of cash and cash equivalents acquired — ( 6,405 ) ( 664,287 )

Purchases of property and equipment ( 52,079 ) ( 24,184 ) ( 69,086 )

Proceeds from sale of foreign entity

Net cash provided by (used in) investing activities

Net cash (used in) provided by investing activities ( 21,074 ) 9,706 ( 733,373 )

Cash flows from financing activities:

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Repayments on ABL revolving credit facility ( 4,040,496 ) ( 3,462,063 ) ( 1,130,544 )

Borrowings on accounts receivable securitization

financing facility

Repayments on accounts receivable securitization

financing facility

Repayments under Term Loan A

Net borrowing (repayments) under inventory financing facility

Borrowings on accounts receivable securitization financing facility

— — 2,364,500

Repayments on accounts receivable securitization financing facility

— — ( 2,558,500 )

Net (repayments) borrowings under inventory financing facilities ( 14,355 ) 103,254 ( 50,454 )

Proceeds from issuance of convertible senior notes — — 341,250

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Net cash (used in) provided by financing activities ( 161,385 ) ( 361,791 ) 577,587

Foreign currency exchange effect on cash, cash

equivalents and restricted cash balances

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

Foreign currency exchange effect on cash, cash equivalents and restricted cash balances

( 5,857 ) 10,788 ( 86 )

(Decrease) increase in cash, cash equivalents and restricted cash ( 24,605 ) 14,285 ( 27,996 )

Cash, cash equivalents and restricted cash at beginning of year 130,582 116,297 144,293

1 unchanged sentence

See accompanying notes to consolidated financial statements.

Table of content

INSIGHT ENTERPRISES, INC.

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Description of Business

We empower organizations of all sizes with Intelligent Technology Solutions TM and services to maximize the business value of Information Technology (“IT”) in North America;

We empower organizations with technology, solutions and services to help our clients maximize the value of Information Technology (“IT”) today and drive (digital) transformation for tomorrow in North America;

Europe, the Middle East and Africa (“EMEA”);

and Asia-Pacific (“APAC”).

As a Fortune 500-ranked global provider of digital innovation, cloud/data center transformation, connected workforce solutions, together with our supply chain optimization expertise, we help clients innovate and optimize their operations to run smarter.

As a Fortune 500-ranked global technology provider of end-to-end secure digital transformation solutions and services, we help clients innovate and optimize their operations to run smarter.

Our company is organized in the following three operating segments, which are primarily defined by their related geographies:

Operating Segment

North America

United States ("U.S.") and Canada

Europe, Middle East and Africa

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

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

Operating Segment Geography

North America United States ("U.S.") and Canada

EMEA Europe, Middle East and Africa

APAC Asia-Pacific

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

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

Effective February 28, 2020, we acquired vNext SAS (“vNext”), a French digital consulting services and managed services provider.

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The acquisition was funded through a combination of using cash on hand and borrowings under our senior secured revolving credit facility (the “ABL facility”).

Effective August 1, 2018 , we acquired Cardinal Solutions Group, Inc.

(“Cardinal”), a digital solutions provider, for a purchase price, net of cash acquired, of approximately $ 78,400,000 , including the final working capital adjustment and tax gross up adjustments.

The acquisition was funded using cash on hand.

Our results of operations include the results of vNext, PCM and Cardinal from their respective acquisition dates.

(See Note 20 for a discussion of our acquisitions).

Our results of operations include the results of vNext and PCM from their respective acquisition dates.

(See Note 20 for a discussion of our PCM acquisition).

Principles of Consolidation and Presentation

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Acquisition-related expenses and transaction costs associated with business combinations are expensed as incurred.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Use of Estimates

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Additionally, these estimates and assumptions affect the reported amounts of net sales and expenses during the reporting period.

Actual results could differ from those estimates.

Actual results could differ from those

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

On an ongoing basis, we evaluate our estimates, including those related to sales recognition, anticipated achievement levels under partner funding programs, assumptions related to stock-based compensation valuation, allowances for doubtful accounts, valuation of inventories, litigation-related obligations, valuation allowances for deferred tax assets and impairment of long-lived assets, including purchased intangibles and goodwill, if indicators of potential impairment exist.

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Additionally, assumptions about future demand, market conditions and decisions by manufacturers/publishers to discontinue certain products or product lines can affect our decision to write down inventories.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Property and Equipment

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Estimated Economic Life

Leasehold improvements

Shorter of underlying lease term or asset life

Furniture and fixtures

Leasehold improvements Shorter of underlying lease term or asset life

Furniture and fixtures 2 – 7 years

Equipment 3 – 5 years

Software 3 – 10 years

Buildings 29 years

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

External direct costs of materials and services consumed in developing or obtaining internal-use computer software and payroll and payroll-related costs for teammates who are directly associated with and who devote time to internal-use computer software development projects, to the extent of the time spent directly on the project and specific to application development, are capitalized.

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Impairment, if any, is based on the excess of the carrying amount over the estimated fair value of those assets.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

We adopted ASU No.

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Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Self-Insurance

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Revenue is measured based on the consideration specified in a contract with a client, and excludes any sales incentives and amounts collected on behalf of third parties.

The Company recognizes revenue when it satisfies a performance obligation by transferring control of a product or service or by arranging for the sales of a vendor’s products or service to a client.

The Company recognizes revenue when it satisfies a performance obligation by transferring control of a product or service or by arranging for the sale of a vendor’s products or service to a client.

Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a client, are excluded from revenue.

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We estimate the price based on observable inputs, including direct labor hours and allocable costs, or use observable stand-alone prices when they are available.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Product Offerings

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In addition to other factors considered, we assume primary responsibility for fulfillment in the arrangement, we assume inventory risk if the product is returned by the client, we set the price of the product charged to the client and we work closely with our clients to determine their hardware specifications.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Bill and Hold Transactions

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Under net sales recognition, the cost of the software maintenance agreement is recorded as a reduction to sales, resulting in net sales equal to the gross profit on the transaction, and there are no costs of goods sold.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Because we are acting as the software publisher’s agent, revenue is recognized when the parties agree to the initial purchase, renewal or extension as our agency services are then complete.

W e report all fees earned from activities reported net within our services net sales category in our consolidated statements of operations.

We report all fees earned from activities reported net within our services net sales category in our consolidated statements of operations.

Vendor Direct Support Services Contracts

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We act as the agent in selling these software-as-a service subscription products.

We do not take control of the software products or assume any performance obligations to the clients related to the provisioning of the offerings in the cloud.

We do not take control of the software products or assume any performance obligations to the clients related to the provisioning of the

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

offerings in the cloud.

As a result, these sales are recorded on a net sales recognition basis.

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When we sell certain hardware and/or software products to our clients, we also enter into service contracts with them.

These contracts are support service agreements for the hardware and/or

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

software products that were purchased from us.

These contracts are support service agreements for the hardware and/or software products that were purchased from us.

Under certain support services contracts, although we purchase third-party support contracts for maintenance on the specific hardware or software products we have sold, our internal support desk assists the client first by performing an initial technical triage to determine the source of the problem and whether we can direct the client on how to fix the problem.

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We have concluded that we control all services under the contract and can direct the third-party sub-contractor to provide the requested services.

As such, we act as the principal in the transaction and record the services under a gross sales recognition basis, with the selling price being recorded in sales and our cost to the third-party service provider being recorded in costs of goods sold.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

provider being recorded in costs of goods sold.

For certain third-party service contracts in which we do not control the services prior to transferring to our clients because we are not responsible for fulfillment of the services, we have concluded that we are an agent in the transaction and record revenue on a net sales recognition basis.

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The amount of partner funding recorded as a reduction of selling and administrative expenses in our statements of operations totaled $ 103,447,000 , $ 85,888,000 and $ 77,668,000 in 2021, 2020 and 2019, respectively.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Concentrations of Risk

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No single client accounted for more than 10 % of our consolidated net sales in 2021.

Purchases from Microsoft and Tech Data (a distributor) accounted for approximately 21 % and 11 %, respectively, of our aggregate purchases in 2020.

Purchases from Microsoft, TD Synnex (a distributor) and Ingram Micro (a distributor) accounted for approximately 22 %, 15 %, and 10 % respectively, of our aggregate purchases in 2021.

No other partner accounted for more than 10 % of purchases in 2021.

Our top five partners as a group for 2020 were Microsoft, Tech Data (a distributor), Dell, Ingram Micro (a distributor) and Cisco Systems, and approximately 56 % of our total purchases during 2020 came from this group of partners.

Our top five partners as a group for 2021 were Microsoft, TD Synnex (a distributor), Ingram Micro (a distributor), Dell and Cisco Systems, and approximately 60 % of our total purchases during 2021 came from this group of partners.

Although brand names and individual products are important to our business, we believe that competitive sources of supply are available in substantially all of our product categories such that, with the exception of Microsoft, we are not dependent on any single partner for sourcing products.

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These amounts were predominantly offset by partner funding earned pursuant to shared marketing expense programs recorded as a reduction of selling and administrative expenses, as discussed in “Partner Funding” above.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Stock-Based Compensation

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dollar as our reporting currency.

The functional currencies of our foreign subsidiaries are the local currencies.

The functional currencies of our foreign subsidiaries are typically the local currencies.

Accordingly, assets and liabilities of the subsidiaries are translated into U.S.

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The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

We recognize net deferred tax assets to the extent that we believe these assets are more likely than not to be realized.

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Such estimates are subject to change and may affect our results of operations and our cash flows.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Net Earnings Per Share (“EPS”)

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Diluted EPS is computed on the basis of the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method.

Dilutive potential common shares include outstanding RSUs.

Dilutive potential common shares include outstanding RSUs and certain shares underlying our outstanding convertible senior notes (the "Notes").

A reconciliation of the denominators of the basic and diluted EPS calculations follows (in thousands, except per share data):

Years Ended December 31,

Weighted-average shares used to compute basic

Dilutive potential common shares due to dilutive:

RSUs, net of tax effect

Weighted-average shares used to compute

2021 2020 2019

Net earnings $ 219,345 $ 172,640 $ 159,407

Weighted-average shares used to compute basic EPS

35,011 35,117 35,538

Dilutive potential common shares due to:

Dilutive RSUs, net of tax effect 399 327 421

The convertible senior notes 1,453 — —

Weighted-average shares used to compute diluted EPS

36,863 35,444 35,959

Net earnings per share:

Basic $ 6.27 $ 4.92 $ 4.49

Diluted $ 5.95 $ 4.87 $ 4.43

In 2021, 2020 and 2019, approximately 2,000 , 122,000 and 42,000 , 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.

In the years ended December 31, 2020 and 2019, certain potential outstanding shares from convertible senior notes and warrants were not included in the diluted EPS calculations because their inclusion would have been anti-dilutive.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In the years ended December 31, 2021, 2020, and 2019 certain potential outstanding shares from the warrants relating to the Call Spread Transactions (as defined in Note 8) were not included in the diluted EPS calculations because their inclusion would have been anti-dilutive.

In the years ended December 31, 2020 and 2019 certain potential outstanding shares from the Notes were not included in the diluted EPS calculations because their inclusion would have been anti-dilutive.

Recently Issued Accounting Standards

In August 2020, the FASB issued ASU No.

2020-06, “Accounting for Convertible Instruments and Contracts in an Equity’s Own Equity”.

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No.

2020-06 , “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”.

The new guidance is intended to simplify the accounting for certain convertible instruments with characteristics of both liability and equity.

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The guidance also expands disclosure requirements for convertible instruments and simplifies areas of the guidance for diluted earnings-per-share calculations by requiring the use of the if-converted method.

The guidance will be effective for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020 and can be adopted on either a fully retrospective or modified retrospective basis.

The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.

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

The guidance is effective for fiscal years beginning after December 15, 2021 and can be adopted on either a fully retrospective or modified retrospective basis.

We adopted the new standard as of January 1, 2022 on a modified retrospective basis.

The cumulative effect adjustment from prior periods that we recognized in our consolidated balance sheet as of the adoption date as an adjustment to increase retained earnings was approximately $ 18,000,000 .

In December 2020, the FASB issued 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.

2 unchanged sentences

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

In June 2016, the FASB issued ASU No.

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.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(2) Sales Recognition

Disaggregation of Revenue

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 years ended December 31, 2020, 2019 and 2018 (in thousands):

Year Ended December 31, 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)

Year Ended December 31, 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)

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Year Ended December 31, 2018

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)

(2) Receivables, Contract Liabilities and Performance Obligations

Contract Balances

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

Current receivables, which are included in “Accounts

receivable, net”

2021 December 31,

Current receivables, which are included in “Accounts receivable, net”

$ 2,936,732 $ 2,685,448

Non-current receivables, which are included in “Other assets” 147,139 154,662

Contract liabilities, which are included in “Accrued expenses and

other current liabilities” and “Other liabilities”

Contract liabilities, which are included in “Accrued expenses and other current liabilities” and “Other liabilities”

116,067 107,158

Significant changes in the contract liabilities balances during the year ended December 31, 2021 are as follows (in thousands):

1 unchanged sentence

Balances at December 31, 2019

Recognition of the beginning contract liabilities to revenue, as the result

of performance obligations satisfied

Recognition of the beginning contract liabilities to revenue, as the result of performance obligations satisfied

Cash received in advance and not recognized as revenue 81,897

Contract liabilities assumed in an acquisition

Balances at December 31, 2020

Recognition of the beginning contract liabilities to revenue, as the result

of performance obligations satisfied

Recognition of the beginning contract liabilities to revenue, as the result of performance obligations satisfied

Cash received in advance and not recognized as revenue 86,531

Balances at December 31, 2021

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Transaction price allocated to the remaining performance obligations

6 unchanged sentences

Our open time and material contracts at December 31, 2021, have an average expected duration of 23 months.

The majority of our backlog historically has been and continues to be open cancelable purchase orders.

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 as of December 31, 2020, in the table above.

The majority of our product backlog historically has been and continues to be open cancellable purchase orders.

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 cancellable purchase orders, which do not qualify for revenue recognition as of December 31, 2021, in the table above.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Assets recognized for costs of obtaining a contract with a customer

Sales commissions are the only significant incremental costs incurred to obtain contracts with our clients.

The majority of our contracts are completed within a one-year performance period, and for contracts with a specified term of one year or less, we recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that we otherwise would have recognized is one year or less.

We record sales commissions on contracts with performance periods that exceed one year as an asset and amortize the asset to expense over the related contract performance period.

As of December 31, 2021 and 2020, the related asset balance was $ 20,549,000 and $ 3,770,000 , respectively.

The expense is expected to be recognized over the next 36 months.

(3) Assets Held for Sale

During 2020, we completed the sale of our properties in Irvine, California and El Segundo, California for approximately $ 14,218,000 and $ 26,404,000 , respectively.

Our property in Santa Monica, California was reclassified as held-in-use as we reevaluate our sale options.

Our properties in Tempe, Arizona and Woodbridge, Illinois continued to be classified as held-for-sale for the remainder of 2020.

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

See note 22 for additional information on the subsequent event regarding the sale of our Tempe, Arizona and Woodbridge, Illinois properties.

During 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 2020, we completed the sale of our Irvine, California and El Segundo, California properties for approximately $ 14,218,000 and $ 26,404,000 , respectively.

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

(4) Property and Equipment

Property and equipment consist of the following (in thousands):

Software $ 160,633 $ 159,413

Buildings 83,405 66,842

Equipment 52,653 62,209

Furniture and fixtures 32,471 38,133

Leasehold improvements 42,246 35,665

Land 38,641 39,819

410,049 402,081

Accumulated depreciation and amortization

( 233,786 ) ( 256,065 )

Property and equipment, net $ 176,263 $ 146,016

1 unchanged sentence

On November 1, 2019, we completed the purchase of real estate in Chandler, Arizona for approximately $ 48,000,000 that we intend to use as our global corporate headquarters.

The property contains a building and some infrastructure in place that we will complete readying for our use in 2021.

The property contains a building and some infrastructure in place that we expect will be ready for our use in 2022.

Included within the software, buildings and land values presented above for 2021 are assets in the process of being readied for use in the amounts of approximately $ 7,016,000 , $ 62,286,000 and $ 11,700,000 , respectively.

Included within the software, buildings and land values presented above for 2020 are assets in the process of being readied for use in the amounts of approximately $ 5,650,000 , $ 29,427,000 and $ 11,700,000 , respectively.

Depreciation on these assets will commence, as appropriate, when they are ready for use and placed in service.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

We intend to sell our current properties in Tempe, Arizona.

See note 22 for additional information on the subsequent event regarding the sale of our Tempe, Arizona and Woodbridge, Illinois properties.

In 2020, we completed the sale of our property in Irvine, California and El Segundo, California for approximately $ 14,218,000 and $ 26,404,000 , respectively .

Included within the software, buildings and land values presented above are assets in the process of being readied for use in the amounts of approximately $ 5,650,000 , $ 29,427,000 and $ 11,700,000 , respectively.

Depreciation on these assets will commence, as appropriate, when they are ready for use and placed in service.

The changes in the carrying amount of goodwill for the year ended December 31, 2021 are as follows (in thousands):

EMEA APAC Consolidated

Goodwill $ 720,240 $ 163,011 $ 20,732 $ 903,983

Accumulated impairment losses ( 323,422 ) ( 151,439 ) ( 13,973 ) ( 488,834 )

Goodwill acquired during 2020

— 4,865 — 4,865

Measurement period adjustments during 2020 5,711 ( 677 ) — 5,034

Foreign currency translation adjustment 947 2,767 606 4,320

Balance at December 31, 2020

Goodwill acquired during 2020

Measurement period adjustments during 2020

$ 403,476 $ 18,527 $ 7,365 $ 429,368

Foreign currency translation adjustment 115 ( 792 ) ( 345 ) ( 1,022 )

Balance at December 31, 2021

$ 403,591 $ 17,735 $ 7,020 $ 428,346

On February 28, 2020, we acquired vNext, which has been integrated into our EMEA business.

7 unchanged sentences

The addition of PCM complements our supply chain optimization solution offering, adding scale and clients in the mid-market and corporate space in North America.

On August 1, 2018 , we acquired Cardinal, which has been integrated into our North America business.

Under the acquisition method of accounting, the purchase price for the acquisition was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values.

The excess purchase price over fair value of net assets acquired of approximately $ 36,040,000 , net of a measurement period adjustment of $ 400,000 recognized in 2019, was recorded as goodwill in the North America reporting unit (see Note 20).

The primary driver for this acquisition was to strengthen our services capabilities and bring value to our clients within our digital innovation services solution offering.

During 2021, we periodically assessed whether any indicators of impairment existed which would require us to perform an interim impairment review.

1 unchanged sentence

We performed our annual test of goodwill for impairment during the fourth quarter of 2021.

The results of the qualitative goodwill impairment test

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

indicated that the fair value s of our North America , EMEA and APAC reporting unit s w ere in excess of the ir respective carrying value s .

The results of the qualitative goodwill impairment test indicated that the fair values of our North America, EMEA and APAC reporting units were in excess of their respective carrying values.

(6) Intangible Assets

1 unchanged sentence

Customer relationships $ 320,323 $ 342,492

Other 5,374 7,906

325,697 350,398

Accumulated amortization ( 110,909 ) ( 103,483 )

Intangible assets, net $ 214,788 $ 246,915

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

During 2021, we periodically assessed whether any indicators of impairment existed related to our intangible assets.

3 unchanged sentences

Years Ending December 31,

2022 $ 31,166

Thereafter 69,568

Total amortization expense $ 214,788

1 unchanged sentence

We have entered into agreements with financial intermediaries to facilitate the purchase of inventory from various suppliers under certain terms and conditions, as described below.

These amounts outstanding under these facilities are classified separately as accounts payable - inventory financing facilities in the accompanying consolidated balance sheets.

The amounts outstanding under these facilities are classified separately as accounts payable - inventory financing facilities in the accompanying consolidated balance sheets.

Inventory Financing Facilities

During 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 .

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

(“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 .

I n August 2021, we increased our maximum availability under our unsecured inventory financing facility with PNC Bank, N.A.

The aggregate availability for vendor purchases under the PNC facilities is $ 300,000,000 , including a new $ 25,000,000 facility in Canada (the "Canada facility").

In addition, we have a $ 40,000,000 unsecured inventory financing facility with Wells Fargo in EMEA (the "EMEA facility").

As of December 31, 2021, our combined inventory financing facilities had a total maximum capacity of $ 620,000,000 , of which $ 311,878,000 was outstanding at December 31, 2021.

The facilities 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.

If balances are not paid within stated vendor terms, they will accrue interest at prime plus 2.00 % on the MUFG facility, Canadian Dollar Offered Rate plus 4.50 % on the Canada facility and LIBOR, EURIBOR, or SONIA, as applicable, plus 4.50 % and 0.25 % on the PNC (other than the Canada facility) and EMEA facilities, respectively.

Net amounts drawn down or repaid during the year on these facilities are classified within cash flows from financing activities in the accompanying consolidated statements of cash flows.

9 unchanged sentences

Finance leases and other financing obligations 63 2,267

Total 361,606 438,686

current portion of long-term debt ( 36 ) ( 1,105 )

9 unchanged sentences

The interest rates applicable to borrowings under the ABL facility are based on the average aggregate excess availability under the ABL facility as set forth on a pricing grid in the credit agreement.

Amounts outstanding under the ABL facility bear interest, payable quarterly, at a floating rate equal to a LIBOR rate plus a pre-determined spread of 1.25 % to 1.50 %.

Amounts outstanding under the ABL facility bear interest, payable quarterly, at a floating rate equal to LIBOR, EURIBOR, or SONIA, as applicable, plus a pre-determined spread of 1.25 % to 1.50 %.

The floating interest rate applicable at December 31, 2021 was 1.35 % per annum for the ABL facility.

5 unchanged sentences

Convertible Senior Notes

On August 15, 2019, we issued $ 300,000,000 aggregate principal amount of convertible senior notes (the “notes”) that mature on February 15, 2025 .

On August 23, 2019, we issued an additional $ 50,000,000 aggregate principal amount of the notes pursuant to the exercise in full by the initial purchasers of the notes of their option to purchase additional notes.

In August 2019, we issued $ 350,000,000 aggregate principal amount of Notes that mature on February 15, 2025.

The Notes bear interest at an annual rate of 0.75 % payable semiannually, in arrears, on February 15th and August 15th of each year.

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

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, 2020 (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

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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;

the product of the last reported sale price of our common stock and the conversion rate on each such trading day;

(3) if we call any or all of the Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date;

1 unchanged sentence

On or after June 15, 2024 until the close of business on the second scheduled trading day immediately preceding the maturity date, the holders may convert their notes at any time, regardless of the foregoing circumstances.

Upon conversion, we will pay or deliver cash, shares of our common stock or a combination of the two, at our discretion.

Our convertible notes exceeded the market price trigger of $ 88.82 in the fourth quarter of 2021 making the Notes convertible at the option of the holders through March 31, 2022.

None of the note holders have exercised their rights at this time.

Upon conversion, we will pay or deliver cash equal to the principal amount of the notes, plus cash or shares of our common stock or a combination of the two for any additional amounts due.

The conversion rate will initially be 14.6376 shares of common stock per $ 1,000 principal amount of notes (equivalent to an initial conversion price of approximately $ 68.32 per share of common stock).

9 unchanged sentences

The Notes consist of the following balances reported within the consolidated balance sheet as of December 31, 2021 and 2020 (in thousands):

Principal $ 350,000 $ 350,000

debt discount and issuance costs, net of accumulated accretion ( 41,457 ) ( 53,581 )

9 unchanged sentences

Amortization of debt issuance costs $ 1,422 $ 1,359

As a result of our adoption of ASU 2020-06, effective January 1, 2022, we will no longer reflect any debt discount on the Notes in our consolidated balance sheet, nor will we recognize amortization of debt discount within our consolidated statement of operations.

Also in January 2022, we filed an irrevocable settlement election notice with the Note holders to inform them of our election to settle the principal amount of the Notes in cash.

As a result of this election, at period ends where the market price, or other conversion triggers are met, the Notes will be classified in our consolidated balance sheet as current.

Convertible Note Hedge and Warrant Transaction

22 unchanged sentences

The following table provides information about the financial statement classification of our lease balances reported within the consolidated balance sheets as of December 31, 2021 and December 31, 2020 (in thousands):

Classification

Operating lease assets

Finance lease assets

Property and equipment (a)

Leases Classification December 31,

2021 December 31,

Operating lease assets Other assets $ 72,605 $ 79,418

Finance lease assets Property and equipment (a)

Total lease assets $ 72,685 $ 81,521

Operating lease liabilities

Accrued expenses and other current liabilities

Finance lease liabilities

Current portion of long-term debt

Operating lease liabilities

Other liabilities

Finance lease liabilities

Long-term debt

Operating lease liabilities Accrued expenses and other current liabilities $ 20,667 $ 20,848

Finance lease liabilities Current portion of long-term debt 36 1,105

Operating lease liabilities Other liabilities 58,442 65,192

Finance lease liabilities Long-term debt 27 1,162

Total lease liabilities $ 79,172 $ 88,307

Recorded net of accumulated amortization of $ 2,162,000 and $ 861,000 as of December 31, 2020 and 2019, respectively.

(a) Recorded net of accumulated amortization of $ 27,000 and $ 2,162,000 as of December 31, 2021 and 2020, respectively.

The following table provides information about the financial statement classification of our lease expenses reported within the consolidated statement of operations for the year ended December 31, 2021 and 2020 (in thousands):

Classification

Lease cost Classification Year ended

December 31, 2021

3 unchanged sentences

Finance lease cost

Amortization of leased

Amortization of leased assets

Selling and administrative expenses 697 1,301

Interest on lease liabilities

Interest expense, net

Interest on lease liabilities Interest expense, net 33 104

Total lease cost $ 25,569 $ 27,323

Includes immaterial amounts recorded to cost of goods sold.

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

(a) Includes immaterial amounts recorded to cost of goods sold.

(b) 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 December 31, 2021 are as follows (in thousands):

Operating leases

Finance leases

Operating leases Finance leases Total

2022 $ 22,387 $ 36 $ 22,423

2023 16,757 27 16,784

2024 11,509 — 11,509

2025 9,525 — 9,525

2026 8,232 — 8,232

18,261 — 18,261

Total lease payments 86,671 63 86,734

Interest ( 7,562 ) — ( 7,562 )

Present value of lease liabilities $ 79,109 $ 63 $ 79,172

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

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table provides information about the remaining lease terms and discount rates applied as of December 31, 2021 and 2020:

December 31, 2020

December 31, 2019

December 31, 2021 December 31, 2020

Weighted average remaining lease term (years):

5 unchanged sentences

The following table provides other information related to leases for the year ended December 31, 2021 and 2020 (in thousands):

December 31, 2020

December 31, 2019

Cash paid for amounts included in the measurement of lease

December 31, 2021 December 31, 2020

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ 24,640 $ 25,849

Leased assets obtained in exchange for new operating lease liabilities (a)

Excludes operating lease assets acquired as part of the PCM acquisition of $ 17,951,000 in 2019.

There were no major acquisitions in 2020.

Leased assets obtained in exchange for new operating lease liabilities

15,980 25,583

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(10) Stock-Based Compensation

1 unchanged sentence

Years Ended December 31,

2021 2020 2019

North America $ 13,699 $ 13,151 $ 12,055

EMEA 3,844 3,953 3,437

APAC 658 623 519

Total Consolidated $ 18,201 $ 17,727 $ 16,011

10 unchanged sentences

No further awards will be made under the Prior Plan.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The Plan is administered by the Compensation Committee of Insight’s Board of Directors, and, except as provided below, the Compensation Committee has the exclusive authority to administer the Plan, including the power to determine eligibility, the types of awards to be granted, the price and the timing of awards.

10 unchanged sentences

As of December 31, 2021, total compensation cost related to nonvested RSUs not yet recognized is $ 28,391,000 , which is expected to be recognized over the next 1.29 years on a weighted-average basis.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes our RSU activity during 2021:

Number Weighted

Nonvested at the beginning of year 863,718 $ 52.61

Vested, including shares withheld to cover taxes

Nonvested at the end of year

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.

Granted 292,838 $ 85.07

Vested, including shares withheld to cover taxes ( 396,886 ) $ 49.08 $ 19,479,165 (a)

Forfeited ( 68,982 ) $ 65.19

Nonvested at the end of year 690,688 $ 67.60 $ 73,627,341 (b)

(a) 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 intrinsic value for RSUs which vested during 2020 and 2019 was $ 16,410,202 and $ 24,837,997 , respectively.

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 $ 76.09 as of December 31, 2020, which would have been received by holders of RSUs had all such holders sold their underlying shares on that date.

During each of the years in the three-year period ended December 31, 2020, the RSUs that vested for teammates in the United States were net-share settled such that we withheld shares with value equivalent to the teammates’ minimum statutory United States tax obligation for the applicable income and other employment taxes and remitted the equivalent cash amount to the appropriate taxing authorities.

(b) 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 $ 106.60 as of December 31, 2021, which would have been received by holders of RSUs had all such holders sold their underlying shares on that date.

During each of the years in the three-year period ended December 31, 2021, the RSUs that vested for teammates in the United States were net-share settled such that we withheld shares with value equivalent up to the teammates’ maximum statutory United States tax obligation for the applicable income and other employment taxes and remitted the equivalent cash amount to the appropriate taxing authorities.

The total shares withheld during 2021, 2020 and 2019 of 105,434 , 101,159 and 115,831 , respectively, were based on the value of the RSUs on their vesting dates as determined by our closing stock price on such dates.

1 unchanged sentence

These net-share settlements had the effect of repurchases of our common stock as they reduced the number of shares that would have otherwise been issued as a result of the vesting and did not represent an expense to us.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(11) Income Taxes

The following table presents the U.S.

1 unchanged sentence

Years Ended December 31,

2021 2020 2019

Earnings before income taxes:

United States $ 200,657 $ 154,788 $ 142,410

Foreign 91,900 73,664 69,306

$ 292,557 $ 228,452 $ 211,716

Income tax expense:

Federal $ 29,478 $ 38,732 $ 20,254

State and local 7,391 8,203 5,457

Foreign 24,485 22,123 19,180

61,354 69,058 44,891

Federal 11,104 ( 10,048 ) 9,180

State and local 3,239 ( 1,779 ) 1,210

Foreign ( 2,485 ) ( 1,419 ) ( 2,972 )

11,858 ( 13,246 ) 7,418

$ 73,212 $ 55,812 $ 52,309

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following schedule reconciles the differences between the U.S.

1 unchanged sentence

statutory rate and our income tax expense (dollars in thousands):

2021 2020 2019

Statutory federal income tax rate $ 61,437 21.0 %

State income tax expense, net of

federal income tax benefit

$ 47,975 21.0 %

$ 44,460 21.0 %

State income tax expense, net of federal income tax benefit

Audits and adjustments, net 2,131 0.7

Change in valuation allowances 1,317 0.5

( 2,739 ) ( 1.3 )

Foreign income taxed at different rates 4,308 1.5

Effects of U.S.

Research and development credits ( 4,352 ) ( 1.5 )

( 1,858 ) ( 0.8 )

( 5,438 ) ( 2.6 )

Other, net ( 2,295 ) ( 0.8 )

( 1,548 ) ( 0.7 ) 2,207 1.1

Effective tax rate $ 73,212 25.0 %

On December 22, 2017, the U.S.

enacted the Tax Cuts and Jobs Act (“TCJA 2017”), which significantly changed the U.S.

In 2018 we completed our accounting for the tax effects of TCJA 2017 and recorded an incremental benefit of $ 5,600,000 against provisional amounts previously reported.

$ 55,812 24.4 %

$ 52,309 24.7 %

On March 27, 2020, the U.S.

2 unchanged sentences

As of December 31, 2021, we have accumulated undistributed earnings generated by our foreign subsidiaries, most of which have been taxed in the U.S.

as a result of TCJA 2017.

as a result of the Tax Cuts and Jobs Act of 2017.

For foreign subsidiary earnings not yet taxed under these provisions, we continue to assert permanent reinvestment of earnings earned in foreign jurisdictions which impose a withholding tax on dividends and, accordingly, have not accrued any additional income or withholding taxes on the potential repatriation of these earnings.

At the present time, given the various complexities involved in repatriating earnings, it is not practicable to estimate the amount of tax that may be payable if these earnings were not reinvested indefinitely.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The significant components of deferred tax assets and liabilities are as follows (in thousands):

2 unchanged sentences

Foreign tax credits 13,518 16,027

Other 27,445 25,786

Gross deferred tax assets 66,754 69,266

4 unchanged sentences

Property and equipment ( 19,351 ) ( 6,715 )

Other ( 1,852 ) ( 2,540 )

Total deferred tax liabilities ( 71,190 ) ( 58,086 )

Net deferred tax (liabilities) assets

Net deferred tax liabilities $ ( 41,384 ) $ ( 28,918 )

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The net non-current deferred tax assets and liabilities are as follows (in thousands):

Net non-current deferred tax assets, which are included in

"Other assets"

Net non-current deferred tax assets, which are included in "Other assets"

$ 5,689 $ 4,291

Net non-current deferred tax liabilities ( 47,073 ) ( 33,209 )

Net deferred tax (liabilities) assets

Net deferred tax liabilities $ ( 41,384 ) $ ( 28,918 )

As of December 31, 2021, we have U.S.

4 unchanged sentences

At December 31, 2021 and 2020, our valuation allowances totaled $ 36,948,000 and $ 40,098,000 , respectively, relating primarily to state and foreign NOLs and foreign tax credits.

Changes to our valuation allowance for the year ended December 31, 2020 were driven by the utilization of foreign tax credits and changes in our foreign and state NOLs.

Changes to our valuation allowance for the year ended December 31, 2021 were driven by the expiration of foreign tax credits and changes in our foreign and state NOLs.

As of December 31, 2021 and 2020, we had approximately $ 12,664,000 and $ 10,546,000 , respectively, of unrecognized tax benefits.

8 unchanged sentences

For state and foreign jurisdictions, the statute of limitations generally varies between three and ten years .

However, to the extent allowable by law, the tax authorities may have a right to examine and

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

make adjustment to prior periods when amended returns have been filed, or when net operating losses or tax credits were generated and carried forward for subsequent utilization .

However, to the extent allowable by law, the tax authorities may have a right to examine and make adjustment to prior periods when amended returns have been filed, or when net operating losses or tax credits were generated and carried forward for subsequent utilization.

(12) Market Risk Management

5 unchanged sentences

Our financing facilities expose our net earnings to changes in short-term interest rates since interest rates on the underlying obligations are variable.

We had $ 140,000,000 outstanding under our ABL facility and $ 296,419,000 outstanding under our senior convertible notes at December 31, 2020.

The interest rate attributable to the borrowings under our ABL facility and our senior convertible notes was 1.40 % and 0.75 %, respectively, per annum at December 31, 2020.

We had $ 53,000,000 outstanding under our ABL facility and $ 308,543,000 outstanding under the Notes at December 31, 2021.

The interest rate attributable to the borrowings under our ABL facility and the Notes was 1.35 % and 0.75 %, respectively, per annum at December 31, 2021.

The change in annual pre-tax earnings from operations resulting from a hypothetical 10% increase or decrease in the applicable interest rate would have been immaterial.

Although our senior convertible notes are based on a fixed rate, changes in interest rates could impact the fair market value of such notes.

As of December 31, 2020, the fair market value of our convertible senior notes was $ 454,790,000 .

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Although the Notes are based on a fixed rate, changes in interest rates could impact the fair market value of such notes.

As of December 31, 2021, the fair market value of the Notes was $ 553,875,000 .

Foreign Currency Exchange Risk

14 unchanged sentences

The estimated fair values of our cash and cash equivalents approximate their carrying values and are determined based on quoted prices in active markets for identical assets.

The estimated fair values of our long-term debt balances approximate their carrying values based on their variable interest rate terms that are based on current market interest rates for similar debt instruments.

The estimated fair values of our long-term debt balances, excluding the Notes, approximate their carrying values based on their variable interest rate terms that are based on current market interest rates for similar debt instruments.

The Notes were initially recorded at their estimated fair value based on market interest rates for similar debt instruments.

The fair market value of the Notes as of December 31, 2021 is disclosed in footnote 12.

The fair values of the other financial assets and liabilities are based on the values that would be received or paid in an orderly transaction between market participants and approximate their carrying values due to their nature and short duration.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(14) Benefit Plans

2 unchanged sentences

The Company provides a discretionary match to all participants who make 401(k) contributions pursuant to the Defined Contribution Plan.

On May 15, 2020, our matching contributions were temporarily suspended due to the global health crises.

Company matching contributions are expected to return in 2021.

On May 15, 2020, our matching contributions were temporarily suspended due to the COVID-19 pandemic.

Company matching contributions returned in 2021.

The discretionary match provided to participants is equivalent to 50 % of a participant’s pre-tax contributions up to a maximum of 6 % of eligible compensation per pay period.

2 unchanged sentences

Total consolidated contribution expense under these plans was $ 25,270,000 , $ 11,974,000 and $ 19,126,000 for 2021, 2020 and 2019, respectively.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(15) Share Repurchase Programs

In each of February 2020 and February 2018, our Board of Directors authorized the repurchase of up to $ 50,000,000 of our common stock.

As of December 31, 2020, $ 25 million remained available under the February 2020 share repurchase plan and none remained available under the February 2018 share repurchase plan.

In May 2021, our Board of Directors authorized the repurchase of up to $ 125,000,000 of common stock, including the $ 25,000,000 that remained available from the February 2020 authorization.

As of December 31, 2021 , approximately $ 75,000,000 remained available under the May 2021 share repurchase plan and none remained available under the February 2018 share repurchase plan.

Our share repurchases may be made on the open market, subject to Rule 10b-18 or in privately negotiated transactions, through block trades, through 10b5-1 plans or otherwise, at management’s discretion.

No share repurchase program was authorized in 2019 .

The following table summarizes the shares of our common stock that we repurchased on the open market under these repurchase programs during the years ended December 31, 2021, 2020 and 2019, respectively, in thousands, except per share amounts:

2021 497 $ 100.55 $ 50,000

2020 445 56.20 25,000

2019 541 51.56 27,899

Total 1,483 $ 102,899

All shares repurchased were retired.

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In the ordinary course of business, we issue performance bonds to secure our performance under certain contracts or state tax requirements.

As of December 31, 2021, we had approximately $ 28,348,000 of performance bonds outstanding.

These bonds are issued on our behalf by a surety company on an unsecured basis;

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In addition, vesting of outstanding nonvested RSUs would accelerate following a change in control.

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.

If severance payments under the current employment agreements or plan payments were to become payable, the severance payments would generally range from one 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.

These arrangements include, but

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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.

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.

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

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

We have entered into separate indemnification agreements with certain of our executive officers and with each of our directors.

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The seller of En Pointe Technologies and related entities providing various post-closing support functions to PCM have asserted claims regarding the sufficiency of earnout payments paid by PCM under the asset purchase agreement and the unwinding of the support functions post-closing.

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

PCM rejected and vigorously responded to those claims, and the Company continues to pursue various counterclaims.

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

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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)

(17) Supplemental Financial Information

Additions and deductions related to the allowance for doubtful accounts receivable for 2021, 2020 and 2019 were as follows (in thousands):

Allowance for doubtful accounts

Additions Deductions Balance at

Allowance for doubtful accounts receivable:

Year ended December 31, 2021

$ 15,106 $ 7,862 $ ( 6,027 ) $ 16,941

Year ended December 31, 2020

$ 10,762 $ 10,163 $ ( 5,819 ) $ 15,106

Year ended December 31, 2019

$ 10,462 $ 5,079 $ ( 4,779 ) $ 10,762

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(18) Cash Flows

Cash payments for interest on indebtedness and cash payments for taxes on income were as follows (in thousands):

Years Ended December 31,

2021 2020 2019

Supplemental disclosures of cash flow information:

Cash paid during the year for interest $ 8,852 $ 16,605 $ 6,246

Cash paid during the year for income taxes, net of

Cash paid during the year for income taxes, net of refunds

$ 75,986 $ 62,545 $ 42,484

(19) Segment and Geographic Information

We operate in three reportable geographic operating segments:

North America;

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 tables summarize net sales by offering for North America, EMEA and APAC by sales mix amounts (in thousands):

North America

Years Ended December 31,

North America, EMEA, and APAC.

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

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

Disaggregation of Revenue

Year Ended December 31, 2021

North America EMEA APAC Consolidated

Major Offerings

Hardware $ 5,163,225 $ 676,815 $ 49,470 $ 5,889,510

Software 1,315,412 825,361 89,844 2,230,617

Services 1,041,686 201,875 72,425 1,315,986

$ 7,520,323 $ 1,704,051 $ 211,739 $ 9,436,113

Major Client Groups

Large Enterprise / Corporate $ 5,356,915 $ 1,219,601 $ 93,796 $ 6,670,312

Commercial 1,495,311 65,728 61,627 1,622,666

Public Sector 668,097 418,722 56,316 1,143,135

$ 7,520,323 $ 1,704,051 $ 211,739 $ 9,436,113

Revenue Recognition based on acting as Principal or Agent in the Transaction

Gross revenue recognition (Principal) $ 7,138,852 $ 1,591,156 $ 184,418 $ 8,914,426

Net revenue recognition (Agent) 381,471 112,895 27,321 521,687

$ 7,520,323 $ 1,704,051 $ 211,739 $ 9,436,113

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years Ended December 31,

Year Ended December 31, 2020

North America EMEA APAC Consolidated

Major Offerings

Hardware $ 4,418,295 $ 617,825 $ 31,953 $ 5,068,073

Software 1,260,757 760,562 82,763 2,104,082

Services 935,980 176,838 55,606 1,168,424

$ 6,615,032 $ 1,555,225 $ 170,322 $ 8,340,579

Major Client Groups

Large Enterprise / Corporate $ 4,507,041 $ 1,101,557 $ 62,734 $ 5,671,332

Commercial 1,395,298 61,535 60,740 1,517,573

Public Sector 712,693 392,133 46,848 1,151,674

$ 6,615,032 $ 1,555,225 $ 170,322 $ 8,340,579

Revenue Recognition based on acting as Principal or Agent in the Transaction

Gross revenue recognition (Principal) $ 6,284,948 $ 1,452,115 $ 146,770 $ 7,883,833

Net revenue recognition (Agent) 330,084 103,110 23,552 456,746

$ 6,615,032 $ 1,555,225 $ 170,322 $ 8,340,579

Year Ended December 31, 2019

North America EMEA APAC Consolidated

Major Offerings

Hardware $ 3,957,507 $ 622,949 $ 34,965 $ 4,615,421

Software 1,269,983 753,729 92,988 2,116,700

Services 796,815 149,966 52,288 999,069

$ 6,024,305 $ 1,526,644 $ 180,241 $ 7,731,190

Major Client Groups

Large Enterprise / Corporate $ 4,466,384 $ 1,126,388 $ 59,786 $ 5,652,558

Commercial 960,432 76,666 65,033 1,102,131

Public Sector 597,489 323,590 55,422 976,501

$ 6,024,305 $ 1,526,644 $ 180,241 $ 7,731,190

Revenue Recognition based on acting as Principal or Agent in the Transaction

Gross revenue recognition (Principal) $ 5,759,247 $ 1,432,300 $ 156,279 $ 7,347,826

Net revenue recognition (Agent) 265,058 94,344 23,962 383,364

$ 6,024,305 $ 1,526,644 $ 180,241 $ 7,731,190

The method for determining what information regarding operating segments, products and services, geographic areas of operation and major clients to report is based upon the “management approach,” or the way that management organizes the operating segments within a company, for which separate financial information is evaluated regularly by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources.

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

Charges are allocated to our operating segments, and the allocations have been

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

determined on a basis that we considered to be a reasonable reflection of the utilization of services provided to or benefits received by the operating segments.

The tables below present information about our reportable operating segments (in thousands):

Year Ended December 31, 2021

EMEA APAC Consolidated

Products $ 6,478,637 $ 1,502,176 $ 139,314 $ 8,120,127

Services 1,041,686 201,875 72,425 1,315,986

Total net sales 7,520,323 1,704,051 211,739 9,436,113

Costs of goods sold:

Products 5,874,551 1,380,221 126,136 7,380,908

Services 510,322 64,968 32,358 607,648

Total costs of goods sold 6,384,873 1,445,189 158,494 7,988,556

Gross profit 1,135,450 258,862 53,245 1,447,557

Operating expenses:

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Severance and restructuring expenses ( 3,129 ) 1,328 167 ( 1,634 )

Acquisition-related expenses

Earnings from operations $ 268,813 $ 46,918 $ 16,330 $ 332,061

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Year Ended December 31, 2020

EMEA APAC Consolidated

Products $ 5,679,052 $ 1,378,387 $ 114,716 $ 7,172,155

Services 935,980 176,838 55,606 1,168,424

Total net sales 6,615,032 1,555,225 170,322 8,340,579

Costs of goods sold:

Products 5,130,851 1,261,236 104,914 6,497,001

Services 462,793 57,943 22,900 543,636

Total costs of goods sold 5,593,644 1,319,179 127,814 7,040,637

Gross profit 1,021,388 236,046 42,508 1,299,942

Operating expenses:

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Earnings from operations $ 219,198 $ 40,368 $ 12,009 $ 271,575

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Year Ended December 31, 2019

EMEA APAC Consolidated

Products $ 5,227,490 $ 1,376,678 $ 127,953 $ 6,732,121

Services 796,815 149,966 52,288 999,069

Total net sales 6,024,305 1,526,644 180,241 7,731,190

Costs of goods sold:

Products 4,748,608 1,258,974 117,778 6,125,360

Services 404,583 40,587 22,562 467,732

Total costs of goods sold 5,153,191 1,299,561 140,340 6,593,092

Gross profit 871,114 227,083 39,901 1,138,098

Operating expenses:

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

2021 December 31,

North America $ 4,920,220 $ 4,837,155

EMEA 828,456 735,771

APAC 148,737 155,761

Corporate assets and intercompany eliminations, net ( 1,208,333 ) ( 1,417,955 )

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Total assets $ 4,689,080 $ 4,310,732

The following is a summary of our geographic net sales and long-lived assets, consisting of property and equipment, net (in thousands):

Net sales $ 7,046,742 $ 826,800 $ 1,562,571 $ 9,436,113

Total long-lived assets $ 144,777 $ 9,282 $ 22,204 $ 176,263

Net sales $ 6,237,901 $ 805,401 $ 1,297,277 $ 8,340,579

Total long-lived assets $ 110,161 $ 11,042 $ 24,813 $ 146,016

Net sales $ 5,696,422 $ 776,051 $ 1,258,717 $ 7,731,190

Net sales by geographic area are presented by attributing net sales to external customers based on the domicile of the selling location.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

Years Ended December 31,

Depreciation and amortization of property and

2021 2020 2019

Depreciation and amortization of property and equipment:

North America $ 18,532 $ 22,396 $ 17,827

EMEA 4,256 5,073 4,166

APAC 588 556 545

23,376 28,025 22,538

Amortization of intangible assets:

North America 29,576 34,990 22,382

EMEA 1,971 2,088 828

APAC 498 457 461

32,045 37,535 23,671

Total $ 55,421 $ 65,560 $ 46,209

(20) Acquisitions

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.

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 in North America and the United Kingdom 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.

The addition of PCM complements our supply chain optimization solution offering, adding scale and clients in the mid-market and corporate space primarily in North America.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

PCM was 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 had 40 office locations in North America and the United Kingdom and more than 4,000 teammates.

We believe that this acquisition allowed us to help 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.

The addition of PCM complemented our supply chain expertise, adding scale and clients in the commercial space primarily in North America.

The following table summarizes the purchase price and the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition (in thousands):

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Property and equipment 91,213

Other assets 32,699

Current liabilities ( 369,183 )

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In the fourth quarter of 2020, an adjustment of $ 56,700,000 was recorded to goodwill primarily due to a change in the customer relationships valuation based on updated information received for key inputs as well as an associated change in deferred taxes.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The estimated fair values of current assets and liabilities are based upon their historical costs on the date of acquisition due to their short-term nature.

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The identifiable intangibles resulting from the acquisition are amortized using the straight-line method over the following estimated useful lives:

Intangible Assets

Estimated Economic Life

Customer relationships

10 - 12 Years

Non-compete agreements

Intangible Assets Estimated Economic Life

Customer relationships 10 - 12 years

Trade name 1 Year

Non-compete agreements 2 - 3 Years

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.

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The addition of the PCM technical employees to our team and the opportunity to grow our business are the primary factors making up the goodwill recognized as part of the transaction.

No ne of the goodwill is tax deductible.

None of the goodwill is tax deductible.

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.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table reports pro forma information as if the acquisition of PCM had been completed at the beginning of the earliest period presented (in thousands, except per share amounts):

Year Ended December 31,

Diluted earnings per share

Effective August 1, 2018, we acquired 100 percent of the issued and outstanding shares of Cardinal, a digital solutions provider based in Cincinnati, Ohio, with offices across the Midwest and Southeast United States, for a cash purchase price, net of cash acquired, of approximately $ 78,400,000 , including final working capital and tax gross up adjustments of $ 3,400,000 .

Cardinal provides technology solutions to digitally transform organizations through their expertise in mobile applications development, Internet of Things and cloud enabled business intelligence.

We believe that this acquisition strengthens our services capabilities and will bring value to our clients within our digital innovation services solution offering.

The fair value of net assets acquired was approximately $ 42,360,000 , including $ 27,540,000 of identifiable intangible assets, consisting primarily of customer relationships that will be amortized using the straight line method over the estimated economic life of ten years .

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

The preliminary purchase price was allocated using the acquisition method of accounting using the information available at the time.

During the fourth quarter of 2018, we finalized the fair value assumptions for identifiable intangible assets with no changes being made to amounts previously recorded.

Goodwill acquired approximated $ 36,040,000 which was recorded in our North America operating segment.

The goodwill is tax deductible.

The working capital adjustment was finalized in the fourth quarter of 2018 and paid in January 2019.

Additionally, we finalized the purchase price allocation when the tax gross up adjustment was agreed upon in April 2019.

This resulted in a reduction of the previously recorded purchase price in the second quarter of 2019.

We consolidated the results of operations for Cardinal within our North America operating segment beginning on August 1, 2018, the effective date of the acquisition.

Our historical results would not have been materially affected by the acquisition of Cardinal and, accordingly, we have not presented pro forma information as if the acquisition had been completed at the beginning of each period presented in our statement of operations.

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Selected Quarterly Financial Information (unaudited)

The following tables set forth selected unaudited consolidated quarterly financial information for 2020 and 2019 (in thousands, except per share data):

Quarters Ended

September 30,

Costs of goods sold

Operating expenses:

Selling and administrative expenses

Severance and restructuring expenses

Acquisition-related expenses

Earnings from operations

Non-operating (income) expense:

Interest expense, net

Other (income) expense, net

Earnings before income taxes

Income tax expense

Net earnings per share:

Shares used in per share calculations:

Quarters Ended

September 30,

Costs of goods sold

Operating expenses:

Selling and administrative expenses

Severance and restructuring expenses

Acquisition-related expenses

Earnings from operations

Non-operating (income) expense:

Interest expense, net

Other (income) expense, net

Earnings before income taxes

Income tax expense

Net earnings per share:

Shares used in per share calculations:

INSIGHT ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Net sales As reported $ 7,731,190

Pro forma $ 9,207,512

Net earnings As reported $ 159,407

Pro forma $ 171,102

Diluted earnings per share As reported $ 4.43

Pro forma $ 4.76

(21) Subsequent Events

In January 2021, we completed the sales of our three properties in Tempe, Arizona and 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.

In February 2022, we increased our maximum availability under our unsecured inventory financing facility with PNC.

The aggregate availability for vendor purchases under the PNC facilities is $ 375,000,000 , including the $ 25,000,000 Canada facility.

INSIGHT ENTERPRISES, INC.

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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-K

Item 8. Financial Statements and Supplementary Data